UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2006

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

Commission file number: 001-33257

White River Capital, Inc.

(Exact name of registrant as specified in its charter)

Indiana	35-1908796
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1445 Brookville Way, Suite I

Indianapolis, Indiana 46239

(Address of principal executive offices/zip code)

Registrant’s telephone number, including area code: (317) 806-2166

Securities registered pursuant to Section 12(b) of the Act:
Common Stock, without par value	American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.	o Yes   x No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.	o Yes   x No
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.	x Yes   o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K	o
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. (Check one):
Large accelerated filer       Accelerated filer o      Non-accelerated filer x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) .	o Yes   x No

As of March 16, 2007, there were 3,839,487 shares outstanding of the issuer’s Common Stock, without par value.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information in the registrant’s definitive proxy statement for its 2007 Annual Meeting of Shareholders, which the registrant will file with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year, is incorporated by reference in Part III of this Form 10-K.

- INDEX -

		PAGE
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	14
Item 2.	Properties	23
Item 3.	Legal Proceedings	23
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Selected Financial Data	30
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	32
Item 7A.	Quantitative and Qualitative Discloses About Market Risk	50
Item 8.	Financial Statements and Supplementary Data	52
	Audited Consolidated Balance Sheets as of December 31, 2006 and 2005	53
	Audited Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004	54
	Audited Consolidated Statements of Shareholders’ Equity (Deficit) for the Years Ended December 31, 2006, 2005 and 2004	55
	Audited Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	56
	Notes to Audited Consolidated Financial Statements	57
Item 9A.	Controls and Procedures	83

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PART III
Item 10.	Directors, Executive Officers and Corporate Governance	84
Item 11.	Executive Compensation	84
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	85
Item 13.	Certain Relationships and Related Transactions, and Director Independence	85
Item 14.	Principal Accounting Fees and Services	85
PART IV
Item 15.	Exhibits and Financial Statement Schedules	86
SIGNATURES		90

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PART I

ITEM 1. BUSINESS

Overview

Founded in 2004, White River Capital, Inc. (“White River”) is a financial services holding company headquartered in Indianapolis, Indiana with two principal operating subsidiaries.

Coastal Credit LLC (“Coastal Credit”), based in Virginia Beach, Virginia, is a specialized subprime auto finance company engaged in acquiring subprime auto receivables from both franchised and independent automobile dealers which have entered into contracts with purchasers of typically used, but some new, cars and light trucks. Coastal Credit then services the receivables it acquires. Coastal Credit operates in 22 states through 16 offices.

Union Acceptance Company LLC (“UAC”), based in Indianapolis, Indiana, is a specialized auto finance company which holds and oversees its portfolio of non-prime auto receivables. On January 5, 2007, the U.S. Bankruptcy Court for the Southern District of Indiana issued a final decree and closed UAC’s Chapter 11 bankruptcy case. UAC remains contractually obligated to distribute its remaining assets in compliance with its Second Amended and Restated Plan of Reorganization (the “Plan” or the “Plan of Reorganization”) approved in connection with the bankruptcy case. Under the Plan, UAC must pay net proceeds from its residual interest in its receivables portfolios and other estate assets to creditors holding notes and claims under the Plan. White River owns all of UAC’s general unsecured claims, 89.1% of UAC’s restructured subordinated notes (“Subordinated Notes”) and 94.7% of UAC's accrual notes (“Accrual Notes”) issued under the Plan. UAC was designated the Creditor Representative to oversee the distribution of is remaining assets as contractually obligated under the Plan.

White River’s net interest margin after provision for estimated losses was $10.7 million for the year ended December 31, 2006. Net income for this same period was $43.4 million which includes an income tax benefit of $39.0 million. At December 31, 2006, total assets were $225.4 million.

COASTAL CREDIT LLC

General

Coastal Credit is a subprime finance company engaged in acquiring sub-prime auto receivables from both franchised and independent automobile dealers which have entered into contracts with purchasers of typically used, but some new, cars and light trucks. Coastal Credit then services the receivables it acquires. Coastal Credit commenced operations in Virginia in 1987. It conducts business in 22 states - Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Hawaii, Kansas, Louisiana, Maryland, Mississippi, Nevada, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and Washington - through its 16 branch locations.

Coastal Credit provides financing programs to customers of automobile dealers who meet Coastal Credit’s credit standards, but who may not meet the credit standards of traditional lenders, such as banks and credit unions. Unlike these traditional lenders, Coastal Credit acquires contracts from dealers for vehicle purchases made by borrowers who typically have limited or impaired credit histories or who are purchasing older model and higher mileage automobiles. This is typically referred to as the subprime automobile finance market.

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A significant number of contracts acquired by Coastal Credit are contracts made with borrowers who are in the United States military. During 2006, 32.2% of new originations were made with these borrowers. Coastal Credit believes that having in its portfolio a significant percentage of contracts for which the borrowers are United States military personnel contributes to lower payment delinquency and higher collection personnel efficiencies. Coastal Credit requests all borrowers who are in the military to use the military allotment system to make payments on their contracts. Under this allotment system, the borrower authorizes the military to make a payroll deduction for the amount of the borrower’s monthly contract payment and to direct this deduction payment to Coastal Credit on behalf of the borrower. Delinquency of payments on contracts paid by allotment historically has been less than delinquency of payments on contracts not paid by allotment. As a result, the collection effort associated with the military contracts requires substantially less time, allowing Coastal Credit’s collection staff to focus on an increased number of civilian sector contracts.

Coastal Credit’s executive offices are located at 3852 Virginia Beach Boulevard, Virginia Beach, Virginia 23452.

Acquisition of Automobile Finance Contracts

Coastal Credit currently conducts its automobile finance programs in 22 states through a total of 16 branches, with two branches in each of Florida, Georgia, Mississippi, and Virginia, and one branch in each of California, Delaware, Louisiana, Nevada, Ohio, Oklahoma, Pennsylvania and Texas. Each branch acquires, processes, and services contracts in its geographic area.

Coastal Credit’s branch managers develop and maintain relationships with automobile dealers in the branches’ geographic areas. Coastal Credit enters into non-exclusive dealer agreements with these dealers for the acquisition of individual contracts. The dealer agreement provides Coastal Credit with recourse to the dealer in cases of dealer fraud or breach of the dealer’s representations and warranties. As of December 31, 2006, Coastal Credit had non-exclusive agreements with approximately 1,500 dealers, of which approximately 650 are active. Coastal Credit considers a dealer agreement to be active if Coastal Credit has acquired a contract under the dealer agreement in the last nine months. After Coastal Credit acquires a contract from a dealer, the dealer is no longer involved in the relationship between Coastal Credit and the borrower, other than through the existence of limited representations and warranties of the dealer.

Borrowers under the contracts typically make down payments, in the form of cash or trade-in, ranging from 5% to 20% of the sale price of the vehicle financed. The balance of the purchase price of the vehicle plus taxes, title fees and, if applicable, premiums for “add-on” products (described below), are generally financed over a period of 32 to 48 months.

Coastal Credit acquires each contract from the automobile dealer at a negotiated price that is less than the original principal amount being financed by the purchaser of the automobile. The amount of the variance depends upon factors such as the creditworthiness of the borrower and the age and value of the automobile. Coastal Credit will pay more for contracts as the credit risk of the borrower improves. Coastal Credit typically acquires contracts at purchase prices that range from 80% to 90% of the original principal amount of the contract. In addition, Coastal Credit typically charges dealers a processing fee ranging from $50 to $295 per contract acquired. See “Pricing of Contracts” below.

As of December 31, 2006, Coastal Credit’s contract portfolio consisted exclusively of contracts acquired by Coastal Credit without credit recourse to the dealer. Although all the contracts in Coastal Credit’s contract portfolio were acquired without credit recourse, each dealer remains liable to Coastal Credit for liabilities arising from any breach of certain representations and warranties made by the dealer with respect to compliance with applicable federal and state laws and valid title to the vehicle.

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Coastal Credit’s policy is to acquire a contract only after the dealer has provided Coastal Credit with the requisite proof that Coastal Credit will have a first priority lien on the financed vehicle, that the borrower has obtained the required collision insurance naming Coastal Credit as loss payee and that the contract has been fully and accurately completed and validly executed. Once Coastal Credit has received and approved all required documents, Coastal Credit purchases the contract and begins servicing the contract.

Both Coastal Credit and the dealers with which it does business offer purchasers of vehicles certain other “add-on” products. These products are offered by the dealer on Coastal Credit’s behalf or by the dealer on behalf of the automobile dealership at the time of sale. The add-on products consist of the following:

· Extended warranty protection - covers the cost of certain repairs after the vehicle’s warranty expires;

· Gap insurance - pays an amount between what the borrower owes and the primary insurance cash value of a vehicle if the vehicle is stolen or destroyed; and

· Collateral protection insurance - pays the cost to repair or the value of the vehicle if the vehicle is stolen, damaged or destroyed.

At the borrower’s option, the cost of these products may be included in the amount financed under the contract.

Underwriting Guidelines

Coastal Credit’s typical borrower has a credit history that may fail to meet the lending standards of most banks, credit unions and captive automobile finance companies. Substantially all of Coastal Credit’s automobile contracts involve loans made to individuals with limited or impaired credit histories. Coastal Credit believes that its borrower credit profile is similar to that of its direct competitors in the subprime automobile finance business. Coastal Credit also believes that its underwriting criteria and branch network management system coupled with close senior management supervision enhances its risk management and collection functions.

In deciding whether to acquire a particular contract, Coastal Credit considers various factors, including:

· the applicant’s length of residence;

· the applicant’s current and prior job status;

· the applicant’s history in making other installment loan payments;

· the applicant’s payment record on previous automobile loans;

· the applicant’s current income and discretionary spending ability;

· the applicant’s credit history;

· the value of the automobile in relation to the purchase price;

· the term of the contract;

· the automobile make and mileage; and

· Coastal Credit’s prior experience with contracts acquired from the dealer.

For applicants who are military personnel, Coastal Credit also considers the applicant’s rank and the time remaining on his or her enlistment contract. These factors affect not only whether Coastal Credit will acquire the contract, but also the purchase price Coastal Credit will be willing to pay the dealer to acquire the contract.

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As part of the approval process, Coastal Credit receives a credit application completed by the prospective borrower. The application contains information relating to the applicant’s background, employment and credit history. Coastal Credit also obtains a credit report from an independent credit reporting service and verifies the applicant’s employment history, income and residence. In certain cases, a Coastal Credit application processor interviews the applicant by telephone. After reviewing the information submitted in the credit application (which includes years at employer, years at residence and income), any telephone interview and the credit report, a Coastal Credit representative approves or rejects the application according to company guidelines.

The branch manager of each branch is responsible for underwriting and purchasing automobile contracts and providing servicing and collections. However, the branch network is closely managed and supervised by Coastal Credit’s senior management. Coastal Credit believes that its branch network operations enable branch managers to develop strong relationships with its automobile dealers. Coastal Credit, through its branches, provides a high level of service to its dealers by providing consistent credit decisions and frequent management contact. Coastal Credit has established internal buying guidelines to be used by its underwriters when acquiring contracts. Although the buying guidelines vary from branch to branch, Coastal Credit’s branch managers or senior management must approve any contract that does not meet a branch’s guidelines in advance of purchasing any such contract. Coastal Credit has 16 branch managers, each charged with managing the specific branches in a defined geographic area. In addition to a variety of administrative duties, the branch managers are responsible for monitoring their assigned branches’ compliance with Coastal Credit’s underwriting standards. On a regular basis, either a branch manager or senior management reviews every newly purchased contract.

To further ensure compliance with its underwriting guidelines, Coastal Credit performs on-site reviews of its branches. The branch reviews are performed on a schedule that varies from branch to branch, depending on the size of the branch, the length of time the branch has been open, the current tenure of the branch manager and the branch’s current and historical profitability. Coastal Credit believes that the branch review is critical to ensuring that credit quality is not sacrificed for asset growth.

Pricing of Contracts

Coastal Credit’s management believes that a key to its consistent profitability has been its ability to effectively price the contracts it acquires to fully cover all future losses on the contracts. Pricing has two components: (1) the interest rate the borrower pays on the amount financed and (2) the purchase price paid to the dealer. To determine the pricing for a particular contract, Coastal Credit considers the same factors it considers in determining whether to acquire the contract. As a result of its disciplined underwriting guidelines, Coastal Credit generally only purchases approximately 12 contracts for every 100 automobile loan applications reviewed. These factors are discussed above under “Underwriting Guidelines.”

To ensure its ability to continue to effectively price the contracts it acquires, Coastal Credit’s branch managers and senior management analyze various reports on a monthly and quarterly basis to identify any trends that will influence pricing. These reports help management compare the performance of contracts by branch, by dealer, by contract age, by borrower’s income and by borrower’s credit history.

Geographic Concentration

Coastal Credit operates its business and acquires its contracts in various regions as follows:

Region #1 - Florida, Georgia, North Carolina, South Carolina, Tennessee and Virginia.

Region #2 - Delaware, Maryland, Ohio and Pennsylvania.

Region #3 - Louisiana, Kansas, Mississippi, Nevada, Oklahoma and Texas.

Region #4 - Alaska, Arizona, California, Colorado, Hawaii and Washington.

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Coastal Credit’s level of contract acquisitions in each state may fluctuate significantly over time depending on competitive conditions and other factors in those areas. In considering potential areas for expansion, Coastal Credit carefully reviews the regulatory and competitive environment and economic and demographic factors, including the availability of qualified underwriters and managers and the number of dealerships in the potential expansion area. Because a significant number of Coastal Credit’s contracts have been with borrowers who are in the military, Coastal Credit also considers the proximity of military bases. To ensure successful branch expansion, Coastal Credit focuses on hiring and developing local, experienced branch-level management.

Servicing, Monitoring and Enforcement of Contracts

Coastal Credit acts as servicer for the contracts it acquires. As servicer, Coastal Credit collects payments due from borrowers, monitors collections and pursues the collection of delinquent accounts, including the liquidation of collateral securing defaulted contracts. Coastal Credit uses integrated computer systems to enhance its ability to respond to borrower inquiries and to monitor the performance of its contract portfolio and the performance of individual borrowers under contracts. All of Coastal Credit’s personnel, including personnel at its branch offices, have instant, simultaneous access to information from a single shared database.

To protect its collateral in financed vehicles, Coastal Credit requires all borrowers to obtain and maintain collision insurance covering damage to the vehicle and naming Coastal Credit as the loss payee. The insurance must have a deductible typically of not more than $500. Failure to maintain insurance constitutes a default under the contract, and Coastal Credit may, at its discretion, repossess the vehicle. Coastal Credit does not “force-place” insurance (that is, purchase insurance on behalf of borrowers whose policies have lapsed and add the cost and applicable finance charges to the balance of the contract).

Coastal Credit uses a number of methods to monitor compliance by borrowers with their obligations under contracts and to pursue collections of delinquent accounts. In addition to Coastal Credit’s collections staff, branch managers and senior management receive a daily delinquency report. The delinquency report is an aging report that provides basic information regarding each account and indicates accounts that are past due. The report includes information that enables the senior management, branch managers and collection staff to identify and access delinquent accounts. The report includes such information as the borrower’s name, account number, outstanding balance, date of last payment, next due date, past due days by recency and contractually, and the delinquency status by aging category.

In most cases, a collection representative begins the process of contacting the borrower by telephone or mail on the first day that the account is past due. The collection representative also mails future reminders and late notices. If the collection representative is able to make contact with the borrower and the borrower is able to provide Coastal Credit with an acceptable explanation for the delinquency, to display the willingness and the ability to make payment, and to commit to a plan to return the account to current status, the information is entered in Coastal Credit’s database and is used to generate a “promises report.” Coastal Credit’s collection staff uses the promises report for further account monitoring. Generally, the same collection representative will pursue the account until it is brought current or charged off.

If the collection representative is not able to make contact with the borrower or if the borrower is unable to make payment arrangements acceptable to Coastal Credit, the collection representative will refer the account to the collection manager or the branch manager to determine whether to repossess the financed vehicle. Coastal Credit’s branch managers and senior management review all repossession determinations and have the authority to override such determinations.

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Coastal Credit prepares a repossession report that provides information regarding repossessed vehicles and aids Coastal Credit in disposing of repossessed vehicles. In addition to information regarding the borrower, this report provides information regarding the date of repossession, the date the vehicle was sold, the number of days it was held in inventory prior to sale, the year, make and model of the vehicle, the vehicle’s mileage, the payoff amount on the contract, the value of the vehicle indicated in standard industry publications, the suggested sale price, the location of the vehicle, the original dealer, the condition of the vehicle, and notes and other information. This data provides Coastal Credit with relevant information that may affect future credit decisions.

Once a branch manager or senior management has approved a repossession request, a repossession firm repossesses the vehicle and delivers it to a secure location specified by Coastal Credit. Coastal Credit maintains relationships with several licensed repossession firms that repossess vehicles for fees that typically range from $225 to $375 for each vehicle repossessed. As required by applicable state law, Coastal Credit notifies the borrower by certified letter that the vehicle has been repossessed and that, to regain the vehicle, he or she must make arrangements satisfactory to Coastal Credit and pay the amount owed under the contract within the statutory redemption period allowed by the applicable state law after delivery of the letter. If satisfactory arrangements for return of the vehicle are not made within the statutory period, Coastal Credit then sends title to the vehicle to the applicable state title transfer department, which then registers the vehicle in Coastal Credit’s name. Coastal Credit then sells the vehicle by public auction. On average, approximately 45 days lapse from the time Coastal Credit takes possession of a vehicle and the time it is sold at auction.

When a repossessed vehicle has been sold and/or a contract has been charged off, if Coastal Credit determines that there is a reasonable likelihood of recovering part or all of any deficiency against the borrower under the contract, Coastal Credit will pursue all legal remedies available to it. States have different collection laws, but legal remedies may include lawsuits, judgment liens and wage garnishments.

In addition, the branch managers and Coastal Credit’s senior management review each account that is 60 days past due to determine whether the contract should be charged off. Coastal Credit requires mandatory charge off of all contracts when 60 days have passed since the most recent payment and the contract is 180 days delinquent per the contract terms. All charged off loans are transferred to a Profit and Loss (P&L) Department. The P&L Department attempts to collect the contract until the borrower has paid the contract or all legal remedies have been exhausted. Historically, Coastal Credit has recovered approximately 25% of deficiencies from such borrowers. Proceeds from the disposition of the vehicles are not included in calculating the foregoing percentage range.

Marketing and Advertising

Coastal Credit’s marketing efforts are directed toward automobile dealers. Coastal Credit attempts to meet dealers’ needs by offering highly-responsive, cost-competitive, locally-based and service-oriented financing programs. Coastal Credit relies on its marketing and branch managers to solicit agreements for the acquisition of contracts with automobile dealers located within each branch’s geographic area. The branch manager provides dealers with information regarding Coastal Credit and the general terms upon which Coastal Credit is willing to acquire contracts.

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Competition

The subprime automobile finance industry is highly fragmented and highly competitive. There are numerous financial service companies that provide subprime credit in the markets served by Coastal Credit, including credit unions, other consumer finance companies and captive finance companies owned by automobile manufacturers and retailers. Many of these companies have significantly greater resources and market presence than Coastal Credit. Coastal Credit does not believe that increased competition for the acquisition of contracts will cause a material reduction in the interest rate payable by the purchaser of the automobile. However, increased competition for the acquisition of contracts will enable automobile dealers to shop for the best price. Coastal Credit’s management believes that its effective pricing has been a key factor in its consistent, historical profitability, and, therefore, Coastal Credit will forego acquisition of a contract if it believes that meeting the competitor’s pricing would compromise its underwriting guidelines.

Coastal Credit’s target market consists of persons who are generally unable to obtain traditional used car financing because of their credit history or the vehicle’s mileage or age. Coastal Credit has been able to expand its automobile finance business in the subprime credit market by offering to acquire contracts on terms that are competitive with those of other companies that acquire automobile receivables in that market segment. As a result of the daily contact that many of Coastal Credit’s employees have with automobile dealers located throughout the market areas Coastal Credit serves, Coastal Credit is generally aware of the terms upon which its competitors are offering to acquire contracts. Coastal Credit’s policy is to modify its terms, if necessary, to remain competitive. However, Coastal Credit will not sacrifice credit quality, its purchasing criteria or prudent business practices to meet the terms offered by its competitors.

Coastal Credit’s ability to compete effectively with other companies offering similar financing arrangements depends upon its maintaining current and developing new business relationships with auto dealers in each branch’s geographic area.

Regulation

Coastal Credit’s financing and collection operations are subject to regulation, supervision and licensing under various federal, state and local statutes and ordinances. Additionally, the procedures that Coastal Credit must follow in connection with the repossession of vehicles securing contracts are regulated by each of the states in which Coastal Credit does business. In addition to applicable federal law, the laws of the following states where Coastal Credit currently has branches govern Coastal Credit’s operations: California, Delaware, Florida, Georgia, Louisiana, Mississippi, Nevada, Ohio, Oklahoma, Pennsylvania, Texas and Virginia.

Compliance with existing laws and regulations has not had a material adverse effect on Coastal Credit’s operations to date. Coastal Credit’s management believes that Coastal Credit maintains all requisite licenses and permits and is in compliance with all applicable local, state and federal laws and regulations. Coastal Credit periodically reviews its branch office practices in an effort to ensure such compliance. The following constitute certain of the federal, state and local statutes and ordinances with which Coastal Credit must comply:

· State consumer regulatory agency requirements. Pursuant to the regulations of various states, the appropriate state regulatory agency may periodically conduct on-site audits of Coastal Credit’s branches in Florida, Delaware, Louisiana, Mississippi and Oklahoma. These regulations govern, among other matters, licensure requirements, requirements for maintenance of proper records, payment of required fees, maximum interest rates that may be charged on loans to finance used vehicles and proper disclosure to customers regarding financing terms.

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· State licensing requirements. Coastal Credit maintains the following licenses:

State	License
Arizona	Sales Finance Company License
Delaware	Motor Vehicle Sales Finance License
Florida	Sales Finance Company License
Louisiana	Sales Finance Company License
Maryland	Sales Finance License
Mississippi	Motor Vehicle Sales Finance License
Oklahoma	Supervised Lender License
Pennsylvania	Sales Finance Company License
Texas	Motor Vehicle Sales Finance License

· Fair Debt Collection Act. The Fair Debt Collection Act and applicable state law counterparts prohibit Coastal Credit from contacting customers during certain times and at certain places, from using certain threatening practices and from making false implications when attempting to collect a debt.

· Truth in Lending Act. The Truth in Lending Act requires Coastal Credit and the dealers with whom Coastal Credit does business to make certain disclosures to customers, including the terms of repayment, the total finance charge and the annual percentage rate charged on each contract.

· Equal Credit Opportunity Act. The Equal Credit Opportunity Act prohibits Coastal Credit from discriminating against loan applicants on the basis of race, color, sex, age or marital status. Pursuant to Regulation B promulgated under the Equal Credit Opportunity Act, Coastal Credit is required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection.

· Fair Credit Reporting Act. The Fair Credit Reporting Act requires Coastal Credit to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency.

· Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act requires Coastal Credit to maintain privacy with respect to certain consumer data in its possession and to periodically communicate with consumers on privacy matters.

