10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

(Mark one)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2002

Or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to ___________

Commission File Number 000-24051

UNITED PANAM FINANCIAL CORP.
(Exact name of Registrant as specified in its charter)

California
(State or other jurisdiction of incorporation or organization) 94-3211687
(I.R.S. Employer Identification Number)

3990 Westerly Place, Suite 200
Newport Beach, CA  92660
(Address of principal executive offices) (Zip Code)

(949) 224-1917
(Registrant’s telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

The number of shares outstanding of the Registrant’s Common Stock as of November 1, 2002 was 15,766,725.

UNITED PANAM FINANCIAL CORP.
FORM 10-Q
SEPTEMBER 30, 2002

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Statements of Financial Condition as of September 30, 2002 and December 31, 2001	1
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2002 and September 30, 2001	2
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2002 and September 30, 2001	3
	Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2002 and September 30, 2001	4
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 2.	Changes in Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Submission of Matters to a Vote of Security Holders	23
Item 5.	Other Information	23
Item 6.	Exhibits and Reports on Form 8-K	23

PART I. FINANCIAL INFORMATION

Item 1.           Financial Statements.

United PanAm Financial Corp. and Subsidiaries
Condensed Consolidated Statements of Financial Condition
(Unaudited)

(In thousands, except share and per share data)				September 30, 2002			December 31, 2001
Assets
Cash and due from banks				$	8,753		$	5,428
Short term investments					2,071			135,267
	Cash and cash equivalents				10,824			140,695
Securities available for sale, at fair value					598,023			284,837
Loans					316,537			252,858
Less allowance for loan losses					(21,646	)		(16,410	)
	Loans, net				294,891			236,448
Loans held for sale					21			194
Premises and equipment, net					2,431			2,124
Federal Home Loan Bank stock, at cost					1,816			6,500
Accrued interest receivable					2,101			4,029
Other assets					9,971			14,746
			Total assets	$	920,078		$	689,573
Liabilities and Shareholders’ Equity
Deposits				$	442,617		$	357,350
Federal Home Loan Bank advances					—			130,000
Reverse repurchase agreements					386,560			114,776
Accrued expenses and other liabilities					5,869			11,781
			Total liabilities		835,046			613,907
Common stock (no par value):
		Authorized, 30,000,000 shares Issued and outstanding, 15,738,218 shares at September 30, 2002 and 15,571,400 shares at December 31, 2001			64,186			63,630
Retained earnings					20,313			11,287
Unrealized gain on securities available for sale, net					533			749
			Total shareholders’ equity		85,032			75,666
			Total liabilities and shareholders’ equity	$	920,078		$	689,573

See accompanying notes to consolidated financial statements.

1

United PanAm Financial Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

						Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands, except per share data)						2002		2001		2002		2001
Interest Income
		Loans				$	15,080	$	11,852	$	42,197	$	33,199
		Securities					3,816		2,880		9,598		9,988
				Total interest income			18,896		14,732		51,795		43,187
Interest Expense
		Deposits					3,503		4,464		9,850		14,295
		Federal Home Loan Bank advances					38		71		823		979
		Repurchase agreements					1,724		86		3,025		118
				Total interest expense			5,265		4,621		13,698		15,392
					Net interest income		13,631		10,111		38,097		27,795
	Provision for loan losses						51		108		234		276
					Net interest income after provision for loan losses		13,580		10,003		37,863		27,519
Non-interest Income
		Net gain on sale of securities					210		—		271		—
		Net gain on sale of loans					—		—		—		1,607
		Service charges and fees					199		164		587		497
		Loan related charges and fees					75		68		231		209
		Other income					35		35		91		102
				Total non-interest income			519		267		1,180		2,415
Non-interest Expense
		Compensation and benefits					5,146		4,060		14,926		12,921
		Occupancy					939		788		2,709		2,305
		Other					2,508		1,913		6,829		5,618
				Total non-interest expense			8,593		6,761		24,464		20,844
				Income before income taxes and cumulative effect of change in accounting principle			5,506		3,509		14,579		9,090
Income taxes							2,171		1,369		5,659		3,544
Income before cumulative effect of change in accounting principle							3,335		2,140		8,920		5,546
Cumulative effect of change in accounting principle net of tax							—		—		106		—
Net income						$	3,335	$	2,140	$	9,026	$	5,546
Earnings per share-basic:
			Income before cumulative effect of change in accounting principle			$	0.21	$	0.13	$	0.57	$	0.34
			Cumulative effect of change in accounting principle			$	—	$	—	$	0.01	$	—
			Net income			$	0.21	$	0.13	$	0.58	$	0.34
			Weighted average shares outstanding				15,607		16,171		15,583		16,164
Earnings per share-diluted:
			Income before cumulative effect of change in accounting principle			$	0.19	$	0.12	$	0.50	$	0.33
			Cumulative effect of change in accounting principle			$	—	$	—	$	0.01	$	—
			Net income			$	0.19	$	0.12	$	0.51	$	0.33
			Weighted average shares outstanding				17,649		17,860		17,550		16,859

See accompanying notes to consolidated financial statements

2

United PanAm Financial Corp. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

		Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)		2002		2001		2002			2001
Net income		$	3,335	$	2,140	$	9,026		$	5,546
Other comprehensive income, net of tax:
	Unrealized gain (loss) on securities available for sale		92		264		(216	)		550
Comprehensive income		$	3,427	$	2,404	$	8,810		$	6,096

See accompanying notes to consolidated financial statements

3

United PanAm Financial Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

			Nine Months Ended September 30,
(Dollars in thousands)			2002			2001
Cash Flows from Operating Activities
Net income			$	9,026		$	5,546
Adjustments to reconcile net income to net cash provided by operating activities:
	Compensation expense for converting option plan			—			1,368
	Sale of loans held for sale			—			16,616
	Gain on sale of securities			(271	)		—
	Provision for loan losses			234			276
	Gain on sale of mortgage loans			—			(1,607	)
	Depreciation and amortization			653			640
	FHLB stock dividend			(207	)		(150	)
	Decrease in residual interest in securitizations			—			8,861
	Decrease (increase) in accrued interest receivable and other assets			6,415			(1,878	)
	Decrease in deferred taxes			426			—
	Decrease in accrued expenses and other liabilities			(5,912	)		1,596
	Amortization of premiums on securities			2,962			409
	Other net			—			(62	)
		Net cash provided by operating activities		13,326			31,615
Cash Flows from Investing Activities
	Proceeds from maturities of investment securities			203,475			267,607
	Purchase of investment securities			(593,984	)		(287,482	)
	Proceeds from sales of securities			74,278			—
	Repayments of mortgage loans			127			849
	Originations and purchases, net of repayments, of non-mortgage loans			(58,631	)		(47,344	)
	Purchase of premises and equipment			(960	)		(982	)
	Proceeds from sale (purchase) of FHLB stock, net			4,891			(1575	)
	Proceeds from sales of real estate owned			—			899
	Other, net			—			(366	)
		Net cash used in investing activities		(370,804	)		(68,394	)
Cash Flows from Financing Activities
	Issuance of capital stock			556			86
	Net increase in deposits			85,267			13,616
	Repurchase of common stock			—			(2,729	)
	Increase (repayment), net, of FHLB advances			(130,000	)		34,500
	Proceeds, net of repayments, from reverse repurchase agreements			271,784			108,905
		Net cash provided by financing activities		227,607			154,378
Net (decrease) increase in cash and cash equivalents				(129,871	)		117,599
Cash and cash equivalents at beginning of period				140,695			42,592
Cash and cash equivalents at end of period			$	10,824		$	160,191

See accompanying notes to consolidated financial statements

4

United PanAm Financial Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

			Nine Months Ended September 30,
(Dollars in thousands)			2002		2001
Supplemental Disclosures of Cash Flow Information
	Cash paid for:
		Interest	$	12,868	$	14,894
		Taxes	$	4,173	$	556
Supplemental Schedule of Non-cash Investing and Financing Activities
		Acquisition of real estate owned through foreclosure of related mortgage loans	$	—	$	36
		Loans transferred to held for sale	$	—	$	14,187

See accompanying notes to consolidated financial statements

5

United PanAm Financial Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)

1.      Organization

         United PanAm Financial Corp. (the “Company”) was incorporated in California on April 9, 1998 for the purpose of reincorporating its business in California, through the merger of United PanAm Financial Corp., a Delaware corporation (the “Predecessor”), into the Company.  Unless the context indicates otherwise, all references herein to the “Company” include the Predecessor.  The Company was originally organized as a holding company for Pan American Financial, Inc. (“PAFI”) and Pan American Bank, FSB (the “Bank”) to purchase certain assets and assume certain liabilities of Pan American Federal Savings Bank from the Resolution Trust Corporation (the “RTC”) on April 29, 1994.  The Company, PAFI and the Bank are considered to be Hispanic owned.  PAFI is a wholly owned subsidiary of the Company, and the Bank is a wholly owned subsidiary of PAFI.

2.      Basis of Presentation

         The accompanying unaudited consolidated financial statements include the accounts of the Company, PAFI and the Bank. Substantially all of the Company’s revenues are derived from the operations of the Bank and they represent substantially all of the Company’s consolidated assets and liabilities as of September 30, 2002 and December 31, 2001.  Significant inter-company accounts and transactions have been eliminated in consolidation.

         These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial condition and results of operations for the interim periods presented in this Form 10-Q have been included.  Operating results for the interim periods are not necessarily indicative of financial results for the full year.  These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

         The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.

6

3.      Earnings Per Share

         Basic EPS and diluted EPS are calculated as follows for the three and nine months ended September 30, 2002 and 2001:

			Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share amounts)			2002		2001		2002		2001
Earnings per share - basic:
	Income before cumulative effect of change in accounting principle		$	3,335	$	2,140	$	8,920	$	5,546
	Net Income		$	3,335	$	2,140		9,026		5,546
	Average common shares outstanding			15,607		16,171		15,583		16,164
		Per share before cumulative effect of  change in accounting principle	$	0.21	$	0.13	$	0.57	$	0.34
		Per share	$	0.21	$	0.13	$	0.58	$	0.34
Earnings per share – diluted:
	Income before cumulative effect of change in accounting principle		$	3,335	$	2,140	$	8,920	$	5,546
	Net Income			3,335		2,140		9,026		5,546
	Average common shares outstanding			15,607		16,171		15,583		16,164
	Add: Stock options			2,042		1,689		1,967		695
	Average common shares outstanding – diluted			17,649		17,860		17,550		16,859
	Per share before cumulative effect of change in accounting priniciple		$	0.19	$	0.12	$	0.50	$	0.33
	Earnings per share		$	0.19	$	0.12	$	0.51	$	0.33

4.      Accounting Pronouncements

         In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”(“SFAS143”), which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair valued can be made. The associated asset retirement costs would be capitalized as part of the carrying amount of the long-lived asset and depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, the Company will recognize a gain or loss on settlement. The provisions of SFAS 143 are effective for fiscal years beginning after June 15, 2002. Management does not expect the adoption of SFAS 143 to have any material impact on the Company’s financial statements.

         In August 2001, FASB issued Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which supersedes both FASB Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” (“SFAS 121”) and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” (“Opinion 30”), for the disposal of a segment of a business (as previously defined in that Opinion). SFAS 144 retains the fundamental provisions in SFAS 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with SFAS 121. For example, SFAS 144 provides guidance on how a long-lived asset that is used, as part of a group should be evaluated for impairment, establishes criteria for when a long-lived asset is held for sale, and prescribes the accounting for a long-lived asset that will be disposed of other than by sale. SFAS 144 retains the basic provisions of Opinion 30 on how to present discontinued operations in the income statement but broadens that presentation to include a component of an entity (rather than a segment of a business).

         The Company adopted SFAS 144 on January 1, 2002. Management does not expect the adoption of SFAS 144 for long-lived assets held for use to have any material impact on the Company’s financial statements because the impairment assessment under SFAS 144 is largely unchanged from SFAS  121.

7

         Statement of Financial Accounting Standards No. 145. Statement of Financial Accounting Standards No. 145, “Recission of SFAS Statements No. 4, 44, and 64, Amendment of SFAS Statement No. 13, and Technical Corrections” (“SFAS 145”), updates, clarifies and simplifies existing account prononcements. SFAS 145 rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt.” SFAS 145 amends SFAS No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The provisions of SFAS 145 related to SFAS No. 4 and SFAS No. 13 are effective for fiscal years beginning and transactions occurring after May 15, 2002, respectively. It is anticipated that the financial impact of SFAS 145 will not have a material effect on the Company.

