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, 2007

¨	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	94-3211687
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

18191 Von Karman Avenue, Suite 300 Irvine, CA	92612
(Address of Principal Executive Offices)	(Zip Code)

(949) 224-1917

(Registrant’s Telephone Number, Including Area Code)

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 ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the Registrant’s Common Stock as of October 31, 2007 was 15,732,399 shares.

UNITED PANAM FINANCIAL CORP.

FORM 10-Q

September 30, 2007

INDEX

		Page
	Cautionary Statement	1

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Financial Condition as of September 30, 2007 and December 31, 2006	2

	Consolidated Statements of Income for the three and nine months ended September 30, 2007 and 2006	3

	Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2007 and 2006	4

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	27

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.	Defaults Upon Senior Securities	28

Item 4.	Submission of Matters to a Vote of Security Holders	28

Item 5.	Other Information	29

Item 6.	Exhibits	29

CAUTIONARY STATEMENT

Certain statements contained in this Quarterly Report on Form 10-Q, as well as some statements by us in periodic press releases and some oral statements by our officials to securities analysts and shareholders during presentations about us are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, or the Act. Statements which are predictive in nature, which depend upon or refer to future events or conditions, or which include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “hopes,” “assumes,” “may,” “project,” “will” and similar expressions constitute forward-looking statements. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions, which may be provided by management are also forward-looking statements as defined in the Act. Forward-looking statements are based upon expectations and projections about future events and are subject to assumptions, risks and uncertainties about, among other things, our company and economic and market factors. Actual events and results may differ materially from those expressed or forecasted in the forward-looking statements due to a number of factors. The principal factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, our dependence on securitizations, our need for substantial liquidity to run our business, loans we made to credit-impaired borrowers, reliance on operational systems and controls and key employees, competitive pressure we face, changes in the interest rate environment, rapid growth of our businesses, general economic conditions, and other factors or conditions described under “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q. Our past performance and past or present economic conditions are not indicative of our future performance or of future economic conditions. Undue reliance should not be placed on forward-looking statements. In addition, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events or changes to projections over time unless required by federal securities law.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Financial Condition

	September 30, 2007			December 31, 2006
*(Dollars in thousands)*	(Unaudited)			(Audited)
Assets
Cash	$	9,928		$	8,389
Short term investments		6,984			19,905
Cash and cash equivalents		16,912			28,294
Restricted cash		72,145			67,987
Loans		898,373			774,075
Allowance for loan losses		(46,050	)		(36,037	)
Loans, net		852,323			738,038
Premises and equipment, net		6,779			5,034
Interest receivable		10,186			9,018
Other assets		32,277			31,118
Total assets	$	990,622		$	879,489
Liabilities and Shareholders’ Equity
Securitization notes payable	$	617,704		$	698,337
Warehouse line of credit		193,202			—
Accrued expenses and other liabilities		10,853			10,977
Junior subordinated debentures		10,310			10,310
Total liabilities		832,069			719,624
Preferred stock (no par value):
Authorized, 2,000,000 shares; no shares issued and outstanding at September 30, 2007 and December 31, 2006		—			—
Common stock (no par value):
Authorized, 30,000,000 shares; 15,732,399 and 16,713,838 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively		49,081			60,614
Retained earnings		109,472			99,251
Total shareholders’ equity		158,553			159,865
Total liabilities and shareholders’ equity	$	990,622		$	879,489

See notes to the consolidated financial statements

United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
*(In thousands, except per share data)*	2007		2006		2007		2006
Interest Income
Loans	$	58,668	$	49,967	$	166,966	$	140,999
Short term investments and restricted cash		1,058		848		3,039		2,145
Total interest income		59,726		50,815		170,005		143,144
Interest Expense
Securitization notes payable		10,171		7,906		27,922		19,538
Warehouse line of credit		2,058		1,549		5,924		5,431
Other interest expense		303		219		801		615
Total interest expense		12,532		9,674		34,647		25,584
Net interest income		47,194		41,141		135,358		117,560
Provision for loan losses		20,031		13,016		48,536		29,555
Net interest income after provision for loan losses		27,163		28,125		86,822		88,005
Non-interest Income
Redemption of preferred stock-investment in AirTime Technologies, Inc.		—		—		—		520
Other non-interest income		469		320		1,316		868
Total non-interest income		469		320		1,316		1,388
Non-interest Expense
Compensation and benefits		15,054		13,147		45,987		37,841
Occupancy		2,372		1,901		6,818		5,365
Other non-interest expense		6,303		5,804		18,659		15,943
Total non-interest expense		23,729		20,852		71,464		59,149
Income from continuing operations before income taxes		3,903		7,593		16,674		30,244
Income taxes		1,345		3,091		6,453		12,259
Income from continuing operations		2,558		4,502		10,221		17,985
Loss from discontinued operations, net of tax		—		—		—		(684	)
Net income	$	2,558	$	4,502	$	10,221	$	17,301
Earnings (loss) per share-basic:
Continuing operations	$	0.16	$	0.26	$	0.64	$	1.03
Discontinued operations		—		—		—		(0.04	)
Net income	$	0.16	$	0.26	$	0.64	$	0.99
Weighted average basic shares outstanding		15,732		17,173		15,990		17,524
Earnings (loss) per share-diluted:
Continuing operations	$	0.16	$	0.25	$	0.62	$	0.95
Discontinued operations		—		—		—		(0.04	)
Net income	$	0.16	$	0.25	$	0.62	$	0.91
Weighted average diluted shares outstanding		16,044		18,121		16,558		18,955

See notes to the consolidated financial statements

United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

	Number of Shares			Common Stock			Retained Earnings		Unrealized Loss On Securities, Net			Total Shareholders’ Equity
	(Dollars in thousands)
Balance, December 31, 2005		17,120,250		$	76,054		$	80,182	$	(1,321	)	$	154,915
Net income		—			—			17,301		—			17,301
Exercise of stock options, net		669,528			(9,334	)		—		—			(9,334	)
Tax effect of exercised stock options		—			11,150			—		—			11,150
Repurchase of common stock		(1,000,000	)		(18,484	)		—		—			(18,484	)
Stock-based compensation expense		—			1,754			—		—			1,754
Loss on disposition of securities, net		—			—			—		1,321			1,321
Balance, September, 2006		16,789,778		$	61,140		$	97,483	$	—		$	158,623
Balance, December 31, 2006		16,713,838		$	60,614		$	99,251	$	—		$	159,865
Net income		—			—			10,221		—			10,221
Exercise of stock options, net		31,774			143			—		—			143
Tax effect of exercised stock options		—			112			—		—			112
Repurchase of common stock		(1,013,213	)		(13,188	)		—		—			(13,188	)
Stock-based compensation expense		—			1,400			—		—			1,400
Balance, September 30, 2007		15,732,399		$	49,081		$	109,472	$	—		$	158,553

See notes to the consolidated financial statements

United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
*(Dollars in thousands)*	2007			2006
Cash Flows from Operating Activities:
Income from continuing operations	$	10,221		$	17,985
Reconciliation of income from continuing operations to net cash provided by operating activities:
Provision for loan losses		48,536			29,555
Accretion of discount on loans		(20,726	)		(17,694	)
Depreciation and amortization		1,779			1,402
Stock-based compensation		1,400			1,754
Tax benefit from stock-based compensation		(542	)		(711	)
Increase in accrued interest receivable		(1,168	)		(1,105	)
Increase in other assets		(1,159	)		(8,085	)
(Decrease) increase in accrued expenses and other liabilities		(124	)		1,398
Net cash provided by operating activities of continuing operations		38,217			24,499
Loss from discontinued operations		—			(684	)
Net cash provided by operating activities		38,217			23,815
Cash Flows from Investing Activities:
Purchases, net of repayments, of loans		(142,095	)		(138,607	)
Change in assets of discontinued operations		—			496,639
Purchase of premises and equipment		(3,524	)		(2,527	)
Net cash (used in) provided by investing activities		(145,619	)		355,505
Cash Flows from Financing Activities:
Change in liabilities of discontinued operations		—			(459,519	)
Proceeds from warehouse line of credit		442,582			349,325
Repayments of warehouse line of credit		(249,380	)		(251,074	)
Proceeds from residual line of credit		36,231			—
Repayments of residual line of credit		(36,231	)		—
Proceeds from securitization		250,000			242,000
Payments on securitization notes payable		(330,633	)		(233,820	)
Increase in restricted cash		(4,158	)		(14,146	)
Proceeds from exercise of stock options		255			1,816
Repurchase of common stock		(13,188	)		(18,484	)
Tax benefit from stock-based compensation		542			711
Net cash provided by (used in) financing activities		96,020			(383,191	)
Net decrease in cash and cash equivalents		(11,382	)		(3,871	)
Cash and cash equivalents at beginning of period		28,294			21,295
Cash and cash equivalents at end of period	$	16,912		$	17,424
Supplemental Disclosures of Cash Payments Made for:
Interest	$	34,297		$	30,100
Income taxes	$	8,971		$	9,184

See notes to the consolidated financial statements

United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements

(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, into the Company. Unless the context indicates otherwise, all references to the Company include the previous Delaware corporation. The Company was originally organized as a holding company for PAFI, Inc. (“PAFI”) and Pan American Bank, FSB (the “Bank”) to purchase certain assets and assume certain liabilities of Pan American Federal Savings Bank.