· Servicemembers' Civil Relief Act. Formerly called the Soldiers’ and Sailors’ Civil Relief Act, the Servicemembers’ Civil Relief Act provides certain protections to borrowers who, subsequent to entering into a contract, have joined or enlisted, or been called to active duty with, the military. Coastal Credit is prohibited from repossessing the vehicles of such borrowers and from terminating the contracts with such borrowers for breach. In addition, Coastal Credit is

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required to reduce the interest rate charged on each loan to such borrowers to 6% if the borrower’s military duty affects the borrower’s ability to pay his or her contract.

· Electronic Funds Transfer Act. The Electronic Funds Transfer Act prohibits Coastal Credit from requiring its customers to repay a loan or other credit by electronic funds transfer, except in limited situations, which do not apply to Coastal Credit. Coastal Credit is also required to provide certain documentation to its customers when an electronic funds transfer is initiated and to provide certain notifications to its customers with regard to preauthorized payments.

· Bankruptcy. Federal bankruptcy and related state laws may interfere with or affect Coastal Credit’s ability to recover collateral or enforce a deficiency judgment.

Employees

Coastal Credit’s executive management and various support functions are centralized at its corporate headquarters in Virginia Beach, Virginia. As of December 31, 2006, Coastal Credit employed a total of approximately 125 persons. None of Coastal Credit’s employees is subject to a collective bargaining agreement, and Coastal Credit considers its relations with its employees generally to be satisfactory.

UNION ACCEPTANCE COMPANY LLC

Historical Business of UAC

UAC is a specialized finance company that, prior to the Bankruptcy Case, as defined below, was engaged in the business of acquiring and servicing automobile retail installment sales contracts and installment loan agreements. UAC would acquire retail installment sales contracts originated by a network of over 5,500 automobile dealerships affiliated with major domestic and foreign manufacturers, nationally recognized rental car outlets and used car superstores. UAC’s receivables acquisition strategy focused on acquiring receivables from automobile purchasers who exhibited a favorable credit profile purchasing late model used and, to a lesser extent, new automobiles.

Generally, after acquiring receivables, UAC would temporarily hold the receivables in short-term “warehouse” financing arrangements through its subsidiaries. Periodically, UAC would pool the receivables and sell interests in the pooled portfolio as asset-backed securities through securitization transactions. A “securitization” is the process through which receivables are pooled and sold to an entity (in UAC’s case, a trust) that issues asset-backed securities to investors. “Asset-backed securities” is a general reference to securities that are backed by financial assets such as automobile receivables. UAC would remain the servicer for the receivables it securitized. A “servicer” in respect of a portfolio of consumer finance receivables is generally responsible for monitoring and reporting collections of payments on the receivables, remitting those payments to appropriate entities and pursuing the collection of delinquent receivables, including liquidation of collateral securing defaulted receivables.

UAC, through its wholly owned special purpose subsidiary, UAC Securitization Corporation (“UACSC”), continues to hold the rights to the retained interest in the securitizations that it had sponsored prior to the UAC bankruptcy petition date and subsequent non-recourse financings of previously securitized receivables. The “retained interest” refers to the net cash flows that become available from securitizations after obligations required to be satisfied by these securitizations and non-recourse financings are paid. The retained interest is discussed in more detail under the heading “The Retained Interest-Cash Flows from Securitizations” below.

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The UAC Bankruptcy Case

In October 2002, UAC filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Indiana (the “Bankruptcy Case”). Shortly after the commencement of the Bankruptcy Case, UAC discontinued acquisition of new automobile receivables, but continued to act as servicer with respect to its securitized portfolios of receivables and receivables owned directly by UAC or indirectly by its subsidiaries.

In April 2003, with approval by the bankruptcy court, UAC sold substantially all of the assets related to its receivable servicing business to Systems & Services Technologies Inc. (“SST”), a subsidiary of J.P. Morgan Chase & Co. SST was appointed as servicer with respect to the securitized receivables and the receivables held directly by UAC or its subsidiaries. SST continues to serve in that capacity.

In August 2003, the Bankruptcy Court confirmed UAC’s Second Amended and Restated Plan of Reorganization. On January 5, 2007, the U.S. Bankruptcy Court for the Southern District of Indiana issued a final decree and closed UAC’s Chapter 11 Bankruptcy Case. Although the Bankruptcy Case is closed, UAC remains contractually obligated to distribute its remaining assets in compliance with the Plan. UAC was designated the Creditor Representative to oversee the distribution of is remaining assets as contractually obligated under the Plan.

Generally, UAC is obligated to continue to collect cash as it became available from prescribed assets of the bankruptcy estate (see “The Retained Interest-Cash Flows from Securitizations” below) and to distribute such cash to the creditors of the bankruptcy estate who made claims in the Bankruptcy Case and whose claims were allowed by the bankruptcy court. The Plan of Reorganization refers to these creditors as holders of “Allowed Claims.” The Plan of Reorganization provides that payments to holders of Allowed Claims be made only from prescribed assets, mostly from cash flows deriving from the retained interest in prior securitizations.

When the Plan was confirmed, UAC expected that the net estate proceeds that would be available (mostly from cash flows deriving from the retained interest in prior securitizations) to make distributions on Allowed Claims over time would be sufficient to pay all Allowed Claims in full, and that cash flows that would benefit UAC’s shareholders would be generated from the retained interest in excess of the amount necessary to pay Allowed Claims. The Plan of Reorganization provided that the equity interests in UAC were unimpaired and provided that payments would be made to holders of Allowed Claims only from prescribed assets. The principal reason for these provisions limiting the recourse of holders of Allowed Claims under the Plan to these specific assets was to afford the holders of UAC’s equity interests the opportunity, through new investment, to continue business operations that would be protected from recourse by holders of Allowed Claims against UAC.

After the Plan was confirmed, the cash flows from the retained interest did not materialize as projected. Loss rates on the securitized portfolio increased substantially following the transition of servicing to SST. The impact of SST’s transitioning of servicing as well as overall performance of the portfolio amid challenging economic times and other factors substantially reduced the cash flows expected from the securitizations. The sources of funds available to make distributions to the holders of Allowed Claims were sufficient to pay the holders of the Senior Notes issued under the Plan, but such funds are not expected to be sufficient to pay the remaining amounts due holders of Class 2A (general unsecured) claims, holders of the Subordinated Notes and the holders of the Accrual Notes issued under the Plan of Reorganization. However, UAC’s parent, White River, has purchased the substantial majority of UAC’s outstanding notes and claims. Amounts available for distribution to such notes and claims owned by White River will be paid by UAC to White River, in accordance with the Plan of Reorganization, as further described below.

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The Retained Interest - Cash Flows from Securitizations

Pursuant to the Plan, UAC is obligated to continue to collect cash as it becomes available from prescribed assets; mostly from cash flows deriving from the retained interest in prior securitizations. UAC, through its wholly owned special purpose subsidiary, UACSC, continues to hold the rights to the retained interest in the securitizations that it had sponsored prior to the Bankruptcy Case petition date and the non-recourse financings effectuated since confirmation of the Plan of Reorganization. The “retained interest” refers to the net cash flows that become available from these securitizations and non-recourse financings after obligations required to be satisfied by the securitization trusts or under the financings are paid. Generally, each securitization or financing represents a pool of receivables that serves as collateral for issued notes, the outstanding balance of which is equal to the balance of receivables in the related pool. The interest payments on the receivables are greater than interest payments owed on the notes, and each transaction is structured such that the cash flows from interest payments are expected to be sufficient to absorb losses from defaults, pay interest and principal due on the notes, and pay servicing and administrative expenses, with any cash flows remaining after those obligations are satisfied payable to UACSC as the holder of the equity interest or retained interest in the trust or as the owner of the financed receivables (subject to the arrangements described below).

In connection with the transfer of servicing to SST, UAC and its subsidiaries entered into agreements with SST, MBIA Insurance Corporation (the surety provider which has issued policies that ensure timely payments on the notes issued by the securitization trusts) (“MBIA”) and other interested parties. Under these agreements, SST was appointed as servicer of the UAC receivables portfolio and standards for SST’s performance and provisions for SST’s compensation were established. In addition, a Master Trust Account was created pursuant to a Master Trust Account Agreement. The Master Trust Account serves effectively to cross-collateralize the securitization trusts and non-recourse financings of UAC receivables. The residual cash flows from the securitizations are to be paid through the Master Trust Account. Amounts held in the Master Trust Account are available to pay certain fees and expenses of the servicer, the securitization trustees, MBIA, the master trustee, and to make distributions to meet cash distribution obligations to security holders of the securitizations, to the extent cash otherwise available to that securitization is insufficient for such purpose. Cash deposited to the Master Trust Account, to the extent not used for the foregoing purposes, accumulates and, to the extent it exceeds prescribed levels, becomes available for distribution to UACSC (for the benefit of holders of Allowed Claims under the Plan).

The Master Trust Account Agreement established an initial amount of approximately $12.5 million in the aggregate to be distributed from time to time from the Master Trust Account under prescribed conditions. That amount had been released by October 10, 2005. After that point, the Master Trust Account continued to accumulate cash until the total cash collateral of the securitizations and the Master Trust Account was equal to 8% of the outstanding securitization obligations. Once that occurred, UACSC received distributions equal to 50.0% of surplus funds each month until total cash collateral equaled 12% of the outstanding securitization obligations. After that point, UACSC received distributions each month equal to 100% of surplus funds, provided that a declining minimum dollar amount of cash is retained in the securitization collateral accounts and the Master Trust Account until the securitizations are liquidated.

These distribution thresholds are subject to adjustment if the securitization portfolio does not perform within the parameters stipulated by the Master Trust Account Agreement. The agreement sets forth net loss ratio triggers and cumulative net loss triggers for future periods that were determined by increasing UAC’s estimated future portfolio losses by a specified margin. If these triggers are breached (until the portfolio is restored to compliance) no distributions will be made to UACSC until total cash collateral exceeds increased minimum dollar levels. As of December 31, 2006 and 2005, the rolling 12 month net losses were below the Level 1 and Level 2 triggers. While the cumulative net losses were below the Level 2 trigger as of December 31, 2005, they did exceed the Level 1 trigger. The cumulative net losses were below the Level 1 and Level 2 triggers as of December 31, 2006.

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The Creditor Buyout

On February 15, 2005, UAC, White River, and the Plan Committee representing the UAC creditors under the Plan of Reorganization entered into a memorandum of understanding providing for the proposed buyout of the remaining outstanding UAC Senior Notes, Subordinated Notes and Accrual Notes payable. This agreement stipulated that White River, as the proposed parent of UAC, would offer to pay 100% of the principal value of the Senior Notes and 13% of the face value of the Subordinated Notes for the tender of these notes and their accompanying Accrual Notes to White River. Additional amounts were to be paid by White River to the former Subordinated Note holders in the future if either of two events occurred, namely (i) the passing of federal legislation prior to February 1, 2007 which would allow UAC to carry back federal income tax net operating loss carryforwards to recover income taxes previously paid in 2000 and (ii) recovery by UAC on a particular unresolved pending claim against SST. During September 2006 the pending claim against SST was resolved. White River distributed additional funds to former Subordinated Note and claim holders who sold their claims to White River during 2005 in accordance with this agreement.

This buyout offer was accepted by 100% of the Senior Note holders and holders of 89.1% of the Subordinated Notes in February 2005. During June 2005, the Senior Notes of UAC were purchased by White River and simultaneously paid in full and White River completed the buyout of 89.1% of the Subordinated Notes of UAC using bridge funding provided by the Funds. During September 2005, White River concluded its offer to purchase claims from the general unsecured creditors of UAC. White River acquired approximately 57.3% of the general unsecured claims of UAC as a result of this offer.

In connection with UAC’s Plan of Reorganization and distributions and as a result of White River’s acquisition of UAC’s general unsecured claims and Subordinated Notes, UAC’s creditor notes payable (in thousands) are as follows at:

	December 31, 2006						December 31, 2005
			Contractual						Contractual
			Remaining		Total				Remaining		Total
			Debt Not		Contractual				Debt Not		Contractual
	Carrying		Owned by		Remaining		Carrying		Owned by		Remaining
	Value		White River		Debt		Value		White River		Debt
Restructured debt:
Class 2A general unsecured claims	$	-	$	-	$	956	$	164	$	405	$	1,330
Restructured senior notes		-		-		-		-		-		-
Restructured subordinated notes		1,391		4,394		40,427		1,296		5,041		46,383
Senior accrual notes		-		-		4,106		-		-		4,106
Subordinated accrual notes		1		431		3,964		1		431		3,964
Total creditor notes payable	$	1,392	$	4,825	$	49,453	$	1,461	$	5,877	$	55,783

During February 2005, when White River agreed to purchase the UAC Senior, Subordinated and Accrual Notes, White River and UAC projected that future cash flows that would inure from UAC estate assets in respect of such notes over time would be somewhat less than the cash price White River agreed to pay, and that the price offered for the Subordinated Notes and related Accrual Notes reflected a reasonable premium. Over the course of 2005, however, cash flows from the remaining UAC securitizations were consistently more favorable than what had been projected in early 2005. White River now projects that the distributions that will be available over time from UAC in respect of the UAC Subordinated Notes that White River purchased will materially exceed the price White River paid for such notes. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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UAC Continuing Operations

UAC continues to oversee the receipt and distribution of the cash flows from its remaining assets and to carry out the Plan. UAC currently has a staff of four employees, while UAC’s President, Mark R. Ruh, is employed by Castle Creek Capital LLC (“Castle Creek”), and its Chief Financial Officer, Martin J. Szumski, is employed by White River. UAC’s current principal activities are the following:

· overseeing collection and distribution of cash flows from receivable portfolios and other assets in accordance with the Plan of Reorganization;

· collecting automobile dealer premium rebates contractually due;

· providing administrative services to support the securitization paying agent with cash management and accounting functions for all outstanding securitizations;

· supporting deficiency account collections by third party collection agencies;

· managing deficiency account collections requiring legal action; and

· holding (directly or indirectly through its securitization subsidiary) portfolios of automobile receivables that it had initially acquired prior to the Bankruptcy Case.

UAC’s consolidated receivable portfolios were as set forth below (in thousands)

	December 31,
	2006		2005
UAC and Subsidiary Receivables Held for Investment
UAC Owned (1)	$	188	$	336
UACSC Owned (2)		298		-
		486		336
Securitized Finance Receivables (3)
2003-A		-		4,167
2004-A1		414		3,795
2004-A2		637		4,712
2004-B		855		5,356
2004-C		3,424		16,837
2005-A		4,913		19,042
2005-B		7,227		25,405
2005-C		11,330		35,717
		28,800		115,031
Off-Balance Sheet Securitizations
2001-B (4)		4,719		12,743
2001-C		14,070		35,009
2002-A		14,530		34,548
		33,319		82,300
Total Portfolios	$	62,605	$	197,667

(1) Receivables that are owned directly by UAC and are not leveraged.

(2) On March 8, 2006 the 2003-A note was paid in full. The receivable portfolio is still owned by UACSC but is now recorded as held for investment.

(3) On-balance sheet portfolios held by UACSC as collateral for non-recourse asset-backed notes.

(4) The 2001-B transaction represents a separate issuance of notes, or a separate tranche, under the UACSC 1999 Master Owner Trust.

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 UAC has “fully administered” its Chapter 11 plan of reorganization and the U.S. Bankruptcy Court for the Southern District of Indiana issued a final decree and closed UAC’s Chapter 11 Bankruptcy Case on January 5, 2007. UAC is no longer subject to the supervision of the bankruptcy court. However, UAC, as the Creditor Representative and as a subsidiary of White River, will continue to comply with the Plan and collect and distribute to the holders of Allowed Claims all funds to which they are properly entitled under the Plan. White River owns all of UAC’s general unsecured claims, 89.1% of UAC’s subordinated notes and 94.7% of UAC's accrual notes. White River will continue to be entitled to receive the large majority of subsequent distributions under the Plan as a holder of such notes and claims. However, the formation of White River as UAC’s parent company allows UAC to carry its business forward with a clear segregation of the assets and liabilities of UAC from the assets and liabilities of White River, while allowing White River to operate UAC and new businesses, such as Coastal Credit.

ITEM 1A. RISK FACTORS

Investors should consider carefully the following factors that could cause our operating results and financial condition to be materially adversely affected. New risks may emerge at any time, and we cannot predict those risks or estimate the extent to which they may affect our businesses or financial performance.

Coastal Credit Business

Our shareholders are substantially dependent on the operations of Coastal Credit.

White River is a holding company with no independent operations. Our profitability and ability to pay dividends to our shareholders are dependent on the operations of our subsidiaries, UAC and Coastal Credit. UAC’s activities consist of administering the receipt and distribution of the cash flows from its remaining assets while carrying out its Plan of Reorganization. We have purchased substantially all claims of creditors under UAC’s Plan of Reorganization. While related future cash flows from UAC may benefit White River, UAC does not presently expect to be profitable in the future. Thus, if Coastal Credit does not generate profits and make distributions to us, the value of our common stock will be diminished.

Our profitability and future growth depend on Coastal Credit’s continued access to bank and subordinated debt financing.

The profitability and growth of Coastal Credit’s business depends on its ability to access bank debt at competitive rates. Coastal Credit currently depends on a $100 million line of credit facility with a financial institution to finance its acquisition of contracts. The line of credit is secured by substantially all of the contracts held by Coastal Credit. Effective January 1, 2007, the line of credit was extended through 2011. At December 31, 2006, Coastal Credit had $49.5 million outstanding under the line of credit and $20.5 million available for additional borrowing based upon the level of eligible collateral. Coastal Credit also relies on subordinated debt as a principal part of its capital structure to provide long-term capital. As of December 31, 2006, the amount of outstanding subordinated debt was $7.7 million. The debentures are subject to a Subordination and Intercreditor Agreement with Coastal Credit’s principal lender. The debentures have maturity dates in 2008. Coastal Credit will continue to depend on the availability of its line of credit, replacement subordinated financing, together with cash from operations, to finance its future operations. The availability of the credit facility depends, in part, on factors outside of Coastal Credit’s control, including regulatory capital treatment for unfunded bank lines of credit and the availability of bank loans in general. Therefore, this credit facility may not continue to be available beyond the current maturity date on reasonable terms or at all. If Coastal Credit were unable to renew or replace the credit facility or find alternative financing at reasonable rates, Coastal Credit could be unable to grow by acquiring contracts or could be forced to liquidate.

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The terms of Coastal Credit’s indebtedness impose significant restrictions on it.

Coastal Credit’s existing outstanding indebtedness restricts its ability to, among other things:

· encumber collateral;

· allow change of ownership or control;

· sell or transfer assets;

· incur debt from additional sources;

· pay dividends;

· make certain investments or acquisitions;

· repurchase or redeem capital stock;

· engage in mergers or consolidations; and

· engage in certain transactions with subsidiaries and affiliates.

In addition, Coastal Credit’s line of credit facility requires it to comply with certain financial ratios and covenants. Coastal Credit’s ability to continue to meet these financial ratios could be affected by events beyond its control. Failure to meet any of these covenants, financial ratios or financial tests could result in an event of default under Coastal Credit’s credit facility. If an event of default occurs under its line of credit facility, the lender may take one or more of the following actions:

· increase Coastal Credit’s borrowing costs;

· restrict Coastal Credit’s ability to obtain additional borrowings under the facility;

· accelerate repayment of all amounts outstanding under the facility; or

· enforce its interests against collateral pledged under the facility.

If Coastal Credit’s lender accelerates its debt payments, Coastal Credit’s assets may not be sufficient to fully repay the debt.

Coastal Credit will require a significant amount of cash to service its indebtedness and meet its other liquidity needs.

Coastal Credit’s ability to make payments on or to refinance its indebtedness and to fund its operations and planned capital expenditures depends on its future operating performance. Coastal Credit’s primary cash requirements include:

· the funding of contract acquisitions;

· interest payments under its line of credit facility and other indebtedness;

· capital expenditures for technology and facilities;

· ongoing operating expenses; and

· planned expansions by opening additional branch offices.

In addition, because Coastal Credit expects to continue to require substantial amounts of cash for the foreseeable future, Coastal Credit may seek additional debt financing. The type, timing and terms of the financing Coastal Credit selects will be dependent upon its cash needs, the availability of other financing sources and the prevailing conditions in the financial markets. These sources may not be available to Coastal Credit at any given time or the terms on which these sources may be available may not be favorable. Coastal Credit’s inability to obtain such additional financing could adversely impact its ability to grow.

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Coastal Credit’s substantial indebtedness could adversely affect its financial condition.

Coastal Credit currently has a substantial amount of outstanding indebtedness. In connection with our acquisition of Coastal Credit, Coastal Credit agreed to guarantee our secured note payable on a subordinated basis. Coastal Credit’s ability to make payments on, or to refinance, its indebtedness will depend on its future operating performance, including its ability to access additional debt or equity financing, which, to a certain extent, is subject to economic, financial, competitive and other factors beyond Coastal Credit’s control.

Coastal Credit’s high level of indebtedness could have important consequences for its business. For example, Coastal Credit:

· may be unable to satisfy its obligations under its outstanding indebtedness;

· may find it more difficult to fund future needs for working capital, capital expenditures, or acquisitions;

· may need to dedicate a substantial portion of its cash resources to the payments on its outstanding indebtedness, thereby reducing the funds available for operations and future business opportunities; and

· may be more vulnerable to adverse general economic and industry conditions.

Coastal Credit may incur substantial additional debt in the future. If new debt is added to Coastal Credit’s current levels, the risks described above could intensify.

Coastal Credit may experience higher than normal delinquency and charge-off rates in its loan portfolios, which could reduce its profitability.

Coastal Credit’s profitability depends, to a material extent, on the performance of contracts that it acquires. Historically, Coastal Credit has experienced higher delinquency and charge-off rates than traditional financial institutions because a large portion of its loans are to subprime borrowers, who may be unable to obtain financing from traditional sources due to their credit history. Although Coastal Credit attempts to mitigate these high credit risks with its underwriting standards, pricing and collection procedures, these standards and procedures may not offer adequate protection against the risk of default. In the event of a default, the collateral value of the financed vehicle usually does not cover the outstanding loan balance and costs of recovery. Higher than anticipated delinquencies and defaults on Coastal Credit’s contracts would reduce its profitability.

Coastal Credit depends upon its relationships with its dealers.

Coastal Credit’s business depends in large part upon its ability to establish and maintain relationships with automobile dealers who originate the contracts Coastal Credit acquires. Although Coastal Credit believes it has been successful in developing and maintaining such relationships, such relationships are not exclusive, and many of them are not longstanding. Coastal Credit may not be successful in maintaining such relationships or increasing the number of dealers with whom it does business. Coastal Credit’s existing dealer base may not continue to generate or refer to Coastal Credit a volume of contracts comparable to the volume of such contracts historically generated or referred by such dealers.

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Coastal Credit’s success depends upon its ability to implement its business strategy.

Coastal Credit’s financial position depends on its management’s ability to execute its business strategy. Key factors involved in the execution of its business strategy include the use of effective pricing, achievement of the desired contract acquisition volume, risk management techniques and collection methods, continued investment in technology to support operating efficiency and continued access to significant funding and liquidity sources. Coastal Credit’s failure or inability to execute any element of its business strategy could materially adversely affect Coastal Credit’s financial condition.

Coastal Credit’s business is highly dependent upon general economic conditions.