         Statement of Financial Accounting Standards No. 146. Statement of Financial Accounting Standards No. 146 “Accounting for Costs Associated with Exit or Disposal Activitities” (“SFAS 146”), requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS 146 replaces Emerging Issues Task Force (“EITF”)  Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The provisions of SFAS 146 are to be applied prospectively to exit or dipsosal activities initiated after December 31, 2002. It is anticipated that the financial impact of SFAS 146 will not have a material effect on the Company.

         Statement of Financial Accounting Standards No. 147. Statement of Financial Accounting Standards No. 147, “Acquisitions of Certain Financial Institutions, an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9” (“SFAS 147”), addresses the financial accounting and reporting for the acquisition of all or part of a financial instituion, except for a transaction between two or more mutual enterprises. SFAS 147 removes acquisitions of financial institutions, other than transaction between two or more mutual enterprises, from the scope of Statement of Financial Accounting Standards No. 72, “Accounting for Certain Acquisitions of Banking or Thrift Institutions,” (“SFAS 72”), and Financial Accounting Standards Board Interpretation No. 9, “Applying APB Option No. 16 and 17 When a Savings and Loan Association or a Similar Institution Is Acquired in a Business Combination Accounted for by the Purchase Method,” and requires that those transactions be accounted for in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations,” and SFAS 142. Thus, the requirement in SFAS 72 to recognize, and subsequently amortize, any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset no longer applies to acquisitions within the scope of SFAS 147.

         SFAS 147 also provides guidance on the accounting for the impariment or disposal of acquired long-term customer-relationship intangible assets of financial institutions such as depositor and borrower relationship intangible assets and credit cardholder intangible assets. Those intagible assets are subject to the same undiscounted cash flow recoverability test and impairment loss recognition and measurement provisions that SFAS 144 requires for other long-lived assets that are held and used. The provisions of SFAS 147 are effective on October 1, 2002.  It is anticipated that the financial impact of SFAS 147 will not have a material effect on the Company.

5.      Operating Segments

         The Company has three reportable segments: auto finance, insurance premium finance and banking. The auto finance segment acquires, holds for investment and services nonprime retail automobile installment sales contracts generated by franchised and independent dealers of used automobiles.  The insurance premium finance segment, through a contractual agreement, underwrites and finances automobile and commercial insurance premiums in California.  The banking segment operates a four-branch federal savings bank and is the principal funding source for the Company’s auto and insurance premium finance segments.

8

         The accounting policies of the segments are the same as those of the Company’s except for funds provided by the banking segment to the other operating segments which are accounted for at a predetermined transfer price (including certain overhead costs).

         The Company’s reportable segments are strategic business units that offer different products and services.  They are managed and reported upon separately within the Company.

	At or For Three Months Ended September 30, 2002
(In thousands)	Auto Finance		Insurance Premium Finance		Banking			Total
Net interest income	$	10,363	$	560	$	2,708		$	13,631
Provision for loan losses		—		51		—			51
Non-interest income		96		138		285			519
Non-interest expense		6,722		144		1,727			8,593
Segment profit, pre-tax	$	3,737	$	503	$	1,266		$	5,506
Total assets	$	258,100	$	40,508	$	621,470		$	920,078
	At or For Three Months Ended September 30, 2001
(In thousands)	Auto Finance		Insurance Premium Finance		Banking			Total
Net interest income	$	8,004	$	522	$	1,585		$	10,111
Provision for loan losses		—		108		—			108
Non-interest income		81		118		68			267
Non-interest expense		4,922		61		1,778			6,761
Segment profit (loss), pre-tax	$	3,163	$	471	$	(125	)	$	3,509
Total assets	$	189,474	$	38,215	$	425,510		$	653,199
	At or For Nine Months Ended September 30, 2002
(In thousands)	Auto Finance		Insurance Premium Finance		Banking			Total
Net interest income	$	28,872	$	1,703	$	7,522		$	38,097
Provision for loan losses		—		234		—			234
Non-interest income		280		409		491			1,180
Non-interest expense		19,038		250		5,176			24,464
Segment profit, pre-tax	$	10,114	$	1,628	$	2,837		$	14,579
Total assets	$	258,100	$	40,508	$	621,470		$	920,078
	At or For Nine Months Ended September 30, 2001
(In thousands)	Auto Finance		Insurance Premium Finance		Banking			Total
Net interest income	$	21,909	$	1,806	$	4,080		$	27,795
Provision for loan losses		—		276		—			276
Non-interest income		237		372		1,806			2,415
Non-interest expense		13,602		290		6,952			20,844
Segment profit (loss), pre-tax	$	8,544	$	1,612	$	(1,066	)	$	9,090
Total assets	$	189,474	$	38,215	$	425,510		$	653,199

         For the reportable segment information presented, substantially all expenses are recorded directly to each industry segment. 

9

         Item 2.           Management’s Discussion and Analysis of Financial Condition and Results of Operations.

         Certain statements in this Quarterly Report on Form 10-Q, including statements regarding the Company’s strategies, plans, objectives, expectations and intentions, may include forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements.  Such risks and uncertainties include, but are not limited to, the following factors:  loans we made to credit-impaired borrowers; our need for additional sources of financing; concentration of our business in California; reliance on operational systems and controls and key employees; competitive pressure we face in the banking industry; changes in the interest rate environment; rapid growth of our businesses; general economic conditions; impact of inflation and changing prices; and other risks, some of which may be identified from time to time in our filings with the Securities and Exchange Commission (the “SEC”). 

General

     The Company

         The Company is a specialty finance company engaged primarily in originating and acquiring retail automobile installment sales contracts and insurance premium finance contracts financed by retail bank deposits.  The Company markets to customers who generally cannot obtain financing from traditional lenders.  These customers usually pay higher interest rates than those charged by traditional lenders to gain access to consumer financing.  The Company has funded its operations to date principally through retail deposits, brokered deposits, Federal Home Loan Bank (“FHLB”) advances, and commercial repurchase agreements. The Company is a holding company for the Bank.

         The Company commenced operations in 1994 by purchasing from the RTC certain assets and assuming certain liabilities of the Bank’s predecessor, Pan American Federal Savings Bank. The Company has used the Bank as a base for expansion into its current specialty finance businesses. In 1995, the Company commenced its insurance premium finance business through an agreement with BPN Corporation (“BPN”) and in 1996, the Company commenced its automobile finance business. 

     Automobile Finance

         In 1996, the Bank commenced its automobile finance business through its subsidiary, United Auto Credit Corporation (“UACC”).  UACC acquires, holds for investment and services nonprime retail automobile installment sales contracts (“auto contracts”) generated by franchised and independent dealers of used automobiles.  UACC’s customers are considered “nonprime” because they typically have limited credit histories or credit histories that preclude them from obtaining loans through traditional sources.  As UACC provides all marketing, purchasing, underwriting and servicing activities for its loans, income is generated from a combination of spread and non-interest income and is used to cover all operating costs, including compensation, occupancy and systems expense.

     Insurance Premium Finance

         In May 1995, the Bank entered into an agreement with BPN under the name “ClassicPlan” (such business, “IPF”). The Bank commenced the IPF business in September 1995 in which it underwrites and finances private passenger automobile and small business insurance premiums in California and BPN markets the financing program and services the loans for the Bank.  The Bank lends to individuals or small businesses for the purchase of single premium insurance policies and the Bank’s collateral is the unearned insurance premium held by the insurance company.  The unearned portion of the insurance premium is refundable to the Bank in the event the underlying insurance policy is canceled.  The Company does not sell or have the risk of underwriting the underlying insurance policy

10

         As a result of BPN performing substantially all marketing and servicing activities, the Bank’s role is primarily that of an underwriter and funder of loans.  Therefore, IPF’s income is generated primarily on a spread basis, supplemented by non-interest income generated from late payment and returned check fees.  The Bank uses this income to cover the costs of underwriting and loan administration, including compensation, occupancy and data processing expenses.

     The Bank

         The Company currently funds its operations primarily through the Bank’s deposits, FHLB advances and repurchase agreements.  As of September 30, 2002, the Bank was a four-branch federal savings bank with $442.6 million in deposits.  The Bank generates spread income not only from loans originated or purchased by each of the Company’s principal businesses, but also from its securities portfolio and consumer loans originated by its retail branches.  This income is supplemented by non-interest income from its branch banking activities (e.g., deposit service charges, safe deposit box fees) and is used to cover operating costs and other expenses.

     Average Balance Sheets

         The following table sets forth information relating to the Company for the three and nine-month periods ended September 30, 2002 and 2001.  The yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown.  The yields and costs include fees, which are considered adjustments to yields.

			Three Months Ended September 30,
			2002							2001
(Dollars in thousands)			Average Balance (1)		Interest		Average Yield/ Cost			Average Balance (1)		Interest		Average Yield/ Cost
Assets
Interest earning assets
	Securities		$	582,279	$	3,816		2.60	%	$	238,586	$	2,880		4.79	%
	Mortgage loans, net (2)			151		—		—			277		6		8.59	%
	IPF loans, net(3)			40,433		1,345		13.20	%		35,821		1,285		14.23	%
	Automobile installment contracts, net(4)			244,562		13,735		22.28	%		179,696		10,561		23.32	%
		Total interest earning assets		867,425		18,896		8.64	%		454,380		14,732		12.86	%
Non-interest earning assets				35,884							27,292
		Total assets	$	903,309						$	481,672
Liabilities and Equity
Interest bearing liabilities
	Deposits		$	428,869	$	3,503		3.24	%	$	374,191	$	4,464		4.73	%
	FHLB advances			6,889		38		2.19	%		11,049		71		2.55	%
	Repurchase Agreements			375,976		1,724		1.82	%		9,601		86		3.55	%
		Total interest bearing liabilities		811,734		5,265		2.57	%		394,841		4,621		4.64	%
Non-interest bearing liabilities				8,791							11,310
		Total liabilities		820,525							406,151
Equity				82,784							75,521
		Total liabilities and equity	$	903,309						$	481,672
Net interest income before provision for loan losses					$	13,631						$	10,111
Net interest rate spread(5)								6.07	%						8.22	%
Net interest margin(6)								6.23	%						8.83	%
Ratio of interest earning assets to interest bearing liabilities								107	%						115	%

(1)	Average balances are computed on a monthly basis
(2)	Net of allowance for loan losses; includes non-performing loans.
(3)	Net of allowance for loan losses; includes non-performing loans.
(4)	Net of unearned finance charges and allowance for loan losses;  includes non-performing loans.
(5)	Net interest rate spread represents the difference between the yield on interest earning assets and the cost of interest bearing liabilities.
(6)	Net interest margin represents net interest income divided by average interest earning assets.

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			Nine Months Ended September 30,
			2002								2001
(Dollars in thousands)			Average Balance (1)		Interest		Average Yield/ Cost			Average Balance (1)		Interest		Average Yield/ Cost
Assets
Interest earning assets
	Securities		$	444,517	$	9,598		2.89	%	$	245,038	$	9,988		5.45	%
	Mortgage loans, net(2)			149		3		2.33	%		5,177		458		11.83	%
	IPF loans, net(3)			40,306		4,110		13.63	%		34,602		3,944		15.24	%
	Automobile installment contracts, net(4)			224,888		38,084		22.64	%		165,824		28,797		23.22	%
		Total interest earning assets		709,860		51,795		9.76	%		450,641		43,187		12.81	%
Non-interest earning assets				35,910							26,468
		Total assets	$	745,770						$	477,109
Liabilities and Equity
Interest bearing liabilities
	Deposits		$	385,920	$	9,850		3.41	%	$	363,527	$	14,295		5.26	%
	FHLB advances			51,929		823		2.12	%		25,351		979		5.16	%
	Repurchase agreements			216,969		3,025		1.86	%		3,973		118		3.97	%
		Total interest bearing liabilities		654,818		13,698		2.80	%		392,851		15,392		5.24	%
Non-interest bearing liabilities				11,309							11,650
		Total liabilities		666,127							404,501
Equity				79,643							72,608
		Total liabilities and equity	$	745,770						$	477,109
Net interest income before provision for loan losses					$	38,097						$	27,795
Net interest rate spread(5)								6.96	%						7.57	%
Net interest margin(6)								7.18	%						8.25	%
Ratio of interest earning assets to interest bearing liabilities								108	%						115	%

(1)	Average balances are computed on a monthly basis
(2)	Net of allowance for loan losses; includes non-performing loans.
(3)	Net of allowance for loan losses; includes non-performing loans.
(4)	Net of unearned finance charges and allowance for loan losses;  includes non-performing loans.
(5)	Net interest rate spread represents the difference between the yield on interest earning assets and the cost of interest bearing liabilities.
(6)	Net interest margin represents net interest income divided by average interest earning assets.