On April 22, 2005, PAFI was merged with and into the Company, and United Auto Credit Corporation (“UACC”) became a direct wholly-owned subsidiary of the Company. Prior to its dissolution on February 11, 2005, the Bank was a direct wholly-owned subsidiary of PAFI, and UACC was a direct wholly-owned subsidiary of the Bank.

On September 2, 2005, BVG West Corp. (“BVG”) was merged with and into UPFC Sub I, Inc., a direct wholly-owned subsidiary of the Company. In this merger, the former stockholders of BVG received the same number of shares of our common stock which BVG owned prior to the merger, based on percentages that such stockholders indirectly owned such shares through BVG immediately prior to the effective time of the merger. The Company’s total outstanding shares did not change as a result of the merger, nor did the underlying beneficial ownership of those shares.

At September 30, 2007, UACC was a direct wholly-owned subsidiary of the Company, and United Auto Business Operations, LLC (“UABO”), UPFC Auto Receivables Corporation (“UARC”), UPFC Auto Financing Corporation (“UAFC”) and UPFC Funding Corporation (“UFC”) were direct wholly-owned subsidiaries of UACC. UARC and UAFC are entities whose business is limited to the purchase of automobile contracts from UACC and UABO in connection with the securitization of such contracts and UFC is an entity whose business is limited to the purchase of such contracts from UACC and UABO in connection with warehouse funding of such contracts.

2.	Discontinued Operations

On March 30, 2006, the Company discontinued its operations related to its investment segment and sold its investment securities portfolio to focus solely on its automobile finance business and to provide additional transparency to the public regarding the actual returns of its automobile finance operations. The Company had maintained its investment securities portfolio to generate a reasonable rate of return on the Company’s equity capital. Prior to the completion of this sale, the Company’s investment securities portfolio consisted of $276.0 million in investment securities, and was financed with $262.1 million of repurchase agreements. The Company satisfied these repurchase agreements with the proceeds of this sale.

The following amounts have been segregated from continuing operations and reflected as discontinued operations.

*(Dollars in thousands)*	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Revenue from discontinued operations	$	—	$	—	$	—	$	4,782
Expense from discontinued operations	$	—	$	—	$	—	$	5,922
Loss from discontinued operations	$	—	$	—	$	—	$	(684	)

3.	Basis of Presentation

The consolidated financial statements include the accounts of the Company and all subsidiaries including certain special purpose financing trusts utilized in securitization transactions, which are considered variable interest entities. All significant inter-company accounts and transactions have been eliminated in consolidation.

These unaudited 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 are of normal recurring nature and 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, 2006. In preparing these consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and assumptions included in the Company’s consolidated financial statements relate to the allowance for loan losses, estimates of loss contingencies, accruals and stock-based compensation forfeiture rates. Certain amounts in the 2006 consolidated financial statements have been reclassified to conform with the consolidated financial statement presentation in 2007.

4.	Recent Accounting Developments

In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of the statement is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The provisions of SFAS No. 159 are effective for fiscal years beginning after November 15, 2007. Management is currently evaluating the impact of the adoption of this statement; however, it is not expected to have a material impact on our consolidated financial position, results of operation or cash flows.

In September 2006, FASB issued SFAS No. 157, Fair Value Measurement. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. The Statement does not require any new fair value measurements but could change the current practices in measuring current fair value measurements. The Statement is effective for fiscal years beginning after November 15, 2007. Management is currently evaluating the impact of the adoption of this statement; however, it is not expected to have a material impact on our consolidated financial position, results of operation or cash flows.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

5.	Restricted Cash

Restricted cash relates to $29.8 million of deposits held as collateral for securitized obligations and warehouse liabilities at September 30, 2007 compared with $29.9 million at December 31, 2006. Additionally, $42.3 million at September 30, 2007 relates to cash that is in process of being applied to the pay down of securitized obligations and warehouse liabilities compared with $38.1 million at December 31, 2006.

Loans

Loans are summarized as follows:

	September 30, 2007			December 31, 2006
	(Dollars in thousands)
Loans securitized	$	682,243		$	768,012
Loans unsecuritized		263,810			48,019
Unearned finance charges		(1,952	)		(2,507	)
Unearned acquisition discount		(45,728	)		(39,449	)
Allowance for loan losses		(46,050	)		(36,037	)
Total loans, net	$	852,323		$	738,038
Allowance for loan losses to gross loans net of unearned acquisition discounts		5.13	%		4.66	%
Unearned acquisition discounts to gross loans		4.84	%		4.85	%
Average percentage rate to customers		22.62	%		22.66	%

Loans securitized represent loans transferred to the Company’s special purpose finance subsidiaries in securitization transactions accounted for as secured financings. Loans unsecuritized include $226.1 million and $26.7 million pledged under the Company’s warehouse facilities as of September 30, 2007 and December 31, 2006, respectively.

The activity in the allowance for loan losses consists of the following:

	Nine Months Ended September 30,
	2007			2006
	(Dollars in thousands)
Allowance for loan losses at beginning of period	$	36,037		$	29,110
Provision for loan losses		48,536			29,555
Net charge-offs		(38,523	)		(25,760	)
Allowance for loan losses at end of period	$	46,050		$	32,905

The allowance for loan losses is the estimate of probable losses in our loan portfolio for the next twelve months as of the statement of financial condition date. The level of the allowance is based principally on historical loss trends and the remaining balance of loans. The Company believes that the allowance for loan losses is currently adequate to absorb probable loan losses in the loans balance as of September 30, 2007 and ultimate losses may vary from current estimates. It is possible that others, given the same information, may reach different conclusions and such differences could be material. To the extent that the analyses considered in determining the allowance for loan losses are not indicative of future performance or other assumptions used by the Company do not prove to be accurate, loss experience could differ significantly from the estimate, resulting in higher or lower future provision for loan losses.

7.	Borrowings

Securitizations

Our securitizations are structured as on-balance-sheet transactions and recorded as secured financings because they do not meet the accounting criteria for sale of finance receivables under FAS 140. Regular contract securitizations are an integral part of our business plan going forward in order to increase our liquidity and reduce risks associated with interest rate fluctuations. We have developed a securitization program that involves selling interests in pools of our automobile contracts to investors through the public issuance of AAA/Aaa rated asset-backed securities. We retain the servicing rights for the loans which have been securitized. Upon the issuance of securitization notes payable, we retain the right to receive over time excess cash flows from the underlying pool of securitized automobile contracts. Debt issuance costs are amortized over the expected term of the securitization using the interest method. Unamortized costs of $3.0 million and $3.3 million as of September 30, 2007 and December 31, 2006, respectively, are included in other assets on the consolidated statements of financial condition.

In our securitizations to date, we transferred automobile contracts we purchased from new and used automobile dealers to a newly formed owner trust for each transaction, which trust then issued the securitization notes payable. The net proceeds of our first securitization were used to replace the Bank’s deposit liabilities and the net proceeds of our subsequent securitization transactions were used to fund our operations. At the time of securitization of our automobile contracts, we are required to pledge assets equal to a specific percentage of the securitization pool to support the securitization transaction. Typically, the assets pledged consist of cash deposited to a restricted account known as a spread account and additional receivables delivered to the trusts, which create over-collateralization. The securitization transaction documents require the percentage of assets pledged to support the transaction to increase over time until a specific level is attained. Excess cash flow generated by the trusts is used to pay down the outstanding debt of the trusts, increasing the level of over-collateralization until the required percentage level of assets has been reached. Once the required percentage level of assets is reached and maintained, excess cash flows generated by the trusts are released to us as distributions from the trusts.

We have arranged for credit enhancement to improve the credit rating and reduce the interest rate on the asset-backed securities issued. This credit enhancement for our securitizations has been in the form of financial guaranty insurance policies insuring the payment of principal and interest due on the asset-backed securities. Agreements with our financial guaranty insurance insurers provide that if portfolio performance ratios (delinquency and net charge-offs as a percentage of automobile contract outstanding) in a trust’s pool of automobile contracts exceed certain targets, the over-collateralization and spread account levels would be increased. Agreements with our financial guaranty insurance insurers also contain additional specified targeted portfolio performance ratios. If, at any measurement date, the targeted portfolio performance ratios with respect to any trust whose securities are insured were to exceed these additional levels, provisions of the agreements permit our financial guaranty insurance providers to terminate our servicing rights to the automobile contracts sold to that trust. Although we do not anticipate violating any event of default triggers for our securitizations, there can be no assurance that our servicing rights with respect to the automobile receivables in the trusts will not be terminated if (i) such targeted portfolio performance ratios are breached, (ii) we breach our obligations under the servicing agreements, (iii) the financial guaranty insurance providers are required to make payments under a policy, or (iv) certain bankruptcy or insolvency events were to occur. The termination of any or all of our servicing rights would have a material adverse effect on our financial position, liquidity, results of operations and cash flows. As of September 30, 2007, we were in compliance with all terms of the financial covenants related to our securitization transactions.

The following table lists each of our securitizations as of September 30, 2007:

Issue Number	Issuance Date		Maturity Date(1)		Original Balance		Remaining Balance at September 30, 2007
(Dollars in thousands)
2004A		September 22, 2004		September 2010	$	420,000	$	—
2005A		April 14, 2005		December 2010	$	195,000	$	37,738
2005B		November 10, 2005		August 2011	$	225,000	$	71,764
2006A		June 15, 2006		May 2012	$	242,000	$	119,842
2006B		December 14, 2006		August 2012	$	250,000	$	166,748
2007A		June 14, 2007		July 2013	$	250,000	$	221,612
				Total	$	1,582,000	$	617,704

___________________________

(1) Contractual maturity of the last class of notes issued by the related securitization owner trust.