During periods of economic slowdown or recession, delinquencies, defaults, repossessions and losses generally increase. These periods also may be accompanied by decreased consumer demand for automobiles and declining values of automobiles securing outstanding loans, which weakens collateral coverage on Coastal Credit’s loans and increases the amount of a loss Coastal Credit would experience in the event of default. Significant increases in the inventory of used automobiles during periods of economic recession may also depress the prices at which repossessed automobiles are sold or delay the timing of these sales. Because Coastal Credit focuses on subprime borrowers, the actual rates of delinquencies, defaults, repossessions and losses on these loans are higher than those experienced in the general automobile finance industry and could be more significantly affected by a general economic downturn. In addition, during an economic slowdown or recession, Coastal Credit’s servicing and collection costs may increase without a corresponding increase in its income. While Coastal Credit seeks to manage the higher risk inherent in loans made to subprime borrowers through its underwriting criteria, pricing and collection methods, these criteria or methods may not afford adequate protection against these risks. Any sustained period of increased delinquencies, defaults, repossessions or losses or increased servicing and collection costs could adversely affect Coastal Credit’s financial condition.

Decreased auction proceeds resulting from the depressed prices at which used automobiles may be sold during periods of economic slowdown or recession will reduce Coastal Credit’s profitability.

If Coastal Credit repossesses a vehicle securing a contract, Coastal Credit typically has it transported to an automobile auction for sale. Auction proceeds from the sale of repossessed vehicles and other recoveries are usually not sufficient to cover the outstanding balance of the contract, and the resulting deficiency is charged off. In addition, there is, on average, approximately a 45-day lapse between the time Coastal Credit repossesses a vehicle and the time it is sold at public auction. Furthermore, depressed wholesale prices for used automobiles may result from significant liquidations of rental or fleet inventories, and from increased volume of trade-ins due to promotional financing programs offered by new vehicle manufacturers. During periods of economic slowdown or recession, decreased auction proceeds resulting from the depressed prices at which used automobiles may be sold will result in Coastal Credit experiencing higher credit losses.

An increase in market interest rates may reduce Coastal Credit’s profitability.

Coastal Credit’s long-term profitability may be directly affected by the level of and fluctuations in interest rates. Sustained, significant increases in interest rates may adversely affect Coastal Credit’s liquidity and profitability by reducing the interest rate spread between the rate of interest Coastal Credit receives on its contracts and interest rates that Coastal Credit pays under its outstanding line of credit facility. As interest rates increase, the gross interest rate spread on new originations will generally decline since the rates charged on the contracts acquired from dealers generally are limited by statutory maximums and competitive market conditions restricting Coastal Credit’s opportunity to pass on increased interest costs.

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Coastal Credit’s growth depends upon its ability to retain and attract a sufficient number of qualified employees.

To a large extent, Coastal Credit’s growth strategy depends on the opening of new offices that will focus primarily on acquiring contracts in markets Coastal Credit has not previously served. Future expansion of Coastal Credit’s office network depends upon its ability to attract and retain qualified and experienced office managers and the ability of such managers to develop relationships with dealers that serve those markets. Coastal Credit generally does not open new offices until it has located and hired a qualified and experienced individual to manage the office. Typically, this individual would be familiar with local market conditions and have existing relationships with dealers in the area to be served. Although Coastal Credit believes that it can attract and retain qualified and experienced personnel as Coastal Credit proceeds with planned expansion into new markets, Coastal Credit may not be successful in doing so. Competition to hire personnel possessing the skills and experience required by Coastal Credit could contribute to an increase in its employee turnover rate. High turnover or an inability to attract and retain qualified personnel could have an adverse effect on Coastal Credit’s origination, delinquency, default and net loss rates and, ultimately, its financial condition.

The loss of one of Coastal Credit’s key executives could have a material adverse effect on its business.

Coastal Credit’s growth and development to date have been largely dependent upon the services of William E. McKnight, who established Coastal Credit and serves as its President. Coastal Credit does not maintain a key-man life insurance policy on Mr. McKnight. Although Coastal Credit believes that it has sufficient additional experienced management personnel to accommodate the loss of any key executive, the loss of services of Mr. McKnight could have a material adverse effect on Coastal Credit.

Coastal Credit is subject to risks associated with litigation.

As a consumer finance company, Coastal Credit is subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things:

· usury laws;

· disclosure inaccuracies;

· wrongful repossession;

· violations of bankruptcy stay provisions;

· certificate of title disputes;

· fraud;

· breach of contract; and

· discriminatory treatment of credit applicants.

Some litigation against Coastal Credit could take the form of class action complaints by consumers. As the assignee of contracts originated by dealers, Coastal Credit may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of actions can be substantial. The relief which may be requested by the plaintiffs varies but may include requests for compensatory, statutory and punitive damages. Coastal Credit may experience material financial losses in the future as a result of litigation and other legal proceedings.

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Coastal Credit is subject to many laws and governmental regulations, and any material violations of or changes in these laws or regulations could have a material adverse effect on Coastal Credit’s financial condition and business operations.

Coastal Credit’s financing operations are subject to regulation, supervision and licensing under various federal, state and local statutes and ordinances. Additionally, the procedures that Coastal Credit must follow in connection with the repossession of vehicles securing contracts are regulated by each of the states in which Coastal Credit does business. The various federal, state and local statutes, regulations and ordinances applicable to Coastal Credit’s business govern, among other things:

· licensing requirements;

· requirements for maintenance of proper records;

· payment of required fees to certain states;

· maximum interest rates that may be charged on loans to finance new and used vehicles;

· interest rates on loans to customers serving in the military;

· debt collection practices;

· proper disclosure to customers regarding financing terms;

· privacy regarding certain customer data; and

· collection of debts from loan customers who have filed bankruptcy.

Coastal Credit believes that it maintains all material licenses and permits required for its current operations and is in compliance with all applicable local, state and federal regulations. Coastal Credit’s failure, or failure by dealers who originate the contracts Coastal Credit acquires, to maintain all requisite licenses and permits, and to comply with other regulatory requirements, could result in consumers having rights of rescission and other remedies that could have a material adverse effect on Coastal Credit’s financial condition. Furthermore, any changes in applicable laws, rules and regulations may make Coastal Credit’s compliance therewith more difficult or expensive or otherwise adversely affect its financial condition.

Coastal Credit’s ability to pay cash distributions is restricted by its line of credit.

While Coastal Credit is not restricted by its charter from making distributions, its line of credit restricts the payment of cash distributions without written approval from its lender. Coastal Credit’s ability to receive the necessary approval is largely dependent upon its portfolio performance, and Coastal Credit may not be able to obtain the necessary approvals in the future for distributions to us that would enable us to pay cash dividends to our shareholders.

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Coastal Credit operates in a competitive market.

The subprime consumer-finance industry is highly competitive. There are numerous financial services companies that provide consumer credit in the markets served by Coastal Credit, including banks, credit unions, other consumer finance companies and captive finance companies owned by automobile manufacturers and retailers. Many of these competitors have substantially greater financial resources than Coastal Credit. In addition, Coastal Credit’s competitors often provide financing on terms more favorable to automobile purchasers or dealers than Coastal Credit offers. Many of these competitors also have long-standing relationships with automobile dealerships and may offer dealerships or their customers other forms of financing, including dealer floor-plan financing and leasing, which Coastal Credit does not provide. Providers of subprime consumer financing have traditionally competed primarily on the basis of:

· interest rates charged;

· the quality of credit accepted;

· the flexibility of loan terms offered; and

· the quality of service provided.

Coastal Credit’s ability to compete effectively with other companies offering a similar financing arrangement depends on maintaining close relationships with dealers of new and used vehicles. Coastal Credit may not be able to compete successfully in this market or against these competitors.

Coastal Credit has focused on a segment of the market composed of consumers who typically do not meet the more stringent credit requirements of traditional consumer financing sources and whose needs, as a result, have not been addressed consistently by such financing sources. If, however, other providers of consumer financing were to assert a significantly greater effort to penetrate Coastal Credit’s targeted market segment, Coastal Credit may have to reduce its interest rates and fees in order to maintain its market share. Any reduction in Coastal Credit’s interest rates or fees could have an adverse impact on its profitability.

Coastal Credit may experience problems with its integrated computer systems or be unable to keep pace with developments in technology.

Coastal Credit uses various technologies in its business, including telecommunication, data processing and integrated computer systems. Technology changes rapidly. Coastal Credit’s ability to compete successfully with other financing companies may depend on its ability to exploit technological changes. Coastal Credit may not be able to exploit technological changes, and any investment it makes may not make Coastal Credit more profitable.

Coastal Credit uses integrated computer systems to respond to customer inquiries and to monitor the performance of its contract portfolios and the performance of individual customers under its contracts. Problems with the operation of Coastal Credit’s systems could adversely impact its ability to monitor its portfolios or collect amounts due under its contracts and direct loans, which could have a material adverse effect on its financial condition.

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UAC’s Business

Our recovery of projected cash flows from UAC is dependent on the performance of UAC receivable portfolios.

UAC's beneficial interest in Master Trust reflected on our consolidated balance sheet reflects the discounted value of projected cash flows that UAC expects to receive from its outstanding securitizations and non-recourse financings of its portfolios of auto finance receivables. White River, as owner of the substantial majority of UAC's notes and claims outstanding under the Plan of Reorganization, will become entitled to distribution of the substantial majority of these cash flows as they are realized by UAC. However, the realization of such projected cash flows is dependent upon the performance of the underlying auto receivable portfolios and the effective servicing of such receivables. In particular, if gross defaults, recoveries on defaulted receivables or prepayments on such receivables are less favorable than the rates projected by management, UAC's realization of such cash flows will be reduced or delayed relative to such projections. Such reduction may be material. Factors summarized above in relation to Coastal Credit's operations regarding the risk of default on auto finance contracts, susceptibility to adverse changes in economic conditions and the adverse effects declines in used car values may have upon receivable recoveries may also materially and adversely impact the performance of UAC's auto finance receivable portfolios.

Transfer Restrictions

There are restrictions on transfer of shares of our common stock that may delay or prevent takeover bids by third parties and may delay or frustrate any attempt by shareholders to replace or remove the current management.

All shares of our common stock are subject to certain transfer restrictions. The transfer restrictions on our common stock are complex and directed toward preserving the value of UAC’s tax net operating loss carryforwards for the benefit of shareholders. The transfer restrictions will require any person attempting to acquire a significant interest in White River to negotiate with our board of directors. The transfer restrictions also may make it more difficult to effect a merger or similar transaction perceived by shareholders to be favorable to us by requiring any person seeking to enter into such a transaction with us to negotiate with our board of directors. Finally, the transfer restrictions may make it more difficult for shareholders to replace current management because no single shareholder may cast votes for more than 5% of our outstanding shares of common stock, unless that shareholder held more than 5% of our common stock before our share exchange with UAC or the acquisition of the shares is otherwise approved by the board of directors.

If the transfer restrictions are not effective in preventing an ownership change from occurring, our ability to use the NOLs will be severely limited.

Although the transfer restrictions are authorized under Indiana law, we are not aware of any published court decisions enforcing similar transfer restrictions. Thus, a transfer could occur that would violate the transfer restrictions and we might not be able to enforce the transfer restrictions. Even if a court did enforce the transfer restrictions in the case of such a transfer, the Internal Revenue Service might not agree that the transfer restrictions provide a sufficient remedy with respect to any ownership change resulting from the prohibited transfer. In either of these cases, despite the implementation of the transfer restrictions, an ownership change could occur that would severely limit our ability to use the tax benefits associated with the NOLs.

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Beneficial Use of the NOLs

The benefits of the NOLs are not certain and could be reduced or lost if challenged by the Internal Revenue Service.

Based on a current maximum federal corporate income tax rate of 35%, UAC’s NOLs could provide significant future tax savings benefits to our consolidated group. However, the ability to use these tax benefits in future years will depend upon a number of factors, including the amount of our otherwise consolidated taxable income and favorable interpretations and treatment from the Internal Revenue Service consistent with our interpretation of complex tax regulations. The Internal Revenue Service could challenge our calculation of the amount of NOLs or our determinations as to when or whether a prior change in ownership occurred for purposes of these tax regulations. Other provisions of the Internal Revenue Code may limit our ability to carry forward the NOLs to offset taxable income in future years. If the Internal Revenue Service were successful with respect to any such challenge, the potential tax benefit of the NOLs to us could be substantially reduced or lost.

Concentration of Ownership

Because ownership of our common stock is concentrated, certain shareholders can exert significant influence over shareholders’ decisions.

As of March 16, 2007, John M. Eggemeyer, III, our Chairman of the Board and Chief Executive Officer, by virtue of his relationship with Castle Creek and the Funds managed by Castle Creek, owned or controlled 18.9% of our outstanding shares of common stock. Mr. Eggemeyer has significant influence on the outcome of shareholder votes, including votes concerning, among other things, the election of directors; the adoption or amendment of provisions in our Articles of Incorporation; and the approval of other significant corporate transactions, including mergers and reorganizations. This level of concentrated ownership by a single entity may have the effect of delaying or preventing a change in the management or voting control of White River.

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ITEM 2. PROPERTIES

White River and its subsidiaries lease our headquarters and branch office facilities. White River’s corporate headquarters, located at 1445 Brookville Way, Suite I, in Indianapolis, Indiana, consists of approximately 1,800 square feet of office space. UAC and its subsidiaries share this space with White River. The current lease relating to this space expires August 31, 2007.

Coastal Credit leases its corporate headquarters and branch office facilities. Its headquarters, located at 3852 Virginia Beach Boulevard, in Virginia Beach, Virginia, consist of approximately 9,340 square feet of office space. The current lease relating to this space expires in September 2009.

Coastal Credit’s 16 branch offices located in California, Delaware, Florida, Georgia, Louisiana, Mississippi, Nevada, Ohio, Oklahoma, Pennsylvania, Texas and Virginia range in size from approximately 885 square feet to 6,700 square feet, with a typical size of 1,600 to 2,000 square feet. These offices are located in office parks, shopping centers or strip malls and are occupied pursuant to leases with an initial term of from one to five years. Coastal Credit believes that these facilities and additional or alternate space available to it are adequate to meet its needs for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

White River and its subsidiaries, as consumer finance companies, are subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, breach of contract and discriminatory treatment of credit applicants. Some litigation against White River and its subsidiaries could take the form of class action complaints by consumers. As the assignees of finance contracts originated by dealers, White River and its subsidiaries may also be named as co-defendants in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. The relief requested by the plaintiffs varies but can include requests for compensatory, statutory and punitive damages. White River and its subsidiaries believe that they have taken prudent steps to address and mitigate the litigation risks associated with their business activities.

On February 1, 2005, American Bankers Insurance Company of Florida, American Bankers Life Assurance Company (successor to Voyager Life Insurance Company and Voyager Life & Health Insurance Company), and Voyager Property & Casualty Insurance Company instituted arbitration proceedings against Coastal Credit in Fort Worth, Texas asserting breach of contract claims in connection with deficit clauses under contingent compensation schedules to an alleged Agency Agreement between the claimants and Coastal Credit. The claimants seek damages in the amount of $757,792, plus pre-judgment interest, in connection with the termination of the Agency Agreement by claimants on July 15, 2003. The matter is now pending before the American Arbitration Association pursuant to an arbitration clause in the Agency Agreement. Coastal Credit believes the claims are without merit and intends to vigorously defend against these claims.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information and Holders

On January 19, 2007, White River’s common stock began trading on the American Stock Exchange under the symbol RVR. Prior to that date, White River’s common stock traded “over-the-counter” on the Pink Sheets under the symbol WRVC. As of March 5, 2007, there were 3,834,475 shares of common stock outstanding and approximately 116 shareholders of record (assuming all remaining unexchanged certificates for shares of UAC common stock are exchanged for certificates representing White River shares). White River’s common stock was held by approximately 661 beneficial owners as of such date.

The following table sets forth the range of the high, low and closing sale prices for White River’s common stock as reported on the Pink Sheets. The share prices prior to the August 9, 2005 share exchange with UAC, are based on UAC’s trading prices, which have been adjusted to reflect the share exchange.

	High		Low		Close
Fiscal year ended December 31, 2005
First Quarter	$	20.00	$	14.00	$	15.00
Second Quarter		16.00		12.00		15.00
Third Quarter		20.00		9.00		10.80
Fourth Quarter		16.00		10.50		15.00
Fiscal year ended December 31, 2006
First Quarter	$	17.05	$	14.50	$	17.05
Second Quarter		17.05		14.00		16.00
Third Quarter		17.50		16.00		17.50
Fourth Quarter		18.00		17.00		17.00

Dividends

White River has never paid cash dividends on its common stock. White River presently intends to retain future earnings, if any, for use in the operation and expansion of the business and does not anticipate paying any cash dividends in the foreseeable future.

While Coastal Credit is not restricted by its charter from making distributions, its line of credit restricts the payment of cash distributions without written approval from its lender. Coastal Credit’s ability to receive the necessary approval is largely dependent upon its portfolio performance, and Coastal Credit may not be able to obtain the necessary approvals in the future for distributions to White River that would enable White River to pay cash dividends to its shareholders.

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Performance Graph

The following Total Return to Shareholders graph compares the performance of White River with that of the Nasdaq Composite Index and the SNL Auto Finance Index.  The SNL Auto Finance Index includes AmeriCredit Corp. (NYSE:ACF), Consumer Portfolio Services Inc. (Nasdaq:CPSS), Credit Acceptance Corp. (Nasdaq:CACC), First Investors Financial Services Group (OTC BB:FIFS), Nicholas Financial Inc. (Nasdaq:NICK), and White River Capital, Inc. (AMEX:RVR), which are all of the publicly traded specialty lenders covered by SNL Financial with a primary focus in the auto finance industry.

Total Return to Shareholders*

*$100 invested on August 31, 2005 in stock or index, including reinvestment of dividends. White River's fiscal year ends December 31.

Summary of Transfer Restrictions and Related Provisions

General

The following is a summary of the material transfer restrictions set forth in Article 10 of White River’s articles of incorporation. The following summary is not complete. The transfer restrictions apply to transfers of White River’s common stock and any other instrument that would be treated as “stock,” as determined under applicable Treasury Regulations. The transfer restrictions will apply until the earlier of:

· the repeal by the Internal Revenue Service of the NOL carryforward limitations in the Code if White River’s board of directors determines the transfer restrictions are no longer necessary for the preservation of the tax benefits; and

· the beginning of a taxable year of White River to which White River’s board determines that no tax benefits may be carried forward.

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However, White River’s board of directors will have the power to extend the expiration date of the transfer restrictions if it determines in writing that such action is reasonably necessary or desirable to preserve the tax benefits or to accelerate the expiration date if it determines in writing that the continuation of the transfer restrictions is no longer reasonably necessary for the preservation of the tax benefits. This power is vested in White River’s board of directors to ensure that White River retains the power to make, in light of all relevant circumstances, including positions that might be taken by tax authorities and contested by White River, the complex determination whether the tax benefits have been fully used or are otherwise available.

Prohibited Transfers

The transfer restrictions generally prohibit any conveyance, from one person to another, by any means, of legal or beneficial ownership, directly or indirectly, of any class of White River stock including indirect transfers of White River stock, accomplished by transferring interests in other entities that own White River stock, to the extent that the transfer, if effective:

· would create a new “public group” of White River. For example, the transfer of stock by an existing 5-percent shareholder to the public would be deemed to result in the creation of a separate, segregated “public group” that would be a new 5-percent shareholder;

· would give rise to a “prohibited ownership percentage,” which is defined by reference to complex federal tax laws and regulations, but generally means any direct or indirect ownership that would cause any person, including a “public group” as defined in the NOL carryforward limitations, to be considered a 5-percent shareholder of White River. By way of example, if shareholder A owns 4% of White River’s outstanding shares of common stock, and shareholder B attempted to sell 2% of White River’s outstanding shares to shareholder A, the transfer restrictions would prohibit the sale of approximately 1.1% of the shares out of the 2% attempted to be sold; or

· would increase the ownership percentage of any person, including a public group that is already a 5-percent shareholder of White River. Therefore, no shareholder will be permitted to sell any shares to 5-percent holders or their affiliates without board approval.

White River will be entitled to require, as a condition to the registration of any transfer of stock, that the proposed transferee furnish to White River all information reasonably requested by it with respect to all the direct and indirect legal or beneficial ownership interest in, or options to acquire, stock of the proposed transferee and its affiliates. White River’s Articles and Code of By-laws provide for specific shareholder ownership disclosure procedures as an additional measure available to White River to protect against prohibited transfers.

Exemptive Power of White River’s Board

White River’s board of directors has the power to approve any otherwise prohibited transfer, conditionally or unconditionally, if it determines, in its discretion, that a specific proposed transaction will not jeopardize White River’s full use of the tax benefits. In addition, White River’s board of directors has the power to waive any of the transfer restrictions in any instance where it determines that a waiver would be in the best interests of White River despite the effect of the waiver on the tax benefits.

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Consequences of Purported Prohibited Transfer

Unless approved by White River’s board of directors, any attempted transfer in excess of the shares of White River stock that could be transferred without restriction will be void and will not be effective to transfer ownership of such excess shares. Further, the purported acquiror of the excess shares will not be entitled to any rights as a shareholder of White River with respect to the excess shares.

In the case of an attempted transfer that creates a new 5-percent shareholder, increases the ownership of an existing 5-percent shareholder, or causes a person or public group to become a new 5-percent shareholder, White River will have the right to demand that the new 5-percent shareholder or existing 5-percent shareholder, as the case may be, transfer any certificate or other evidence of purported ownership of the prohibited shares within the party’s possession or control, along with any dividends or other distributions received on the prohibited shares from White River, to an agent designated by White River who will be required to sell the prohibited shares in an arm’s-length transaction, in the public market, if possible, but in any event consistent with applicable law. The agent will be required to pay the sale proceeds in excess of the sum of the agent’s expenses plus the purchase price paid by the purported acquiror for the prohibited shares (or the fair market value of the prohibited shares if they were the subject of a gift or inheritance in favor of the purported acquiror), as well as all prohibited distributions, to a tax-exempt charitable organization designated by White River. If the purported acquiror has sold the prohibited shares to an unrelated party in an arm’s-length transaction, the purported acquiror will be deemed to have done so for the agent, who will have the right to allow the purported acquiror to retain a portion of the resale proceeds not exceeding the amount that the agent would have been required to remit to the purported acquiror out of the proceeds of a resale by the agent. Any purported transfer of the prohibited shares by the purported acquiror, other than a transfer that is described in the preceding sentences of this paragraph and that does not itself violate the transfer restrictions, will not be effective to transfer any ownership of the prohibited shares.

In addition to the powers of White River’s board of directors described above, if the board determines that a purported prohibited transfer or other action in violation of the transfer restrictions has occurred or is proposed, it may take such action as it deems advisable to prevent or refuse to give effect to such purported transfer or other action, including refusing to give effect to the purported transfer or other action on White River’s books or instituting injunctive proceedings.

If any person knowingly violates the transfer restrictions or knowingly causes any entity under such person’s control to do so, such person and, if applicable, the controlled entity will be jointly and severally liable to White River in such amount as will put White River in the same financial position, on an after-tax basis, as it would have been had such violation not occurred.

With respect to any conveyance of White River common stock that does not involve a transfer of “securities” of White River within the meaning of the Indiana Business Corporation Law, but that would create a new 5-percent shareholder, increase the ownership of an existing 5-percent shareholder or create a new public group, the following procedure will apply. The person or group will not be required to dispose of any interest that is not a security of White River, but will be deemed to have disposed of, and will be required to dispose of, sufficient shares, simultaneously with the transfer, to cause the person or group not to be in violation of the transfer restrictions. The shares will be disposed of through the agent under the provisions summarized above, with the maximum amount payable to the prohibited party from the proceeds of sale by the agent being the fair market value of the prohibited shares at the time of the prohibited transfer.