Comparison of Operating Results for the Three Months Ended September 30, 2002 and September 30, 2001

     General

         For the three months ended September 30, 2002, the Company reported income of $3.3 million or $0.19 per diluted share, an increase of $1.2 million from $2.1 million or $.12 per diluted share for the comparable period a year ago.

         The increase in net income was due primarily to a $3.5 million increase in net interest income to $13.6 million from $10.1 million in the third quarter of 2001.  Net interest income was favorably impacted by the continued expansion and growth of the Company’s automobile finance business.

         Auto contracts purchased, including unearned finance charges, increased $25.0 million to $83.7 million from $58.7 million for the three months ended September 30, 2001, as a result of our planned growth in the auto finance business. Insurance premium finance originations decreased $2.5 million to $25.7 million from $28.2 million for the three months ended September 30, 2001.

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     Interest Income

         Interest income increased to $18.9 million from $14.7 million for the three months ended September 30, 2001, due primarily to a $413.0 million increase in average interest earning assets, partially offset by a decrease in net interest margin of 2.6%. The largest growth components in average interest earning assets were in investment securities, which increased by $343.7 million and automobile installment contracts, which increased by $64.9 million. The increase in investment securities reflects the need to maintain the 30% limitation on indirect consumer loans-to-assets under regulations of the Office of Thrift Supervision (“OTS”) while the increase in auto contracts resulted from the purchase of additional dealer contracts in existing and new markets consistent with planned growth.

         The decline in net interest margin was due primarily to an increased concentration of short term investments and securities in the three months ended September 30, 2002 compared to the three months ended September 30, 2001. In addition, the yield on the average balance of short-term investments and investment securities decreased to 2.60% from 4.79% for the 3-month period ending September 30, 2002 and 2001, respectively, as a result of a general decline in market interest rates.

     Interest Expense

         Interest expense increased to $5.3 million from $4.6 million for the three months ended September 30, 2001, due to a $416.9 million increase in average interest bearing liabilities partially offset by a decline in the average cost of funds of 2.07%. The largest components of average interest bearing liabilities were deposits of $428.9 million, repurchase agreements of $376.0 million and FHLB advances of $6.9 million. Average repurchase agreements increased to $376.0 million from $9.6 million for the three months ended September 30, 2001 as a result of a corresponding increase in investment securities.   The average cost of liabilities decreased to 2.57% from 4.64% for the three months ended September 30, 2001 generally as a result of a decrease in market interest rates.

     Provision for Loan Losses

         Provision for loan losses was $51,000 for the three months ended September 30, 2002 compared to $108,000 for the three months ended September 30, 2001.  The provision for loan losses reflects estimated losses associated with the Company’s insurance premium finance business. 

         In addition, the Company’s allowance for loan losses is increased by a percentage of each new auto loan, currently 10.5% of the net contract amount. This allocation represents management’s estimate of losses expected over the life of the loan.

         The total allowance for loan losses, including specific allowances allocated to loans held for sale, was $21.8 million at September 30, 2002 compared with $17.1 million at September 30, 2001, representing 6.88% of loans at September 30, 2002 and 7.63% at September 30, 2001. Annualized net charge-offs to average gross loans were 5.93% for the three months ended September 30, 2002 compared with 4.56% for the three months ended September 30, 2001. Should the annualized rates of charge-offs continue to increase, a material provision for loan losses, charged to operations, may be recognized.

         A provision for loan losses is charged to operations based on the Company’s regular evaluation of its loans and the adequacy of its allowance for loan losses. While management believes it has adequately provided for losses over the life of such loans and does not expect any material loss on its loans in excess of allowances already recorded, no assurance can be given that economic or market conditions or other circumstances will not result in increased losses in the loan portfolio.

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     Non-interest Income

         Non-interest income increased to $519,000 from  $267,000 for the three months ended September 30, 2001. The increase was the result of a $210,000 gain on sale of securities and an increase in deposit and loan related service charges.

     Non-interest Expense

         Non-interest expense increased $1.8 million to $8.6 million from $6.8 million for the three months ended September 30, 2001. The increase in non-interest expense was driven primarily by an increase in salaries, employee benefit costs and occupancy expenses associated with the planned growth of the auto finance business segment.  During the last 12 months, the Company expanded its automobile finance operations, resulting in an increase to 334 employees in 51 offices, as of September 30, 2002 from 264 employees in 38 offices as of September 30, 2001.

     Income Taxes

         Income taxes increased to $2.2 million from $1.4 million for the three months ended September 30, 2002.  This increase occurred as a result of a $2.0 million increase in income before income taxes between the two periods.

Comparison of Operating Results for the Nine Months Ended September 30, 2002 and September 30, 2001

     General

         For the nine months ended September 30, 2002, the Company reported income of $9.0 million or $0.51 per diluted share.  This compares with income of $5.5 million or  $0.33 per diluted share, for the comparable period a year ago. 

         In 2002, net interest income increased $10.3 million as a result of the planned increase in the auto finance unit receivables. In 2001, the Company recognized a gain on sale of loans of $1.3 million as a result of the sale of substantially all of the remaining mortgage loan portfolio, and a $1.4 million one-time non-cash increase in compensation expense as a result of the conversion of an option plan in UACC to options of the Company. These items were not repeated in 2002.

         Purchased auto contracts increased to $232.7 million from $177.0 million for the nine months ended September 30, 2001, while insurance premium finance originations increased to $84.0 million from $77.2 million for the nine months ended September 30, 2001.

     Interest Income

         Interest income increased to $51.8 million from $43.2 million for the nine months ended September 30, 2001, due primarily to a $259.2 million increase in average interest earning assets, partially offset by a decrease in net interest margin of 1.07%. The largest growth components in average interest earning assets were in investment securities, which increased by $199.5 million and automobile installment contracts, which increased by $59.1 million. The increase in investment securities reflects the need to increase assets to maintain the 30% limitation on indirect consumer loans-to-assets under regulations of the OTS, while the increase in auto contracts resulted from the purchase of additional dealer contracts in existing and new markets consistent with planned growth.

         The decline in net interest margin was due primarily to an increased concentration of lower yielding securities in the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001. The yield on the average balance of short-term investments and investment securities decreased to 2.89% from 5.45% for the nine-month period ended September 30, 2002 and 2001, respectively, as a result of a general decline in the market interest rates.

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     Interest Expense

         Interest expense decreased to $13.7 million from $15.4 million for the nine months ended September 30, 2001 due to a general decline in market interest rates, partially offset by a $262.0 million increase in average interest bearing liabilities. The largest components of average interest bearing liabilities are Bank deposits, which increased to $385.9 million from an average balance of $363.5 million during the nine months ended September 30, 2001, repurchase agreements which increase to $217.0 million from $4.0 million for the nine months ended September 30, 2001 and FHLB advances which increased to $51.9 million from $25.4 million for the nine months ended September 30, 2001.  The average cost of liabilities decreased to 2.8% from 5.24% for the nine-month period ended September 30, 2001.

     Provision for Loan Losses

         Provision for loan losses was $234,000 for the nine months ended September 30, 2002 compared to $276,000 for the nine months ending September 30, 2001. The provision for loan losses reflects estimated losses associated with the Company’s insurance premium finance business. 

         In addition the Company’s allowance for loan losses is increased by a percentage at each new auto loan, currently 10.5% of the net contract amount. This allocation represents management’s estimate of losses expected over the life of the loan.

         The total allowance for loan losses, including specific allowances allocated to loans held for sale, was $21.8 million at September 30, 2002 compared with $17.1 million at September 30, 2001, representing 6.88% of loans at September 30, 2002 and 7.63% at September 30, 2001. Annualized net charge-offs to average gross loans were 5.45% for the nine months ended September 30, 2002 compared with 4.12% for the nine months ended September 30, 2001 and 5.86% for the three months ended December 31, 2001. Should the annualized rate of charge-offs continue to increase, a material provision for loan losses, charged to operations, may be recognized.

         A provision for loan losses is charged to operations based on the Company’s regular evaluation of its loans and the adequacy of its allowance for loan losses. While management believes it has adequately provided for losses over the life of such loans and does not expect any material loss on its loans in excess of allowances already recorded, no assurance can be given that economic or market conditions or other circumstances will not result in increased losses in the loan portfolio.

     Non-interest Income

         Non-interest income decreased to $1.2 million, from $2.4 million for the nine months ended September 30, 2001 as a result of a $1.6 million gain on the sale of substantially all of the remaining mortgage loan portfolio in 2001, partially offset by a $271,000 gain on the sale of securities and an increase in service charges and fee income.

     Non-interest Expense

         Non-interest expense increased $3.7 million to $24.5 million from $20.8 million for the nine months ended September 30, 2001.  During 2001, the company recognized a one-time non-cash charge of $1.4 million for compensation expense as a result of converting the option plan in UACC, its auto-lending unit, to options in the Company.  Without considering this item, non-interest expense increased $5.1 million.  The increase in non-interest expense was driven primarily by an increase in salaries, employee benefit costs and occupancy expenses associated with the planned growth of the auto finance business.  During the last 12 months, the Company expanded its automobile finance operations, resulting in an increase to 334 employees in 51 offices, as of September 30, 2002, from 264 employees in 38 offices, as of September 30, 2001.

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     Income Taxes

         Income taxes increased $2.2 million to $5.7 million from $3.5 million for the nine-month period ended September 30, 2001. This increase occurred as a result of a $5.5 million increase in income before income taxes between the two periods.

Comparison of Financial Condition at September 30, 2002 and December 31, 2001

         Total assets increased $230.5 million to $920.1 million from $689.6 million at December 31, 2001. This increase occurred primarily as a result of a $63.6 million increase in loans to $316.5 million from $252.9 million at December 31, 2001 and a $183.3 million increase in the combined balance of cash and cash equivalents and securities available for sale to $608.8 million from $425.5 million at December 31, 2001.

         Cash and cash equivalents decreased to $10.8 million, from $140.7 million at December 31, 2001.  Securities available for sale increased to $598.0 million from $284.8 million at December 31, 2001.  This net increase reflected the reinvestment of the proceeds received from expanded usage of reverse repurchase agreements in investment securities to meet the 30% limitation on indirect consumer loans-to-assets under regulations of the OTS.

         Deposits increased $85.2 million to $442.6 million from $357.4 million at December 31, 2001 while retail deposits, including Internet deposits, increased $32.4 million to $310.4 million from $278.0 million at December 31, 2001 as a result of the expanded use of the Internet in originating deposits.  Brokered deposits increased $52.8 million to $132.2 from $79.4 million at December 31, 2001 reflecting the expanded use of brokered deposits to add longer term, fixed rate deposits in a low interest rate environment. 

         Other interest bearing liabilities include commercial repurchase agreements and Federal Home Loan Bank advances. Outstanding Federal Home Loan Bank advances were $0 compared to $130.0 million at December 31, 2001.  Commercial repurchase agreements were $386.6 million compared with $114.8 million at December 31, 2001. The increase in repurchase agreements resulted from a decline in borrowings from FHLB and the purchase of investment securities to increase assets to comply with the 30% limitation on indirect consumer loans-to-assets under the regulations of the OTS. 

         Shareholders’ equity increased to $85.0 million from $75.7 million at December 31, 2001 primarily as a result of net income of $9.0 million during the nine months ended September 30, 2002.

Management of Interest Rate Risk

         The principal objective of the Company’s interest rate risk management program is to evaluate the interest rate risk inherent in the Company’s business activities, determine the level of appropriate risk given the Company’s operating environment, capital and liquidity requirements and performance objectives and manage the risk consistent with guidelines approved by the Board of Directors.  Through such management, the Company seeks to reduce the exposure of its operations to changes in interest rates.  The Board of Directors reviews on a quarterly basis the asset/liability position of the Company, including simulation of the effect on capital of various interest rate scenarios.

         The Company’s profits depend, in part, on the difference, or “spread,” between the effective rate of interest received on the loans it originates and the interest rates paid on deposits and other financing facilities, which can be adversely affected by movements in interest rates. 