Assets pledged to the trusts as of September 30, 2007 and December 31, 2006 is as follows:

	September 30, 2007		December 31, 2006
	(Dollars in thousands)
Automobile contracts, net	$	682,243	$	768,012
Restricted cash	$	25,254	$	29,221
Total assets pledged	$	707,497	$	797,233

A summary of our securitization activity and cash flows from the trusts is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
	(Dollars in thousands)
Receivables securitized	$	—	$	—	$	268,817	$	260,215
Proceeds from securitization	$	—	$	—	$	250,000	$	242,000
Distribution from the trusts	$	30,501	$	21,070	$	72,009	$	58,898

In addition, as servicer we have the option to purchase the owner trust estate when the pool balance falls below 10% of the original balance of loans securitized. In August 2007, we executed a clean up call on the remaining 10% of the notes payable that were issued in our 2004A securitization transaction. We anticipate that we will continue to execute clean up calls for our securitizations in the future.

In order to assist our borrowers who have been adversely impacted by the rise in gasoline pries, we increased our extension usage. Under our current servicing agreements, we are required to repurchase loans under our securitizations if we are in excess of extension performance targets. As a result, we repurchased $10.8 million loans during the nine months ended September 30, 2007. We funded the purchase price for the repurchase by obtaining advances under our existing warehouse facility. The repurchased loans have been securitized in the 2007B transaction.

As of September 30, 2007 we were in compliance with all terms of the financial covenants related to our securitization transactions.

On October 31, 2007, we priced a $250 million offering of automobile receivables-backed securities. The securities will be issued via an owner trust, United Automobile Receivables Trust 2007-B, in three classes of Notes:

Note Class

Amount

Average Life

Price

Coupon Rate

Standard & Poor's

Moody's

A-1

58,000,000

0.27 years

100.00000

4.98685%

A-1+

Prime-1

A-2

93,000,000

1.05 years

99.99110

5.75%

AAA

Aaa

A-3

99,000,000

2.40 years

99.98087

6.15%

AAA

Aaa

The weighted average coupon on the Notes is 5.987%.

AMBAC Assurance Corporation will provide a note guaranty insurance policy for this transaction at a rate of 0.45%. Initial credit enhancement will total 9.0% of the original receivable pool balance building to the total required enhancement level of 13.0% of the then outstanding receivable pool balance. The initial 9.0% enhancement will consist of a 2.0% reserve fund and 7.0% overcollateralization.

Warehouse Facility

As of September 30, 2007, our $300 million warehouse facility was drawn to $193.2 million, which we use to fund our automobile finance operations to purchase automobile contracts pending securitization. On October 18, 2007, we executed a twelve month extension of our existing $300 million warehouse facility with Deutsche Bank. There were no material changes to the existing warehouse agreement. Under the terms of the facility, our indirect subsidiary, UFC, may obtain advances on a revolving basis by issuing notes to the participating lenders and pledging for each advance a portfolio of automobile contracts. UFC purchases the automobile contracts from UACC and UACC services the automobile contracts, which are held by a custodian. We have provided an absolute and unconditional and irrevocable guaranty of the full and punctual payment and performance, of all liabilities, agreements and other obligations of UACC and UFC under the warehouse facility. Whether we may obtain further advances under the facility depends on, among other things, the performance of the automobile contracts that are pledged under the facility and whether we comply with certain financial covenants contained in the sale and servicing agreement. We were in compliance with the terms of such financial covenants as of September 30, 2007. The principal and interest collected on the automobile contracts pledged is used to pay the interest due each month on the notes to the participating lenders and any excess cash is released to UFC. As of September 30, 2007, restricted cash of $4.6 million was held as collateral for the warehouse facility. Debt issuance costs are amortized over thirty-six months on a straight-line basis. Unamortized costs of $0.4 million and $0.4 million as of September 30, 2007 and December 31, 2006, respectively, are included in other assets on the consolidated statements of financial condition. The performance, timing and amount of cash flows from automobile contracts varies based on a number of factors, including:

•

the yields received on automobile contracts;

•

the rates and amounts of loan delinquencies, defaults and net credit losses; and

•

how quickly and at what price repossessed vehicles can be resold.

Residual Credit Facility

On January 24, 2007, we closed a $26 million residual variable rate credit facility. The facility, which allows us to initiate borrowings over the next three years, is secured by eligible residual interests in previously securitized pools of automobile receivables and certain securities issued by UARC, UAFC, and UFC. We have provided an absolute and unconditional and irrevocable guaranty of the full and punctual payment and performance, of all liabilities, agreements and other obligations of UARC, UAFC and UFC under the residual credit facility. Debt issuance costs are amortized over thirty six months on a straight-line basis. Unamortized costs of $0.3 million as of September 30, 2007 are included in other assets on the consolidated statements of financial condition. As of September 30, 2007, the $26 million facility had a zero balance. As of September 30, 2007, we were in compliance with all terms of the financial covenants under the residual credit facility.

8.	Share Repurchase Program

On June 27, 2006, our Board of Directors approved a share repurchase program and authorized us to repurchase up to 500,000 shares of our outstanding common stock from time to time in the open market or in private transactions in accordance with the provisions of applicable state and federal law, including, without limitation, Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. On August 4, 2006, our Board of Directors approved an increase in the aggregate number of shares that we may repurchase pursuant to the previously announced share repurchase program from 500,000 shares to 1,500,000 shares. On December 21, 2006, our Board of Directors approved a second increase in the aggregate number of shares of our outstanding common stock that we may repurchase pursuant to the previously announced share repurchase program from 1,500,000 shares to 3,500,000 shares. During the three months ended September 30, 2007, we did not repurchase any shares of our common stock. During the nine months ended September 30, 2007, we repurchased 1,013,213 shares of our common stock for an average price of $12.98 per share for an aggregate purchase price of $13.2 million. From July 24, 2006 to May 18, 2007, we have repurchased 2,089,738 shares of our common stock.

9.	Share Based Compensation

In 1994, we adopted a stock option plan and, in November 1997, June 2001, June 2002, and July 2007 amended and restated such plan as the United PanAm Financial Corp. 1997 Employee Stock Incentive Plan (the “Plan”). The maximum number of shares that may be issued to officers, directors, employees or consultants under the Plan is 8,500,000. Options issued pursuant to the Plan have been granted at an exercise price of no less that fair market value on the date of grant. Options generally vest over a one to five year period and have a maximum term of ten years. Options may be exercised by using either a standard cash exercise procedure or a cashless exercise procedure. As of September 30, 2007 there were 4,203,035 options outstanding.

SFAS No. 123(R) requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our consolidated statement of income. Prior to the adoption of SFAS No. 123(R), we accounted for stock-based awards to employees and directors using the intrinsic value method in accordance with APB Opinion No. 25 as allowed under SFAS No. 123. Under the intrinsic value method, no stock-based compensation expense had been recognized in our consolidated statement of income, because the exercise price of our stock options granted equaled the fair market value of the underlying stock at the date of grant.

Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Stock-based compensation expense recognized in our consolidated statement of income for the three and nine months ended September 30, 2007 and 2006 included compensation expense for share-based payment awards granted prior to, but not yet vested as of December 31, 2005 based on the grant date fair value estimated in accordance with the pro forma provisions of SFAS No. 123 and compensation expense for the share-based payment awards granted subsequent to December 31, 2005 based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). As stock-based compensation expense recognized in the consolidated statement of income for the three and nine months ended September 30, 2007 and 2006 is based on awards ultimately expected to vest on a straight-line prorated basis, it has been reduced for estimated forfeitures. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In our pro forma information required under SFAS No. 123 for the periods prior to January 1, 2006, we accounted for forfeitures as they occurred.

On November 10, 2005, the FASB issued FASB Staff Position No. FAS 123(R)-3, Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards. We have elected to adopt the alternative transition method provided in the FASB Staff Position for calculating the tax effects of stock-based compensation pursuant to SFAS No. 123(R). The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool (“APIC pool”) related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool and consolidated statements of cash flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS No. 123(R).

The following table summarizes stock-based compensation expense, net of tax, under SFAS No. 123(R) for the three and nine months ended September 30, 2007 and 2006.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
	(Dollars in thousands)
Stock-based compensation expense	$	207		$	661		$	1,400		$	1,754
Tax benefit		(65	)		(269	)		(542	)		(711	)
Stock-based compensation expense, net of tax	$	142		$	392		$	858		$	1,043

The fair value of options under our Plan was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: no dividend yield; volatility was the actual 33 month volatility on the date of grant; risk-free interest rate equivalent to the appropriate US Treasury constant maturity treasury rate on the date of grant and expected lives of one to five years depending on final maturity of the options.