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Other Powers of White River’s Board

White River’s board of directors has the power:

· to accelerate or extend the expiration date of the transfer restrictions, modify the definitions of any terms set forth in White River’s articles of incorporation with respect to the transfer restrictions or conform certain provisions to make them consistent with any future changes in federal tax law, in the event of a change in law or regulation or if it otherwise believes such action is in the best interests of White River, provided White River’s board of directors determines in writing that such action is reasonably necessary or desirable to preserve the tax benefits or that continuation of the transfer restrictions is no longer reasonably necessary for the preservation of the tax benefits;

· to adopt by-laws, regulations and procedures, not inconsistent with the transfer restrictions, for purposes of determining whether any acquisition of White River common stock would jeopardize the ability of White River to preserve and use the tax benefits and for the orderly application, administration and implementation of the transfer restrictions; and

· to administer, interpret and make calculations under the transfer restrictions, which power it may delegate in whole or in part to a committee of White River’s board of directors, and which actions shall be final and binding on all parties if made in good faith.

Disclosure Procedures

The following is a summary of the shareholder disclosure and ownership procedures adopted by White River’s board of directors and set forth in Article III, Section 14 of White River’s Code of By-laws, in accordance with authority and direction granted in Section 6.08 of White River’s Articles of Incorporation. The following is a summary and does not completely restate the provisions of Article III, Section 14 of the Code of By-laws. You should read Article III, Section 14 of the Code of By-laws in its entirety.

The shareholder disclosure and ownership procedures have the following purposes:

· to preserve important characteristics of White River for federal income tax purposes and, in particular, the NOLs;

· to protect White River and its shareholders against undisclosed efforts to assume or influence control of White River, its operations and policies; and

· to facilitate communication among White River and its shareholders.

The disclosure and ownership procedures apply to all holders and beneficial owners of White River’s outstanding shares of common stock. “Beneficial owner” generally refers to a person to whom the economic value of the shares of common stock ultimately inures and who has the power directly or indirectly to dispose of the shares of common stock.

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From the date shares of common stock were first issued by White River until December 31, 2015, every beneficial owner of more than 4.5% of the outstanding shares of common stock within thirty (30) days after the end of each fiscal quarter, shall give written notice to White River stating the name and address of such owner, the number of shares beneficially owned and a description of the manner in which such shares are held. In addition, each such beneficial owner must provide additional ownership information reasonably requested by White River in order to determine the effect, if any, of such beneficial ownership on White River’s federal income tax characteristics (including ownership changes that have occurred or may occur for purposes of Section 382 of the Code), or on control of White River’s outstanding shares, or to ensure compliance with the Code of By-laws.

The disclosure procedures also require each person who is a beneficial owner of shares and, to the extent permitted by law, each person (including the shareholder of record) holding shares for a beneficial owner or as nominee to provide or confirm to White River such information relating to a beneficial owner’s present and past beneficial ownership of shares or changes in that ownership to the extent the information is in the person’s possession or can be acquired without unreasonable expense. White River may request this information, in good faith, in order to determine the effect, if any, on White River’s federal income tax characteristics (including ownership changes that have occurred or may occur for purposes of Section 382 of the Code) or on control of White River’s outstanding shares, or to determine compliance with requirements of any taxing authority or governmental authority, or to determine compliance with White River’s Articles of Incorporation or Code of By-laws.

The procedures do not require information to be reported that a beneficial owner has previously reported to White River or that has been previously reported on the beneficial owner’s behalf. If there has been no change in information previously reported, a person does not need to report it again unless White River requests confirmation. The procedures also will not require the disclosure of the names of the beneficial owners of a private trust created in good faith and not for the purpose of circumventing the White River Articles of Incorporation or Code of By-laws.

Disclosure Compliance

To ensure compliance with the disclosure procedures, the following sanctions are available to White River:

Distributions Withheld. White River shall withhold payment of any dividend or distribution otherwise payable in respect of shares (or property or securities into which such shares may be converted or for which they may be exchanged in a merger or share exchange transaction) if the beneficial owner of the shares has failed, or White River reasonably believes it has failed, to comply with these disclosure procedures. Such distributions or property shall be payable only at such time as the subject beneficial owner has complied with the disclosure procedures. However, if the distribution is to be made with respect to subscription rights or similar time-sensitive rights that required action or exercise by the beneficial owner before a time that has passed or elapsed, such rights shall be deemed expired and the beneficial owner shall be deemed to have elected to forfeit such rights.

Vote Disregarded. White River shall disregard the affirmative vote on any action by shareholders on any matter, whether at a meeting or by written consent, purported to be cast in respect of shares if the holder or beneficial owner of the shares has failed, or White River reasonably believes it has failed, to comply with these disclosure procedures, unless such vote is cast in a manner consistent with a recommendation of the board of directors in respect of such matter. These shares will still be counted, however, in determining the presence of a quorum if the shares are represented in person or by proxy at a meeting of shareholders.

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Remedial Transfer. If a beneficial owner fails to comply with the disclosure procedures, and White River delivers a compliance demand notice to the nominee or holder of record of the shares, then at or before the close of business on the date ten (10) business days following delivery of the notice, the nominee or holder of record shall effect the disposition of beneficial ownership by the non-compliant beneficial owner of the shares and deliver a “Disposition Certificate” to White River. The Disposition Certificate certifies to White River that the interest of the non-compliant beneficial owner has been effectively transferred and that everything required to be disclosed has been disclosed. If the disposition of shares is not effected or a Disposition Certificate is not timely delivered, then White River may require the nominee or record holder of such shares to whom the compliance demand notice was delivered to effect a remedial transfer whereby the affected shares would be sold by an independent agent.

Additional Remedies. The board of directors of White River is also authorized to take any other action it deems necessary or advisable to protect White River and the interests of its shareholders, including actions to protect and preserve White River’s status under Section 382 of the Code. This action may include a decision to exclude any shareholder the board reasonably believes has failed to comply with the disclosure procedures from any offering of White River securities that is otherwise made available to shareholders.

Anti-Takeover Effect of Transfer Restrictions and Disclosure Procedures

The transfer restrictions:

· may have the effect of impeding the attempt of a person or entity to acquire a significant or controlling interest in White River;

· may render it more difficult to effect a merger or similar transaction even if such transaction is favored by a majority of the independent shareholders of White River; and

· may serve to entrench management.

In addition to the transfer restrictions and disclosure procedures, White River will be subject to certain other provisions of White River’s articles of incorporation, to which we are currently subject, that may have the effect of discouraging a takeover or similar transaction, including the authority, vested in White River’s board of directors, to issue up to three million shares of preferred stock and to fix the preferences and rights thereof.

The purpose of the transfer restrictions and disclosure procedures is to help preserve the tax benefits rather than to have an anti-takeover effect, which is an incidental result.

ITEM 6. SELECTED FINANCIAL DATA

The following table summarizes selected financial information for White River and its subsidiaries on a consolidated basis. For purposes of the consolidated financial statements and in accordance with SFAS No. 141, Business Combinations (“SFAS No. 141”), the form of the share exchange points to UAC as the predecessor to White River. Therefore, the consolidated financial statements include results of UAC and White River as though they always coexisted. For additional information refer to the audited consolidated financial statements and notes thereto in Item 8., Financial Statements and Supplementary Data.

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	For The Years Ended December 31,
For The Twelve Months Ended December 31,	2006			2005			2004			2003			2002
Total interest income	$	53,945		$	37,333		$	14,013		$	15,716		$	54,704
Interest expense		(11,820	)		(15,204	)		(13,108	)		(15,171	)		(20,555	)
Net interest margin		42,125			22,129			905			545			34,149
Recovery (provision) for estimated credit losses		(36	)		1,465			(11,025	)		(874	)		(6,725	)
Net interest margin (deficiency) after provision for estimated credit losses		42,089			23,594			(10,120	)		(329	)		27,424
Total other revenues, net		(8,346	)		1,767			7,419			66,999			33,206
Total other expenses (a)		16,418			8,851			4,561			60,996			250,810
Net income (loss) (b)	$	56,318		$	16,510		$	(7,262	)	$	5,674		$	(183,433	)
Basic earnings per share	$	14.77		$	11.08		$	(23.41	)	$	18.29		$	(591.97	)
Diluted earnings per share	$	14.51		$	11.02		$	(23.41	)	$	18.29		$	(591.97	)
Diluted weighted average shares		3,882,017			1,498,549			310,191			310,191			309,869

	December 31,
	2006		2005		2004			2003			2002
Securitized finance receivables, net	$	27,447	$	109,506	$	115,165		$	93,089		$	-
Finance receivables, net		78,693		70,784		-			-			-
Receivables held for sale, net (a)		454		269		499			805			303,423
Retained interest / Beneficial interest in Master Trust		23,601		13,968		3,677			4,619			37,243
Total assets		225,424		266,994		150,930			130,093			426,630
Collateralized financings		32,368		122,293		132,257			102,234			-
Line of credit		49,500		51,500		-			-			-
Secured note payable		13,125		15,000		-			-			-
Subordinated debentures		7,700		7,700		-			-			-
Note payable - Coastal Credit purchase holdback		-		3,840		-			-			-
Creditor notes payable		1,392		1,461		11,445			17,087			-
Notes payable (a)		-		-		-			-			294,780
Term debt (a)		-		-		-			-			100,330
Total liabilities		117,506		213,633		159,232			133,076			437,320
Shareholder's equity (deficit)		107,918		53,361		(8,302	)		(2,983	)		(10,690	)

(a) As discussed in Item 1. Business, UAC filed for bankruptcy protection on October 31, 2002. From November 2002 through August 2003, UAC took several steps with the approval of the bankruptcy court: i. UAC sold a majority of the receivables held for sale and used the proceeds to pay in full the notes payable, secured by such receivables, ii. UAC discontinued originating loans and sold its servicing platform thus reducing operating expenses, and iii. the UAC bankruptcy plan of reorganization was approved and the UAC liabilities were converted to creditor notes payable.

(b) The 2006 net income of $56.3 million includes income tax benefit of $39.0 million. This income tax benefit is a result of the removal of a majority of the deferred tax asset valuation allowance.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

White River is an Indiana corporation incorporated on December 30, 2004, for the purpose of acting as a holding company and effecting a recapitalization transaction proposed by the board of directors of UAC

On August 9, 2005, the share exchange between White River and UAC became effective upon the filing of Articles of Share Exchange with the State of Indiana. The outstanding shares of common stock of UAC were exchanged for shares of common stock of White River, at an exchange rate of one share of White River common stock for 100 shares of UAC common stock. White River exchanged 310,155 shares of its common stock for the outstanding shares of UAC. On August 31, 2005, White River completed the acquisition of 100% of the ownership interest in Coastal Credit with an aggregate purchase price of $50.8 million, including direct costs of acquisition. $45.0 million was paid at closing and $3.8 million, net of a $1.2 million receivable from the previous owners, was held back (subject to offsetting adjustments) until March 31, 2006 and paid with interest at the rate of 10% per annum. Upon completion of these transactions, White River became the parent holding company of UAC and Coastal Credit.

On August 31, 2005, White River completed a $35 million subscription offering. In this offering, White River issued 3,500,000 shares of common stock at the subscription price of $10.00 per share. The net proceeds of this subscription offering were used to acquire Coastal Credit, to repay the secured bridge note payable to Castle Creek, to pay transaction costs, and for ongoing operations.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. White River believes that the following represents the material critical accounting policies used in the preparation of its consolidated financial statements. Actual results could differ significantly from estimates.

Net Assets of Collateralized Financings

UAC Securitization Corporation has purchased receivables from off-balance sheet securitizations that were eligible for clean-up calls. These receivables were re-securitized through non-recourse collateralized financing issuances. The associated future cash flows from these receivables are subject to the same Master Trust Account provisions as the securitizations called.

To finance the securitized receivable acquisitions, collateralized financings were used, secured by the respective portfolios of the acquired receivables and related restricted cash accounts. Timely payments of principal and interest on the non-recourse collateralized financings are insured by surety policies. Such obligations are also cross-collateralized through the Master Trust Agreement. Net interest cash flows in excess of expense are payable to the Master Trust Account and expensed as charge to Master Trust, net.

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Valuation of Beneficial Interest in Master Trust

The Master Trust Agreement established that all excess cash from securitizations is to be deposited in the Master Trust Account. Once prescribed cash reserve levels are met, cash will be released to UAC from the Master Trust Account. This future cash flow is reported as beneficial interest in Master Trust. In determining the fair value of the beneficial interest in Master Trust, estimates must be made for the future prepayments, rates of gross credit losses and credit loss severity, and delinquencies as they impact the amount and timing of the estimated cash flows from the Master Trust. The average of the interest rates on the receivables exceeds the interest rates on the securities issued in the securitization. This excess cash is held by the Master Trust Account and released based on reserve requirements of the Master Trust. These estimated cash flows from the Master Trust are then discounted to reflect the present value.

Allowance for Loan Losses - Finance Receivables

Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at a level considered adequate to cover probable credit losses inherent in finance receivables.

The allowance for loan losses is established systematically by management based on the determination of the amount of probable credit losses inherent in the finance receivables as of the reporting date. Coastal Credit reviews charge off experience factors, delinquency reports, historical collection rates and other information in order to make the necessary judgments as to probable credit losses inherent in the portfolio as of the reporting date. Assumptions regarding probable credit losses are reviewed quarterly and may be impacted by actual performance of finance receivables and changes in any of the factors discussed above. Should the credit loss assumptions increase, there could be an increase in the amount of allowance for loan losses required, which could decrease the net carrying value of finance receivables and increase the provision for loan losses recorded on the consolidated statements of operations. Coastal Credit believes that the existing allowance for loan losses is sufficient to absorb all probable finance receivable losses.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The ultimate realization of the deferred tax asset depends on White River’s ability to generate sufficient taxable income in the future and their ability to not allow an ownership change to occur for tax purposes. The valuation allowance has been derived pursuant to the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes, and reduces the total deferred tax asset to an amount that will “more likely than not” be realized (see Note 14).

On August 31, 2005, White River acquired Coastal Credit, an established, profitable operating business within UAC’s historical line of business. With this acquisition, it is now likely that some of the deferred tax assts will be realized by White River. As part of the acquisition purchase accounting, the taxable income of Coastal Credit was estimated and partially offset by the taxable loss of UAC and corporate expenses of White River for the remainder of tax year 2005 and the following five years. The results of these estimates were a reduction in the valuation allowance of $4.7 million at August 31, 2005. This adjustment to the valuation allowance was offset by a reduction to goodwill as part of the purchase of Coastal Credit.

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During 2006 White River continued to evaluate its future taxable income based on the successful integration of Coastal Credit and various other events that occurred during 2006. As a result of this evaluation, White River determined that it is “more likely than not” that the federal deferred tax assets will be realized resulting in the reversal of the corresponding valuation allowance. The reversal of the valuation allowance for the federal and state net operating loss carryforward contributed to the income tax benefit of $39.0 million for the twelve months ended December 31, 2006.

White River reviews the valuation allowance based on the estimated taxable income and will make adjustments as required. These future adjustments will be recorded as a component of income tax expense (benefit).

Results of Operations

Executive Summary

As a result of the share exchange, management’s discussion and analysis of results of operations include results of UAC and White River as though they always coexisted. With the acquisition of Coastal Credit on August 31, 2005, results of operations include results of Coastal Credit for the four months ended December 31, 2005 and year ended December 31, 2006.

The Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005

Net income was $56.3 million, or $14.51 per diluted share, for the year ended December 31, 2006, compared to $16.5 million, or $11.02 per diluted share, for the year ended December 31, 2005. The improvement from the prior year is primarily due to the following:

· an income tax benefit of $39.0 million for 2006 primarily as a result of the removal of the majority of the deferred tax asset valuation allowance;

· an increase in accretion income from beneficial interest in Master Trust;

· 12 months activity of Coastal Credit for 2006 as compared to four months activity in 2005.

The Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004

Net income was $16.5 million, or $11.02 per diluted share, for the year ended December 31, 2005, compared to net loss of $(7.3) million, or $(23.41) per diluted share, for the year ended December 31, 2004. The improvement from the prior year is primarily due to the following:

· an increase in accretion income from beneficial interest in Master Trust,

· elimination of a substantial portion of the accretion and interest expense from creditor notes payable resulting from the purchase by White River of general unsecured claims and Subordinated Notes of UAC,

· the acquisition of Coastal Credit on August 31, 2005 contributed $2.4 million,

· a one time gain of $11.4 million from extinguishment of debt related to the purchase by White River of general unsecured claims and Subordinated Notes of UAC.

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Discussion of Results

The following table presents consolidating financial information for White River for the periods indicated:

For The Year Ended December 31, 2006	UAC			Coastal Credit			Corporate and Other			Consolidated
Interest on receivables	$	8,435		$	29,065		$	-		$	37,500
Accretion and other interest		16,383			-			62			16,445
Total interest income		24,818			29,065			62			53,945
Interest expense		(4,805	)		(5,308	)		(1,707	)		(11,820	)
Net interest margin		20,013			23,757			(1,645	)		42,125
Recovery (provision) for estimated credit losses		4,624			(4,660	)		-			(36	)
Net interest margin (deficit) after recovery (provision) for estimated credit losses		24,637			19,097			(1,645	)		42,089
OTHER REVENUES:
Charge to master trust—net		(14,853	)		-			-			(14,853	)
Gain (loss) from extinguishment of debt		(13,542	)		-			12,018			(1,524	)
Gain from deficiency sale and litigation settlement		7,924			-			-			7,924
Other income		494			(387	)		-			107
Total other revenues (charges), net		(19,977	)		(387	)		12,018			(8,346	)
OTHER EXPENSES:
Salaries and benefits		309			7,516			670			8,495
Operating expenses		890			3,383			1,643			5,916
Third party servicing expense		1,824			-			-			1,824
Bankruptcy costs		183			-			-			183
Total other expenses		3,206			10,899			2,313			16,418
Income before income taxes		1,454			7,811			8,060			17,325
Income tax benefit		-			-			38,993			38,993
Net income	$	1,454		$	7,811		$	47,053		$	56,318

For The Year Ended December 31, 2005		UAC			Coastal Credit			Corporate and Other			Consolidated
Interest on receivables	$	19,993		$	8,810		$	-		$	28,803
Accretion and other interest		8,512			-			18			8,530
Total interest income		28,505			8,810			18			37,333
Interest expense		(12,939	)		(1,545	)		(720	)		(15,204	)
Net interest margin		15,566			7,265			(702	)		22,129
Provision for estimated credit losses		3,078			(1,613	)		-			1,465
Net interest margin (deficit) after provision for estimated credit losses		18,644			5,652			(702	)		23,594
OTHER REVENUES:
Charge to master trust—net		(10,253	)		-			-			(10,253	)
Gain from extinguishment of debt		11,352			-			-			11,352
Gain from deficiency sale and litigation settlement		-			-			-			-
Other income		740			(85	)		13			668
Total other revenues (charges), net		1,839			(85	)		13			1,767
OTHER EXPENSES:
Salaries and benefits		353			2,056			53			2,462
Operating expenses		917			1,147			706			2,770
Third party servicing expense		3,323			-			-			3,323
Bankruptcy costs		296			-			-			296
Total other expenses		4,889			3,203			759			8,851
Income (loss) before income taxes		15,594			2,364			(1,448	)		16,510
Income tax benefit		-			-			-			-
Net income (loss)	$	15,594		$	2,364		$	(1,448	)	$	16,510

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For The Year Ended December 31, 2004	UAC			Coastal Credit		Corporate and Other		Consolidated
Interest on receivables	$	12,985		$	-	$	-	$	12,985
Accretion and other interest		1,028			-		-		1,028
Total interest income		14,013			-		-		14,013
Interest expense		(13,108	)		-		-		(13,108	)
Net interest margin		905			-		-		905
Provision for estimated credit losses		(11,025	)		-		-		(11,025	)
Net interest deficit after provision for estimated credit losses		(10,120	)		-		-		(10,120	)
OTHER REVENUES:
Credit to master trust—net		4,485			-		-		4,485
Gain from extinguishment of debt		-			-		-		-
Gain from deficiency sale and litigation settlement		-			-		-		-
Other income		2,934			-		-		2,934
Total other revenues, net		7,419			-		-		7,419
OTHER EXPENSES:
Salaries and benefits		434			-		-		434
Operating expenses		1,126			-		-		1,126
Third party servicing expense		2,344			-		-		2,344
Bankruptcy costs		657			-		-		657
Total other expenses		4,561			-		-		4,561
Loss before income taxes		(7,262	)		-		-		(7,262	)
Income tax benefit		-			-		-		-
Net loss	$	(7,262	)	$	-	$	-	$	(7,262	)

The Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005 - Consolidated

Interest on receivables increased 30.2% to $37.5 million compared to $28.8 million for the years ended December 31, 2006 and 2005, respectively. Coastal Credit contributed $20.3 million to the increase as a result of a complete year of activity during 2006 compared to four months of activity during 2005 with the acquisition of Coastal Credit on August 31, 2005. Interest on receivables from UAC declined $11.6 million due to a smaller average securitized finance receivable balance of $64.7 million during the year ended December 31, 2006 as compared to $143.5 million during the year ended December 31, 2005 from the liquidation of securitization receivables.

Accretion and other interest increased 92.8% to $16.4 million compared to $8.5 million for the years ended December 31, 2006 and 2005, respectively. This increase is a result from an increase in accretion from accumulated other comprehensive income of the beneficial interest in Master Trust. This accumulated other comprehensive income is accreted over time based on the timing of projected cash receipts from the Master Trust. As projected cash receipts increase so does the interest income from the accretion of accumulated other comprehensive income. The individual components of accretion and other interest income are shown in the following table (in thousands):

	Years Ended December 31,
	2006		2005
UAC discount accretion for beneficial interest in Master Trust	$	15,538	$	7,696
Interest on restricted cash balances		907		834
UAC accretion and other interest income	$	16,445	$	8,530

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Interest expense decreased 22.3% to $11.8 million compared to $15.2 million for the years ended December 31, 2006 and 2005, respectively. Coastal Credit interest expense was $5.3 million for the year ended December 31, 2006 as compared to $1.5 million for the four months ended December 31, 2005 since its acquisition on August 31, 2005. UAC interest expense decreased by $8.1 million due to the decrease in interest expense and accretion expense from the UAC creditor notes payable that were acquired by White River and, to a greater extent, the decrease in the average collateralized financings of $70.0 million during the year ended December 31, 2006 compared to $152.8 million during the same period ended December 31, 2005. Interest expense of Corporate and Other was $1.7 million and $0.7 million for the years ended December 31, 2006 and 2005, respectively. This increase is primarily a result of interest from the secured note payable that was outstanding for only four months during 2005 compared to the entire year of 2006.

Recovery (provision) for estimated credit losses was a provision of $(36,000) compared to a recovery of $1.5 million for the years ended December 31, 2006 and 2005, respectively. Provision for estimated credit losses is charged to income to bring Coastal Credit’s allowance for estimated credit losses to a level which management considers adequate to absorb probable credit losses inherent in the portfolio of finance receivables. For Coastal Credit, the provision for estimated credit losses was $(4.7) million for the year ended December 31, 2006 as compared to $(1.6) million for the four months ended December 31, 2005. UAC recorded recovery for estimated credit losses of $4.6 million compared to $3.1 million for the years ended December 31, 2006 and 2005, respectively. This change in recovery for estimated credit losses is due to stronger than projected cash flows from recoveries on defaulted receivables during 2006. In addition, as the receivable balances continues to liquidate a smaller reserve is required and thus less provision expense is recognized.

