EX-99.1 2 v120756_ex99-1.htm Unassociated Document
 
 
Contact:
Arash A. Khazei
Chief Financial Officer
United PanAm Financial Corp.
Tel: 949.224.1227
e-mail: akhazei@upfc.com
 
News Release

UNITED PANAM FINANCIAL CORP. ANNOUNCES
SECOND QUARTER 2008 RESULTS
 
Irvine, California - July 24, 2008 - United PanAm Financial Corp. (Nasdaq: UPFC) today announced results for its second quarter ended June 30, 2008.
 
For the quarter ended June 30, 2008, UPFC reported net income of $4.1 million, compared to net income of $4.6 million for the same period a year ago. Interest income increased 0.9% to $57.6 million for the quarter ended June 30, 2008 from $57.1 million for the same period a year ago. UPFC reported net income of $0.26 per diluted share for the quarter ended June 30, 2008 compared to $0.28 per diluted share for the same period a year ago. The reported net income for the quarter ended June 30, 2008 also includes an after tax charge of $1.7 million or $0.11 per diluted share for restructuring charges associated with the closure of 22 branches.

During the quarter ended June 30, 2008, UPFC closed 22 branches bringing the total number of closures to 36 branches in 2008. There were 106 branches in operation as of July 24, 2008. The majority of closures were from the consolidation of branches within the same market. The loan portfolios of the closed branches represented less than 10% of the overall portfolio balance and will continue to be serviced by other branches within the same market or by UPFC’s Business Operation Unit in Texas. The closures resulted in a decrease in the number of employees of approximately 230 or 20% of the work force since December 31, 2007. These closures are expected to result in cost savings, including operating expenses, of $12.0 million to $15.0 million annually. The closures have improved operating leverage and allow UPFC to remain profitable at lower total origination levels. These branch closures have been achieved with no deterioration in servicing quality. The delinquencies over 30 days have dropped to 1.09% at June 30, 2008 from 1.24% at December 31, 2007. Charge-offs for the second quarter decreased to 6.66% from 7.14% in the first quarter of 2008 and 7.99% in the fourth quarter of 2007.

For the six months ended June 30, 2008, UPFC reported net income of $5.3 million, compared to net income of $7.7 million for the same period a year ago. Interest income increased 5.3% to $116.1 million for the six months ended June 30, 2008 from $110.3 million for the same period a year ago. UPFC reported net income of $0.34 per diluted share for the six months ended June 30, 2008 compared to $0.46 per diluted share for the same period a year ago. The reported net income for the six months ended June 30, 2008 also includes an after tax charge of $2.3 million or $0.15 per diluted share for restructuring charges associated with the closure of 36 branches during the six month ended June 30, 2008.

UPFC purchased $98.5 million of automobile contracts during the second quarter of 2008, compared with $167.8 million during the same period a year ago, representing a 41.3% decrease. This decrease was the result of the slowdown in the economy and current market conditions, in addition to UPFC’s focus on tighter underwriting criteria. Contracts outstanding totaled $917.5 million at June 30, 2008, compared with $918.6 million at June 30, 2007, representing a 0.1% decrease.

 
The decrease in net income for the quarter ended June 30, 2008 compared to the same period a year ago primarily reflects the following:

·
Interest income increased 0.9% to $57.6 million from $57.1 million due primarily to the increase in average loans of $32.7 million as a result of the purchase of additional automobile contracts.

·
Interest expense decreased 0.9% to $11.5 million from $11.6 million due primarily to the lower cost of funds on the warehouse line of credit. As a result, net interest margin increased from 79.7% for the quarter ended June 30, 2007 to 80.1% for the quarter ended June 30, 2008.

·
Provision for loan losses increased due to an increase in the annualized charge-off rate to 6.66% for the quarter ended June 30, 2008 from 5.04% for the same period a year ago. The major factors that continue to impact our charge-off rate are the overall deteriorating economic environment and increasing gasoline prices.
 
·
Non-interest expense increased to $25.0 million from $24.2 million for the same period a year ago. The increase in non-interest expense was due to a pretax restructuring charge of $2.8 million that was recorded for costs associated with closure of branches in the quarter ended June 30, 2008 ($1.7 million after tax). The restructuring charge included severance, fixed asset write-offs, post-closure costs and a $1.5 million reserve for estimated future lease obligations. Non-interest expense, excluding the restructuring charges, as a percentage of average loans dropped to 9.7% from 10.9% for the same period a year ago.

For the six months ended June 30, 2008, UPFC’s securitization notes payable decreased by $213.0 million and the borrowings under UPFC’s warehouse facility increased by $201.5 million. The reduction in securitization notes payable and the increase in borrowings under the warehouse facility reflect the fact that UPFC has not accessed the securitization market with a transaction since November 2007. If UPFC is unable to securitize a sufficient number of automobile installment sales contracts in a timely manner or obtain financing by other means, then UPFC’s liquidity position would be adversely affected, as UPFC will require continued execution of securitization transactions in order to fund future liquidity needs. In addition, unanticipated delays in closing a securitization would also increase UPFC’s interest rate risk by increasing the warehousing period for automobile installment sales contracts.