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2007		2006		2007		2006
Expected dividends	$	—	$	—	$	—	$	—
Expected volatility		47.71%		40.43%		46.77%		33.70%
Risk-free interest rate		4.40%		4.87%		4.48%		4.71%
Expected life (in years)		5.0 years		5.0 years		5.0 years		4.78 years

At September 30, 2007, there was $5.6 million of unrecognized compensation cost related to share based compensation, which is expected to be recognized over a weighted average period of 3.12 years. A summary of option activity for the nine months ended September 30, 2007 and 2006 is as follows:

	Nine Months Ended September 30,
	2007					2006
	(Dollars in thousands, except per share amounts)
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Balance at beginning of period		4,023,436		$	14.66		4,574,390		$	10.07
Granted		364,299			11.02		729,625			27.93
Canceled or expired		(146,000	)		21.97		(167,800	)		20.16
Exercised		(38,700	)		6.19		(1,102,179	)		3.45
Balance at end of period		4,203,035			14.18		4,034,036			14.69
Weighted average fair value per share of options granted during period	$	7.41				$	9.61

At September 30, 2007, options exercisable to purchase 3,082,636 shares of our common stock under the Plan were outstanding as follows:

Range of Exercise Prices	Number of Shares Vested		Number of Shares Unvested		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Number of Shares Exercisable		Exercisable Shares Weighted Average Exercise Price
$0.0000 to $3.1650		16,469		58,299	$	0.52		7.95		16,469	$	2.35
$3.1651 to $6.3300		679,392		1,000		4.23		2.84		679,392		4.23
$6.3301 to $9.4950		72,800		33,400		7.50		5.43		72,800		7.00
$9.4951 to $12.6600		1,385,100		75,400		10.28		3.95		1,385,100		10.21
$12.6601 to $15.8250		311,250		214,500		14.60		5.58		311,250		14.89
$15.8251 to $18.9900		124,500		108,800		17.69		6.83		124,500		17.69
$18.9901 to $22.1550		294,000		64,500		20.05		4.05		294,000		20.02
$22.1551 to $25.3200		31,400		48,100		23.29		8.00		31,400		23.25
$25.3201 to $28.4850		77,600		69,900		26.77		8.02		77,600		26.40
$28.4851 to $31.6500		90,125		446,500		29.96		8.28		90,125		29.38
		3,082,636		1,120,399	$	14.18		5.02		3,082,636	$	11.58

The weighted average remaining contractual life of outstanding options was 5.02 years at September 30, 2007 and 5.41 at December 31, 2006.

At September 30, 2007, 543,686 shares of common stock were reserved for future grants or issuances under the Plan. On July 10, 2007, the shareholders approved an amendment and restatement of our Amended and Restated 1997 Employee Stock Incentive Plan that (i) extended the term of the plan through May 16, 2017, (ii) increased the number of common stock reserved for issuance under the plan from 7,750,000 to 8,500,000 and (iii) permitted certain transfers of awards granted under the Stock Incentive Plan for estate planning purposes or pursuant to a domestic relations order.

On July 10, 2007, the Board of Directors approved restricted stock grants of 58,299 shares to our executive officers and members of the Board. The restricted stock grants vest at various dates.

10.

Earnings per Share

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options. The following table reconciles the number of shares used in the computations of basic and diluted earnings per share for the three and nine months ended September 30, 2007 and 2006:

	Three Months Ended September 30,				Nine Months Ended September 30,
*(In thousands)*	2007		2006		2007		2006
Weighted average common shares outstanding during the period to compute basic earnings per share		15,732		17,173		15,990		17,524
Incremental common shares attributable to exercise of outstanding options		312		948		568		1,431
Weighted average number of common shares used to compute diluted earnings per share		16,044		18,121		16,558		18,955

The above calculation of diluted earnings per share excluded 2,192,000 and 888,000 average shares for the three months ended September, 2007 and 2006, and 1,881,000 and 422,000 average shares for the nine months ended September 30, 2007 and 2006, attributable to outstanding stock options because the exercise prices of the stock options were greater than or equal to the average price of the common shares, and therefore their inclusion would have been anti-dilutive.

11.

Trust Preferred Securities

On July 31, 2003, we issued trust preferred securities of $10.0 million through a subsidiary UPFC Trust I. The trust issuer is a “100% owned finance subsidiary” and we “fully and unconditionally” guaranteed the securities. We will pay interest on these funds at a rate equal to the three month LIBOR plus 3.05%, variable quarterly, and the rate was 8.41% as of September 30, 2007. The final maturity of these securities is 30 years, however, they can be called at par any time after July 31, 2008 at our discretion.

12.

Consolidation of Variable Interest Entities

FASB Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”), was issued in January 2003. FIN 46 requires that if an entity is the primary beneficiary of a variable interest entity, the assets, liabilities and results of operations of the variable interest entity should be included in the consolidated financial statements of the entity. FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities (“FIN 46(R)”), was issued in December 2003. The assets, liabilities and results of operations of our trusts associated with securitizations and trust preferred securities have been included in our consolidated financial statements.

13. Accounting for Uncertainty in Income Taxes

Effective January 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainties in Income Taxes, an Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of September 30, 2007 and January 1, 2007, we had an insignificant amount of unrecognized tax benefits. Our policy is to recognize interest and penalties on unrecognized tax benefits in income taxes in the Consolidated Statements of Income. The amount of interest and penalties for the nine months ended September 30, 2007 was immaterial. The tax years subject to examination by the taxing authorities are the years ending December 31, 2006, 2005, 2004 and 2003.

Item 2.

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

The following discussion is intended to help the reader understand our results of operations and financial condition and is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements, the accompanying notes to the consolidated financial statements, and the other information included or incorporated by reference herein.

Overview

We are a specialty finance company engaged in automobile finance, which includes the purchase, warehousing, securitization and servicing of automobile installment sales contracts, or automobile contracts, originated by independent and franchised dealers of used automobiles. We conduct our automobile finance business through our wholly-owned subsidiaries, United Auto Credit Corporation, or UACC and United Auto Business Operations, LLC or UABO, which provide financing to borrowers who typically have limited or impaired credit histories that restrict their ability to obtain loans through traditional sources. Financing arms of automobile manufacturers generally do not make these loans to non-prime borrowers, nor do many other traditional automotive lenders. Non-prime borrowers generally pay higher interest rates and loan fees than do prime borrowers.

We use a warehouse line of credit and periodic securitizations to fund our business. We currently have a warehouse line of credit in the amount of $300 million and we have closed six securitizations. We plan to price a new securitization approximately every six months. We believe that our securitization funding strategy allows us to mitigate interest rate risk and lock in a fixed interest rate spread, since the interest received on automobile contracts and interest paid for securitization notes payable are both fixed rate arrangements. We feel this method of funding provides us with a reliable source of funding at reasonable market rates. On October 18, 2007, we executed a twelve month extension of our existing $300 million warehouse facility with Deutsche Bank. There were no material changes to the existing warehouse agreement.

Our primary business strategy includes the origination of purchased automobile contracts through a national retail branch network, which is comprised of branches that are generally located in proximity to dealers and borrowers. The branch manager of each branch is responsible for underwriting and purchasing automobile contracts and providing focused servicing and collections. The branch network is closely managed and supervised by our regional managers and divisional vice presidents. We believe that our branch network operations enable branch managers to develop strong relationships with our primary customers, the automobile dealers. Through our branches, we provide a high level of service to the dealers by providing consistent credit decisions, typically same-day funding and frequent management contact. We believe that this branch network and management structure also enhances our risk management and collection functions.

As a secondary platform for growth, we began to originate and service automobile contracts during the second quarter of 2007 in the states of West Virginia and Connecticut from the newly created Business Operations Unit based in Dallas, Texas. We intend to eventually expand operations into the states of Arkansas, Nebraska and Maine through the Business Operations Unit. We currently have no branch presence in these five states. This Business Operations Unit, with its lower cost structure, will allow us to penetrate new markets in states where, due to interest rate caps, our traditional retail branch structure is not cost effective. We expect that the average yield for the portfolio originated in these states will be approximately 24.5% as compared to 27.89% in states in which we operate our national retail branch network. We expect to offset the lower yield by increased cost efficiencies generated from operating from a central location.

The Business Operations Unit uses Business Development Managers, or BDMs, in the local markets to introduce the dealers to the Company and our services. The Business Operations Unit is responsible for underwriting, purchasing contracts and collections. We believe that we can continue to provide a high level of service to the dealers by providing consistent credit decisions and two to three day funding. At September 30, 2007, the Business Operations Unit had seven employees and two BDMs. We currently anticipate that each BDM will originate loans at twice the volume of our traditional retail branch. By following tighter underwriting guidelines from a single location, which will result in a stronger portfolio, we should offset any potential drawback from managing collection activity from a central location rather than being local to the borrower as in our traditional retail branch. We estimate the market for our Business Operations Unit in the five states to be equivalent to 20 to 25 of our traditional retail branches.

While we have traditionally achieved growth in the origination of purchased automobile contracts through the opening of new branch offices, we began to pursue controlled growth through a combination of expanding our more seasoned branch offices and opening fewer new branch offices during the third quarter of 2007. This change is designed to improve individual branch profitability, enhance loan servicing and facilitate more effective branch management, while at the same time continuing to grow originations 10% to 20% over time. In connection with our new long-term growth strategy, we intend to increase the average portfolio of purchased contracts within the best performing seasoned branches from approximately $10 million up to $20 million over the next 3 to 5 years. During the third quarter of 2007, we consolidated four underperforming branch offices.