The charge to Master Trust, net was a $14.9 million charge for the year ended December 31, 2006 compared to a $10.3 million credit for the year ended December 31, 2005. Charge to Master Trust is expense related to future transfers of funds to the Master Trust from securitized finance receivables of UAC. The $4.6 million increase in charge to Master Trust is related to sale of deficiency receivables, the sale of receivables that filed for Chapter 13 bankrupt protection, and the funds received from the settlement with SST which were allocated by securitization pool and recorded as other income.

Gain (loss) from extinguishment of debt was a loss of $(1.5) million for the year ended December 31, 2006 compared to a gain of $11.4 million for the year ended December 31, 2005. The loss during 2006 is related to the SST settlement distribution White River paid to UAC creditors who sold their general unsecured claims and Subordinated Notes during 2005. The gain during 2005 is related to the purchase by White River of a portion of UAC’s general unsecured claims and Subordinated Notes.

Gain from deficiency sale and litigation settlement was $7.9 million for the year ended December 31, 2006. This gain is the result of the UAC sale of deficiency receivables, the sale of receivables that filed Chapter 13 bankruptcy protection, and the funds received from the settlement with SST.

Other income was $0.1 million compared to $0.7 million for the years ended December 31, 2006 and 2005, respectively. Other income is primarily the result of refunds of dealer rebates from charged-off and prepaid finance contracts and amounts collected on previously charged-off balances net of expenses.

Salaries and benefits increased to $8.5 million for the year ended December 31, 2006 compared to $2.5 million for the year ended December 31, 2005. Coastal Credit contributed $5.5 million to this increase primarily since Coastal Credit was acquired on August 31, 2005 resulting in only four months of activity being recorded during 2005. There was no significant change in salaries and benefits for UAC during these periods. Corporate and Other contributed $0.6 million to the increase in salaries and benefits.

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Operating expenses increased to $5.9 million for the year ended December 31, 2006 compared to $2.8 million for the year ended December 31, 2005. Coastal Credit contributed $2.2 million to this increase primarily since Coastal Credit was acquired on August 31, 2005 resulting in only four months of activity being recorded during 2005. UAC operating expenses remained relatively unchanged between these periods. Corporate and Other contributed $0.9 million to the increase in operating expense between these periods. These Corporate and Other expenses were primarily professional fees.

Third party servicing expenses decreased 45.1% to $1.8 million for the year ended December 31, 2006 compared to $3.3 million for the year ended December 31, 2005. UAC is the only segment that incurs this expense. This decrease is the result of the ongoing liquidation of the UAC receivable portfolio during 2006. UAC pays a monthly servicing fee per active receivable. As the number of receivables decreased as the result of the liquidation of receivables, the third party servicing expenses decreased.

Bankruptcy costs are professional fees and expenses associated with the bankruptcy proceedings of UAC. These costs were $0.2 million and $0.3 million for the years ended December 31, 2006 and 2005, respectively. UAC is the only segment that incurs these costs which were for the purpose of assisting the reorganized company in complying with its bankruptcy plan. Future bankruptcy costs will be eliminated with the closure of the bankruptcy case on January 5, 2007.

Income tax benefit was $39.0 million for the year ended December 31, 2006. Prior to 2006, any income tax provision (benefit) in the year was offset by an increase (decrease) in the valuation allowance against deferred tax assets. As of December 31, 2006, White River had federal net operating loss carryforwards for income tax purposes of $102.1 million. Net operating losses may be carried forward up to 20 years for federal income tax purposes. White River’s earliest net operating losses available for carryforward were generated in the tax year ended June 30, 2003, and will expire if not used prior to the tax year ending December 31, 2022. With the acquisition of Coastal Credit on August 31, 2005, White River has a historically profitable subsidiary that will enable White River to recognize a portion of the net operating loss (“NOL”) carryforwards.

During 2006 White River continued to evaluate its future taxable income based on the successful integration of Coastal Credit and various other items that occurred during 2006. This evaluation determined that it is “more likely than not” that the federal deferred tax assets will be realized resulting in the reversal of the corresponding valuation allowance. The reversal of the valuation allowance for the federal and state net operating loss carryforward contributed to the income tax benefit of $39.0 million for the year ended December 31, 2006.

The availability of these tax benefits would be jeopardized if an ownership change (as defined in IRS regulations governing NOL carryforward limitations) were to occur in the future with respect to White River. In general, an ownership change occurs when, as of any testing date, the aggregate of the increase in percentage points of the total amount of a corporation's stock owned by each 5-percent shareholder within the meaning of the NOL carryforward limitations whose percentage ownership of the stock has increased as of such date over the lowest percentage of the stock owned by each such 5-percent shareholder at any time during the three-year period preceding such date, is more than 50 percentage points. In general, persons who own 5% or more of a corporation's stock are 5-percent shareholders, and all other persons who own less than 5% of a corporation's stock are treated together, as a single, public group 5-percent shareholder, regardless of whether they own an aggregate of 5% of a corporation's stock. Calculating whether an ownership change has occurred is subject to inherent uncertainty. This uncertainty results from the complexity and ambiguity of the NOL carryforward limitations as well as the limitations on the knowledge of a publicly-traded corporation concerning the ownership of, and transactions in, its securities. White River is not aware of any facts indicating that an ownership change has occurred with respect to White River.

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The Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004 - Consolidated

Interest on receivables increased 121.8% to $28.8 million compared to $13.0 million for the years ended December 31, 2005 and 2004, respectively. UAC contributed $7.0 million to the increase due to a larger average securitized finance receivable balance of $143.5 million during the year ended December 31, 2005 as compared to $96.9 million during the year ended December 31, 2004 from the repurchase of securitization receivables that occurred after December 31, 2004. Since the acquisition of Coastal Credit on August 31, 2005, Coastal Credit contributed $8.8 million to the increase.

Accretion and other interest increased 729.8% to $8.5 million compared to $1.0 million for the years ended December 31, 2005 and 2004, respectively. UAC contributed $7.5 million to this increase from an increase in accretion income of the beneficial interest in Master Trust. The fair value of beneficial interest in Master Trust increased between the periods primarily as a result of reductions in estimated securitized finance receivable net losses. As an increase in the fair value of beneficial interest in Master Trust is recorded, an adjustment is recorded to increase accumulated other comprehensive income in the shareholders’ equity section of the consolidated balance sheet. The accumulated other comprehensive income is accreted over time as interest income resulting in an increase in accretion income. The individual components of accretion and other interest income are shown in the following table (in thousands):

	2005		2004
UAC discount accretion for beneficial interest in Master Trust	$	7,696	$	757
Interest on restricted cash balances		834		271
UAC accretion and other interest income	$	8,530	$	1,028

Interest expense increased 16.0% to $15.2 million compared to $13.1 million for the years ended December 31, 2005 and 2004, respectively. UAC interest expense decreased by $0.2 million due to the decrease in interest expense and accretion expense from the UAC creditor notes payable purchased by White River which was partially offset by the increase in the average collateralized financings of $152.8 million during the year ended December 31, 2005 compared to $106.5 million during the same period ended December 31, 2004. The UAC interest expense decrease offset the interest expense from Coastal Credit and Corporate and Other. Since the acquisition of Coastal Credit on August 31, 2005, Coastal Credit interest expense was $1.5 million. Interest expense of Corporate and Other was $0.7 million which is primarily related to the secured note payable.

Recovery (provision) for estimated credit losses was a recovery of $1.5 million compared to a provision of $(11.0) million for the years ended December 31, 2005 and 2004, respectively. UAC contributed $14.1 million to the recovery from estimated credit losses due to the improved performance of the securitized finance receivable portfolio during 2005 and the reduction of the allowance for credit losses from reduced securitized receivable balances at December 31, 2005 and the change in the assumptions used to estimate the allowance. This recovery was partially offset by $1.6 million provision at Coastal Credit for the four months ended December 31, 2005.

The credit (charge) to Master Trust, net was a $(10.3) million charge for the year ended December 31, 2005 compared to a $4.5 million credit for the year ended December 31, 2004. Charge to Master Trust is expense related to future transfers of funds to the Master Trust from securitized finance receivables of UAC. As additional securitized finance receivables were purchased and the projected losses of UAC’s securitized finance receivables decreased during 2005, interest income increased, and thus the amounts related to future transfers of funds to the Master Trust increased, resulting in an increase in the charge to Master Trust. UAC is the only segment that reports this activity.

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Gain from extinguishment of debt was $11.4 million for the year ended December 31, 2005. This gain is related to the purchase by White River of a portion of UAC’s general unsecured claims and Subordinated Notes during 2005. No such activity occurred during 2004.

Other income was $0.7 million compared to $2.9 million for the years ended December 31, 2005 and 2004, respectively. UAC contributed $2.2 million to this decrease from a decline in refunds of dealer rebates from charged-off and prepaid finance contracts and amounts collected on previously charged-off balances net of expenses.

Salaries and benefits increased to $2.5 million for the year ended December 31, 2005 compared to $0.4 million for the year ended December 31, 2004. There was no significant change in salaries and benefits for UAC during these periods. Since the acquisition of Coastal Credit on August 31, 2005, Coastal Credit contributed $2.1 million to the increase. Corporate and Other contributed $0.1 million to the increase in salaries and benefits.

Operating expenses increased to $2.8 million for the year ended December 31, 2005 compared to $1.1 million for the year ended December 31, 2004. UAC operating expenses decreased $0.2 million between these periods. Since the acquisition of Coastal Credit on August 31, 2005, Coastal Credit contributed $1.1 million to the increase in operating expense. Corporate and Other contributed $0.7 million to the increase in operating expense between these periods. These Corporate and Other expenses were primarily professional fees.

Third party servicing expenses increased 41.8% to $3.3 million for the year ended December 31, 2005 compared to $2.3 million for the year ended December 31, 2004. UAC is the only segment that incurs this expense. This increase is the result of additional receivables repurchased by UAC from off-balance sheet securitizations during 2004 and 2005. UAC pays a monthly servicing fee per active receivable. As the number of receivables increased from each repurchase of receivables from off-balance sheet securitizations, the third party servicing expense increased.

Bankruptcy costs are professional fees and expenses associated with the bankruptcy proceedings of UAC. These costs were $0.3 million and $0.7 million for the years ended December 31, 2005 and 2004, respectively. UAC is the only segment that incurs these costs which were for the purpose of assisting the reorganized company in complying with its bankruptcy plan.

Any income tax provision (benefit) in the year was offset by an increase (decrease) in the valuation allowance against deferred tax assets.

As of December 31, 2005, White River had net operating loss carryforwards for income tax purposes of $112.8 million.

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Financial Condition as of December 31, 2006 and 2005

Securitized Finance Receivables, Net

Securitized finance receivables, net balance is 74.9% less at December 31, 2006, $27.4 million, compared to December 31, 2005, $109.5 million. This decrease is attributable to the normal runoff of the portfolio and the collateralized financing for securitization 2003-A which was paid in full during the first quarter of 2006. At that time, the 2003-A receivables were released from collateral arrangements and, accordingly, are recorded in subsequent periods as receivables held for investment, net. The principal balances of the securitized finance receivables, net and the off-balance sheet securitization portfolios are summarized in the following table (in thousands):

	December 31,
	2006		2005
Securitized Finance Receivables (1)
2003-A	$	-	$	4,167
2004-A1		414		3,795
2004-A2		637		4,712
2004-B		855		5,356
2004-C		3,424		16,837
2005-A		4,913		19,042
2005-B		7,227		25,405
2005-C		11,330		35,717
		28,800		115,031
Off-Balance Sheet Securitizations
2001-B		4,719		12,743
2001-C		14,070		35,009
2002-A		14,530		34,548
		33,319		82,300
Total Portfolios	$	62,119	$	197,331

(1) On-balance sheet portfolios held by UAC Securitization Corporation as collateral for non-recourse asset-backed notes.

Finance Receivables, Net

Finance receivables, net increased to $78.7 million at December 31, 2006 as compared to $70.8 million at December 31, 2005. Finance receivables, net generally have original terms ranging from 32 to 48 months and are secured by the related vehicles.

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A significant number of contracts acquired by Coastal Credit are contracts made with borrowers who are in the United States military. As of December 31, 2006 32.6% of the Coastal Credit Receivables were with borrowers who are in the United State military as compared to 38.1% as of December 31, 2005. Coastal Credit believes that having in the portfolio a significant percentage of contracts for which the borrowers are United States military personnel contributes to lower payment delinquency and greater collection personnel efficiencies. Coastal Credit requests that all borrowers who are in the military use the military allotment system to make payments on their contracts. Under this allotment system, the borrower authorizes the military to make a payroll deduction for the amount of the borrower’s monthly contract payment and to direct this deduction payment to Coastal Credit on behalf of the borrower. Delinquency of payments on contracts paid by allotment historically has been less than delinquency of payments on contracts not paid by allotment. As a result, the collection effort associated with the military contracts requires substantially less time, allowing Coastal Credit’s collection staff to focus on an increasing number of non-military contracts. Throughout 2006, the percentage of contracts made with borrowers who are in the United States military has declined due to the deployment of troops abroad. Until these deployments are reduced, it is likely that Coastal Credit will continue to see a decline in contracts with military personnel.

As of December 31, 2006, Coastal Credit’s finance receivables consisted exclusively of contracts acquired by Coastal Credit without credit recourse to the dealer. Although all the contracts in Coastal Credit’s portfolio were acquired without credit recourse, each dealer remains liable to Coastal Credit for liabilities arising from certain representations and warranties made by the dealer with respect to compliance with applicable federal and state laws and valid title to the vehicle.

Coastal Credit’s policy is to only acquire a contract after the dealer has provided Coastal Credit with the requisite proof that Coastal Credit will have a first priority lien on the financed vehicle, that the borrower has obtained the required collision insurance naming Coastal Credit as loss payee and that the contract has been fully and accurately completed and validly executed. Coastal Credit typically buys contracts on an individual basis and occasionally considers portfolio acquisitions as part of its growth strategy.

Beneficial Interest in Master Trust

Beneficial interest in Master Trust increased to $23.6 million at December 31, 2006 compared to $14.0 million at December 31, 2005. UAC used a 15% discount rate to value the beneficial interest in Master Trust as of December 31, 2006 and 2005. Over time, the time value effects of the discount rate to the beneficial interest in Master Trust are diminished and results in an increase in this balance. The increase in beneficial interest in Master Trust is also the result of the accretion of this discount during 2006 and to a lesser extent the better than projected results of net losses during the year. See Note 6 of Item 8, Financial Statements and Supplementary Data.

UAC continually assesses the adequacy of its beneficial interest in Master Trust cash flow model and, as necessary, adjusts both its cash flow model and the balance of the beneficial interest in Master Trust accordingly. Adjustments to beneficial interest in Master Trust are recorded as accumulated other comprehensive income in the shareholders’ equity section of the consolidated balance sheet and are accreted over time as accretion and other interest. The anticipated amortization period of the accumulated other comprehensive income is based on the estimated cash flows from the Master Trust which is projected to be completed by 2010.

Collateralized Financings

Collateralized financings were $32.4 million at December 31, 2006, compared to $122.3 million at December 31, 2005. The decrease was the result of principal payments to note holders that correspond to the principal reduction of securitized finance receivable, net.

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Accrued Interest Payable

Accrued interest payable was $1.2 million at December 31, 2006, compared to $2.1 million at December 31, 2005. The decrease was the result of (i) the extinguishment of debt, for accounting purposes, in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, when White River purchased a portion of UAC’s general unsecured claims during 2006 and (ii) the continued repayment of interest and reduced level of debt of White River and its subsidiaries.

Creditor Notes Payable

Creditor notes payable was $1.4 million at December 31, 2006, compared to $1.5 million at December 31, 2005. The decrease was the result of (i) the extinguishment of debt, for accounting purposes, in accordance with SFAS No. 140 when White River purchased a portion of UAC’s general unsecured claims and (ii) continued repayment of principal in accordance with the bankruptcy plan partially offset by the accretion, and thus of the valuation discount.

Contractual Obligations

The following table represents the estimated future contractual obligations of White River and its subsidiaries (in thousands). The long term debt obligations represent the estimated principal and interest obligations related to collateralized financing, line of credit, secured note payable, subordinated debentures and creditor notes payable. The future obligations for the line of credit assumes the line of credit balance at December 31, 2006 remains constant through the remaining term of the agreement and monthly interest and fees are calculated using this balance for purposes of creating the following table. Amounts due to Master Trust are excluded from the following table since funds from the Master Trust are returned to UAC. 

	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Contractual Obligations
Long-term debt obligations
Coastal Credit (1)	$	71,196	$	5,076	$	66,120	$	-	$	-
UAC		35,179		30,785		4,394		-		-
White River		15,771		5,010		8,810		1,951		-
Total long-term debt obligations		122,146		40,871		79,324		1,951		-
Operating lease obligations		1,254		533		700		21		-
Total	$	123,400	$	41,404	$	80,024	$	1,972	$	-

(1) Effective January 1, 2007, the line of credit obligation was extended two years from December 31, 2009 to December 31, 2011.

43

Liquidity and Capital Resources for the Years Ended December 31, 2006 and 2005

Net cash provided by operating activities was $6.0 million for the year ended December 31, 2006 compared to net cash used by operating activities of $(0.3) million for the year ended December 31, 2005. The change in net cash provided by (used in) operating activities was primarily from net income activity during the periods.

Net cash provided by investing activities was $88.2 million for the year ended December 31, 2006 compared to net cash used in investing activities of $(28.5) million for the year ended December 31, 2005. Included in the net cash used in investing activities for the year ended December 31, 2005 was $41.8 million related to the acquisition of Coastal Credit, including direct acquisition costs, the purchase and subsequent collection of securitized finance receivables and finance receivables and $149.3 million related to the purchase of securitized finance receivables, neither of which occurred during 2006.

Net cash used in financing activities was $(94.2) million for the year ended December 31, 2006 compared to net cash provided by financing activities of $31.9 million for the year ended December 31, 2005. Net cash used in financing activities for the year ended December 31, 2006 primarily resulted from net principal payment on UAC collateralized financings of $89.9 million, the net decrease in the line of credit of $2.0 million, and principal payments on secured notes payable of $1.9 million. Net cash flows provided by financing activities for the year ended December 31, 2005 primarily resulted from the completion of the $35.0 million subscription offering of White River, the issuance of a $15.0 million secured note payable and net collateralized financing activities during the period.

At December 31, 2006, White River and its subsidiaries had cash and cash equivalents of $7.0 million compared to $6.9 million at December 31, 2005. White River and its subsidiaries have ongoing cash flow requirements to support their operations.

Coastal Credit has a revolving credit facility from a lending institution with a maximum borrowing limit of $100 million. This facility increased from $80 million during July 2006. The maturity date is December 31, 2009. As of December 31, 2006, Coastal Credit had $49.5 million of indebtedness outstanding under this facility as compared to $51.5 million as of December 31, 2005. There was $20.6 million and $12.5 million available in excess of the amount utilized at December 31, 2006 and 2005, respectively. The credit facility is secured by substantially all of the assets of Coastal Credit. In addition, White River has provided an unconditional corporate guaranty. Coastal Credit must maintain specified financial ratios within guidelines established by the lender. Interest is paid monthly at a variable rate, based on meeting certain financial criteria. The rate was the London Interbank Offered Rate (“LIBOR”) plus 2.85% (8.20% and 7.14% at December 31, 2006 and 2005, respectively). There is an annual commitment fee of 1/8 of 1% on the average daily unused commitment. In the event of a significant pay down or an earlier retirement of the revolver commitment, Coastal Credit would sustain certain prepayment penalties. This facility limits distributions Coastal Credit may make to White River to 50% of Coastal Credit’s net income in addition to permitted payments on subordinated debt (including White River debt guaranteed by Coastal Credit.) Effective January 1, 2007 the line of credit was extended to December 31, 2011. In addition the interest rate was reduced to LIBOR plus 2.60%.

Coastal Credit has $7.7 million in subordinated debentures outstanding at December 31, 2006 and 2005. Interest on the notes is payable quarterly at a fixed rate of interest of 12% per annum. At December 31, 2006 and 2005, approximately 43% of the holders of subordinated debentures were related parties. All of the subordinated debt matures during 2008 and is subordinated to the line of credit and White River’s secured note payable.

44

UAC’s sources of liquidity are limited and consist of cash on hand, escrowed cash for operations, funds from consolidated operations and distributions from the Master Trust. UAC's beneficial interest in Master Trust reflected on the balance sheet reflects the discounted value of projected cash flows that UAC expects to receive from its outstanding securitizations and non-recourse financings of its portfolios of auto finance receivables. White River, as owner of the substantial majority of UAC's notes and claims outstanding under the Plan of Reorganization, is entitled to distribution of the substantial majority of these cash flows as they are realized by UAC. However, the realization of such projected cash flows is dependent upon the performance of the underlying auto receivable portfolios and the effective servicing of such receivables. In particular, if gross defaults, recoveries on defaulted receivables or prepayments on such receivables are less favorable than the rates projected by management, UAC's realization of such cash flows will be reduced or delayed relative to such projections. Such reduction may be material. Within the first two quarters of 2007, it is anticipated that the cash releases from the Master Trust will be in excess of $15 million as a result of the reduction of the cash collateral required minimum balances.

White River had outstanding $13.1 million and $15.0 million in a secured note at December 31, 2006 and 2005, respectively. Interest on the note is payable quarterly in arrears at a fixed rate of 10.75% per annum. The secured note payable is secured by White River’s ownership interest in Coastal Credit and is guaranteed by Coastal Credit, but subordinate to the revolving credit facility of Coastal Credit. Principal is payable in quarterly installments of $937,500 which began July 1, 2006. Prepayment of the note is allowed beginning September 1, 2007. There is a 2% prepayment penalty if prepayment occurs between September 1, 2007 and August 30, 2008. This prepayment is 1% if prepayment occurs between September 1, 2008 and August 30, 2009. There is no penalty if the prepayment occurs after August 30, 2009.

White River’s sources of liquidity, as the parent company, are limited and consist of cash on hand, payments by UAC on the UAC creditor notes payable owned by White River and distributions by Coastal Credit (subject to restrictions under Coastal Credit’s credit facility).

White River currently intends to retain its earnings to finance the growth and development of its businesses and has no present intention of paying any cash dividends in the foreseeable future.

45

Asset Quality

Set forth below is certain information concerning the credit loss experiences on the fixed rate retail automobile receivables of White River. There can be no assurance that future net credit loss experience on the receivables will be comparable to that set forth below. See “Discussion of Forward-Looking Statements.”

Securitized Finance Receivables

Selected information about active UAC securitizations (dollars in thousands):

Current Transaction	Initial Transaction		Original Amount of Initial Transaction		Remaining Balance at December 31, 2006		Remaining Balance as a Percentage of Original Amount			Net Loss Incurred to Original Amount at December 31, 2006
On Balance Sheet Securitized Finance Receivables:
2004-A1		1999-C	$	364,792	$	414		0.11	%		9.33	%
2004-A2		1999-D		302,693		637		0.21	%		10.83	%
2004-B		2000-A		282,721		855		0.30	%		8.91	%
2004-C		2000-B		534,294		3,424		0.64	%		11.44	%
2005-A		2000-C		499,999		4,913		0.98	%		9.48	%
2005-B		2000-D		510,000		7,227		1.42	%		10.07	%
2005-C		2001-A		573,000		11,330		1.98	%		9.20	%
				3,067,499		28,800
Off Balance Sheet Securitized Finance Receivables:
2001-B				150,002		4,719		3.15	%		7.33	%
2001-C				330,000		14,070		4.26	%		6.84	%
2002-A				300,000		14,530		4.84	%		4.95	%
				780,002		33,319
Total			$	3,847,501	$	62,119		1.61	%		8.61	%

Securitized finance receivables displayed seasonal trends with decreases in delinquency and net losses during the period January to May 2006. Increases in delinquency and net losses occurred during the period June to December 2006. Management believes the increase in net losses is generally from seasonal trends. While a portion of the increase in the percentage of delinquencies are also from seasonal trends, the effect of the total receivable principal decline is contributing to the increase in the percentage delinquencies. See “Discussion of Forward-Looking Statements.”