         The Bank’s interest rate sensitivity is monitored by the Board of Directors and management through the use of a model, which estimates the change in the Bank’s net portfolio value (“NPV”) over a range of interest rate scenarios.  NPV is the present value of expected cash flows from assets and liabilities, and “NPV Ratio” is defined as the NPV in that scenario divided by the market value of assets in the same scenario.  The Company reviews a market value model (the “OTS NPV model”) prepared quarterly by the OTS, based on the Bank’s quarterly Thrift Financial Reports filed with the OTS.  The OTS NPV model measures the Bank’s interest rate risk by approximating the Bank’s NPV under various scenarios which range from a 300 basis point increase to a

16

300 basis point decrease in market interest rates.   The OTS has incorporated an interest rate risk component into its regulatory capital rule for thrifts.  Under the rule, an institution whose sensitivity measure, as defined by the OTS, in the event of a 200 basis point increase or decrease in interest rates exceeds 20% would be required to deduct an interest rate risk component in calculating its total capital for purposes of the risk-based capital requirement.

         At June 30, 2002, the most recent date for which the relevant OTS NPV model is available, the Bank’s sensitivity measure resulting from a 100 basis point decrease in interest rates was +29 basis points and would result in a $3.7 million increase in the NPV of the Bank, and from a 200 basis point increase in interest rates was -76 basis points and would result in a $8.8 million decrease in the NPV of the Bank.  At June 30, 2002, the Bank’s sensitivity measure was below the threshold at which the Bank could be required to hold additional risk-based capital under OTS regulations.

         Although the NPV measurement provides an indication of the Bank’s interest rate risk exposure at a particular point in time, such measurement is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on the Bank’s net interest income and will differ from actual results.  Management monitors the results of this modeling, which are presented to the Board of Directors on a quarterly basis.

         The following table shows the NPV and projected change in the NPV of the Bank at June 30, 2002 assuming an instantaneous and sustained change in market interest rates of 100, 200 and 300 basis points (“bp”).  This table is based on data prepared by the OTS.   The table does not include data for –200 and –300 basis points because these changes would infer negative interest rates and are therefore irrelevant.

Interest Rate Sensitivity of Net Portfolio Value

	Net Portfolio Value								NPV as % of Portfolio Value of Assets
Change in Rates	$ Amount		$ Change			% Change			NPV Ratio			% Change
	(Dollars in thousands)
+300 bp	$	110,376	$	(13,547	)		-11	%		13.38	%		-118	bp
+200 bp		115,104		(8,819	)		-7	%		13.81	%		-76	bp
+100 bp		119,615		(4,309	)		-3	%		14.20	%		-36	bp
0 bp		123,923		—			—			14.57	%		—
-100 bp		127,581		3,658			+3	%		14.86	%		+29	bp
-200 bp		—		—			—			—			—
-300 bp		—		—			—			—			—

Liquidity and Capital Resources

     General

         The Company’s primary sources of funds are deposits at the Bank, FHLB advances, commercial repurchase agreements, and, to a lesser extent, interest payments on short-term investments and proceeds from the maturation of securities.  While maturities and scheduled amortization of loans are a predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. However, the Company has continued to maintain adequate levels of liquid assets to fund its operations. Management, through its Asset and Liability Committee, monitors rates and terms of competing sources of funds to use the most cost-effective source of funds wherever possible.

         The major source of funds consists of deposits obtained through the Bank’s four retail branches in California.  The Bank offers checking accounts, various money market accounts, regular passbook accounts, fixed interest rate certificates with varying maturities and retirement accounts.  Deposit account terms vary by interest rate, minimum balance requirements and the duration of the account.  Interest rates paid, maturity terms, service fees and withdrawal penalties are established by the Bank periodically based on liquidity and financing requirements, rates paid by competitors, growth goals and federal regulations. The Bank also solicits deposits by posting its interest rates on a national on-line service which advertises the bank’s products to investors.  At September 30, 2002, such retail deposits were $310.4 million or 70.1% of total deposits.

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         The Bank uses broker-originated deposits to supplement its retail deposits and, at September 30, 2002, such brokered deposits totaled $132.2 million or 29.9% of total deposits.  Brokered deposits are originated through major dealers specializing in such products.

         The following table sets forth the balances and rates paid on each category of deposits for the dates indicated.

			September 30, 2002					December 31, 2001
(Dollars in thousands)			Balance		Weighted Average Rate			Balance		Weighted Average Rate
Passbook accounts			$	52,803		1.72	%	$	47,931		2.31	%
Checking accounts				16,127		1.00	%		13,795		1.06	%
Certificates of deposit
	Under $100,000			292,160		3.71	%		212,981		4.43	%
	$100,000 and over			81,527		3.25	%		82,643		4.33	%
		Total	$	442,617		3.29	%	$	357,350		3.99	%

         The following table sets forth the time remaining until maturity for all CDs at September 30, 2002, December 31, 2001 and 2000.

(Dollars in thousands)	September 30, 2002		December 31, 2001
Maturity within one year	$	203,240	$	237,683
Maturity within two years		52,549		46,170
Maturity within three years		38,379		7,657
Maturity over three years		79,519		4,114
Total certificates of deposit	$	373,687	$	295,624

         Although the Bank has a significant amount of deposits maturing in less than one year, the Company believes the Bank’s current pricing strategy will enable it to retain a significant portion of these accounts at maturity and that it will continue to have access to sufficient amounts of CDs which, together with other funding sources, will provide the necessary level of liquidity to finance its lending businesses.  However, as a result of these shorter-term deposits, the rates on these accounts may be more sensitive to movements in market interest rates, which may result in a higher cost of funds.

         At September 30, 2002, the Bank exceeded all of its regulatory capital requirements with tangible capital of $75.0 million, or 8.16% of total adjusted assets, which is above the required level of $13.8 million, or 1.5%; core capital of $75.0 million, or 8.16% of total adjusted assets, which is above the required level of $27.6 million, or 3.0%; and risk-based capital of $79.7 million, or 18.85% of risk-weighted assets, which is above the required level of $28.8 million, or 8.0%.

         As used herein, leverage ratio means the ratio of core capital to adjusted total assets, Tier 1 risk-based capital ratio means the ratio of core capital to risk-weighted assets, and total risk-based capital ratio means the ratio of total capital to risk-weighted assets, in each case as calculated in accordance with current OTS capital regulations.  Under the Federal Deposit Insurance Corporation Act of 1991 (“FDICIA”), the Bank is deemed to be “well capitalized” as of September 30, 2002.

         The Company has other sources of liquidity, including FHLB advances, repurchase agreements and its liquidity and securities portfolio.  Through the Bank, the Company can obtain advances from the FHLB, collateralized by its securities and enter into repurchase agreements utilizing its securities.  The FHLB functions as a central reserve bank providing credit for thrifts and certain other member financial institutions.  Advances are made pursuant to several programs, each of which has its own interest rate and range of maturities.  Limitations on the amount of advances are based generally on a fixed percentage of total assets or on the

18

FHLB’s assessment of an institution’s credit-worthiness.  As of September 30, 2002, the Bank’s total borrowing capacity under this credit facility was $230.0 million, all of which was unused and available for borrowing.   

         The following table sets forth certain information regarding the Company’s short-term borrowed funds (consisting of FHLB advances and reverse repurchase agreements) at or for the periods ended on the dates indicated.

(Dollars in thousands)		September 30, 2002			December 31, 2001
FHLB advances
	Maximum month-end balance	$	10,000		$	130,000
	Balance at end of period		—			130,000
	Average balance for period		51,929			30,830
	Weighted average interest rate on balance at end of period		—			1.97	%
	Weighted average interest rate on average balance for period		2.12	%		4.04	%
Reverse repurchase agreements
	Maximum month end balance	$	387,634		$	114,776
	Balance at end of period		386,560			114,776
	Average balance for period		216,969			4,503
	Weighted average interest rate on balance at end of period		1.79	%		2.37	%
	Weighted average interest rate on average balance for period		1.86	%		3.46	%

         The Company had no material contractual obligations or commitments for capital expenditures at September 30, 2002. 

Lending Activities

         Summary of Loan Portfolio.  At September 30, 2002, the Company’s net loan portfolio constituted $295 million, or 32.1% of the Company’s total assets.

         The following table sets forth the composition of the Company’s loan portfolio at the dates indicated.

(Dollars in thousands)			September 30, 2002			December 31, 2001
Consumer Loans
Automobile installment contracts			$	283,979		$	232,902
Insurance premium finance				24,110			28,710
Other consumer loans				86			98
		Total consumer loans		308,175			261,710
Mortgage Loans
Mortgage loans				—			—
Subprime mortgage loans				157			352
		Total mortgage loans		157			352
Commercial Loans
Insurance premium finance				16,518			10,921
Other commercial loans				—			—
		Total commercial loans		16,518			10,921
		Total loans		324,850			272,983
Unearned finance charges				(8,156	)		(18,881	)
Allowance for loan losses				(21,782	)		(17,460	)
	Total loans, net		$	294,912		$	236,642

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         Loan Maturities.  The following table sets forth the dollar amount of loans, net of unearned finance charges, maturing in the Company’s loan portfolio at September 30, 2002 based on final maturity.  Loan balances are reflected before allowance for loan losses.

		September 30, 2002
		One Year or Less		More Than 1 Year to 3 Years		More Than 3 Years to 5 Years		More Than 5 Years to 10 Years		More Than 10 Years to 20 Years		More Than 20 Years		Total Loans
		(Dollars in thousands)
Mortgage loans		$	—	$	—	$	—	$	—	$	194		—	$	194
Commercial loans			16,518		—		—		—		—		—		16,518
Consumer loans			32,490		110,029		156,960		503		—		—		299,982
	Total	$	49,008	$	110,029	$	156,960	$	503	$	194		—	$	316,694

         Classified Assets and Allowance for Loan Losses

         The Company’s policy is to maintain an allowance for loan losses to absorb inherent losses, which may be realized on its loan portfolio. The allowance includes a specific allowance for identifiable impairments of individual loans and a general valuation allowance for estimates for probable losses not specifically identified. In addition, the Company’s allowance for loan losses is increased by a percentage of each new auto loan, currently 10.5% of the net contract amount. For IPF loans, management established a level of allowance for loan losses based on recent trends in delinquencies and historical charge offs, currently 1.25% of loans, that it feels adequate for the risk in the portfolio. Each month an amount necessary to reach that level is charged against current earnings and added to allowance for loan losses.

         Periodically, management reviews the level of allowance for loan losses to determine adequacy. The determination of the adequacy of the allowance for loan losses is based on a variety of factors including an assessment of the credit risk inherent in the portfolio, prior loss experience, the levels and trends of non-performing loans, current and prospective economic conditions and other factors.

         The Company’s management uses its best judgment in providing for possible loan losses and establishing allowances for loan losses.  However, the allowance is an estimate, which is inherently uncertain and depends on the outcome of future events.  In addition, regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses.  Such agencies may require the Bank to increase the allowance based upon their judgment of the information available to them at the time of their examination.  The Bank’s most recent examination by its regulatory agencies was completed in May 2002 and no adjustment to the Bank’s allowance for loan losses was required.

         The following table sets forth the remaining balances of all loans (before allowances for losses) that were more than 30 days delinquent at September 30, 2002 and December 31, 2001.

Loan Delinquencies	September 30, 2002		% of Total Loans			December 31, 2001		% of Total Loans
(Dollars in thousands)
30 to 59 days	$	1,508		.5	%	$	1,368		0.6	%
60 to 89 days		717		.2	%		776		0.3	%
90+ days		679		.2	%		942		0.4	%
Total	$	2,904		.9	%	$	3,086		1.3	%

         Nonaccrual and Past Due Loans.  A non-mortgage loan is placed on nonaccrual status when it is delinquent for 120 days or more.  When a loan is reclassified from accrual to nonaccrual status, all previously accrued interest is reversed.  Interest income on nonaccrual loans is subsequently recognized only to the extent that cash payments are received or the borrower’s ability to make periodic interest and principal payments is in accordance with the loan terms, at which time the loan is returned to accrual status.

20

Accounts, which are deemed fully or partially uncollectible by management, are generally fully reserved or charged off for the amount that exceeds the estimated fair value (net of selling costs) of the underlying collateral.   

         The following table sets forth the aggregate amount of nonaccrual loans (net of unearned discounts, premiums and unearned finance charges) at September 30, 2002 and December 31, 2001.

(Dollars in thousands)			September 30, 2002			December 31, 2001
Nonaccrual loans
	Single-family residential		$	157		$	352
	Multi-family residential and commercial			—			—
	Consumer and other loans			473			688
		Total	$	630		$	1,040
Nonaccrual loans as a percentage of
	Total loans held for investment			0.20	%		0.44	%
	Total assets			0.07	%		0.15	%
Allowance for loan losses as a percentage of total loans				6.88	%		7.38	%

         Allowance for Loan Losses.  The following is a summary of the changes in the consolidated allowance for loan losses of the Company for the period indicated.