During 2006, UPFC and the industry in general experienced a higher rate of delinquencies and losses which we believe have been primarily due to general economic conditions, and particularly to increased gasoline prices and employment contraction. As a result, during the third quarter of 2007, we modified our underwriting criteria for purchasing automobile contracts requiring higher minimum income levels and higher minimum book value of the automobile in order to pursue higher-quality borrowers and more recent model year automobiles. In addition, under our revised underwriting criteria, we intend to purchase contracts with terms extending up to 72 months (from up to 60 months previously) for creditworthy borrowers who can demonstrate higher income levels and better credit records. Also, as part of the underwriting review, we increased pricing for purchasing automobile contracts in 22 states by almost 100 basis points in APR. The states affected by the new pricing account for approximately 60% of our current originations and we expect that the impact will result in a gradual increase of approximately 60 basis points in weighted average yield over the next few years.

Critical Accounting Policies

We have established various accounting policies, which govern the application of accounting principles generally accepted in the United States of America, or GAAP, in the preparation of our consolidated financial statements. Our accounting policies are integral to understanding the results reported. Certain accounting policies are described in detail in Note 3 to our Notes to Consolidated Financial Statements presented in our 2006 Annual Report on Form 10-K.

Certain accounting policies require us to make significant estimates and assumptions, which have a material impact on the carrying value of certain assets and liabilities, and we consider these to be critical accounting policies. The estimates and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Actual results could differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the date of the statement of financial condition and our results of operations for the reporting periods. The following is a brief description of our current accounting policies involving significant management valuation judgments.

Securitization Transactions

The transfer of our automobile contracts to securitization trusts is treated as a secured financing under Statement of Financial Accounting Standard (“SFAS”) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The trusts are considered variable interest entities. The assets, liabilities and results of operations of the trusts have been included in our consolidated financial statements. The contracts are retained on the statement of financial condition with the securities issued to finance the contracts recorded as securitization notes payable. We retain the servicing rights for the loans which have been securitized. We record interest income on the securitized contracts and interest expense on the notes issued through the securitization transactions. Debt issuance costs are amortized over the expected term of the securitization using the interest method.

As servicer of these contracts, we remit funds collected from the borrowers on behalf of the trustee to the trustee and direct the trustee how the funds should be invested until the distribution dates. We have retained an interest in the securitized contracts, and have the ability to receive future cash flows as a result of that retained interest.

In August 2007, we executed a clean up call on the remaining 10% of the notes payable that were issued in our 2004A securitization transaction. We anticipate that we will continue to execute clean up calls for our securitizations in the future.

Allowance for Loan Losses

The allowance for loan losses is established systematically based on incurred loss methodology for the determination of the amount of probable credit losses inherent in the finance receivables as of the reporting date. Our loan loss allowances are monitored by management 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 nonperforming loans, current and prospective economic conditions and other factors. Management also undertakes a review of various quantitative and qualitative analyses. Quantitative analyses include the review of charge-off trends and evaluation of credit loss experienced by credit tier. Other quantitative analyses include the concentration of any credit tier, the level of nonperformance and the percentage of delinquency. Qualitative analysis includes trends in charge-offs over various time periods and at various statistical midpoints and high points, the severity of depreciated values of repossession and trends in the economy generally or in specific geographic locations.

The allowance for credit losses is established through provisions for losses recorded in income as necessary to provide for estimated contract losses in the next 12 months at each reporting date. We account for such contracts by static pool, stratified into three-month buckets, so that the credit risk in each individual static pool can be evaluated independently, on a periodic basis, in order to estimate the future losses within each pool. Any such adjustment is recorded in the current period as the assessment is made.

Despite these analyses, we recognize that establishing an allowance is an estimate, which is inherently uncertain and depends on the outcome of future events. Our operating results and financial condition are sensitive to changes in our estimate for loan losses and the estimate’s underlying assumptions. Our operating results and financial condition are immediately impacted as changes in estimates for calculating loan loss reserves are immediately recorded in our consolidated statement of income as an addition or reduction in provision expense.

Stock-Based Compensation

On January 1, 2006, we adopted SFAS No. 123(R), Share-Based Payment, which requires that the compensation cost relating to share-based payment transactions (including the cost of all employee stock options) be recognized in the financial statements. That cost will be measured based on the estimated fair value of the equity or liability instruments issued. SFAS No. 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. SFAS No. 123(R) replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board Opinion (“APB Opinion”) No. 25, Accounting for Stock Issued to Employees. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (“SAB No. 107”) relating to SFAS No. 123(R). We have applied the provisions of SAB No. 107 in our adoption of SFAS No. 123(R).

We adopted SFAS No. 123(R) using the modified prospective transition method, which requires the application of the accounting standard as of January 1, 2006, the first day of our 2006 fiscal year. In accordance with the modified prospective transition method, our Consolidated Financial Statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS No. 123(R). Stock-based compensation expense recognized under SFAS No. 123(R) was $207,000 and $661,000 for the three months ended September 30, 2007 and 2006, respectively, $1,400,000 and $1,754,000 for the nine months ended September 30, 2007 and 2006, respectively.

Derivatives and Hedging Activities

The automobile contracts purchased and held by us are written at fixed interest rates and, accordingly, have interest rate risk. Such contracts are funded with warehouse borrowings and the warehouse borrowings accrue interest at a variable rate. Prior to closing our first securitization, while we were shifting the funding source of our automobile finance business to the public capital markets through securitizations and warehouse facilities, we entered into forward agreements in order to reduce the interest rate risk exposure on our securitization notes payable. The market value of these forward agreements was designed to respond inversely to changes in interest rates. Because of this inverse relationship, we were able to effectively lock in a gross interest rate spread for our automobile contracts held in portfolio prior to the sale of the securitization notes payable. Losses related to these agreements were recorded on our Consolidated Statements of Operations during 2004 because the derivative transactions did not meet the accounting requirements to qualify for hedge accounting. Accordingly, we did not amortize them over the life of the automotive contracts.

We are not currently utilizing interest rate hedging instruments because we plan to enter into a new securitization every six months and therefore will only fund the acquisition of approximately six months of automobile contracts at variable interest rates with our warehouse facility prior to locking a gross interest rate spread through the sale of securitization notes payable at fixed interest rates.

Lending Activities

Summary of Loan Portfolio

The following table sets forth the composition of our loan portfolio at the dates indicated.

	September 30, 2007			December 31, 2006
	(Dollars in Thousands)
Loans	$	946,053		$	816,031
Unearned finance charges (1)		(1,952	)		(2,507	)
Unearned acquisition discount (1)		(45,728	)		(39,449	)
Allowance for loan losses (1)		(46,050	)		(36,037	)
Total loans, net	$	852,323		$	738,038

_________________________

(1)	See “—Critical Accounting Policies”

Allowance for Loan Losses

Our policy is to maintain an allowance for loan losses to absorb inherent losses which may be realized on our portfolio. These allowances are general valuation allowances for estimates for probable losses not specifically identified that will occur in the next twelve months. The total allowance for loan losses was $46.1 million at September 30, 2007 compared with $36.0 million at December 31, 2006, representing 5.13% of loans at September 30, 2007 and 4.66% at December 31, 2006.

Following is a summary of the changes in our consolidated allowance for loan losses for the periods indicated.

	At or For the Nine Months Ended
	September 30, 2007			September 30, 2006
	(Dollars in Thousands)
Allowance for Loan Losses
Balance at beginning of year	$	36,037		$	29,110
Provision for loan losses (1)		48,536			29,555
Net charge-offs		(38,523	)		(25,760	)
Balance at end of year	$	46,050		$	32,905
Annualized net charge-offs to average loans		5.80%			4.66%
Ending allowance to period end loans		5.13%			4.31%

___________________________

(1)	See “—Critical Accounting Policies”

Past Due and Nonaccrual Loans

The following table sets forth the remaining balances of all loans (net of unearned finance charges, excluding loans for which vehicles have been repossessed) that were more than 30 days delinquent at the periods indicated.

	September 30, 2007				December 31, 2006				September 30, 2006
	(Dollars in Thousands)
Loan Delinquencies	Balance		% of Total Loans		Balance		% of Total Loans		Balance		% of Total Loans
30 to 59 days	$	6,729		0.71%	$	4,898		0.60%	$	5,284		0.66%
60 to 89 days		2,641		0.28%		1,678		0.21%		2,036		0.25%
90+ days		1,674		0.18%		966		0.12%		1,077		0.13%

Total	$	11,044		1.17%	$	7,542		0.93%	$	8,397		1.04%

Our policy is to charge off loans delinquent in excess of 120 days.

The following table sets forth the aggregate amount of nonaccrual loans (net of unearned finance charges, including loans over 30 days delinquent and loans for which vehicles have been repossessed) at the periods indicated.

	September 30, 2007			December 31, 2006			September 30, 2006
	(Dollars in Thousands)
Nonaccrual loans	$	19,970		$	13,314		$	14,776
Nonaccrual loans to gross loans		2.12	%		1.64	%		1.84	%
Allowance for loan losses to gross loans, net of unearned acquisition discounts		5.13	%		4.66	%		4.31	%

Cumulative Losses for Contract Pools

The following table reflects our cumulative losses (i.e., net charge-offs as a percent of original net contract balances) for contract pools (defined as the total dollar amount of net contracts purchased in a three-month period) purchased from July 2004 through June 2007. Contract pools subsequent to June 2007 were not included in this table because the loan pools were not seasoned enough to provide a meaningful comparison with prior periods.