46

Delinquency experience of securitized finance receivables at UAC (in thousands):

	December 31, 2006			December 31, 2005
Securitized finance receivables principal balance	$	28,800		$	115,031
Delinquencies:
30-59 days		2,812			7,703
60-89 days		748			2,390
90+ days		419			1,271
Total delinquencies	$	3,979		$	11,364
Delinquencies as a percentage of securitized finance receivables		13.8	%		9.9	%
Off-balance sheet finance receivables principal balance	$	33,319		$	82,300
Delinquencies:
30-59 days		1,929			2,737
60-89 days		544			859
90+ days		220			553
Total delinquencies	$	2,693		$	4,149
Delinquencies as a percentage of securitized finance receivables		8.1	%		5.0	%

Provisions are made for estimated net credit losses of securitized finance receivables in conjunction with each repurchase of an off-balance sheet securitization. The cumulative credit loss assumptions used for the pools of receivables repurchased ranged from 8.91% to 11.44% as of December 31, 2006 (this range excludes the 2003-A securitization receivables), compared to a range of 7.34% to 11.87% as of December 31, 2005. See “Discussion of Forward-Looking Statements.”

On June 9, 2006, UAC sold receivables in Chapter 13 bankruptcy status from its portfolio to an unrelated third party. These accounts had a combined secured and unsecured receivable balance of approximately $10.6 million which, on each account, was previously charged off to a book value of zero during the Chapter 13 bankruptcy process. Payments received from these accounts were treated as recoveries. Therefore, the sale of these accounts will, in conjunction with seasonal trends, result in a reduction of recovery for estimated credit losses in subsequent periods.

47

Allowance for loan losses of securitized finance receivables at UAC ($ in thousands):

	Years Ended December 31,
	2006			2005
Balance at the beginning of period	$	6,503		$	11,722
Allowance at purchase		-			5,163
Charge-offs		(9,189	)		(21,637	)
Recoveries		8,927			14,333
Provision (recovery) for estimated credit losses		(4,624	)		(3,078	)
Balance at the end of the period	$	1,617		$	6,503
Net charge offs (recoveries)	$	262		$	7,304
Securitized finance receivables	$	28,800		$	115,031
Allowance for loan losses as a percent of securitized finance receivables		5.61	%		5.65	%
Net charge offs (recoveries) as a percent of securitized finance receivables		0.91	%		6.35	%
Allowance for loan losses as a percent of net charge offs		617.18	%		89.03	%

Finance Receivables

Delinquency experience of finance receivables at Coastal Credit, including unearned interest ($ in thousands):

	December 31,
	2006			2005
Finance receivables - gross balance	$	104,399		$	97,820
Delinquencies:
30-59 days		1,261			1,124
60-89 days		898			768
90+ days		1,208			878
Total delinquencies	$	3,367		$	2,770
Delinquencies as a percentage of finance receivables - gross balance		3.2	%		2.8	%

48

As a result of the nature of the customers in Coastal Credit’s portfolio, Coastal Credit considers the establishment of an adequate allowance for loan losses to be critical to its continued profitability. Coastal Credit has an allowance for loan losses that is calculated independent of the aggregate acquisition discounts and fees on finance receivables. Coastal Credit’s allowance for loan losses is based upon the historical rate at which (1) current loans, (2) contracts in a 30, 60 and 90+ day delinquency state and (3) loans ineligible for its borrowing line will default. These historical rates are evaluated and revised on a quarterly basis. See “Discussion of Forward-Looking Statements.”

Allowance for loan losses of finance receivables ($ in thousands):

	Year Ended December 31, 2006			Four Months Ended December 31, 2005
Balance at beginning of period	$	6,031		$	5,200
Charge-offs, net of recoveries (1)		(4,997	)		(782	)
Provision for estimated credit losses		4,660			1,613
Balance at the end of the period	$	5,694		$	6,031
Net charge offs	$	4,997		$	782
Finance receivables, net of unearned finance charges	$	95,825		$	87,952
Allowance for loan losses as a percent of finance receivables, net of unearned finance charges		5.94	%		6.86	%
Net charge offs as a percent of finance receivables, net of unearned finance charges (annualized for the four months ended December 31, 2005)		5.21	%		2.67	%
Allowance for loan losses as a percent of net charge offs (annualized for the four months ended December 31, 2005)		113.95	%		257.08	%

(1) Charge-offs do not include $0.9 million of loans subject to SOP 03-3 that were charged off and attributable to the non-accretable discount during the four months ended December 31, 2005.

49

Discussion of Forward-Looking Statements

The preceding Management’s Discussion and Analysis contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Forward-looking statements are also made elsewhere in this report. White River publishes other forward-looking statements from time to time. Statements that are not historical in nature, including the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions, are intended to identify forward-looking statements. We caution you to be aware of the speculative nature of “forward-looking statements.” Although these statements reflect White River’s good faith belief based on current expectations, estimates and projections about (among other things) the industry and the markets in which White River operates, they are not guarantees of future performance. Whether actual results will conform to management’s expectations and predictions is subject to a number of known and unknown risks and uncertainties, including:

· the risks and uncertainties discussed in this Annual Report on Form 10-K;

· general economic, market, or business conditions;

· changes in interest rates, the cost of funds, and demand for White River’s financial services;

· changes in White River’s competitive position;

· White River’s ability to manage growth;

· the opportunities that may be presented to and pursued by White River;

· competitive actions by other companies;

· changes in laws or regulations;

· changes in the policies of federal or state regulators and agencies; and

· other circumstances, many of which are beyond White River’s control.

Consequently, all of White River’s forward-looking statements are qualified by these cautionary statements. White River may not realize the results anticipated by management or, even if White River substantially realizes the results management anticipates, the results may not have the consequences to, or effects on, White River or its business or operations that management expects. Such differences may be material. Except as required by applicable laws, White River does not intend to publish updates or revisions of any forward-looking statements management makes to reflect new information, future events or otherwise.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Fluctuations in market interest rates impact Coastal Credit’s line of credit facility. Coastal Credit’s gross interest rate spread, which is the difference between interest earned on its finance receivables and interest paid, is affected by changes in interest rates. 

Line of Credit

 Finance receivables purchased by the Coastal Credit and pledged to secure borrowings under its line of credit bear fixed interest rates. Amounts borrowed under Coastal Credit’s line of credit facility bear interest at variable rates that are subject to frequent adjustments to reflect prevailing market interest rates.

50

The line of credit bears interest at the London Interbank Offered Rate (“LIBOR”) plus 2.85%, which was 8.20% and 7.14% per annum at December 31, 2006 and 2005, respectively, and has a maturity date of December 31, 2009. On January 2, 2007 the line of credit maturity date was extended to December 31, 2011 and the interest rate was reduced to LIBOR plus 2.60%. Interest rate changes generally do not affect the fair market value of such debt, but do impact future earnings and cash flows, assuming other factors are held constant. The line of credit had $49.5 million and $51.5 million outstanding at December 31, 2006 and 2005, respectively. Holding other variables constant, a one percentage point change in interest rates would be expected to have an impact on pre-tax earnings and cash flows for the next year of approximately $0.5 million.

51

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

White River Capital, Inc.

Indianapolis, Indiana

We have audited the accompanying consolidated balance sheets of White River Capital, Inc. and subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of White River Capital, Inc. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

New York, New York

March 15, 2007

52

WHITE RIVER CAPITAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

ASSETS	December 31, 2006			December 31, 2005
Cash and cash equivalents	$	6,958		$	6,878
Restricted cash		13,618			22,739
Securitized finance receivables—net		27,447			109,506
Finance receivables—net		78,693			70,784
Beneficial interest in Master Trust		23,601			13,968
Goodwill		34,698			35,097
Deferred tax assets—net		38,189			4,707
Other assets		2,220			3,315
TOTAL	$	225,424		$	266,994
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Collateralized financing	$	32,368		$	122,293
Line of credit		49,500			51,500
Secured note payable		13,125			15,000
Subordinated debentures		7,700			7,700
Note payable - Coastal Credit purchase holdback		-			3,840
Accrued interest		1,169			2,131
Amounts due to Master Trust		8,400			7,417
Creditor notes payable		1,392			1,461
Other payables and accrued expenses		3,852			2,291
Total liabilities		117,506			213,633
SHAREHOLDERS’ EQUITY:
Preferred Stock, without par value, authorized
3,000,000 shares; none issued and outstanding		-			-
Common Stock, without par value, authorized
20,000,000 shares; 3,813,155 and 3,810,155
issued and outstanding at December 31, 2006 and
2005, respectively		179,594			179,157
Warrants, 150,000 outstanding at December 31, 2006 and 2005		534			534
Accumulated other comprehensive income, net of taxes		11,107			13,305
Accumulated deficit		(83,317	)		(139,635	)
Total shareholders’ equity		107,918			53,361
TOTAL	$	225,424		$	266,994
See notes to consolidated financial statements.

53

WHITE RIVER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
	Year Ended December 31,
	2006			2005			2004
INTEREST:
Interest on receivables	$	37,500		$	28,803		$	12,985
Accretion and other interest		16,445			8,530			1,028
Total interest income		53,945			37,333			14,013
Interest expense		(11,820	)		(15,204	)		(13,108	)
Net interest margin		42,125			22,129			905
Recovery (provision) for estimated credit losses		(36	)		1,465			(11,025	)
Net interest margin (deficiency) after recovery (provision) for estimated credit losses		42,089			23,594			(10,120	)
OTHER REVENUES:
Charge to Master Trust—net		(14,853	)		(10,253	)		4,485
Gain (loss) from extinguishment of debt		(1,524	)		11,352			-
Gain from deficiency sale and litigation settlement		7,924			-			-
Other income		107			668			2,934
Total other revenues (charges), net		(8,346	)		1,767			7,419
OTHER EXPENSES:
Salaries and benefits		8,495			2,462			434
Third party servicing expense		1,824			3,323			2,344
Other operating expenses		5,916			2,770			1,126
Bankruptcy costs		183			296			657
Total other expenses		16,418			8,851			4,561
INCOME (LOSS) BEFORE INCOME TAXES		17,325			16,510			(7,262	)
INCOME TAX BENEFIT		38,993			-			-
NET INCOME (LOSS)	$	56,318		$	16,510		$	(7,262	)
NET INCOME (LOSS) PER COMMON SHARE (BASIC)	$	14.77		$	11.08		$	(23.41	)
NET INCOME (LOSS) PER COMMON SHARE (DILUTED)	$	14.51		$	11.02		$	(23.41	)
BASIC WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING		3,813,073			1,489,607			310,191
DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING		3,882,017			1,498,549			310,191
See notes to consolidated financial statements.

54

WHITE RIVER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(Dollars in thousands)
	Number of							Accumulated						Total
	Common							Other						Shareholders’
	Shares			Common				Comprehensive			Accumulated			Equity
	Outstanding			Stock		Warrants		Income (Loss)			Deficit			(Deficit)
BALANCE—January 1, 2004		310,191		$	145,900	$	-	$	-		$	(148,883	)	$	(2,983	)
Comprehensive loss:
Net loss												(7,262	)		(7,262	)
Net unrealized gain on beneficial interest in Master Trust									1,943						1,943
Total comprehensive income															(5,319	)
BALANCE—December 31, 2004		310,191			145,900		-		1,943			(156,145	)		(8,302	)
Comprehensive loss:
Net income												16,510			16,510
Net unrealized gain on beneficial interest in Master Trust									11,362						11,362
Total comprehensive income															27,872
UAC fractional shares adjustment as a result of share exchange		(36	)
Issuance of warrants							534								534
Issuance of common stock, net of costs of $1,743		3,500,000			33,257										33,257
BALANCE—December 31, 2005		3,810,155			179,157		534		13,305			(139,635	)		53,361
Comprehensive loss:
Net income												56,318			56,318
Net unrealized gain on beneficial interest in Master Trust									4,186						4,186
Tax effect of OCI									(6,384	)					(6,384	)
Total comprehensive income															54,120
Stock-based compensation expense		3,000			437										437
BALANCE—December 31, 2006		3,813,155		$	179,594	$	534	$	11,107		$	(83,317	)	$	107,918
See notes to consolidated financial statements.

55

WHITE RIVER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
	Year Ended December 31,
	2006			2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	56,318		$	16,510		$	(7,262	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Accretion of beneficial interest in Master Trust		(15,538	)		(7,696	)		(756	)
Provision (recovery) for estimated credit losses		36			(1,465	)		11,025
Amortization and depreciation		462			181			28
Amortization of discount and interest accrued on creditor notes payable		664			5,171			8,642
Loss (gain) from extinguishment of debt		1,524			(11,352	)		-
Deferred income taxes		(39,866	)		-			-
Stock based compensation expense		437			-			-
Changes in assets and liabilities:
Accrued interest receivable and other assets		2,306			3,170			2,725
Amounts due to Master Trust		983			777			(2,032	)
Payment of creditor notes payable accrued interest		(993	)		(6,390	)		(849	)
Other payables and accrued expenses		(291	)		752			(1,706	)
Net cash provided by (used in) operating activities		6,042			(342	)		9,815
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Coastal Credit, LLC, net of cash acquired		(3,840	)		(41,804	)		-
Purchase of securitized finance receivables		-			(149,333	)		(138,935	)
Principal collections and recoveries on securitized finance receivables		82,815			156,746			104,974
Purchase of finance receivables		(61,317	)		(18,204	)		-
Collections on finance receivables		48,748			14,562			-
Principal collections and recoveries on receivables held for investment		3,055			-			-
Collections on beneficial interest in Master Trust		9,872			8,767			3,641
Proceeds from sale of equipment		-			42			-
Change in restricted cash		9,121			791			(5,866	)
Capital expenditures		(228	)		(32	)		(11	)
Net cash provided by (used in) investing activities		88,226			(28,465	)		(36,197	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of costs		-			33,524			-
Proceeds from collateralized financings		-			153,359			136,671
Principal payments on collateralized financings		(89,925	)		(163,323	)		(106,648	)
Proceeds from secured note payable		-			15,000			-
Principal payments on secured note payable		(1,875	)		-			-
Principal payments on creditor notes payable		(388	)		(3,460	)		(8,557	)
Net decrease in line of credit		(2,000	)		(2,000	)		-
Payment of debt issuance costs related to secured note payable		-			(210	)		-
Proceeds from notes payable to Castle Creek		-			2,375			-
Principal payments on notes payable to Castle Creek		-			(2,375	)		-
Principal payments on subordinated debentures		-			(950	)		-
Net cash provided by (used in) financing activities		(94,188	)		31,940			21,466
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		80			3,133			(4,916	)
CASH AND CASH EQUIVALENTS—Beginning of year		6,878			3,745			8,661
CASH AND CASH EQUIVALENTS—End of year	$	6,958		$	6,878		$	3,745
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income tax refunds	$	2		$	73		$	83
Interest paid	$	10,681		$	12,651		$	4,906
Non cash items:
Issuance of warrants	$	-		$	534		$	-
Transfer of securitized finance receivables—net to other assets after the collateralized financing for securitization 2003-A was paid in full	$	2,771		$	-		$	-
Receivable recognition in other assets of beneficial interest in Master Trust distribution	$	268		$	-		$	-
See notes to consolidated financial statements.

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WHITE RIVER CAPITAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

1.GENERAL DISCUSSION

White River Capital, Inc. (“White River”) is a holding company for specialized indirect auto finance businesses, with two principal operating subsidiaries, Coastal Credit LLC (“Coastal Credit”) and Union Acceptance Company LLC (“UAC”). Coastal Credit based in Virginia Beach, Virginia, is a specialized subprime auto finance company engaged in acquiring subprime auto receivables from both franchised and independent automobile dealers which have entered into contracts with purchasers of typically used, but some new, cars and light trucks. Coastal Credit then services the receivables it acquires. Coastal Credit operates in 22 states through 16 offices. UAC, based in Indianapolis, Indiana, holds and oversees its portfolio of approximately $62.6 million in non-prime auto receivables, as of December 31, 2006. Its portfolio is held approximately 53.2% in off-balance sheet securitizations, 46.0% through subsidiary non-recourse financings and 0.8% directly or by subsidiaries not subject to financing. UAC operates under a confirmed Second Amended and Restated Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code (the “Plan”) under which net proceeds from its beneficial interest in Master Trust and other bankruptcy estate assets must be paid to creditors holding notes and claims under the plan. During 2005 and 2006, White River purchased and owns directly approximately 90% of such notes and claims. On January 5, 2007, the U.S. Bankruptcy Court for the Southern District of Indiana issued a final decree and closed UAC’s Chapter 11 bankruptcy case.

2005 Recapitalization Transactions

White River was formed in December 2004. During 2005, White River became the holding company of UAC, purchased the majority of outstanding notes and claims under UAC’s plan of reorganization and purchased Coastal Credit in a series of transactions that included:

· the buyout of substantially all of the UAC restructured senior notes (“Senior Notes”), restructured subordinated notes (“Subordinated Notes”), and their accompanying accrual notes (“Accrual Notes”) that were issued by UAC under the Plan;

· a share exchange for White River common shares by UAC common shareholders;

· a $35 million subscription rights equity offering by White River to UAC shareholders and standby investors;

· a $15 million note issuance by White River; and

· the acquisition of Coastal Credit for $50.8 million, including expenses.

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On February 15, 2005, UAC, White River, and the Plan Committee representing the UAC creditors under the Plan of Reorganization entered into a memorandum of understanding providing for the proposed buyout of the remaining outstanding UAC Senior Notes, Subordinated Notes and Accrual Notes payable. This agreement stipulated that White River, as the proposed parent of UAC, would offer to pay 100% of the principal value of the Senior Notes and 13% of the face value of the Subordinated Notes for the tender of these notes and their accompanying Accrual Notes to White River. Additional amounts were required to be paid by White River to the former Subordinated Note holders in the future if certain prescribed events occurred including but not limited to recovery by UAC on a particular unresolved pending claim. (The pending claim was resolved during September 2006 and additional amounts were paid to holders that had sold their notes to White River during 2005.) This purchase offer was accepted by 100% of the Senior Note holders and holders of 89.1% of the Subordinated Notes in February 2005. During June 2005, the Senior Notes of UAC were purchased by White River and simultaneously paid in full and White River completed the buyout of 89.1% of the Subordinated Notes of UAC using bridge funding provided by Castle Creek Capital Partners Fund IIa, LP and Castle Creek Capital Partners Fund IIb, LP (collectively the “Funds”). During September 2005, White River concluded its offer to purchase claims from the general unsecured creditors of UAC. White River acquired approximately 57.3% of the general unsecured claims of UAC as a result of this offer.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, UAC’s carrying value for the portion of the creditor notes payable owned by White River was netted against the amount paid by White River for the creditor notes resulting in a net gain from extinguishment of debt of $11.4 million.

On March 8, 2005, the board of directors of White River reviewed and authorized the following transactions and UAC’s board of directors approved the following actions subject to shareholder approval:

1. the share exchange agreement between UAC and White River;

2. the acquisition of Coastal Credit;

3. the issuance of a warrant to purchase White River common stock to the Funds, which advanced funds in connection with the described transactions and the general partner of which, Castle Creek Capital LLC (“Castle Creek”), assisted in developing, structuring and implementing the transactions; and

4. the $15 million note placement agreement.

The share exchange agreement was executed on March 9, 2005 by UAC and White River. A purchase agreement (to effect the acquisition of Coastal Credit), the note purchase agreement and the warrant issuance agreement were also executed on March 9, 2005 by White River.

On August 9, 2005, the share exchange became effective upon the filing of Articles of Share Exchange with the State of Indiana. The outstanding shares of common stock of UAC were exchanged for shares of common stock of White River, at an exchange rate of one share of White River common stock for 100 shares of UAC common stock (the “Share Exchange”). White River exchanged 310,155 shares of its common stock for the outstanding shares of UAC. White River became the parent holding company of UAC.

For purposes of the consolidated financial statements and in accordance with SFAS No. 141, Business Combinations (“SFAS No. 141”), the form of the Share Exchange points to UAC as the predecessor to White River. Therefore, the consolidated financial statements include results of UAC and White River as though they always coexisted.

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On August 31, 2005, White River completed a $35 million subscription offering. In this offering, White River issued 3,500,000 shares of common stock at the subscription price of $10.00 per share. The net proceeds of this subscription offering and the debt issuance of $15 million were used to acquire Coastal Credit, to repay a secured bridge note payable to the Funds, to pay transaction costs, and for ongoing operations.

On August 31, 2005, warrants were issued by White River to the Funds to purchase 150,000 shares of White River common stock at an exercise price of $10 per share. The term of the warrant is three years and 90 days and is exercisable beginning September 1, 2008.

Also on August 31, 2005, White River completed the acquisition of 100% of the ownership interests in Coastal Credit for an aggregate purchase price of $50.8 million, including direct costs of acquisition. $45.0 million was paid to the sellers at closing and $3.8 million, net of a $1.2 million receivable from the previous owners, was held back until March 31, 2006 and payable with interest at the rate of 10% per annum.

In connection with UAC’s Plan of Reorganization and distributions and as a result of White River’s purchase of the majority of UAC’s general unsecured claims and Subordinated Notes, UAC’s creditor notes payable principle amounts (in thousands) are as follows at:

	December 31, 2006						December 31, 2005
			Contractual						Contractual
			Remaining		Total				Remaining		Total
			Debt Not		Contractual				Debt Not		Contractual
	Carrying		Owned by		Remaining		Carrying		Owned by		Remaining
	Value		White River		Debt		Value		White River		Debt
Restructured debt:
Class 2A general unsecured claims	$	-	$	-	$	956	$	164	$	405	$	1,330
Restructured senior notes		-		-		-		-		-		-
Restructured subordinated notes		1,391		4,394		40,427		1,296		5,041		46,383
Senior accrual notes		-		-		4,106		-		-		4,106
Subordinated accrual notes		1		431		3,964		1		431		3,964
Total creditor notes payable	$	1,392	$	4,825	$	49,453	$	1,461	$	5,877	$	55,783

UAC History

UAC had historically been engaged primarily in the business of acquiring, securitizing and servicing retail automobile installment sales contracts originated by dealerships.

UAC had historically operated as a specialized finance company, engaged in (1) acquiring receivables in the form of retail installment sales contracts and installment loan agreements for the purchase of automobiles primarily from automobile dealerships and used car superstores (the “Receivables Acquisitions”) and (2) the servicing of such receivables by collecting payments due, remitting those payments to appropriate entities and collecting delinquent and defaulted accounts (“Servicing”).

On October 31, 2002, UAC filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Indiana, Indianapolis Division (the “Court”). This proceeding did not include UAC’s wholly owned subsidiaries. On November 7, 2002, UAC announced it would discontinue receivable acquisitions because it was not able to establish timely arrangements for further acquisition funding. UAC continued to manage its business as a debtor-in-possession as it prepared for reorganization under bankruptcy law.