On October 18, 2007, UPFC executed a twelve month extension of the existing $300 million warehouse facility with Deutsche Bank, and as of June 30, 2008 the warehouse facility was drawn to $237.1 million. There is no assurance that UPFC will be able to obtain further advances under this facility during its term or that this facility will continue to be available beyond the current expiration date at reasonable terms or at all. Management is currently evaluating alternative sources of financing in case UPFC is unable to obtain advances for any reason under the warehouse facility. If UPFC is unable to obtain advances under the warehouse facility or arrange for other types of interim financing, UPFC will have to curtail or cease automobile contract purchasing activities, sell receivables on a whole-loan basis or otherwise revise the scale of its business, which would have a material adverse effect on UPFC’s financial position and results of operations.



United PanAm Financial Corp.

UPFC is a specialty finance company engaged in automobile finance, which includes the purchasing, warehousing, securitizing and servicing of automobile installment sales contracts originated by independent and franchised dealers of used automobiles. UPFC conducts its automobile finance business through its wholly-owned subsidiary, United Auto Credit Corporation, with branch offices in 36 states.

Forward Looking Statements

Any statements set forth above that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act (“SLRA”) of 1995, including statements concerning the Company’s strategies, plans, objectives, intentions and projections. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “realize,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. Such statements are subject to a variety of estimates, risks and uncertainties, known and unknown, which may cause the Company’s actual results to differ materially from those anticipated in such forward-looking statements. Potential risks and uncertainties include, but are not limited to, such factors as our dependence on securitizations; our need for substantial liquidity to run our business; loans we made to credit-impaired borrowers; reliance on operational systems and controls and key employees; competitive pressures which we face; changes in the interest rate environment; general economic conditions; the effects of accounting changes; and other risks discussed in our Company’s filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K, which filings are available from the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. UPFC undertakes no obligation to publicly update or revise any forward-looking statements.

# # #
Editors Note: Four pages of selected financial data follow.


United PanAm Financial Corp. and Subsidiaries
Consolidated Statements of Financial Condition
 
 
  
June 30,
2008 
  
December 31,
2007 
  
(Dollars in thousands)
              
Assets
          
Cash
  
$
8,257
  
$
9,909
  
Short term investments
    
14,646
   
7,332
  
Cash and cash equivalents
    
22,903
    
17,241
  
Restricted cash
    
76,094
    
73,633
  
Loans
    
876,075
    
882,651
  
Allowance for loan losses
    
(49,290
)
  
(48,386
)
Loans, net
    
826,785
    
834,265
  
Premises and equipment, net
    
5,870
    
6,799
  
Interest receivable
    
10,071
    
10,424
  
Other assets
    
31,144
   
34,819
 
Total assets
  
$
972,867
  
$
977,181
  
 
              
               
Liabilities and Shareholders’ Equity
              
Securitization notes payable
  
$
549,157
  
$
762,245
  
Warehouse line of credit
    
237,144
    
35,625
  
Accrued expenses and other liabilities
    
11,091
    
9,660
  
Junior subordinated debentures
    
10,310
    
10,310
 
Total liabilities
    
807,702
    
817,840
  
 
              
               
Preferred stock (no par value):
              
Authorized, 2,000,000 shares; no shares issued and outstanding
   
—
   
—
 
Common stock (no par value):
              
Authorized, 30,000,000 shares; 15,737,399 shares issued and outstanding at June 30, 2008 and December 31, 2007
    
49,990
    
49,504
  
Retained earnings
    
115,175
    
109,837
  
 
              
Total shareholders’ equity
    
165,165
    
159,341
  
 
              
               
Total liabilities and shareholders’ equity
  
$
972,867
  
$
977,181
  
 
          
 

United PanAm Financial Corp. and Subsidiaries
Consolidated Statements of Income
 
(In thousands, except per share data)
  
Three Months
Ended June 30,
  
Six Months
Ended June 30,
  
   
2008
  
 2007
  
2008
  
2007
  
Interest Income
                          
Loans
  
$
57,090
  
$
56,019
  
$
114,797
  
$
108,298
  
Short term investments and restricted cash
    
536
    
1,036
    
1,299
    
1,981
  
Total interest income
    
57,626
    
57,055
    
116,096
    
110,279
  
Interest Expense
                          
Securitization notes payable
    
9,304
    
8,551
    
20,192
    
17,751
  
Warehouse line of credit
    
2,023
    
2,763
    
3,548
    
3,866
  
Other interest expense
    
146
    
288
    
339
    
498
  
Total interest expense
    
11,473
    
11,602
    
24,079
    
22,115
  
Net interest income
    
46,153
    
45,453
    
92,017
    
88,164
  
Provision for loan losses
    
15,080
    
14,024
    
32,722
    
28,505
  
Net interest income after provision for loan losses
    
31,073
    
31,429
    
59,295
    
59,659
  
                           
Non-interest Income
    
568
    
500
    
1,039
    
847
  
                           
Non-interest Expense
                          
Compensation and benefits
    
14,904
    
15,594
    
31,819
    
30,933
  
Occupancy
    
2,140
    
2,263
    
4,604
    
4,446
  
Other non-interest expense
    
5,217
    
6,345
    
11,418
    
12,356
  
Restructuring charges
    
2,751
    
—
   
3,785
    
—
 
Total non-interest expense
    
25,012
    
24,202
    
51,626
    
47,735
  
                           
Income before income taxes
    
6,629
    
7,727
    
8,708
    
12,771
  
Income taxes
   
2,565
    
3,090
    
3,370
    
5,108
  
Net income
  
$
4,064
  
$
4,637
  
$
5,338
  
$
7,663
  
Earnings per share-basic:
                          