(Dollars in thousands)			At or For the Nine Months Ended September 30, 2002			At or For the Year Ended December 31, 2001
Allowance for Loan Losses
Balance at beginning of period			$	17,460		$	15,156
	Provision for loan losses			235			615
	Charge-offs
		Mortgage loans		(32	)		(1,713	)
		Consumer loans		(13,194	)		(9,173	)
				(13,226	)		(10,886	)
	Recoveries
		Mortgage loans		—			140
		Consumer loans		787			266
				787			406
	Net charge-offs			(12,439	)		(10,480	)
	Acquisition discounts allocated to loss allowance			16,526			12,169
Balance at end of period			$	21,782		$	17,460
	Annualized net charge-offs to average gross loans			5.45	%		4.58	%
	Ending allowance to period end loans			6.88	%		7.38	%

         The Company’s policy is to maintain an allowance for loan losses to absorb future losses, which may be realized on its loan portfolio.  The Company’s allowance for loan losses is increased by a percentage of each new auto loan, currently 10.5% of the net contract amount. This allocation represents management’s estimate of the losses expected over the life of the loan.

         The determination of the adequacy of the allowance for loan losses is based on a variety of factors, including an assessment of the credit risk inherent in the portfolio, prior loss experience, the levels and trends of non-performing loans, the concentration of credit, current and prospective economic conditions and other factors.

21

Cash Equivalents and Securities Portfolio

         The Company’s cash equivalents and securities portfolios are used primarily for liquidity and investment income purposes.  Cash equivalents and securities satisfy regulatory requirements for liquidity.

         The following is a summary of the Company’s short-term investments and securities portfolios as of the dates indicated.

(Dollars in thousands)		September 30, 2002			December 31, 2001
Balance at end of period
	Overnight deposits	$	2,071		$	135,267
	U.S. agency securities		316,038			229,660
	U. S. mortgage backed securities		281,985			35,015
	Mutual funds		—			20,162
	Total	$	600,094		$	420,104
Weighted average yield at end of period
	Overnight deposits		1.05	%		1.23	%
	U.S. agency securities		2.38	%		3.35	%
	U.S. mortgage backed securities		2.95	%		6.60	%
	Mutual funds (mortgage backed securities)		—			3.59	%
Weighted average maturity at end of period
	Overnight deposits		1 day			1 day
	U.S. agency securities		52 months			85 months
	U.S. mortgage backed securities		316 months			254 months
	Mutual funds (mortgage backed securities)		1 day			1 day

         Item 3.           Quantitative and Qualitative Disclosures About Market Risk

         See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Management of Interest Rate Risk. ”

         Item 4.           Controls and Procedures

         Based on their evaluation of the Company’s disclosure controls and procedures conducted within 90 days of the date of filing this report on Form 10-Q, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-14c and 15d-14c promulgated under the Securities Exchange Act of 1934, as amended) are effective.

         There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

22

PART II.				OTHER INFORMATION
Item 1.		Legal Proceeding s.
Not applicable
Item 2.		Changes in Securities and Use of Proceeds .
Not applicable
Item 3.		Defaults Upon Senior Securities .
Not applicable
Item 4.		Submission of Matters to a Vote of Security H olders.
Not applicable
Item 5.		Other Information .
Not applicable
Item 6.		Exhibits and Reports on Form 8-K .
	(a)	List of Exhibits
		10.110	Employment Agreement dated July 18, 2002 between Pan American Bank, FSB and Garland Koch
		10.111	Employment Agreement dated July 18, 2002 between Pan American Bank, FSB and John J. Warren
		10.112	Employment Agreement dated July 18, 2002 between Pan American Bank, FSB and Mario Radrigan.
		99.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act.
		99.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act.
	(b)	Reports on Form 8-K
		None

23

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			UNITED PANAM FINANCIAL CORP.
Date:	November 7, 2002	By:	/s/ GUILLERMO BRON
			Guillermo Bron Chairman and Chief Executive Officer (Principal Executive Officer)
	November 7, 2002	By:	/s/ GARLAND W. KOCH
			Garland W. Koch Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

24

CERTIFICATION

I, Guillermo Bron, certify that:

	1.	I have reviewed this quarterly report on Form 10-Q of United PanAm Financial Corp.;
	2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
	3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this quarterly report;
	4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
		a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
		b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
		c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
	5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function);
		a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
	6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date:		November 7, 2002

/s/ GUILLERMO BRON

Guillermo Bron
Chairman and Chief Executive Officer

25

CERTIFICATION

I, Garland Koch, certify that:

	1.	I have reviewed this quarterly report on Form 10-Q of United PanAm Financial Corp.;
	2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
	3.	Based on my know edge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this quarterly report;
	4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
		a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
		d)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
		e)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
	5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function);
		a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
	6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date:		November 7, 2002

/s/ GARLAND W. KOCH

Garland W. Koch
Chief Financial Officer / Sr. Vice President

26

EX-10.110

Mr. Garland Koch
24 Flossmoor
Trabuco Canyon, CA  92679 Exhibit 10.110

               Re:     Employment Agreement

Dear Mr. Koch:

This letter agreement and attachments hereto, (collectively the “Agreement”) set forth the terms and conditions of your employment with Pan American Bank, FSB (“Employer”) and its subsidiary United Auto Credit Corporation (“UACC”), both of which may be referred to interchangeably hereinafter as “Employer”.  By signing this Agreement, you will be agreeing to these terms.  It is important that you understand clearly both what your benefits are and what is expected of you by Employer.  The effective date of this Agreement (the “Effective Date”) shall be as of March 1, 2002 and will replace your previous agreement.

1.	Term.  This Agreement shall have a term of three (3) years, commencing as of the Effective Date (the “Term”).  Where used herein, “Term” shall refer to the entire period of your employment by Employer from and after the Effective Date, whether for the period provided above or as extended or terminated earlier as hereinafter provided.
2.	Duties.  You shall hold the office of Sr. Vice President – Chief Financial Officer. You shall perform the duties customarily performed by individuals holding a similar title with other financial institutions or as otherwise may be agreed upon by Employer and you from time to time. During the Term hereof, you shall perform the services herein contemplated faithfully, diligently and to the best of your ability in compliance with instructions and policies of the Bank’s senior management, the Bank’s Board of Directors the Bank’s Federal Charter and Bylaws and with all applicable laws and regulations.
3.		Compensation.
		a)	Base Salary.  For your service rendered to the Bank or any subsidiary corporation hereunder, during the Term hereof, the Bank shall pay or cause to be paid a base salary to you at the rate of $150,000 per annum from March 1, 2002 to February 28, 2003 $150,000 per annum from March 1, 2003 to February 28, 2004 and $150,000 per annum from March 1, 2004 to February 28, 2005, payable in conformity with Bank’s normal payroll periods and procedures.
		b)	Bonus.  In addition to the base salary provided for under Section 3(a) above, you shall be entitled to annual bonus compensation in accordance with the incentive compensation formula set forth in Exhibit A to this Agreement.  Among other things, the incentive compensation formula establishes certain performance criteria and sales objectives by which the amount of your bonus compensation, if any, is to be determined.
		c)	Automobile Allowance.  You shall receive during the Term of this Agreement an automobile allowance of Two Hundred Dollars ($200) per month.
		d)	Options. Options will vest according to separate option agreements.

4.	Other Benefits.  During the Term hereof and unless otherwise agreed to by the Bank and you:
	a)	Vacation.  You shall be entitled to a total of three (3) weeks paid vacation, the amount and term of which shall be determined in accordance with the policies of Employer as in effect from time to time.
	b)	Group Medical, Life Insurance and Other Benefits.  You will be eligible for the medical, dental, vision, life insurance and long-term disability plans that are generally applicable to your employment classification.
5.	Business Expenses.  You shall be entitled to reimbursement by Employer for any and all ordinary and necessary business expenses reasonably incurred by you in the performance of your duties and in acting for Employer during the Term of this Agreement, provided that you furnish to Employer adequate records and other documentation as may be required for the substantiation of such expenditures as a business expense of the Bank.
6.	Termination.
	a)	Termination for Cause.  The Bank’s Board may for cause terminate your employment at any time during the Term of this Agreement.  In such event, all of your rights under this Agreement shall terminate and you shall have no right to receive compensation, and other benefits shall cease for any period after the effective date of such termination for cause.  Any bonus compensation otherwise accrued shall be forfeited.  Termination for “cause” shall be defined as your personal dishonesty, willful misconduct, breach of fiduciary or duty of loyalty, continuing intentional or habitual failure to perform stated duties, violation of any law (other than minor traffic violations or similar misdemeanor offenses), rule or regulation adopted by the Office of Thrift Supervision, Federal Deposit Insurance Corporation or other regulatory agency with jurisdiction over Employer, any judgment, ruling or decree by any court of competent jurisdiction or administrative body that precludes or impairs your ability to perform the services contemplated by this Agreement or any material breach by you of any provision of this Agreement.
	b)	Termination Without Cause.  Employer may terminate your employment without cause at any time during the Term of this Agreement.  In the event that Employer terminates your employment without cause, you shall be entitled to receive as severance compensation an amount as provided in Exhibit B.  The severance payment under this Section 6(b) shall be provided in a lump sum or, at your election, in equal monthly installments for a period not to exceed six (6) months from the date of termination.  This payment shall be in lieu of any and all other compensation due under the agreement unless previously vested or earned, except the amount of any bonus compensation payable to you under Section 3(b) hereof, shall be prorated through the date of termination.
	c)	Compliance with Law and Regulation.  You and Employer expressly acknowledge and agree that any payments made to you pursuant to this Agreement or otherwise are subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.
	d)	Suspension and Removal Orders.  If you are suspended and/or temporarily prohibited from participating in the conduct of Employer’s affairs by notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section 1818 (e)(3) and (g)(1)), the Bank’s obligations under this Agreement shall be suspended as of the

	date of service, unless stayed by appropriate proceeding.  If the charges in the notice are dismissed, the Bank may in its discretion: (I) pay you all or part of the compensation withheld while its obligations under this Agreement were suspended; and (ii) reinstate (in whole or in part) any of its obligations which were suspended.  If you are removed and/or permanently prohibited from participating in the conduct of Employer’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties shall not be affected.
e)	Termination by Default.  If Employer is in default (as defined in Section 3(x)(1) of the Federal Deposit Insurance Action (12 U.S.C. Section 1813(x)(1)), all obligations under this Agreement shall terminate as of the date of default, but vested rights of the parties shall not be affected.
f)	Supervisory Assistance or Merger.  All obligations under this Agreement shall be terminated, except to the extent that it is determined that continuation of the Agreement is necessary for the continued operation of Employer: (I) by the Director of the Office of Thrift Supervision (the “Director”) or his or her designee, at the time that the Federal Deposit Insurance Corporation enters into an agreement to provide assistance to or on behalf of Employer under the authority contained in Section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. Section 1823(c)); or (ii) by the Director or his or her designee, at the time that the Director or his or her designee approves a supervisory merger to resolve problems related to the operation of Employer or when Employer is in an unsafe or unsound condition.  All rights of the parties that have already vested, however, shall not be affected by such action.
g)	Disability.  In the event that you shall fail, because of illness, incapacity or injury, to render the services contemplated by this Agreement for three (3) consecutive calendar months, or for shorter periods aggregating four (4) months in any twelve (12) month period, your employment hereunder may be terminated by written notice from Employer to you.  In the event that your employment is terminated under this Section 6(g), you shall receive the difference between any disability payments provided through insurance plans offered by Employer, if any, provided you have enrolled in such plans and paid the cost thereof, and your base salary as set forth in Section 3(a) hereof, for six months after notice from Employer, plus the amount of any bonus compensation payable to you under Section 3(b) hereof, prorated through the date of termination.  Such termination shall not affect any rights, which you may have pursuant to any insurance or other death benefit, or any stock option plans, or options thereunder, which rights shall continue to be governed by the provisions of such plans and arrangements.
h)	Death.  If your employment is terminated by reason of your death, this Agreement shall terminate without further obligations of Employer to you (or your heirs or legal representatives) under this Agreement, other than for payment of: (i) your base salary (as set forth in Section 3(a) hereof) through the date of termination; (ii) the amount of any bonus compensation payable to you under Section 3(b) above, prorated through the date of termination; (iii) any compensation previously deferred by you; (iv) any accrued vacation and/.or sick leave pay; and (v) any amounts due pursuant to the terms of any applicable welfare benefit plan.  All of the foregoing amounts shall be paid to