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In connection with the sale of the servicing platform and related assets to Systems & Services Technologies, Inc. (“SST”), UAC and its subsidiaries entered into various amendments to the trust and servicing agreements, indentures and various other agreements related to UAC’s outstanding securitizations. In addition, UAC entered into an agreement with the surety provider to establish a Master Trust Account and to effectively cross collateralize the outstanding securitizations (“Master Trust Agreement”). These agreements generally provided for the following:

· UAC resigned, and SST was appointed, as servicer, and standards for SST’s performance and provisions for SST’s compensation were established.

· UAC was released from performance trigger obligations related to the securitizations, including the release of claims against UAC by the securitization trusts and MBIA, Inc. (“MBIA”).

· A Master Trust Account was created pursuant to the Master Trust Agreement. The Master Trust Account serves effectively to cross-collateralize the securitization trusts, as more specifically described below (“Master Trust Account”). The residual cash flows from the securitizations are paid through the Master Trust Account.

· Funds in excess of the cash collateral requirements of specific securitizations are remitted to the Master Trust Account.

· Funds in a particular securitization’s spread account in excess of the amount required for the immediately following distribution date may be drawn by the master trust to the Master Trust Account to make distributions to other securitization trusts or otherwise as provided in the Master Trust Agreement.

· Amounts held in the Master Trust Account are available to pay certain fees and expenses of the servicer, the securitization trustees, MBIA, and the master trustee, and to make distributions to securitization trusts to meet cash distribution obligations of those trusts to security holders of a securitization trust, to the extent cash otherwise available to that trust is insufficient for such purpose.

· Cash deposited to the Master Trust Account, to the extent not used for the foregoing purposes, will accumulate and, to the extent it exceeds prescribed levels, will be available for distribution to UAC.

With the establishment of the Master Trust Agreement in 2003, all excess cash from securitizations is required to be deposited in the Master Trust Account. Once prescribed cash reserve levels are met, cash will be released to UAC from the Master Trust Account. This future cash flow is reported as beneficial interest in Master Trust. Based upon this agreement, UAC’s retained interest was exchanged for the beneficial interest in Master Trust for financial reporting purposes.

On January 5, 2007, the U.S. Bankruptcy Court for the Southern District of Indiana issued a final decree and closed UAC’s Chapter 11 bankruptcy case.

Acquisition of Coastal Credit, LLC

On August 31, 2005, White River completed the acquisition of 100% of the interests in Coastal Credit with an aggregate purchase price of $50.8 million, including direct costs of acquisition. $45.0 million was paid to the sellers at closing and $3.8 million, net of a $1.2 million receivable from the previous owners, was held back until March 31, 2006 and paid with interest at the rate of 10% per annum. The results of Coastal Credit’s operations for the four months ended December 31, 2005 are included in the consolidated statement of operations for 2005.

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Coastal Credit is a specialized subprime auto finance company engaged primarily in (1) acquiring retail installment sales contracts from both franchised and independent automobile dealers which have entered into contracts with purchasers of used and, to a much lesser extent, new cars and light trucks, and (2) servicing the contract portfolio. Coastal Credit commenced operations in Virginia in 1987 and was restructured as a limited liability company under the laws of the Commonwealth of Virginia in 1997. It conducts business in 22 states - Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Hawaii, Kansas, Louisiana, Maryland, Mississippi, Nevada, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and Washington - through its 16 branch locations.

In accordance with SFAS No. 141, the acquisition was accounted for using the purchase method. The purchase method requires the cost of the acquired company, Coastal Credit, be allocated to the assets acquired and liabilities assumed. In accordance SFAS No. 141, the excess of the cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed shall be recognized as goodwill.

The following table is the final allocation of the purchase price of Coastal Credit:

Cash and cash equivalent	$	3,733
Finance receivables, net		68,756
Property and equipment		626
Other assets		1,450
Deferred tax assets		4,651
Goodwill		35,153
Line of credit		(53,500	)
Subordinated debentures		(8,650	)
Accrued interest		(380	)
Other payables and accrued expenses		(1,035	)
Total purchase price	$	50,804

With the acquisition of Coastal Credit on August 31, 2005, the excess of purchase price over fair value of net assets acquired and liabilities assumed, goodwill, was recorded. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), White River will annually test the goodwill for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the carrying value exceeds the fair value, impairment to goodwill will be recognized. The goodwill for this acquisition has been allocated to Coastal Credit for segment reporting. The goodwill is deductible for tax purposes.

The following is supplemental pro forma information that discloses the consolidated results of operations for the years ended December 31, 2005 and 2004 as though the acquisition of Coastal Credit by White River had been completed as of the beginning of the periods reported on. Assumed in this pro forma information is that the secured note payable was issued on January 1 of each respective year and the notes payable - Coastal Credit purchase holdback were issued on January 1 and paid March 31 of each respective year. In addition, it is assumed that the subscription offering was completed on January 1 of each respective year for the calculation of the weighted average share information. During the January 1, 2005 to August 31, 2005 time period, there were nonrecurring expenses for employee bonuses of $1.0 million and transaction expenses incurred by Coastal Credit related to the acquisition of Coastal Credit by White River of $0.4 million which are included in the pro forma information:

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(Dollars in thousands, except per share amounts)
	Years Ended December 31,
	2005			2004
Total interest income	$	53,861		$	37,211
Interest expense		(19,052	)		(17,722	)
Net interest margin		34,809			19,489
Provision for estimated credit losses		(2,446	)		(15,942	)
Net interest margin after provision for estimated credit losses		32,363			3,547
Total other revenues, net		1,552			7,345
Total other expenses		16,469			13,211
Income (Loss) Before Income Taxes		17,446			(2,319	)
Income Taxes		-			-
Net Income (Loss)	$	17,446		$	(2,319	)
Net Income (Loss) Per Common Share (Basic)	$	4.58		$	(0.61	)
Net Income (Loss) Per Common Share (Diluted)	$	4.58		$	(0.61	)
Basic Weighted Average Number Of Common Shares Outstanding		3,810,155			3,810,155
Diluted Weighted Average Number Of Common Shares Outstanding		3,812,808			3,810,155

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of White River and its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with the general practices of those in the consumer finance industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the valuation of the beneficial interest in Master Trust, the valuation of deferred tax assets, and the allowance for credit losses.

Cash and Cash Equivalents—White River considers all investments with maturity of three months or less when purchased to be cash equivalents.

Restricted Cash—Restricted cash consists of funds held in reserve accounts in compliance with the terms of the collateralized financing agreements.

Net Assets of Collateralized Financings-UAC Securitization Corporation has purchased receivables from off-balance sheet securitizations that were eligible for clean-up calls. These receivables were re-securitized through non-recourse asset backed note issuances. The associated future cash flows from these receivables are subject to the same Master Trust Account provisions as the securitizations called.

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To finance the securitized receivable acquisitions, collateralized financings are used, secured by the respective portfolios of the acquired receivables and related restricted cash accounts. Timely payments of principal and interest on the non-recourse collateralized financings are insured by surety policies. Such obligations are also cross-collateralized through the Master Trust Agreement. Net interest cash flows in excess of expense are payable to the Master Trust Account and expensed as charge to Master Trust, net.

Securitized Finance Receivables—net—UAC has repurchased receivables from outstanding securitizations and uses these receivables as collateral for new securitization debt that is recorded on White River’s consolidated balance sheet as collateralized financings. The receivables are carried at their principal amount plus interest receivable, less an allowance for credit losses. 

Finance Receivables—net—Finance receivables are recorded at cost, net of unearned finance charges, discounts and an allowance for credit losses. Coastal Credit purchases finance contracts from auto dealers without recourse, and accordingly, the dealer usually has no liability to Coastal Credit if the consumer defaults on the contract. There is no off-balance sheet credit exposure related to these receivables.

Allowance for Loan Losses - Finance Receivables—Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at a level considered adequate to cover probable credit losses inherent in finance receivables.

The allowance for loan losses is established systematically by management based on the determination of the amount of probable credit losses inherent in the finance receivables as of the reporting date. Coastal Credit reviews charge off experience factors, delinquency reports, historical collection rates and other information in order to make the necessary judgments as to probable credit losses inherent in the portfolio as of the reporting date. Assumptions regarding probable credit losses are reviewed quarterly and may be impacted by actual performance of finance receivables and changes in any of the factors discussed above. Should the credit loss assumptions increase, there could be an increase in the amount of allowance for loan losses required, which could decrease the net carrying value of finance receivables and increase the provision for loan losses recorded on the consolidated statements of operations. Coastal Credit believes that the existing allowance for loan losses is sufficient to absorb all probable finance receivable losses.

Charge off Policy - Finance Receivables—The policy is to charge off finance receivables against the allowance for loan losses in the month in which the installment contract becomes 60 days delinquent under recency terms and 180 days delinquent under contractual terms, if the vehicle has not been repossessed. If the vehicle has been repossessed, the receivable is charged off in the month the repossessed automobile is disposed of at public auction unless cash collections on the receivable are foreseeable in the near future. Receivables that are deemed uncollectible prior to the maximum charge off period are charged off immediately.

Income Recognition - Finance Receivables-Interest on receivables is recognized for financial reporting purposes using the interest method. Initial fees earned on add-on products such as collateral protection insurance, credit life insurance, road service plans and warranty products are recorded in income using the interest method. Late charges and deferment charges on contracts are recorded in income as collected. Cash received from loans that have previously been charged off is applied directly to the allowance for credit losses in the consolidated balance sheets. Discounts and fees, which consist primarily of non-refundable dealer acquisition discounts, are amortized over the term of the related finance receivables using the interest method and are removed from the consolidated balance sheets when the related finance receivables are charged off or paid in full.

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Beneficial Interest in Master Trust—UAC records beneficial interest in Master Trust as an “available for sale” security at fair value. Any associated unrealized gains and losses attributable to changes in fair value, net of income taxes, are recorded as a separate component of shareholders’ equity (deficit) (“accumulated other comprehensive income”), net of taxes. Accumulated other comprehensive income is accreted to income based on projected cash releases from the Master Trust Account.

Goodwill—White River has adopted the provisions of SFAS No. 142 for the accounting of goodwill related to the acquisition of Coastal Credit during 2005. As a result, goodwill is not amortized; rather, White River annually tests the goodwill for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired. The amount of goodwill impairment, if any, is measured as the excess of the carrying value over the fair value. Goodwill will be adjusted for adjustments related to excess tax deductibility of goodwill.

Receivables Held for Investment—net—Certain receivables are held for investment and are included in other assets. The receivables are carried at amortized cost plus interest less an allowance for credit losses. Interest on these receivables is accrued and credited to interest income based upon the daily principal amount outstanding.

Property, Equipment, and Leasehold Improvements—net—Property, equipment, and leasehold improvements are recorded at cost and included in other assets. Depreciation is determined primarily on straight-line methods over the estimated useful lives of the respective assets, ranging from 3 to 10 years.

Collateralized Financing—Collateralized financings are non-recourse debt obligations that were used to purchase finance receivables from previous securitization trusts. This debt is secured by the securitized finance receivables that were purchased by UAC in addition to cash collateral “Spread Accounts” that are recorded as restricted cash and the Master Trust Account. Principal payments are required to correspond to the principal reduction of the finance receivables on a monthly basis.

Amounts Due to Master Trust—Amounts due to Master Trust represents excess cash from finance receivables and restricted cash that are to be deposited in the Master Trust Account in accordance with the Master Trust Agreement that was established during April 2003.

Creditor Notes Payable—Creditor notes payable represents the liability to creditors upon UAC’s emergence from bankruptcy in 2003. In accordance with SOP 90-7, UAC recorded the liabilities at fair value at the confirmation date. As a result, the restructured principal amount of the debt exceeded the recorded fair value of the debt by $51.6 million. This difference or discount was recorded as gain on fair valuation of creditor liabilities and will be amortized over the expected life of the liabilities. Although there is no stated maturity for the creditor notes payable, the discount is being accreted, using the effective interest method, over the period ending on the date on which the last contractual payment on the receivables underlying the beneficial interest in Master Trust was expected. The following table contains the contractual interest rates for the individual classes of creditor notes payable:

	Contractual Interest Rate
Restructured debt:
Class 2A general unsecured claims	8.00%
Restructured senior notes	8.00%
Restructured subordinated notes	10.00%
Senior accrual notes	4.75%
Subordinated accrual notes	4.75%

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In December 2004, SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123R”), was issued, which eliminates the intrinsic value method under APB 25 as an alternative method of accounting for stock-based awards. SFAS No. 123R also revises the fair-value-based method of accounting for share-based payment liabilities, forfeitures, and modifications of stock-based awards and clarifies SFAS No. 123’s guidance in several areas, including measuring fair value, classifying an award as equity or as a liability, and attributing compensation cost to reporting periods. In addition, SFAS No. 123R amends SFAS No. 95, Statement of Cash Flows, to require that excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid, which is included within operating cash flows. White River adopted the modified prospective application of SFAS No. 123R as of January 1, 2006. The adoption of SFAS No. 123R had no impact on White River as there were no share based payment awards outstanding at December 31, 2005. White river recognizes compensation expense for awards with only service conditions on a straight-line basis over the requisite service period for the entire award.

Other Income—Other income represents refunds of dealer rebates, monies collected on previously charged-off balances in the securitization trusts, and other miscellaneous income.

Common Stock— White River’s Registration Statement on Forms S-1/S-4 (Reg. No. 333-123909) was declared effective on July 18, 2005. Pursuant to the registration statement, White River registered (1) 3,500,000 shares of its common stock (aggregate offering price $35,000,000) which was offered in a subscription offering to the shareholders of Union Acceptance Corporation and to certain standby purchasers, and (2) 310,191 shares of its common stock which was offered in a Share Exchange for the outstanding shares of common stock of Union Acceptance Corporation. The Share Exchange was approved and consummated August 9, 2005 and 310,155 shares were ultimately issued in the exchange due to cash issued in lieu of fractional shares. The Subscription Offering closed on August 31, 2005.

Income Taxes—Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The ultimate realization of the deferred tax asset depends on White River’s ability to generate sufficient taxable income in the future and its ability to not allow an ownership change to occur for tax purposes. The valuation allowance has been determined pursuant to the provisions of SFAS No. 109, Accounting for Income Taxes (“SFAS No. 109”), including White River’s estimation of future taxable income, and reduces the total deferred tax asset to an amount that will more likely than not be realized (see Note 15).

Segment Information— White River is the holding company for Coastal Credit and UAC which are specialized auto finance companies. These subsidiaries are distinct legal entities and managed separately. Corporate and Other is the holding company and includes debt and interest expense related to the acquisition of Coastal Credit, professional fees related to holding activities of White River and the elimination of all inter-segment amounts, which generally relate to the holding activities of White River.

Stock-Based Compensation—UAC had two stock-based compensation plans, which are discussed in Note 16. UAC applied Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees and related Interpretations, in accounting for the plans. If compensation cost had been determined based on the fair value at the grant date for awards under those plans consistent with the method of SFAS No. 123, Accounting for Stock-Based Compensation, the effect on the net income (loss) and income (loss) per share for the years ended December 31, 2005 and 2004 would have been immaterial.

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In December 2004, SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123R”), was issued, which eliminates the intrinsic value method under APB 25 as an alternative method of accounting for stock-based awards. SFAS No. 123R also revises the fair-value-based method of accounting for share-based payment liabilities, forfeitures, and modifications of stock-based awards and clarifies SFAS No. 123’s guidance in several areas, including measuring fair value, classifying an award as equity or as a liability, and attributing compensation cost to reporting periods. In addition, SFAS No. 123R amends SFAS No. 95, Statement of Cash Flows, to require that excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid, which is included within operating cash flows. White River adopted the modified prospective application of SFAS No. 123R as of January 1, 2006. The adoption of SFAS No. 123R had no impact on White River as there were no share based payment awards outstanding at December 31, 2005. White River recognizes compensation expense for awards with only service conditions on a straight-line basis over the requisite service period for the entire award.

New Accounting Pronouncements— During July 2006, FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 establishes standards for measurement and recognition in financial statements of positions taken by an entity in its income tax returns. In addition, FIN 48 requires new disclosures about positions taken by an entity in its tax returns that are not recognized in its financial statements, information about potential significant changes in estimates related to tax positions and descriptions of open tax years by major jurisdiction. The provisions of FIN 48 will become effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to retained earnings. White River is evaluating the impact of the adoption of FIN 48, but does not expect FIN 48 to have a material impact on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which provides guidance on how to measure assets and liabilities that use fair value. SFAS No. 157 will apply whenever another United States generally accepted accounting principles standard requires (or permits) assets or liabilities to be measured at fair value but does not expand the use of fair value to any new circumstances. This standard also will require additional disclosures in both annual and quarterly reports. SFAS No. 157 will be effective for financial statements issued for fiscal years beginning after November 15, 2007. White River is evaluating the impact of the adoption of SFAS No. 157 on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Valuation Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits all entities to choose, at specified election dates, to measure eligible assets and liabilities at fair value. SFAS No. 159 will be effective for financial statements issued for fiscal years beginning after November 15, 2007. White River is evaluating the impact of the adoption of SFAS 159 and has not determined what elections it may make.

3.NET ASSETS OF COLLATERALIZED FINANCINGS

UAC Securitization Corporation (“UACSC”), a wholly owned special purpose subsidiary of UAC, in conjunction with a conduit provider and its surety provider, purchased receivables from outstanding securitizations during 2005, 2004 and 2003. These receivables were re-securitized through non-recourse asset backed note issuances. The associated future cash flows from these receivables are subject to the same Master Trust Account provisions as the securitizations called.

To finance the receivable acquisitions, UACSC used collateralized financings, secured by the respective portfolio of the acquired receivables and related restricted cash accounts. Timely payments of principal and interest on the non-recourse collateralized financings are insured by surety policies. Such obligations are also cross-collateralized through the Master Trust Agreement. Net interest cash flows in excess of expenses are payable to the Master Trust Account and expensed as charge to Master Trust, net.

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The collateralized financing for 2003-A was paid in full during the first quarter of 2006. At that time, the remaining receivables were released from the related collateral arrangements and inure directly to UACSC. These receivables are recorded as receivables held for investment, net in other assets. The amount due to Master Trust with respect to 2003-A, as of December 31, 2005, was limited to the actual amounts paid to the Master Trust prior to the collateral financing being paid in full.

The following table represents the restricted net assets and liabilities related to non-recourse collateralized financings (in millions) as of: 

	December 31,
	2006			2005
Securitized finance receivables—net	$	27.4		$	109.5
Restricted cash		13.3			22.7
Receivable from servicer included in other assets		0.3			1.1
Collateralized financings		(32.4	)		(122.3	)
Series 2003-A excess collateral (1)		-			(2.7	)
Accrued interest payable		(0.1	)		(0.5	)
Other payables and accrued expenses		(0.1	)		(0.4	)
Amounts due to Master Trust	$	8.4		$	7.4
(1) On March 8, 2006 the 2003-A note was paid in full and no longer contributes to amounts due to Master Trust.

4.   SECURITIZED FINANCE RECEIVABLES—NET

Securitized finance receivables-net are recorded at the outstanding principal balance of the receivables plus accrued interest receivable, net of an allowance for credit losses. The collateralized financing for securitization 2003-A was paid in full during the first quarter of 2006. The remaining receivables were released from the related collateral arrangements and inure directly to UACSC. These receivables are recorded as receivables held for investment, net. The following table represents components of securitized finance receivables—net (in thousands) as of:

	December 31,
	2006			2005
Principal balance of securitized finance receivables	$	28,800		$	115,031
Accrued interest receivable		264			978
Allowance for credit losses		(1,617	)		(6,503	)
Securitized finance receivables—net	$	27,447		$	109,506

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Activity in the allowance for credit losses on securitized finance receivables is as follows (in thousands):

	Years Ended December 31,
	2006			2005			2004
Balance at the beginning of period	$	6,503		$	11,722		$	5,006
Allowance at purchase		-			5,163			3,604
Charge-offs		(9,189	)		(21,637	)		(17,453	)
Recoveries		8,927			14,333			9,540
Provision (recovery) for estimated credit losses		(4,624	)		(3,078	)		11,025
Balance at the end of the period	$	1,617		$	6,503		$	11,722

5.COLLATERALIZED FINANCINGS

UACSC issued notes to complete $153.4 million, $136.7 million and $120.3 million of non-recourse collateralized financings consisting of asset backed note issuances during 2005, 2004 and 2003, respectively to purchase securitized finance receivables.

The note principal and interest is paid monthly with total cash received from the corresponding securitized finance receivables collateralizing the notes. If the cash received within the month is insufficient to pay the note principal and interest, funds are drawn from restricted cash accounts or the Master Trust Account in accordance with the Master Trust Agreement. Interest expense related to these collateralized financings, including the amortization of debt issuance costs, was $3.5 million, $7.8 million and $4.5 million for the years ended December 31, 2006, 2005 and 2004, respectively.

The following table summarizes the outstanding principal balance of the collateralized financings (in thousands) at:

	Note			Initial Note		December 31,
Notes Series	Rate			Amount		2006		2005
Series 2003-A		3.95	%	$	120,327	$	-	$	2,072
Series 2004-A1		4.15			29,485		425		3,743
Series 2004-A2		4.55			29,298		764		5,317
Series 2004-B		5.02			25,896		1,009		5,972
Series 2004-C		4.89			51,992		3,946		18,636
Series 2005-A		4.49			47,742		5,564		20,730
Series 2005-B		4.69			50,684		8,087		27,445
Series 2005-C		5.40			54,933		12,573		38,378
				$	410,357	$	32,368	$	122,293

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Based on the projected receivable reductions, the repayment of collateralized financings is as follows (in thousands):

	Principal
Year	Repayment
2007	$	29,162
2008		3,125
2009		81
	$	32,368

6.BENEFICIAL INTEREST IN MASTER TRUST

With the establishment of the Master Trust Agreement in 2003, all excess cash flows, as defined, from retained interest in securitized assets, finance receivables, and restricted cash accounts are to be deposited in the Master Trust Account. Once prescribed cash reserve levels are met, cash is released to UAC from the Master Trust Account. This estimated future discounted cash flow is reported as beneficial interest in Master Trust. In determining the fair value of the beneficial interest in Master Trust, estimates must be made for the future prepayments, rates of gross credit losses and credit loss severity, and delinquencies as they impact the amount and timing of the estimated cash flows from the Master Trust. The average of the interest rates on the receivables exceeds the interest rates on the securities issued in the securitization and the servicing and surety fees. This excess cash is held by the Master Trust Account and released based on reserve requirements of the Master Trust. These estimated cash flows from the Master Trust are then discounted to reflect the present value.

The assumptions used to calculate the beneficial interest in Master Trust are as follows:

· Credit Loss Assumptions—Prior to December 31, 2005, estimated net credit losses were calculated using the loss to liquidation methodology for each securitized pool. The loss to liquidation methodology takes into account the current loss level of each securitized pool and its “pool factor,” which is the percentage remaining of the original pool balance. Dividing the current cumulative net loss for each pool by its corresponding pool factor, future projected cumulative net losses were calculated.