Number of Months Outstanding	Jul. 2004 - Sept. 2004		Oct. 2004 - Dec. 2004		Jan. 2005 - Mar. 2005		Apr. 2005 - Jun. 2005		Jul. 2005 - Sept. 2005		Oct. 2005 - Dec. 2005		Jan. 2006 - Mar. 2006		Apr. 2006 - Jun. 2006		Jul. 2006 - Sept. 2006		Oct. 2006 - Dec. 2006		Jan. 2007 - Mar. 2007		Apr. 2007 - Jun. 2007
1		0.00%		0.00%		0.00%		0.00%		0.00%		0.00%		0.00%		0.00%		0.00%		0.00%		0.00%		0.00%
4		0.08%		0.05%		0.03%		0.06%		0.12%		0.05%		0.02%		0.06%		0.09%		0.10%		0.05%		0.08%
7		0.65%		0.49%		0.40%		0.64%		0.59%		0.47%		0.40%		0.62%		0.88%		0.64%		0.54%
10		1.29%		1.19%		1.35%		1.63%		1.36%		1.28%		1.61%		2.00%		1.84%		1.73%
13		2.21%		2.41%		2.48%		2.57%		2.37%		2.71%		2.96%		3.13%		3.23%
16		3.12%		3.56%		3.32%		3.47%		3.56%		4.07%		3.90%		4.35%
19		4.20%		4.44%		4.21%		4.70%		4.85%		5.01%		5.03%
22		4.95%		5.17%		5.50%		5.95%		5.76%		5.96%
25		5.56%		6.12%		6.56%		6.69%		6.69%
28		6.31%		7.02%		7.23%		7.41%
31		7.05%		7.66%		7.86%
34		7.47%		8.24%
37		7.81%
Original Pool ($000)	$	89,688	$	86,697	$	118,883	$	120,502	$	112,487	$	101,482	$	142,873	$	143,988	$	136,167	$	113,767	$	164,019	$	162,873
Remaining Pool ($000)	$	12,758	$	15,452	$	28,097	$	33,586	$	37,526	$	40,345	$	69,900	$	81,021	$	87,588	$	83,374	$	137,075	$	147,932
Remaining Pool (%)		14.2%		17.8%		23.6%		27.9%		33.4%		39.8%		48.9%		56.3%		64.3%		73.3%		83.6%		90.8%

Loan Maturities

The following table sets forth the dollar amount of automobile contracts maturing in our automobile contracts portfolio at September 30, 2007 based on final maturity. Automobile contract balances are reflected before unearned acquisition discounts and allowance for loan losses.

	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		Total Loans
	(Dollars in thousands)
Total loans	$	21,488	$	312,819	$	598,756	$	11,038	$	944,101

All loans are fixed rate loans.

Liquidity and Capital Resources

General

We require substantial cash and capital resources to operate our business. Our primary funding sources are a warehouse credit line, securitizations and retained earnings.

Our primary uses of cash include:

•

acquisition of automobile contracts;

•

interest expense;

•

operating expenses; and

•

securitization costs.

The capital resources available to us include:

•

interest income and principal collections on automobile contracts;

•

servicing fees that we earn under our securitizations;

•

releases of excess cash from the spread accounts relating to the securitizations;

•

securitization proceeds;

•

borrowings under our warehouse credit facility;

•

releases of excess cash from our warehouse credit facility; and

•

borrowings under our residual credit facility.

Management believes that the resources available to us will provide the needed capital and cash flows to fund purchases of automobile contracts, investments in our branch network and servicing capabilities and ongoing operations for the next twelve months.

Securitizations

Our securitizations are structured as on-balance-sheet transactions and recorded as secured financings because they do not meet the accounting criteria for sale of finance receivables under SFAS No. 140. Regular contract securitizations are an integral part of our business plan going forward in order to increase our liquidity and reduce risks associated with interest rate fluctuations. We have developed a securitization program that involves selling interests in pools of our automobile contracts to investors through the public issuance of AAA/Aaa rated asset-backed securities. We retain the servicing rights for the loans which have been securitized. Upon the issuance of securitization notes payable, we retain the right to receive over time excess cash flows from the underlying pool of securitized automobile contracts.

The following table lists each of our securitizations and its remaining balance as of September 30, 2007.

(Dollars in thousands)

Issue Number	Issuance Date		Original Balance		Current Balance Class A-1		Interest Rate			Current Balance Class A-2		Interest Rate			Current Balance Class A-3		Interest Rate			Total Current Balance		Current Receivables Pledged		Surety Costs(1)			Back-up Servicing Fees
2004A		September 22, 2004	$	420,000	$	—		1.94	%	$	—		2.56	%	$	—		3.27	%	$	—	$	—		0.46	%		0.020	%
2005A		April 14, 2005		195,000		—		3.12	%		—		3.85	%		37,738		4.34	%		37,738		41,277		0.43	%		0.035	%
2005B		November 10, 2005		225,000		—		4.28	%		—		4.82	%		71,764		4.98	%		71,764		82,054		0.41	%		0.035	%
2006A		June 15, 2006		242,000		—		5.27	%		23,842		5.46	%		96,000		5.49	%		119,842		132,219		0.39	%		0.035	%
2006B		December 14, 2006		250,000		—		5.34	%		67,748		5.15	%		99,000		5.01	%		166,748		185,655		0.38	%		0.035	%
2007A		June 14, 2007		250,000		25,612		5.33	%		97,000		5.46	%		99,000		5.53	%		221,612		241,038		0.37	%		0.032	%
			$	1,582,000																$	617,704	$	682,243

________________________

(1) Related to premiums on financial guaranty insurance policies.

There is an average of $1.0 million in underwriting and issuance costs associated with each securitization transaction, which is amortized over the term of the securitizations. As of September 30, 2007, we were in compliance with the terms of all covenants related to each securitization.

As of September 30, 2007 we were in compliance with all terms of the financial covenants related to our securitization transactions.

Note Class

Amount

Average Life

Price

Coupon Rate

Standard & Poor's

Moody's

A-1

58,000,000

0.27 years

100.00000

4.98685%

A-1+

Prime-1

A-2

93,000,000

1.05 years

99.99110

5.75%

AAA

Aaa

A-3

99,000,000

2.40 years

99.98087

6.15%

AAA

Aaa

The weighted average coupon on the Notes is 5.987%.

Warehouse Facility

As of September 30, 2007, our $300 million warehouse facility was drawn to $193.2 million, which we use to fund our automobile finance operations to purchase automobile contracts pending securitization. On October 18, 2007, we executed a twelve month extension of our warehouse facility. There were no material changes to the existing warehouse agreement. The current cost on our warehouse facility includes a usage fee of 0.70% spread above commercial paper rate plus a program fee equal to 0.25% in the total facility annually. Under the terms of the facility, our indirect subsidiary, UFC, may obtain advances on a revolving basis by issuing notes to the participating lenders and pledging for each advance a portfolio of automobile contracts. UFC purchases the automobile contracts from UACC and UACC services the automobile contracts, which are held by a custodian. We have provided an absolute and unconditional and irrevocable guaranty of the full and punctual payment and performance, of all liabilities, agreements and other obligations of UACC and UFC under the warehouse facility. Whether we may obtain further advances under the facility depends on, among other things, the performance of the automobile contracts that are pledged under the facility and whether we comply with certain financial covenants contained in the sale and servicing agreement. We were in compliance with the terms of such financial covenants as of September 30, 2007. The principal and interest collected on the automobile contracts pledged is used to pay the interest due each month on the notes to the participating lenders and any excess cash is released to UFC. The performance, timing and amount of cash flows from automobile contracts varies based on a number of factors, including:

•

the yields received on automobile contracts;

•

the rates and amounts of loan delinquencies, defaults and net credit losses; and

•

how quickly and at what price repossessed vehicles can be resold.

Residual Credit Facility

On January 24, 2007, we closed a $26 million variable rate residual credit facility. The facility, which allows us to initiate borrowings over the next three years, is secured by eligible residual interests in previously securitized pools of automobile receivables and certain securities issued by UARC, UAFC, and UFC. We have provided an absolute and unconditional and irrevocable guaranty of the full and punctual payment and performance, of all liabilities, agreements and other obligations of UARC, UAFC, and UFC under the residual credit facility. As of September 30, 2007, the $26 million facility had a zero balance. As of September 30, 2007, we were in compliance with all terms of the financial covenants under the residual credit facility.

Share Repurchase Program

On June 27, 2006, our Board of Directors approved a share repurchase program and authorized us to repurchase up to 500,000 shares of our outstanding common stock from time to time in the open market or in private transactions in accordance with the provisions of applicable state and federal law, including, without limitation, Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. On August 4, 2006, our Board of Directors approved an increase in the aggregate number of shares that we may repurchase pursuant to the previously announced share repurchase program from 500,000 shares to 1,500,000 shares. On December 21, 2006, our Board of Directors approved a second increase in the aggregate number of shares of our outstanding common stock that we may repurchase pursuant to the previously announced share repurchase program from 1,500,000 shares to 3,500,000 shares. We did not repurchase any shares of our common stock during the three months ended September 30, 2007. During the nine months ended September 30, 2007, we repurchased 1,013,213 shares of our common stock for an average price of $12.98 per share for an aggregate purchase price of $13.2 million. From July 24, 2006 to May 18, 2007, we have repurchased 2,089,738 shares of our common stock.

Subordinated Debentures

In 2003, we issued junior subordinated debentures in the amount of $10.3 million to a subsidiary trust, UPFC Trust I, to enhance our liquidity. UPFC Trust I in turn issued $10.0 million of company-obligated mandatorily redeemable preferred securities. We will pay interest on these funds at a rate equal to the three month LIBOR plus 3.05%, variable quarterly, and the rate was 8.41% as of September 30, 2007. The final maturity of these securities is 30 years, however, they can be called at par any time after July 31, 2008 at our discretion.