		your estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days after the date of termination or earlier as required by applicable law.
7.	Disclosure or Use of Employer’s Trade Secrets.  During the Term hereof, you will have access to and become acquainted with what you and Employer acknowledge are trade secrets or confidential or proprietary information of Employer (including but not limited to products, employees, practices, policies or process).  You shall not use or disclose any trade secrets, confidential or proprietary information, directly or indirectly, or cause them to be used or disclosed in any manner, except as may be required or requested by Employer, by court order or under applicable law or regulation.  This paragraph shall survive the termination of this agreement.
8.	Return of Documents.  You expressly agree that all manuals, documents, files, reports, studies or other materials used and/or developed by you for Employer during the Term of this Agreement or prior thereto while you were employed by Employer are solely the property of Employer, and that you have no right, title or interest therein.  Upon termination of this Agreement, you or your representative shall promptly deliver possession of all such materials (including any copies thereof) to Employer.
9.	Notices.  All notices, demands or other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered in person, or sent by United States mail, certified or registered, with return receipt requested, if to you, addressed to you at your last residence address as shown in the records of Employer, and if to Employer, addressed to the President of Employer at Employer’s principal office.
10.	Governing Law and Jurisdiction.  This Agreement, the legal relations between the parties and any action instituted by any party arising under or in connection with this Agreement, shall be governed by and interpreted in accordance with the laws of the State of California.
11.	Arbitration.  Any dispute, controversy or claim arising out of or in respect of this Agreement (or its validity, interpretation or enforcement), the employment relationship or the subject matter hereof shall at the request of either party be submitted to and settled by arbitration conducted at a mutually convenient office of the Judicial Arbitration & Mediation Services, Inc. (“JAMS”).  Employer and Employee may agree on a retired judge from the JAMS panel.  If we are unable to agree upon a retired judge, JAMS will provide a list of three available judges and each party may strike one.  If two of the three judges are stricken, the remaining judge will serve as arbitrator.  If two arbitrators remain, the first judge listed shall serve as arbitrator.  Employer and you agree that arbitration must be initiated within two years after the claim breach occurred and that the failure to initiate arbitration within the two-year period constitutes an absolute bar to the institution of any new proceedings related to such alleged breach.  The aggrieved party can initiate arbitration by sending written notice of any intention to arbitrate by registered or certified mail to all parties and to JAMS.  The notice must contain a description of the dispute, the amount involved and the remedy sought.  The prevailing party in such proceeding will be entitled to the reasonable attorneys’ fees and expenses of counsel and costs incurred by reason of such arbitration.
12.	Benefit of Agreement.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that you may not assign any interest in this Agreement without the prior written consent of Employer.
13.	Captions.  Captions and paragraph heading used in this Agreement are for convenience only and shall not be used in interpreting this Agreement.

14.	Entire Agreement.  This Agreement contains the entire agreement of the parties with respect to your employment by Employer, and it expressly supersedes any and all other agreements, either oral or written, relating thereto.
15.	Severability.  Should any provision of this Agreement for any reason be declared invalid, void or unenforceable by a court of competent jurisdiction, the validity and binding effect of any remaining portions of this Agreement shall remain in full force and effect as if this Agreement had been executed with such invalid, void or unenforceable provisions eliminated; provided, however, that the remaining provisions still reflect the intent of the parties to this Agreement.
16.	Amendments.  This Agreement may not be amended or modified except by a written agreement signed by you and the President of the Bank.  This Agreement and any amendment thereof may be executed in counterparts.
17.	Non-Solicitation.  You agree that for a period of one year after the termination of employment you will not, except in the case of termination pursuant to Section 6(b) hereof, on behalf of the Employee or on behalf of any other individual, association or entity, call on any of the customers of Employer for the purpose of soliciting or inducing any of such customers to acquire (or providing to any of such customers) any product or service provided by Employer, nor will Employee in any way, directly or indirectly, as agent or otherwise, in any other manner solicit, influence or encourage such customers to take away or to divert or direct their business to Employee or any other person or entity by or with which Employee is employed, associated, affiliated or otherwise related.
18.	Employees.  Employee agrees that for a period of two years after the termination of Employee’s employment, except in the case of termination pursuant to Section 6(b) hereof, Employee will not, directly or indirectly, disrupt, damage, impair, or interfere with Employer’s business by soliciting, influencing, encouraging or recruiting any employee of Employer to work for Employee or any Employee Related Entity.
We look forward to your continued successful association with the Bank.  In order to confirm your agreement with and acceptance of the terms and conditions set forth above, please sign and date one copy of this Agreement where indicated below and return it to the Bank’s Human Resources Department.  The other copy is for your records.

Very truly yours,

/s/ RAY THOUSAND

Ray Thousand
President and CEO

I agree to the terms of employment set forth in this Agreement subject to approval of the Board of Directors of Pan American Bank.

/s/ GARLAND KOCH	July 18, 2002
Employee	Date

EXHIBIT B
Severance Compensation
Upon Termination Without Cause
Pursuant to 6(b)

If termination occurs during the first two years of the Term, the payment shall be equal to twelve (12) months salary at the then current base salary, plus prorated bonus through the date of termination.

If termination occurs in the third year, the amount paid shall be the actual amount of base salary remaining to be paid to the end of the Term, plus prorated bonus through the date of termination.

EXHIBIT A
Bonus Calculations

GOALS for 2002

	Bonus Level			% of Plan
UPFC Pretax Net Income	50% of base salary	$	15.6 MM Pretax NI	100	%
	37.5% of base salary	$	14.0 MM Pretax NI	90	%
	25% of base salary	$	12.7 MM Pretax NI	81	%
UACC Pretax Net Income	50% of base salary	$	13.0 MM Pretax NI	100	%
	37.5% of base salary	$	12.0 MM Pretax NI	95.5	%
	25% of base salary	$	11.0 MM Pretax NI	85	%
UACC Volume	Minimum $22MM Avg/mo for one (1) quarter
UACC Delinquency	Max 2% Average 30+ (incl. Repos)
UACC Charge offs	Max 6.75% Average charge off

The bonus calculation, including the amounts to be used for the goals as set forth above, shall be mutually agreed upon in years 2 and 3 based on the approved budget.

“Pre-tax profit” for UACC shall be based upon the amount reflected in the Bank’s internal financial statements for UACC without any allocation for Bank Corporate overhead, but including Cost of Funds charged by the Bank at 7% and assuming 6 to 1 leverage.

Attainment of goals/bonus assumes that there are no material changes in policy by the Bank that might materially affect or limit the Auto Finance Division Business Plan.  If any material changes in policy are made by the Bank, and not concurred in by you, then goals and bonus calculation will be adjusted accordingly upon mutual agreement of the parties.

Employee must be on the payroll at the end of the calendar year to be eligible for payment of a bonus regardless of length of service or reason for termination or resignation unless provided for specifically in the Employment Agreement.  If Employee is discharged by the Company for “Willful Misconduct” or any other reason set forth in Paragraph 6(a) of the Employment Agreement, any right of the Employee to a bonus shall be forfeited even if you are on the payroll at the end of the calendar year.

Bonus payments will be made within 60 days after the end of the calendar year allowing for the review of the results of operations. 

EX-10.111

Mr. Jim Warren
25965 Terra Bella
Laguna Hills, CA  92653 Exhibit 10.111

               Re:     Employment Agreement

Dear Mr. Warren:

This letter agreement and attachments hereto, (collectively the “Agreement”) set forth the terms and conditions of your employment with Pan American Bank, FSB (“Employer”) and its subsidiary United Auto Credit Corporation (“UACC”), both of which may be referred to interchangeably hereinafter as “Employer”.  By signing this Agreement, you will be agreeing to these terms.  It is important that you understand clearly both what your benefits are and what is expected of you by Employer.  The effective date of this Agreement (the “Effective Date”) shall be as of March 1, 2002, and will replace your previous agreement.

1.	Term.  This Agreement shall have a term of three (3) years, commencing as of the Effective Date (the “Term”).  Where used herein, “Term” shall refer to the entire period of your employment by Employer from and after the Effective Date, whether for the period provided above or as extended or terminated earlier as hereinafter provided.
2.	Duties.  You shall hold the office of Sr. Vice President – Operations of the Bank’s automobile finance subsidiary, (“UACC”).  You shall perform the duties customarily performed by individuals holding a similar title with other financial institutions or as otherwise may be agreed upon by Employer and you from time to time. During the Term hereof, you shall perform the services herein contemplated faithfully, diligently and to the best of your ability in compliance with instructions and policies of the Bank’s senior management, the Bank’s Board of Directors the Bank’s Federal Charter and Bylaws and with all applicable laws and regulations.
3.		Compensation.
		a)	Base Salary.  For your service rendered to the Bank or any subsidiary corporation hereunder, during the Term hereof, the Bank shall pay or cause to be paid a base salary to you at the rate of $150,000 per annum from March 1, 2002 to February 28, 2003 $150,000 per annum from March 1, 2003 to February 28, 2004 and $150,000 per annum from March 1, 2004 to February 28, 2005, payable in conformity with Bank’s normal payroll periods and procedures.
		b)	Bonus.  In addition to the base salary provided for under Section 3(a) above, you shall be entitled to annual bonus compensation in accordance with the incentive compensation formula set forth in Exhibit A to this Agreement.  Among other things, the incentive compensation formula establishes certain performance criteria and sales objectives by which the amount of your bonus compensation, if any, is to be determined.
		c)	Automobile Allowance.  You shall receive during the Term of this Agreement an automobile allowance of Two Hundred Dollars ($200) per month.
		d)	Options. Options will vest according to the separate INCENTIVE OPTION AGREEMENT dated March 31, 2002

4.	Other Benefits.  During the Term hereof and unless otherwise agreed to by the Bank and you:
	a)	Vacation.  You shall be entitled to a total of three (3) weeks paid vacation, the amount and term of which shall be determined in accordance with the policies of Employer as in effect from time to time.
	b)	Group Medical, Life Insurance and Other Benefits.  You will be eligible for the medical, dental, vision, life insurance and long-term disability plans that are generally applicable to your employment classification.
5.	Business Expenses.  You shall be entitled to reimbursement by Employer for any and all ordinary and necessary business expenses reasonably incurred by you in the performance of your duties and in acting for Employer during the Term of this Agreement, provided that you furnish to Employer adequate records and other documentation as may be required for the substantiation of such expenditures as a business expense of the Bank.
6.	Termination.
	a)	Termination for Cause.  The Bank’s Board may for cause terminate your employment at any time during the Term of this Agreement.  In such event, all of your rights under this Agreement shall terminate and you shall have no right to receive compensation, and other benefits shall cease for any period after the effective date of such termination for cause.  Any bonus compensation otherwise accrued shall be forfeited.  Termination for “cause” shall be defined as your personal dishonesty, willful misconduct, breach of fiduciary or duty of loyalty, continuing intentional or habitual failure to perform stated duties, violation of any law (other than minor traffic violations or similar misdemeanor offenses), rule or regulation adopted by the Office of Thrift Supervision, Federal Deposit Insurance Corporation or other regulatory agency with jurisdiction over Employer, any judgment, ruling or decree by any court of competent jurisdiction or administrative body that precludes or impairs your ability to perform the services contemplated by this Agreement or any material breach by you of any provision of this Agreement.
	b)	Termination Without Cause.  Employer may terminate your employment without cause at any time during the Term of this Agreement.  In the event that Employer terminates your employment without cause, you shall be entitled to receive as severance compensation an amount as provided in Exhibit B.  The severance payment under this Section 6(b) shall be provided in a lump sum or, at your election, in equal monthly installments for a period not to exceed six (6) months from the date of termination.  This payment shall be in lieu of any and all other compensation due under the agreement unless previously vested or earned, except the amount of any bonus compensation payable to you under Section 3(b) hereof, shall be prorated through the date of termination.
	c)	Compliance with Law and Regulation.  You and Employer expressly acknowledge and agree that any payments made to you pursuant to this Agreement or otherwise are subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.
	d)	Suspension and Removal Orders.  If you are suspended and/or temporarily prohibited from participating in the conduct of Employer’s affairs by notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section 1818 (e)(3) and (g)(1)), the Bank’s obligations under this Agreement shall be suspended as of the