Net income
 
$
0.26
  
$
0.29
  
$
0.34
  
$
0.48
  
Weighted average basic shares outstanding
    
15,737
    
15,803
    
15,737
  
$
16,121
  
Earnings per share-diluted:
                          
Net income
 
$
0.26
  
$
0.28
  
$
0.34
  
$
0.46
  
Weighted average diluted shares outstanding
    
15,763
    
16,494
    
15,763
    
16,766
  




United PanAm Financial Corp. and Subsidiaries
Consolidated Statement of Changes in Shareholders’ Equity
 
 
  
Number
of Shares
 
Common
Stock
 
Retained
Earnings
 
Total
Shareholders’
Equity
 
   
(Dollars in thousands)
  
Balance, December 31, 2007
    
15,737,399
  
$
49,504
  
$
109,837
  
$
159,341
  
Net income
    
—
   
—
   
5,338
    
5,338
  
Stock-based compensation expense
    
—
   
486
    
—
   
486
  
 
    
___________
    
___________
    
___________
    
___________
  
Balance, June 30, 2008
    
15,737,399
  
$
49,990
  
$
115,175
  
$
165,165
  
 
                  
 

United PanAm Financial Corp. and Subsidiaries
Selected Financial Data

 
(Dollars in thousands)
  
At or For the
Three Months Ended
  
At or For the
Six Months Ended
  
   
June 30,
2008
  
June 30,
2007
  
June 30,
2008
  
June 30,
2007
  
                   
Operating Data
                  
Contracts purchased
  
$
98,508
  
$
167,807
  
$
228,438
  
$
335,447
  
Contracts outstanding
  
$
917,491
  
$
918,638
  
$
917,491
  
$
918,638
  
Unearned acquisition discounts
  
$
(41,416
)
$
(45,077
)
$
(41,416
)
$
(45,077
)
Average loan balance
  
$
925,891
  
$
893,174
  
$
926,135
  
$
865,254
  
Unearned acquisition discounts to gross loans
    
4.51
%
  
4.91
%
  
4.51
%
  
4.91
%
Average percentage rate to borrowers
    
22.71
%
  
22.62
%
  
22.71
%
  
22.62
%
                           
Loan Quality Data
                          
Allowance for loan losses
  
$
(49,290
)
$
(41,713
)
$
(49,290
)
$
(41,713
)
Allowance for loan losses to gross loans net of
unearned acquisition discounts
    
5.63
%
  
4.78
%
  
5.63
%
  
4.78
%
Delinquencies (% of net contracts)
31-60 days
61-90 days
90+ days
    
0.73
0.25
0.11
%
%
%
  
0.53
0.20
0.07
%
%
%
  
0.73
0.25
0.11
%
%
%
  
0.53
0.20
0.07
%
%
%
Total
    
1.09
%
  
0.80
%
  
1.09
%
  
0.80
%
Repossessions over 30 days past due (% of net contracts)
    
0.85
%
  
0.54
%
  
0.85
%
  
0.54
%
Annualized net charge-offs to average loans (1)
    
6.66
%
  
5.04
%
  
6.91
%
  
5.32
%
                           
Other Data
                          
Number of branches
   
106
    
144
    
106
    
144
  
Number of employees
    
947
    
1,035
    
947
    
1,035
  
Interest income
  
$
57,626
  
$
57,055
  
$
116,096
  
$
110,279
  
Interest expense
  
$
11,473
  
$
11,602
  
$
24,079
  
$
22,115
  
Interest margin
  
$
46,153
  
$
45,453
  
$
92,017
  
$
88,164
  
Net interest margin as a percentage of interest income
    
80.09
%
  
79.67
%
  
79.26
%
  
79.95
%
Net interest margin as a percentage of average loans (1)
    
20.05
%
  
20.41
%
  
19.98
%
  
20.55
%
Non-interest expense to average loans (1)
    
10.86
%
  
10.87
%
  
11.21
%
  
11.13
%
Non-interest expense to average loans (2)
    
9.67
%
  
10.87
%
  
10.39
%
  
11.13
%
Return on average assets (1)
    
1.67
%
  
1.97
%
  
1.10
%
  
1.68
%
Return on average shareholders’ equity (1)
    
10.03
%
  
12.04
%
  
6.65
%
  
9.89
%
Consolidated capital to assets ratio
    
16.98
%
  
16.01
%
  
16.98
%
  
16.01
%
_____________________________________
 
 
(1)
Quarterly information is annualized for comparability with full year information.
 
(2)
Excluding restructuring charges.