Aggregate Contractual Obligations

The following table provides the amounts due under specified obligations for the periods indicated as of September 30, 2007.

	Less than 1 Year		1 Year to 3 Years		3 Years to 5 Years		More Than 5 Years		Total
	(Dollars in thousands)
Warehouse line of credit	$	193,202	$	—	$	—	$	—	$	193,202
Securitization notes payable		261,027		356,677		—		—		617,704
Operating lease obligations		1,655		12,338		8,493		1,217		23,703
Junior subordinated debentures		—		—		—		10,310		10,310
Total	$	455,884	$	369,015	$	8,493	$	11,527	$	844,919

The obligations are categorized by their contractual due dates, except securitization borrowings that are categorized by the expected repayment dates. We may, at our option, prepay the junior subordinated debentures prior to their maturity date. Furthermore, the actual payment of certain current liabilities may be deferred into future periods.

Discontinued Operations

On March 30, 2006, we discontinued our operations related to our investment segment and sold our investment securities portfolio to focus solely on our automobile finance business and to provide additional transparency to the public regarding the actual returns of our automobile finance operations.

Selected Financial Data

(Dollars and shares in thousands)	At or For the Three Months Ended				At or For the Nine Months Ended
	September 30, 2007		September 30, 2006		September 30, 2007		September 30, 2006
Operating Data
Contracts purchased	$	149,294	$	139,617	$	484,741	$	433,926
Contracts outstanding	$	944,101	$	803,692	$	944,101	$	803,692
Unearned acquisition discounts	$	(45,728)	$	(39,495)	$	(45,728)	$	(39,495)
Average loan balance	$	934,334	$	786,880	$	887,548	$	738,923
Unearned acquisition discounts to gross loans		4.84%		4.91%		4.84%		4.91%
Average percentage rate to borrowers		22.62%		22.69%		22.62%		22.69%

Loan Quality Data
Allowance for loan losses	$	(46,050)	$	(32,905)	$	(46,050)	$	(32,905)
Allowance for loan losses to gross loans net of unearned acquisition discounts		5.13%		4.31%		5.13%		4.31%
Delinquencies (% of net contracts)
31-60 days		0.71%		0.66%		0.71%		0.66%
61-90 days		0.28%		0.25%		0.28%		0.25%
90+ days		0.18%		0.13%		0.18%		0.13%
Total		1.17%		1.04%		1.17%		1.04%
Repossessions over 30 days past due (% of net contracts)		0.76%		0.62%		0.76%		0.62%
Annualized net charge-offs to average loans⁽¹⁾		6.66%		5.43%		5.80%		4.66%

Other Data
Number of branches		142		125		142		125
Interest Income	$	59,726	$	50,815	$	170,005	$	143,144
Interest Expense	$	12,532	$	9,674	$	34,647	$	25,584
Net interest margin	$	47,194	$	41,141	$	135,358	$	117,560
Net interest margin as a percentage of interest income		79.02%		80.96%		79.62%		82.13%
Net interest margin as a percentage of average loans ⁽¹⁾		20.04%		20.74%		20.39%		21.27%
Non-interest expense to average loans ⁽¹⁾		10.08%		10.51%		10.77%		10.70%
Return on average assets from continuing operations ⁽¹⁾		1.03%		2.11%		1.45%		3.04%
Return on average shareholders’ equity ⁽¹⁾		6.46%		10.83%		8.72%		14.72%
Consolidated capital to assets ratio		16.01%		18.42%		16.01%		18.42%

(1) Quarterly and nine month information is annualized for comparability with full year information.

Results of Operations

Comparison of Operating Results for the Three Months Ended September 30, 2007 and 2006

General

For the three months ended September 30, 2007, our net income was $2.6 million, or $0.16 per diluted share, compared with $4.5 million, or $0.25 per diluted share for the same period a year ago.

Interest income increased 18% to $59.7 million for the three months ended September 30, 2007 from $50.8 million for the same period a year ago. Automobile contracts purchased increased 7% to $149.3 million for the three months ended September 30, 2007 from $139.6 million for the same period a year ago as a result of the purchase of additional automobile contracts in existing and new markets consistent with our controlled growth strategy. During the three months ended September 30, 2007, we opened two branch offices and consolidated four underperforming branch offices bringing our total to 142 branch offices in 37 states.

Interest Income

Interest income increased by 18% to $59.7 million for the three months ended September 30, 2007 from $50.8 million for the same period a year ago due primarily to the increase in average automobile contracts of $147.5 million. Interest income on loans represents finance charges taken into earnings during the quarter as well as the accretion of the acquisition discount fee on loans acquired. Investment income increased as a result of higher invested cash balances combined with increased market interest rates.

Interest Expense

Interest expense increased 29% to $12.5 million for the three months ended September 30, 2007 from $9.7 million for the same period a year ago. The average debt outstanding increased by 22% to $815.3 million for the three months ended September 30, 2007 from $669.8 million for the same period a year ago. The average interest rate increased to 6.10% for the three months ended September 30, 2007 from 5.73% for the same period a year ago. The increase was the result of higher market interest rates, coupled with pay down of lower priced securitizations.

Provision and Allowance for Loan Losses

Provisions for loan losses are charged to income to bring our allowance for loan losses to a level which management considers adequate to absorb probable credit losses inherent in the portfolio of automobile loans. The provision for loan losses recorded in the three months ended September 30, 2007 and 2006 reflects inherent losses on receivables originated during those periods and changes in the amount of inherent losses on receivables originated in prior periods. The provision for loan losses increased to $20.0 million for the three months ended September 30, 2007 compared with $13.0 million for the same period a year ago. The increase in the provision for loan losses was due primarily to a $147.5 million increase in average automobile contracts and an increase in the annualized charge-off rate to 6.66% for the three months ended September 30, 2007 compared to 5.43% for the same period a year ago.

The increase in our quarterly annualized net charge-offs was the result of increased defaults due to changes in general economic conditions particularly due to increased gasoline prices and employment contraction. The increase in gasoline prices which started in late 2006 and continues into 2007 has impacted the disposable income of our lower income borrowers causing increases in defaults.

The total allowance for loan losses was $46.1 million at September 30, 2007 compared with $32.9 million at September 30, 2006, representing 5.13% of automobile contracts, less unearned acquisition discount, at September 30, 2007 and 4.31% at September 30, 2006. The increase in the allowance for loan losses was due primarily to a $140.4 million increase in automobile contracts outstanding, which increased to $944.1 million at September 30, 2007 from $803.7 million at September 30, 2006 and an increase in the loss rate within the portfolio.

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

For further information, see “—Critical Accounting Policies.”

Non-interest Income

Non-interest income increased to $0.5 million for the three months ended September 30, 2007 from $0.3 million for the same period a year ago.

Non-interest Expense

Non-interest expense increased $2.8 million to $23.7 million for the three months ended September 30, 2007 from $20.9 million for the same period a year ago. The increase was driven primarily by our controlled growth strategy, investment in corporate accounting, human resources, training and information technology, an increase in the corporate facility from 20,000 square feet to 31,000 square feet and higher collection costs. During the last 12 months, we continued with our controlled growth strategy, resulting in an increase to 1,095 employees as of September 30, 2007, from 906 employees as of September 30, 2006.

Income Taxes

Income taxes from continuing operations decreased $1.8 million to $1.3 million for the three months ended September 30, 2007 from $3.1 million for the same period a year ago. This decrease occurred primarily as a result of a $3.7 million decrease in taxable income from continuing operations before income taxes. Our effective tax rate has been lower in 2007 relative to 2006 due to our expansion into lower tax jurisdictions.

Comparison of Operating Results for the Nine Months Ended September 30, 2007 and 2006

General

For the nine months ended September 30, 2007, our net income was $10.2 million, or $0.62 per diluted share, compared with $17.3 million, or $0.91 per diluted share for the same period a year ago.

Interest income increased 19% to $170.0 million for the nine months ended September 30, 2007 from $143.1 million for the same period a year ago. Automobile contracts purchased increased $50.8 million to $484.7 million for the nine months ended September 30, 2007 from $433.9 million for the same period a year ago as a result of the purchase of additional automobile contracts in existing and new markets consistent with our controlled growth strategy. During the nine months ended September 30, 2007, we opened 15 branch offices and consolidated four underperforming branch offices bringing our total to 142 branch offices in 37 states.

Interest Income

Interest income increased by 19% to $170.0 million for the nine months ended September 30, 2007 from $143.1 million for the same period a year ago due primarily to the increase in average automobile contracts of $148.6 million. Interest income on loans represents finance charges taken into earnings during the quarter as well as the accretion of the acquisition discount fee on loans acquired. Investment income increased as a result of higher invested cash balances combined with increased market interest rates.

Interest Expense

Interest expense increased 35% to $34.6 million for the nine months ended September 30, 2007 from $25.6 million for the same period a year ago. The average debt outstanding increased by 24% to $773.0 million for the nine months ended September 30, 2007 from $625.5 million for the same period a year ago. The average interest rate increased to 5.99% for the nine months ended September 30, 2007 from 5.47% for the same period a year ago. The increase was the result of higher market interest rates, coupled with pay down of lower priced securitizations.