	date of service, unless stayed by appropriate proceeding.  If the charges in the notice are dismissed, the Bank may in its discretion: (I) pay you all or part of the compensation withheld while its obligations under this Agreement were suspended; and (ii) reinstate (in whole or in part) any of its obligations which were suspended.  If you are removed and/or permanently prohibited from participating in the conduct of Employer’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties shall not be affected.
e)	Termination by Default.  If Employer is in default (as defined in Section 3(x)(1) of the Federal Deposit Insurance Action (12 U.S.C. Section 1813(x)(1)), all obligations under this Agreement shall terminate as of the date of default, but vested rights of the parties shall not be affected.
f)	Supervisory Assistance or Merger.  All obligations under this Agreement shall be terminated, except to the extent that it is determined that continuation of the Agreement is necessary for the continued operation of Employer: (I) by the Director of the Office of Thrift Supervision (the “Director”) or his or her designee, at the time that the Federal Deposit Insurance Corporation enters into an agreement to provide assistance to or on behalf of Employer under the authority contained in Section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. Section 1823(c)); or (ii) by the Director or his or her designee, at the time that the Director or his or her designee approves a supervisory merger to resolve problems related to the operation of Employer or when Employer is in an unsafe or unsound condition.  All rights of the parties that have already vested, however, shall not be affected by such action.
g)	Disability.  In the event that you shall fail, because of illness, incapacity or injury, to render the services contemplated by this Agreement for three (3) consecutive calendar months, or for shorter periods aggregating four (4) months in any twelve (12) month period, your employment hereunder may be terminated by written notice from Employer to you.  In the event that your employment is terminated under this Section 6(g), you shall receive the difference between any disability payments provided through insurance plans offered by Employer, if any, provided you have enrolled in such plans and paid the cost thereof, and your base salary as set forth in Section 3(a) hereof, for six months after notice from Employer, plus the amount of any bonus compensation payable to you under Section 3(b) hereof, prorated through the date of termination.  Such termination shall not affect any rights, which you may have pursuant to any insurance or other death benefit, or any stock option plans, or options thereunder, which rights shall continue to be governed by the provisions of such plans and arrangements.
h)	Death.  If your employment is terminated by reason of your death, this Agreement shall terminate without further obligations of Employer to you (or your heirs or legal representatives) under this Agreement, other than for payment of: (i) your base salary (as set forth in Section 3(a) hereof) through the date of termination; (ii) the amount of any bonus compensation payable to you under Section 3(b) above, prorated through the date of termination; (iii) any compensation previously deferred by you; (iv) any accrued vacation and/.or sick leave pay; and (v) any amounts due pursuant to the terms of any applicable welfare benefit plan.  All of the foregoing amounts shall be paid to

		your estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days after the date of termination or earlier as required by applicable law.
7.	Disclosure or Use of Employer’s Trade Secrets.  During the Term hereof, you will have access to and become acquainted with what you and Employer acknowledge are trade secrets or confidential or proprietary information of Employer (including but not limited to products, employees, practices, policies or process).  You shall not use or disclose any trade secrets, confidential or proprietary information, directly or indirectly, or cause them to be used or disclosed in any manner, except as may be required or requested by Employer, by court order or under applicable law or regulation.  This paragraph shall survive the termination of this agreement.
8.	Return of Documents.  You expressly agree that all manuals, documents, files, reports, studies or other materials used and/or developed by you for Employer during the Term of this Agreement or prior thereto while you were employed by Employer are solely the property of Employer, and that you have no right, title or interest therein.  Upon termination of this Agreement, you or your representative shall promptly deliver possession of all such materials (including any copies thereof) to Employer.
9.	Notices.  All notices, demands or other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered in person, or sent by United States mail, certified or registered, with return receipt requested, if to you, addressed to you at your last residence address as shown in the records of Employer, and if to Employer, addressed to the President of Employer at Employer’s principal office.
10.	Governing Law and Jurisdiction.  This Agreement, the legal relations between the parties and any action instituted by any party arising under or in connection with this Agreement, shall be governed by and interpreted in accordance with the laws of the State of California.
11.	Arbitration.  Any dispute, controversy or claim arising out of or in respect of this Agreement (or its validity, interpretation or enforcement), the employment relationship or the subject matter hereof shall at the request of either party be submitted to and settled by arbitration conducted at a mutually convenient office of the Judicial Arbitration & Mediation Services, Inc. (“JAMS”).  Employer and Employee may agree on a retired judge from the JAMS panel.  If we are unable to agree upon a retired judge, JAMS will provide a list of three available judges and each party may strike one.  If two of the three judges are stricken, the remaining judge will serve as arbitrator.  If two arbitrators remain, the first judge listed shall serve as arbitrator.  Employer and you agree that arbitration must be initiated within two years after the claim breach occurred and that the failure to initiate arbitration within the two-year period constitutes an absolute bar to the institution of any new proceedings related to such alleged breach.  The aggrieved party can initiate arbitration by sending written notice of any intention to arbitrate by registered or certified mail to all parties and to JAMS.  The notice must contain a description of the dispute, the amount involved and the remedy sought.  The prevailing party in such proceeding will be entitled to the reasonable attorneys’ fees and expenses of counsel and costs incurred by reason of such arbitration.
12.	Benefit of Agreement.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that you may not assign any interest in this Agreement without the prior written consent of Employer.
13.	Captions.  Captions and paragraph heading used in this Agreement are for convenience only and shall not be used in interpreting this Agreement.

14.	Entire Agreement.  This Agreement contains the entire agreement of the parties with respect to your employment by Employer, and it expressly supersedes any and all other agreements, either oral or written, relating thereto.
15.	Severability.  Should any provision of this Agreement for any reason be declared invalid, void or unenforceable by a court of competent jurisdiction, the validity and binding effect of any remaining portions of this Agreement shall remain in full force and effect as if this Agreement had been executed with such invalid, void or unenforceable provisions eliminated; provided, however, that the remaining provisions still reflect the intent of the parties to this Agreement.
16.	Amendments.  This Agreement may not be amended or modified except by a written agreement signed by you and the President of the Bank.  This Agreement and any amendment thereof may be executed in counterparts.
17.	Non-Solicitation.  You agree that for a period of one year after the termination of employment you will not, except in the case of termination pursuant to Section 6(b) hereof, on behalf of the Employee or on behalf of any other individual, association or entity, call on any of the customers of Employer for the purpose of soliciting or inducing any of such customers to acquire (or providing to any of such customers) any product or service provided by Employer, nor will Employee in any way, directly or indirectly, as agent or otherwise, in any other manner solicit, influence or encourage such customers to take away or to divert or direct their business to Employee or any other person or entity by or with which Employee is employed, associated, affiliated or otherwise related.
18.	Employees.  Employee agrees that for a period of two years after the termination of Employee’s employment, except in the case of termination pursuant to Section 6(b) hereof, Employee will not, directly or indirectly, disrupt, damage, impair, or interfere with Employer’s business by soliciting, influencing, encouraging or recruiting any employee of Employer to work for Employee or any Employee Related Entity.
We look forward to your continued successful association with the Bank.  In order to confirm your agreement with and acceptance of the terms and conditions set forth above, please sign and date one copy of this Agreement where indicated below and return it to the Bank’s Human Resources Department.  The other copy is for your records.

Very truly yours,

/s/ RAY THOUSAND

Ray Thousand
President and CEO

I agree to the terms of employment set forth in this Agreement subject to approval of the Board of Directors of Pan American Bank.

/s/ JIM WARREN	July 18, 2002
Employee	Date

EXHIBIT B
Severance Compensation
Upon Termination Without Cause
Pursuant to 6(b)

If termination occurs during the first two years of the Term, the payment shall be equal to twelve (12) months salary at the then current base salary, plus prorated bonus through the date of termination.

If termination occurs in the third year, the amount paid shall be the actual amount of base salary remaining to be paid to the end of the Term, plus prorated bonus through the date of termination.

EXHIBIT A
Bonus Calculations

GOALS for 2002

	Bonus Level			% of Plan
UPFC Pretax Net Income	50% of base salary	$	15.6 MM Pretax NI	100	%
	37.5% of base salary	$	14.0 MM Pretax NI	90	%
	25% of base salary	$	12.7 MM Pretax NI	81	%
UACC Pretax Net Income	50% of base salary	$	13.0 MM Pretax NI	100	%
	37.5% of base salary	$	12.0 MM Pretax NI	95.5	%
	25% of base salary	$	11.0 MM Pretax NI	85	%
UACC Volume	Minimum $22MM Avg/mo for one (1) quarter
UACC Delinquency	Max 2% Average 30+ (incl. Repos)
UACC Charge offs	Max 6.75% Average charge off

The bonus calculation, including the amounts to be used for the goals as set forth above, shall be mutually agreed upon in years 2 and 3 based on the approved budget.

“Pre-tax profit” for UACC shall be based upon the amount reflected in the Bank’s internal financial statements for UACC without any allocation for Bank Corporate overhead, but including Cost of Funds charged by the Bank at 7% and assuming 6 to 1 leverage.

Attainment of goals/bonus assumes that there are no material changes in policy by the Bank that might materially affect or limit the Auto Finance Division Business Plan.  If any material changes in policy are made by the Bank, and not concurred in by you, then goals and bonus calculation will be adjusted accordingly upon mutual agreement of the parties.

Employee must be on the payroll at the end of the calendar year to be eligible for payment of a bonus regardless of length of service or reason for termination or resignation unless provided for specifically in the Employment Agreement.  If Employee is discharged by the Company for “Willful Misconduct” or any other reason set forth in Paragraph 6(a) of the Employment Agreement, any right of the Employee to a bonus shall be forfeited even if you are on the payroll at the end of the calendar year.

Bonus payments will be made within 60 days after the end of the calendar year allowing for the review of the results of operations. 

EX-10.112

Mr. Mario Radrigan
7 Arado
Rancho Santa Margarita, CA  92688 Exhibit 10.112

               Re:     Employment Agreement

Dear Mr. Radrigan:

This letter agreement and attachments hereto, (collectively the “Agreement”) set forth the terms and conditions of your employment with Pan American Bank, FSB (“Employer”) and its subsidiary United Auto Credit Corporation (“UACC”), both of which may be referred to interchangeably hereinafter as “Employer”.  By signing this Agreement, you will be agreeing to these terms.  It is important that you understand clearly both what your benefits are and what is expected of you by Employer.  The effective date of this Agreement (the “Effective Date”) shall be as of March 1, 2002 and will replace your previous agreement.

1.	Term. This Agreement shall have a term of three (3) years, commencing as of the Effective Date (the “Term”).  Where used herein, “Term” shall refer to the entire period of your employment by Employer from and after the Effective Date, whether for the period provided above or as extended or terminated earlier as hereinafter provided.
2.	Duties.  You shall hold the office of Sr. Vice President – Marketing of the Bank’s automobile finance subsidiary, (“UACC”).  You shall perform the duties customarily performed by individuals holding a similar title with other financial institutions or as otherwise may be agreed upon by Employer and you from time to time. During the Term hereof, you shall perform the services herein contemplated faithfully, diligently and to the best of your ability in compliance with instructions and policies of the Bank’s senior management, the Bank’s Board of Directors the Bank’s Federal Charter and Bylaws and with all applicable laws and regulations.
3.		Compensation.
		a)	Base Salary.  For your service rendered to the Bank or any subsidiary corporation hereunder, during the Term hereof, the Bank shall pay or cause to be paid a base salary to you at the rate of $150,000 per annum from March 1, 2002 to February 28, 2003 $150,000 per annum from March 1, 2003 to February 28, 2004 and $150,000 per annum from March 1, 2004 to February 28, 2005, payable in conformity with Bank’s normal payroll periods and procedures.
		b)	Bonus.  In addition to the base salary provided for under Section 3(a) above, you shall be entitled to annual bonus compensation in accordance with the incentive compensation formula set forth in Exhibit A to this Agreement.  Among other things, the incentive compensation formula establishes certain performance criteria and sales objectives by which the amount of your bonus compensation, if any, is to be determined.
		c)	Automobile Allowance.  You shall receive during the Term of this Agreement an automobile allowance of Two Hundred Dollars ($200) per month.
		d)	Options. Options will vest according to the separate INCENTIVE OPTION AGREEMENT dated March 31, 2002.

4.	Other Benefits.  During the Term hereof and unless otherwise agreed to by the Bank and you:
	a)	Vacation.  You shall be entitled to a total of three (3) weeks paid vacation, the amount and term of which shall be determined in accordance with the policies of Employer as in effect from time to time.
	b)	Group Medical, Life Insurance and Other Benefits.  You will be eligible for the medical, dental, vision, life insurance and long-term disability plans that are generally applicable to your employment classification.
5.	Business Expenses.  You shall be entitled to reimbursement by Employer for any and all ordinary and necessary business expenses reasonably incurred by you in the performance of your duties and in acting for Employer during the Term of this Agreement, provided that you furnish to Employer adequate records and other documentation as may be required for the substantiation of such expenditures as a business expense of the Bank.
6.	Termination.
	a)	Termination for Cause.  The Bank’s Board may for cause terminate your employment at any time during the Term of this Agreement.  In such event, all of your rights under this Agreement shall terminate and you shall have no right to receive compensation, and other benefits shall cease for any period after the effective date of such termination for cause.  Any bonus compensation otherwise accrued shall be forfeited.  Termination for “cause” shall be defined as your personal dishonesty, willful misconduct, breach of fiduciary or duty of loyalty, continuing intentional or habitual failure to perform stated duties, violation of any law (other than minor traffic violations or similar misdemeanor offenses), rule or regulation adopted by the Office of Thrift Supervision, Federal Deposit Insurance Corporation or other regulatory agency with jurisdiction over Employer, any judgment, ruling or decree by any court of competent jurisdiction or administrative body that precludes or impairs your ability to perform the services contemplated by this Agreement or any material breach by you of any provision of this Agreement.
	b)	Termination Without Cause.  Employer may terminate your employment without cause at any time during the Term of this Agreement.  In the event that Employer terminates your employment without cause, you shall be entitled to receive as severance compensation an amount as provided in Exhibit B.  The severance payment under this Section 6(b) shall be provided in a lump sum or, at your election, in equal monthly installments for a period not to exceed six (6) months from the date of termination.  This payment shall be in lieu of any and all other compensation due under the agreement unless previously vested or earned, except the amount of any bonus compensation payable to you under Section 3(b) hereof, shall be prorated through the date of termination.
	c)	Compliance with Law and Regulation.  You and Employer expressly acknowledge and agree that any payments made to you pursuant to this Agreement or otherwise are subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.
	d)	Suspension and Removal Orders.  If you are suspended and/or temporarily prohibited from participating in the conduct of Employer’s affairs by notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section 1818 (e)(3) and (g)(1)), the Bank’s obligations under this Agreement shall be suspended as of the

	date of service, unless stayed by appropriate proceeding.  If the charges in the notice are dismissed, the Bank may in its discretion: (I) pay you all or part of the compensation withheld while its obligations under this Agreement were suspended; and (ii) reinstate (in whole or in part) any of its obligations which were suspended.  If you are removed and/or permanently prohibited from participating in the conduct of Employer’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties shall not be affected.
e)	Termination by Default.  If Employer is in default (as defined in Section 3(x)(1) of the Federal Deposit Insurance Action (12 U.S.C. Section 1813(x)(1)), all obligations under this Agreement shall terminate as of the date of default, but vested rights of the parties shall not be affected.
f)	Supervisory Assistance or Merger.  All obligations under this Agreement shall be terminated, except to the extent that it is determined that continuation of the Agreement is necessary for the continued operation of Employer: (I) by the Director of the Office of Thrift Supervision (the “Director”) or his or her designee, at the time that the Federal Deposit Insurance Corporation enters into an agreement to provide assistance to or on behalf of Employer under the authority contained in Section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. Section 1823(c)); or (ii) by the Director or his or her designee, at the time that the Director or his or her designee approves a supervisory merger to resolve problems related to the operation of Employer or when Employer is in an unsafe or unsound condition.  All rights of the parties that have already vested, however, shall not be affected by such action.
g)	Disability.  In the event that you shall fail, because of illness, incapacity or injury, to render the services contemplated by this Agreement for three (3) consecutive calendar months, or for shorter periods aggregating four (4) months in any twelve (12) month period, your employment hereunder may be terminated by written notice from Employer to you.  In the event that your employment is terminated under this Section 6(g), you shall receive the difference between any disability payments provided through insurance plans offered by Employer, if any, provided you have enrolled in such plans and paid the cost thereof, and your base salary as set forth in Section 3(a) hereof, for six months after notice from Employer, plus the amount of any bonus compensation payable to you under Section 3(b) hereof, prorated through the date of termination.  Such termination shall not affect any rights, which you may have pursuant to any insurance or other death benefit, or any stock option plans, or options thereunder, which rights shall continue to be governed by the provisions of such plans and arrangements.
h)	Death.  If your employment is terminated by reason of your death, this Agreement shall terminate without further obligations of Employer to you (or your heirs or legal representatives) under this Agreement, other than for payment of: (i) your base salary (as set forth in Section 3(a) hereof) through the date of termination; (ii) the amount of any bonus compensation payable to you under Section 3(b) above, prorated through the date of termination; (iii) any compensation previously deferred by you; (iv) any accrued vacation and/.or sick leave pay; and (v) any amounts due pursuant to the terms of any applicable welfare benefit plan.  All of the foregoing amounts shall be paid to

		your estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days after the date of termination or earlier as required by applicable law.
7.	Disclosure or Use of Employer’s Trade Secrets.  During the Term hereof, you will have access to and become acquainted with what you and Employer acknowledge are trade secrets or confidential or proprietary information of Employer (including but not limited to products, employees, practices, policies or process).  You shall not use or disclose any trade secrets, confidential or proprietary information, directly or indirectly, or cause them to be used or disclosed in any manner, except as may be required or requested by Employer, by court order or under applicable law or regulation.  This paragraph shall survive the termination of this agreement.
8.	Return of Documents.  You expressly agree that all manuals, documents, files, reports, studies or other materials used and/or developed by you for Employer during the Term of this Agreement or prior thereto while you were employed by Employer are solely the property of Employer, and that you have no right, title or interest therein.  Upon termination of this Agreement, you or your representative shall promptly deliver possession of all such materials (including any copies thereof) to Employer.
9.	Notices.  All notices, demands or other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered in person, or sent by United States mail, certified or registered, with return receipt requested, if to you, addressed to you at your last residence address as shown in the records of Employer, and if to Employer, addressed to the President of Employer at Employer’s principal office.
10.	Governing Law and Jurisdiction.  This Agreement, the legal relations between the parties and any action instituted by any party arising under or in connection with this Agreement, shall be governed by and interpreted in accordance with the laws of the State of California.
11.	Arbitration.  Any dispute, controversy or claim arising out of or in respect of this Agreement (or its validity, interpretation or enforcement), the employment relationship or the subject matter hereof shall at the request of either party be submitted to and settled by arbitration conducted at a mutually convenient office of the Judicial Arbitration & Mediation Services, Inc. (“JAMS”).  Employer and Employee may agree on a retired judge from the JAMS panel.  If we are unable to agree upon a retired judge, JAMS will provide a list of three available judges and each party may strike one.  If two of the three judges are stricken, the remaining judge will serve as arbitrator.  If two arbitrators remain, the first judge listed shall serve as arbitrator.  Employer and you agree that arbitration must be initiated within two years after the claim breach occurred and that the failure to initiate arbitration within the two-year period constitutes an absolute bar to the institution of any new proceedings related to such alleged breach.  The aggrieved party can initiate arbitration by sending written notice of any intention to arbitrate by registered or certified mail to all parties and to JAMS.  The notice must contain a description of the dispute, the amount involved and the remedy sought.  The prevailing party in such proceeding will be entitled to the reasonable attorneys’ fees and expenses of counsel and costs incurred by reason of such arbitration.
12.	Benefit of Agreement.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that you may not assign any interest in this Agreement without the prior written consent of Employer.
13.	Captions.  Captions and paragraph heading used in this Agreement are for convenience only and shall not be used in interpreting this Agreement.

14.	Entire Agreement.  This Agreement contains the entire agreement of the parties with respect to your employment by Employer, and it expressly supersedes any and all other agreements, either oral or written, relating thereto.
15.	Severability.  Should any provision of this Agreement for any reason be declared invalid, void or unenforceable by a court of competent jurisdiction, the validity and binding effect of any remaining portions of this Agreement shall remain in full force and effect as if this Agreement had been executed with such invalid, void or unenforceable provisions eliminated; provided, however, that the remaining provisions still reflect the intent of the parties to this Agreement.
16.	Amendments.  This Agreement may not be amended or modified except by a written agreement signed by you and the President of the Bank.  This Agreement and any amendment thereof may be executed in counterparts.
17.	Non-Solicitation.  You agree that for a period of one year after the termination of employment you will not, except in the case of termination pursuant to Section 6(b) hereof, on behalf of the Employee or on behalf of any other individual, association or entity, call on any of the customers of Employer for the purpose of soliciting or inducing any of such customers to acquire (or providing to any of such customers) any product or service provided by Employer, nor will Employee in any way, directly or indirectly, as agent or otherwise, in any other manner solicit, influence or encourage such customers to take away or to divert or direct their business to Employee or any other person or entity by or with which Employee is employed, associated, affiliated or otherwise related.
18.	Employees.  Employee agrees that for a period of two years after the termination of Employee’s employment, except in the case of termination pursuant to Section 6(b) hereof, Employee will not, directly or indirectly, disrupt, damage, impair, or interfere with Employer’s business by soliciting, influencing, encouraging or recruiting any employee of Employer to work for Employee or any Employee Related Entity.
We look forward to your continued successful association with the Bank.  In order to confirm your agreement with and acceptance of the terms and conditions set forth above, please sign and date one copy of this Agreement where indicated below and return it to the Bank’s Human Resources Department.  The other copy is for your records.

Very truly yours,

/s/ RAY THOUSAND

Ray Thousand
President and CEO

I agree to the terms of employment set forth in this Agreement subject to approval of the Board of Directors of Pan American Bank.

/s/ MARIO RADRIGAN	July 18, 2002
Employee	Date

EXHIBIT B
Severance Compensation
Upon Termination Without Cause
Pursuant to 6(b)

If termination occurs during the first two years of the Term, the payment shall be equal to twelve (12) months salary at the then current base salary, plus prorated bonus through the date of termination.

If termination occurs in the third year, the amount paid shall be the actual amount of base salary remaining to be paid to the end of the Term, plus prorated bonus through the date of termination.

EXHIBIT A
Bonus Calculations

GOALS for 2002

	Bonus Level			% of Plan
UPFC Pretax Net Income	50% of base salary	$	15.6 MM Pretax NI	100	%
	37.5% of base salary	$	14.0 MM Pretax NI	90	%
	25% of base salary	$	12.7 MM Pretax NI	81	%
UACC Pretax Net Income	50% of base salary	$	13.0 MM Pretax NI	100	%
	37.5% of base salary	$	12.0 MM Pretax NI	95.5	%
	25% of base salary	$	11.0 MM Pretax NI	85	%
UACC Volume	Minimum $22MM Avg/mo for one (1) quarter
UACC Delinquency	Max 2% Average 30+ (incl. Repos)
UACC Charge offs	Max 6.75% Average charge off

The bonus calculation, including the amounts to be used for the goals as set forth above, shall be mutually agreed upon in years 2 and 3 based on the approved budget.

“Pre-tax profit” for UACC shall be based upon the amount reflected in the Bank’s internal financial statements for UACC without any allocation for Bank Corporate overhead, but including Cost of Funds charged by the Bank at 7% and assuming 6 to 1 leverage.

Attainment of goals/bonus assumes that there are no material changes in policy by the Bank that might materially affect or limit the Auto Finance Division Business Plan.  If any material changes in policy are made by the Bank, and not concurred in by you, then goals and bonus calculation will be adjusted accordingly upon mutual agreement of the parties.

Employee must be on the payroll at the end of the calendar year to be eligible for payment of a bonus regardless of length of service or reason for termination or resignation unless provided for specifically in the Employment Agreement.  If Employee is discharged by the Company for “Willful Misconduct” or any other reason set forth in Paragraph 6(a) of the Employment Agreement, any right of the Employee to a bonus shall be forfeited even if you are on the payroll at the end of the calendar year.

Bonus payments will be made within 60 days after the end of the calendar year allowing for the review of the results of operations. 

EX-99.1

Exhibit 99.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Quarterly Report of United Pan Am Financial Corp (the “Company”) on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Guillermo Bron certifies in his capacity as Chairman and Chief Executive Officer of the Company, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(a) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act of 1934, as amended, and

(b) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

         IN WITNESS WHEREOF, the undersigned have hereunto signed this Certification as of November 7, 2002.

/s/ GUILLERMO BRON

Guillermo Bron
Chairman and Chief Executive Officer

EX-99.2

Exhibit 99.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Quarterly Report of United Pan Am Financial Corp (the “Company”) on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Garland W. Koch certifies in his capacity as Senior Vice President and Chief Financial Officer of the Company, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(a) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act of 1934, as amended, and

(b) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

         IN WITNESS WHEREOF, the undersigned have hereunto signed this Certification as of November 7, 2002.

/s/ GARLAND W. KOCH

Garland W. Koch
Senior Vice President and Chief Financial Officer