Provision and Allowance for Loan Losses

Provisions for loan losses are charged to income to bring our allowance for loan losses to a level which management considers adequate to absorb probable credit losses inherent in the portfolio of automobile loans. The provision for loan losses recorded in the nine months ended September 30, 2007 and 2006 reflects inherent losses on receivables originated during those periods and changes in the amount of inherent losses on receivables originated in prior periods. The provision for loan losses increased to $48.5 million for the nine months ended September 30, 2007 compared with $29.6 million for the same period a year ago. The increase in the provision for loan losses was due primarily to a $148.6 million increase in average automobile contracts and an increase in the annualized charge-off rate to 5.80% for the nine months ended September 30, 2007 compared to 4.66% for the same period a year ago.

The increase in our year-to-date annualized net charge-offs was the result of increased defaults due to changes in general economic conditions particularly due to increased gasoline prices and employment contraction. The increase in gasoline prices which started in late 2006 and continues into 2007 has impacted the disposable income of our lower income borrowers causing increases in defaults.

The total allowance for loan losses was $46.1 million at September 30, 2007 compared with $32.9 million at September 30, 2006, representing 5.13% of automobile contracts, less unearned acquisition discount, at September 30, 2007 and 4.31% at September 30, 2006. The increase in allowance loan losses was due primarily to a $140.4 million increase in automobile contracts outstanding, which increased to $944.1 million at September 30, 2007 from $803.7 million at September 30, 2006 and an increase in the loss rate within the portfolio.

For further information, see “—Critical Accounting Policies.”

Non-interest Income

Non-interest income decreased to $1.3 million for the nine months ended September 30, 2007 from $1.4 million for the same period a year ago. The decrease was primarily the result of the redemption of the preferred stock of AirTime Technologies, Inc. held by WorldCash Technologies, Inc., a wholly-owned subsidiary of the Company that was dissolved in August 2006. In March 2006, an agreement was reached to merge AirTime Technologies, Inc. with InComm Holdings Inc. As part of the agreement, the preferred stock owned by the Company through WorldCash Technologies, Inc. was redeemed for $520,000.

Non-interest Expense

Non-interest expense increased $12.4 million to $71.5 million for the nine months ended September 30, 2007 from $59.1 million for the same period a year ago. The increase was driven primarily by our controlled growth strategy, investment in corporate accounting, human resources, training and information technology, an increase in the corporate facility from 20,000 square feet to 31,000 square feet and higher collection costs. During the last 12 months, we continued with our controlled growth strategy, resulting in a total of 1,095 employees as of September 30, 2007, from a total of 906 employees as of September 30, 2006.

Income Taxes

Income taxes before discontinued operations decreased $5.8 million to $6.5 million for the nine months ended September 30, 2007 from $12.3 million for the same period a year ago. This decrease occurred primarily as a result of a $13.6 million decrease in income from continuing operation before income taxes. Our effective tax rate has been lower in 2007 relative to 2006 due to our expansion into lower tax jurisdictions.

Financial Condition

Comparison of Financial Condition at September 30, 2007 and December 31, 2006

Total assets increased $111.1 million, to $990.6 million at September 30, 2007, from $879.5 million at December 31, 2006. The increase resulted from a $124.3 million increase in automobile contracts to $898.4 million, net of unearned acquisition discounts and unearned finance charges, at September 30, 2007 from $774.1 million at December 31, 2006.

Securitization notes payable decreased to $617.7 million at September 30, 2007 from $698.3 million at December 31, 2006 due to the execution of a clean up call in August 2007 on the remaining 10% of the notes payable that were issued in our 2004-A securitization transaction and payments on automobile contracts backing the securitized borrowings, partially offset by the completion of a $250 million securitization in June 2007.

Warehouse line of credit borrowing increased to $193.2 million as of September 30, 2007 from zero as of December 31, 2006 due to funding of additional automobile contracts during the nine months ended September 30, 2007, partially offset by the completion of a $250 million securitization in June 2007.

Shareholders’ equity decreased to $158.6 million at September 30, 2007 from $159.9 million at December 31, 2006, primarily as a result of $13.2 million of the Company’s common stock repurchased during the nine months ended September 30, 2007, partially offset by net income of $10.2 million and recognition of expense for fair value of options of $1.4 million during the nine months ended September 30, 2007.

Liquidity and Capital Resources

Cash provided by operating activities was $38.2 million and $23.8 million in the first nine months of 2007 and 2006, respectively. Cash provided by operating activities increased in the first nine months of 2007 compared to the same period in 2006 due primarily to an increase in cash received on interest income, partially offset by an increase in cash used on interest expense.

Cash used in investing activities was $145.6 million in the first nine months of 2007. Cash provided by investing activities was $355.5 million in the first nine months of 2006. Cash used in investing activities decreased in the first nine months of 2007 compared to the same period in 2006 due to the discontinuation of the Company’s operations related to its investment segment in March 2006.

Cash provided by financing activities was $96.0 million in the first nine months of 2007. Cash used in financing activities was $383.2 million in the first nine months of 2006. Cash provided by financing activities decreased due to the discontinuation of the Company’s operations related to its investment segment in March 2006.

Management of Interest Rate Risk

The principal objective of our interest rate risk management program is to evaluate the interest rate risk inherent in our business activities, determine the level of appropriate risk given our operating environment, capital and liquidity requirements and performance objectives and manage the risk consistent with guidelines approved by our Board of Directors. Through such management, we seek to reduce the exposure of our operations to changes in interest rates.

Our profits depend, in part, on the difference, or “spread,” between the effective rate of interest received on the loans which we originate and the interest rates paid on our financing facilities, which can be adversely affected by movements in interest rates.

The automobile contracts purchased and held by us are written at fixed interest rates and, accordingly, have interest rate risk while such contracts are funded with warehouse borrowings because the warehouse borrowings accrue interest at a variable rate.

Recent Accounting Developments

See Note 4 to the Consolidated Financial Statements included in Item 1 to this Quarterly Report on Form 10-Q for a discussion of recent accounting developments.

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.

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2007.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during the quarter ended September 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

Not applicable

Item 1A.

Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, operating results and/or cash flows.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

During the quarter ended September 30, 2007, we did not repurchase any shares of our common stock.

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program		Approximate Number of Shares That May Yet Be Purchased Under the Plan or Program
July 1, 2007 to July 31, 2007		—	$	—		—		1,410,262
August 1, 2007 to August 31, 2007		—	$	—		—		1,410,262
September 1, 2007 to September 30, 2007		—	$	—		—		1,410,262
Total		—	$	—		—		1,410,262

On June 27, 2006, our Board of Directors approved a share repurchase program and authorized us to repurchase up to 500,000 shares of our outstanding common stock from time to time in the open market or in private transactions in accordance with the provisions of applicable state and federal law, including, without limitation, Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. On August 4, 2006, our Board of Directors approved an increase in the aggregate number of shares of our outstanding common stock that we may repurchase pursuant to the previously announced share repurchase program from 500,000 shares to 1,500,000 shares. On December 21, 2006, our Board of Directors approved a second increase in the aggregate number of shares of our outstanding common stock that we may repurchase pursuant to the previously announced share repurchase program from 1,500,000 shares to 3,500,000 shares. This share repurchase program does not have an expiration date.

Item 3.

Defaults Upon Senior Securities.

Not applicable

Item 4.

Submission of Matters to a Vote of Security Holders.

The Company’s 2007 Annual Meeting of Shareholders was held on July 10, 2007. At this meeting, the following matters were submitted to a vote of the Company’s shareholders:

Proposal 1:	Elect Four Directors;

Proposal 2:	Approve Amendment and Restatement of our Amended and Restated 1997 Employee Stock Incentive Plan; and

Proposal 3:	Ratify Selection of Independent Public Accountants for 2007.

Proposal 1. At this meeting, each of the following directors was elected to serve on the Company’s Board of Directors until the annual meeting of shareholders to be held in 2009, or until election of his(her) successor, or until he(she) resigns:

	Votes For		Votes Withheld
Guillermo Bron		16,086,432		451,209
Ray C. Thousand		16,086,432		451,209
Luis Maizel		15,458,401		1,079,240
Julie Sullivan		16,086,432		451,209

Other directors continuing to serve on the Company’s Board of Directors until the annual meeting of shareholders to be held in 2008, or until election of their successors, or until they resign, are Giles H. Bateman, Ron R. Duncanson and Mitchell G. Lynn.

Proposal 2. At this meeting, the Amendment and Restatement of our Amended and Restated 1997 Employee Stock Incentive Plan was approved by the Company’s shareholders (with 10,588,324 votes cast for, 2,445,551 votes cast against, and 3,503,766 votes abstaining).

Proposal 3. At this meeting, the ratification of Grobstein, Horwath & Company LLP as the Company’s independent auditors for the year ending December 31, 2007 was approved by the Company’s shareholders (with 16,475,646 votes cast for, 60,645 votes cast against, and 1,350 votes abstaining).

Item 5.

Other Information.

Not applicable

Item 6.

Exhibits.

31.1		Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act 2002.

31.2		Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act 2002.

32.1		Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act 2002.

32.2		Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act 2002.

SIGNATURES

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 8, 2007	By:	/s/ RAY THOUSAND
			Ray Thousand
			Chief Executive Officer and President
			(Principal Executive Officer)

	November 8, 2007	By:	/s/ ARASH KHAZEI
			Arash Khazei
			Chief Financial Officer and Executive Vice President
			(Principal Financial and Accounting Officer)