Beginning December 31, 2005, the gross credit losses are calculated using the loss to liquidation factor methodology as discussed above. However, recovery cash flows from gross credit losses are estimated independently as two different cash flow streams. These two recovery cash flow streams are:

o Liquidation recovery - consists of net auction proceeds, deficiency recoveries by the servicer, and scheduled payments from defaulted accounts. On a monthly basis for each pool, liquidation recovery cash dollars as a percentage of gross default dollars has been calculated for the previous year (this is typically in the 50-60% range). This twelve month average for each pool will be used to project monthly liquidation recovery by multiplying this value by the monthly estimated gross default dollars projected.

o Bankruptcy recovery - consists of cash recovered from accounts charged off and in bankruptcy status. Bankruptcy cash flows are somewhat independent of default rates due to bankruptcy court involvement and the latitude allowed debtors during the bankruptcy process. UAC has observed a reasonably predictable cash flow stream from bankruptcy payments in each securitized pool. This cash flow stream will, however, eventually expire as the bankruptcy cases are dismissed from the various courts with either a successful or non-successful outcome. A previous twelve month average of bankruptcy

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cash flows is calculated for each pool. This value is then reduced on a straight line basis over either a 18 or 30 month period.

Finally, gross credit losses are netted against the two recovery cash streams to estimate future net credit losses.

The weighted average net credit loss assumption as a percentage of the original principal balance over the life of the receivables to value beneficial interest in Master Trust was 8.61% and 8.93% at December 31, 2006 and 2005, respectively.

Prepayment Assumptions—UAC estimates prepayments by evaluating the historical prepayment performance of each pool of receivables. UAC used annual prepayment rates ranging from 30.2% to 46.0% at December 31, 2006 as compared to 27.8% to 42.3% at December 31, 2005.

Discount Rate Assumptions—UAC determines the estimated fair value of its beneficial interest in Master Trust by discounting the expected cash flows released from the Master Trust Account (the cash out method) using a discount rate that UAC believes is commensurate with the risks involved. UAC used a discount rate of 15% to value the beneficial interest in Master Trust at December 31, 2006 and 2005 to reflect current market conditions and the reduction in the uncertainty of these future cash flows.

At December 31, 2006, key economic assumptions and the sensitivity of the current fair value of residual cash flows to immediate 10% and 20% adverse changes in assumed economics is as follows (in thousands):

	Expected Remaining Gross Credit Losses			Discount Rate (annual rate)			Prepayment Speed (curve) (1)
Impact on fair value of
10% adverse change	$	(338	)	$	(237	)	$	-
20% adverse change	$	(673	)	$	(469	)	$	-
(1) The sensitivity impact of the adverse changes were less then $1,000.

These sensitivities are hypothetical and should be used with caution. As the figures indicate, any change in fair value based on a particular percentage variation in assumptions cannot be extrapolated because the relationship of the change in fair value is not linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the beneficial interest in Master Trust is calculated independent from any change in another assumption; in reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities.

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7.FINANCE RECEIVABLES - NET

Finance receivables - net are originated by Coastal Credit and generally have original terms ranging from 32 to 48 months and are secured by the related vehicles.

A significant number of contracts acquired by Coastal Credit are contracts made with borrowers who are in the United States military. As of December 31, 2006 32.6% of the Coastal Credit Receivables were with borrowers who are in the United State military as compared to 38.1% as of December 31, 2005. Coastal Credit requests that all borrowers who are in the military use the military allotment system to make payments on their contracts. Under this allotment system, the borrower authorizes the military to make a payroll deduction for the amount of the borrower’s monthly contract payment and to direct this deduction payment to Coastal Credit on behalf of the borrower. Throughout 2006, the percentage of contracts made with borrowers who are in the United States military has declined due to the deployment of troops abroad. Until these deployments are reduced, it is likely that Coastal Credit will continue to see a decline in contracts with military personnel.

White River used SOP 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer, as guidance to record the fair value of Coastal Credit’s finance receivables whose credit quality has deteriorated since origination at the date White River acquired Coastal Credit. The outstanding finance receivable net of unearned income for receivables identified as subject to SOP 03-3 was $0.0 million as of December 31, 2006 as compared to $0.3 million as of December 31, 2005. These receivables had a fair value of $0.6 million as of the acquisition date. The entire discount of $0.9 million was allocated to non-accretable discount.

Finance receivables - net outstanding were as follows (in thousands):

	December 31,
	2006			2005
Finance receivables, gross	$	104,399		$	97,820
Unearned interest		(8,574	)		(9,868	)
Finance receivables, net of unearned finance charge income		95,825			87,952
Accretable unearned acquisition discounts and fees		(11,438	)		(11,137	)
Finance receivables, net of unearned finance charge income and discounts and fees		84,387			76,815
Allowance for loan losses		(5,694	)		(6,031	)
Finance receivables, net	$	78,693		$	70,784

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Activity in the allowance for credit losses on finance receivables is as follows (in thousands):

	Year Ended December 31, 2006			Four Months Ended December 31, 2005
Balance at beginning of period	$	6,031		$	5,200
Charge-offs, net of recoveries (1)		(4,997	)		(782	)
Provision for estimated credit losses		4,660			1,613
Balance at the end of the period	$	5,694		$	6,031
Net charge offs	$	4,997		$	782
Finance receivables, net of unearned finance charges	$	95,825		$	87,952
Allowance for loan losses as a percent of finance receivables, net of unearned finance charges		5.94	%		6.86	%
Net charge offs as a percent of finance receivables, net of unearned finance charges (annualized for the four months ended December 31, 2005)		5.21	%		2.67	%
Allowance for loan losses as a percent of net charge offs (annualized for the four months ended December 31, 2005)		113.95	%		257.08	%

(1) Charge-offs do not include $0.9 million of loans subject to SOP 03-3 that were charged off and attributable to the non-accretable discount during the four months ended December 31, 2005.

8.OTHER ASSETS

Other assets are as follows (in thousands) at:

	December 31,
	2006		2005
Receivable from servicer	$	296	$	1,124
Prepaid expenses		408		712
Property, equipment and leasehold improvements, net		609		601
Receivables held for investment, net		454		269
Receivable from Master Trust account		268		-
Other		185		609
Total other assets	$	2,220	$	3,315

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9.GOODWILL

The changes in the carrying amount of the Coastal Credit goodwill are as follows (in thousands):

	Years Ended December 31,
	2006			2005
Beginning Balance	$	35,097		$	-
Goodwill acquired August 31, 2005		-			35,153
Impairment losses		-			-
Adjustment related to excess tax deductibility of goodwill		(399	)		(56	)
Ending Balance	$	34,698		$	35,097

Goodwill was tested for impairment as of August 31, 2006. There were no changes to the Coastal Credit segment goodwill for impairment.

10.LINE OF CREDIT

The line of credit is utilized by Coastal Credit to finance the purchase of finance receivables. $49.5 million and $51.5 million of the line of credit was utilized at December 31, 2006 and 2005, respectively. This line of credit was $80 million at December 31, 2005 and increased to $100 million in July 2006. The maturity date on the line of credit is December 31, 2009. The availability of the line of credit allows Coastal Credit to borrow up to 84% of the aggregate balance of outstanding eligible receivables net of unearned interest, commissions and discounts. Eligible receivables exclude the following: (i) receivables for which a payment is 90 or more days past due on a contractual basis; (ii) receivables which have been deferred more than two times during the same calendar year, or more than six times over the contract term; (iii) receivables subject to foreclosure, repossession or bankruptcy proceedings or the account debtor with respect to which is a debtor under the Bankruptcy Code; (iv) receivables from officers, employees or shareholders of the borrower or any affiliate; (v) interest only accounts; (vi) receivables missing titles after 120 days from their origination date; and (vii) receivables which, in the lender’s reasonable discretion, do not constitute acceptable collateral. Total available under the line of credit was $70.0 million and $64.0 million based upon the level of eligible collateral with $20.5 million and $12.5 million available in excess of the amount utilized at December 31, 2006 and 2005, respectively.

The credit facility is secured by substantially all assets of Coastal Credit. In addition, White River has provided an unconditional corporate guaranty. Coastal Credit must maintain specified financial ratios within guidelines established by the lender and was in compliance with these ratios at December 31, 2006 and 2005. Interest is paid monthly at a variable rate, based on meeting certain financial criteria. The rate was the London Interbank Offered Rate (“LIBOR”) plus 2.85% which equated to 8.20% at December 31, 2006 as compared to 7.14% at December 31, 2005. There is an annual commitment fee of 1/8 of 1% on the average daily unused commitment. In the event of a significant pay down or an earlier retirement of the revolver commitment, Coastal Credit would sustain certain prepayment penalties. This facility limits distributions Coastal Credit may make to White River to 50% of Coastal Credit’s net income in addition to permitted payments on subordinated debt (including White River debt guaranteed by Coastal Credit.) Effective January 1, 2007, the line of credit was extended to December 31, 2011. In addition the interest rate was reduced to LIBOR plus 2.60%.

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11.SECURED NOTE PAYABLE

A $15 million secured note was issued on August 31, 2005 and bears interest at a fixed rate of 10.75%. Interest is payable in arrears quarterly beginning October 1, 2005. The secured note payable is collateralized by White River’s ownership interest in Coastal Credit and is guaranteed by Coastal Credit, but subordinate to the line of credit. Principal is payable in sixteen quarterly installments of $937,500 commencing July 1, 2006. Prepayment of the note is allowed beginning September 1, 2007. There is a 2% prepayment penalty if prepayment occurs between September 1, 2007 and August 31, 2008. This prepayment is 1% if prepayment occurs between September 1, 2008 and August 31, 2009. There is no penalty if the prepayment occurs after August 31, 2009. The outstanding principal balance of the secured note was $13.1 million and $15.0 million at December 31, 2006 and 2005, respectively.

12.SUBORDINATED DEBENTURES

Coastal Credit has $7.7 million of subordinated debentures outstanding at December 31, 2006 and 2005. Interest on the debentures is payable quarterly at a fixed rate of interest of 12% per annum. Approximately 43% the holders of subordinated debentures were related parties. All of the subordinated debt matures in 2008 and is subordinated to the line of credit and the secured note payable.

13.SELECT DEBT REPAYMENT SCHEDULES

The following table represents select debt principal repayment schedules (in thousands):

Year	Total		Secured Note Payable		Subordinated Debentures		Line of Credit (1)
2007	$	3,750	$	3,750	$	-	$	-
2008		11,450		3,750		7,700		-
2009		53,250		3,750		-		49,500
2010		1,875		1,875		-		-
2011		-		-		-		-
	$	70,325	$	13,125	$	7,700	$	49,500
(1) Effective January 1, 2007, the line of credit obligation was extended two years from December 31, 2009 to December 31, 2011.

14.RELATED PARTY TRANSACTIONS

White River and UAC leased their corporate offices in Indianapolis, Indiana until November 2005 from Shadeland Properties, L.P., an entity controlled by Mr. Richard D. Waterfield, a significant shareholder and a director of White River. During November 2005, this property was sold by Shadeland Properties, L.P. to an unrelated third party. The lease was a month-to-month lease, subject to termination at any time by UAC or Shadeland Properties, L.P. upon 90 days prior written notice. The lease provided for rent payments of $2,164 per month for 2,361 square feet. Beginning March 1, 2006, White River and UAC relocated their corporate offices to a nearby location in Indianapolis, Indiana. The new corporate office is leased from an unrelated third party.

UAC’s administration of the Plan is supervised by Castle Creek, whose Funds are significant shareholders of White River. For these services, UAC compensates Castle Creek at a rate of $14,583 per month. Castle Creek was paid $175,000 during 2006, 2005 and 2004. While the bankruptcy case was closed on January 5, 2007, UAC must continue to operate in accordance with the Plan.

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On April 22, 2005, White River entered into a revolving note agreement with the Funds for the purpose of funding operating expenses of White River. This agreement allowed White River to borrow from the Funds up to $120,000 at a rate of 10% per annum. The outstanding principal and interest were payable on August 16, 2005, or, if earlier, the date three business days following consummation of White River’s subscription offering. On August 5, 2005, White River paid, in full, the principal related to the $120,000 revolving note to Castle Creek and interest of $2,444.

On June 22, 2005, White River entered into a secured bridge note agreement for $2.3 million with the Funds for the purpose of funding the buyout of the UAC Subordinated Notes in advance of June 30, 2005. This note bore interest at 10.75% per annum and was secured by White River’s purchase of $41,341,325 in face value of Subordinated Notes. The outstanding principal and interest were payable on September 30, 2005, or, if earlier, the date three business days following consummation of White River’s subscription offering. On August 31, 2005, White River paid, in full, the principal and interest of $46,195 related to the secured bridge note payable to the Funds.

Investment funds managed by Castle Creek owned directly or indirectly 51.5% of the equity interest in Coastal Credit that was purchased by White River on August 31, 2005. Mr. Eggemeyer's personal interest in Castle Creek represented approximately a 5% indirect interest in Coastal Credit. William E. McKnight held approximately 22% of Coastal Credit and John W. Rose indirectly held approximately 6%. White River paid $45 million toward the purchase of Coastal Credit on August 31, 2005, and aggregate principal and interest of $4.1 million, net of a $1.2 million receivable from the previous owners, was paid to the former owners of Coastal Credit on March 31, 2006.

On August 31, 2005, White River reimbursed the Funds $1.4 million for transaction expenses incurred in connection with the acquisition of Coastal Credit which were paid by the Funds.

On August 31, 2005, warrants were issued by White River to the Funds to purchase 150,000 shares of White River common stock at an exercise price of $10 per share. The term of the warrant is three years and 90 days and will be exercisable three years after issuance. The warrants were recorded at fair value as of August 31, 2005. The fair value of the warrants was determined using the Black-Scholes option-pricing model with the following assumptions used for the warrants granted on August 31, 2005: expected volatility of 33.6%, risk free interest rate of 3.8% and expected life of three years and 90 days.

During August, 2005, Coastal Credit effected a private placement of $7.7 in subordinate debentures, due 2008, bearing interest at 12% per annum. Mr. John W. Rose and members of his family purchased $1.5 million, a family partnership of William E. McKnight purchased $1.5 million of such debentures and certain employees of Castle Creek purchased $0.3 million of such debentures.

Coastal Credit leases its corporate offices in Virginia Beach, Virginia and one of its branch offices in Jacksonville (Orange Park), Florida, from the McKnight Family Partnerships, L.P., an entity controlled by Mr. McKnight, the President of Coastal Credit and a director of White River. The Virginia Beach lease has a three-year term, and provides for rent payments of $13,532 per month. The Virginia Beach lease will expire in September 2009. The Orange Park lease has a three-year term, and provides for rent payments of $9,280 per month. The Orange Park lease will expire in April 2007.

Coastal Credit and Mr. McKnight are parties to a letter agreement with respect to use of an aircraft owned by McKnight L.L.C., an entity controlled by Mr. McKnight. The aircraft is a Beechcraft King Air™ B200 twin engine turbo prop. The agreement provides that Coastal Credit will pay McKnight L.L.C. $14,000 per month to defray expenses associated with ownership of the aircraft in consideration for Mr. McKnight’s willingness to make the aircraft available for business use by key employees of Coastal Credit. Coastal Credit is required to pay additional amounts in any month in which its aircraft usage exceeds prescribed amounts. Six months prior written notice is required to withhold availability of the monthly payment or the plane. During 2006, approximately $178,000 was paid for this purpose.

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On November 8, 2005, White River entered into an expense sharing agreement with Castle Creek and Castle Creek Advisors LLC (collectively, “Castle Creek Entities”). The Castle Creek Entities will provide various facilities, equipment and services to White River for a fee that represents an allocation of actual Castle Creek Entities expenses proportionate to facilities, equipment and services provided to White River. This agreement was effective from September 1, 2005 and shall continue until terminated by either party upon 30 days’ prior written notice.

During 2006, White River paid a management fee to Castle Creek for services rendered during 2005. This fee was approximately $117,000.

15.INCOME TAXES

UAC incurred net operating losses for federal income tax purposes for the years ended June 30, 2003, 2004 and 2005. White River will carry forward these tax losses to future periods. Net operating loss carryforwards for federal income tax purposes were $102.1 million and $112.8 million as of December 31, 2006 and 2005, respectively. These tax losses will expire during 2022 through 2024. A full valuation allowance was recorded against the net operating loss carryforwards and other deferred tax assets through August 31, 2005.

On August 31, 2005, White River acquired Coastal Credit, an established, profitable operating business within UAC’s historical line of business. With this acquisition, it was considered more likely than not that a portion of the deferred tax assts were to be realized by White River. As part of the acquisition purchase accounting, the taxable income of White River was estimated for remainder of 2005 and the following five years. The result of these estimates was a reduction in the valuation allowance of $4.7 million at August 31, 2005. This adjustment to the valuation allowance was offset by a reduction to goodwill as part of the purchase of Coastal Credit.

During the fourth quarter 2006, White River continued to evaluate its future taxable income based on the successful integration of Coastal Credit and other activity at UAC during 2006 that increased current and expected future taxable income. This evaluation determined that it is more likely than not that the federal deferred tax assets will be realized resulting in the reversal of the corresponding valuation allowance. A valuation allowance of $1.6 million was retained related to state operating loss carryforwards as it is more likely than not that these carryforwards will not be realized. The reversal of the valuation allowance for the federal and state net operating loss carryforwards contributed to the income tax benefit of $39.0 million for the year ended December 31, 2006. In addition, a credit of $6.4 million was recorded to income tax benefit in 2006 related to recording the amount in accumulated other comprehensive income as of December 31, 2006 related to the beneficial interest in Master Trust net of tax. This contributed to the income tax benefit of $39.0 million in 2006.

            The composition of income tax expense (benefit) is as follows for the years ended December 31 (in thousands):

	2006			2005			2004
Current tax expense	$	873		$	-		$	-
Deferred tax expense (benefit)		6,039			9,369			(884	)
Valuation allowance increase (reversal)		(45,905	)		(9,369	)		884
Net income tax expense (benefit)	$	(38,993	)	$	-		$	-

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The effective income tax rate differs from the statutory federal corporate tax rate as follows for the years ended December 31:

	2006			2005			2004
Statutory rate		35.0	%		35.0	%		35.0	%
State income taxes		1.5			1.5			1.5
Valuation allowance and other		(261.9	)		(38.3	)		(34.0	)
Bankruptcy costs not deductible		0.3			1.8			(2.5	)
Effective rate		(225.1	)%		-	%		-	%

The composition of deferred income taxes is as follows as of December 31 (in thousands):

	2006			2005
Deferred tax assets:
Net operating loss carryforward	$	38,109		$	41,188
AMT credit carryforward		928			620
Basis difference in beneficial interest in Master Trust		2,004			5,361
Allowance for estimated credit losses		2,092			614
Other		158			-
Total deferred tax assets		43,291			47,783
Valuation allowance		(1,635	)		(41,156	)
		41,656			6,627
Deferred tax liabilities:
Basis difference in creditor notes payable		1,252			1,582
Basis difference in goodwill		2,033			265
Other		182			73
Total deferred tax liabilities		3,467			1,920
Net deferred tax assets	$	38,189		$	4,707

White River had a current tax payable of $.4 million as of December 31, 2006.

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16.STOCK-BASED COMPENSATION

UAC had two stock-based compensation plans. UAC applied APB Opinion No. 25 in accounting for the plans. During 2005 all outstanding options had either expired or were surrendered to UAC and cancelled.

On October 26, 2005, the board of directors of White River adopted the White River Capital, Inc. Directors Stock Compensation Plan. The plan provides for the payment of a portion of regular fees to certain members of the board of directors in the form of shares of White River common stock. The terms of the plan includes the reservation of 50,000 shares of White river common stock for issuance under the plan.

Effective January 1, 2006, the restated employment agreement between Coastal Credit and William McKnight, President of Coastal Credit, includes a long-term incentive award. This award provides for the payment, in cash, of the value of 100,000 shares of White River stock, vesting in three annual increments of 33,333.33 shares on January 1, 2007, 2008 and 2009. In accordance with SFAS No. 123R, Share-Based Payment (“SFAS No. 123R”), is accounted for as a liability account for this award. The value of payment is to be determined based on the mean of the trading value of White River shares for 20 trading days prior to the vesting date. Compensation expense related to this award approximated $582,500 for the year ended December 31, 2006 and is included in salaries and benefits expense in the accompanying consolidated statements of operations. Additional compensation costs will be incurred based on the value of White River’s stock price through 2008.

On May 5, 2006, White River shareholders approved the White River Capital, Inc. 2005 Stock Incentive Plan. The purpose of this plan is to offer certain employees, non-employee directors, and consultants the opportunity to acquire a proprietary interest in White River. The plan provides for the grant of options, restricted stock awards and performance stock awards.

On June 1, 2006, White River granted restricted stock awards totaling 84,000 shares to certain employees, vesting in three equal annual increments on January 2, 2007, 2008 and 2009. In addition, White River granted restricted stock awards totaling 9,000 shares that vest in three equal annual increments on March 31, 2007, 2008 and 2009. SFAS No. 123R is used for guidance in accounting for these awards. The value of awards is determined based on the trading value of White River shares on the June 1, 2006 grant date of $14.25 per share with an estimated forfeiture rate of 3%. Compensation expense related to these awards approximated $391,500 for year ended December 31, 2006 and is included in salaries and benefits expense in the accompanying consolidated statements of operations. During 2006, 6,600 shares with January 2 vesting dates were forfeited. As of December 31, 2006, there was $0.8 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted. That cost is expected to be recognized over a weighted-average period of 2.0 years.

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17.BUSINESS SEGMENT INFORMATION

Set forth in the table below is certain financial information with respect to White River’s operating segments as discussed in Note 1. All taxes are recorded at Corporate and Other. UAC and Coastal Credit are limited liability corporations and are consolidated with White River for tax purposes. Prior to 2005 UAC was the only operating segment.

For The Year Ended December 31, 2006	UAC			Coastal Credit			Corporate and Other			Consolidated
Total interest income	$	24,818		$	29,065		$	62		$	53,945
Interest expense		(4,805	)		(5,308	)		(1,707	)		(11,820	)
Net interest margin		20,013			23,757			(1,645	)		42,125
Recovery (provision) for estimated credit losses		4,624			(4,660	)		-			(36	)
Net interest margin (deficit) after recovery (provision) for estimated credit losses		24,637			19,097			(1,645	)		42,089
Total other revenues (charges), net		(19,977	)		(387	)		12,018			(8,346	)
Total other expenses		3,206			10,899			2,313			16,418
Income before income taxes		1,454			7,811			8,060			17,325
Income tax benefit		-			-			38,993			38,993
Net income	$	1,454		$	7,811		$	47,053		$	56,318

For The Year Ended December 31, 2005	UAC			Coastal Credit			Corporate and Other			Consolidated
Total interest income	$	28,505		$	8,810		$	18		$	37,333
Interest expense		(12,939	)		(1,545	)		(720	)		(15,204	)
Net interest margin		15,566			7,265			(702	)		22,129
Provision for estimated credit losses		3,078			(1,613	)		-			1,465
Net interest margin (deficit) after provision for estimated credit losses		18,644			5,652			(702	)		23,594
Total other revenues (charges), net		1,839			(85	)		13			1,767
Total other expenses		4,889			3,203			759			8,851
Income (loss) before income taxes		15,594			2,364			(1,448	)		16,510
Income tax benefit		-			-			-			-
Net income (loss)	$	15,594		$	2,364		$	(1,448	)	$	16,510

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The following table presents assets with respect to White River’s operating segments (in thousands) at:

	December 31,
	2006		2005
Corporate and other	$	43,205	$	6,918
Coastal Credit		114,900		108,165
UAC		67,319		151,911
	$	225,424	$	266,994

18.EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the reported net income for the period by the weighted average number of common shares outstanding. The weighted average number of common shares outstanding during a period is weighted for the portion of the period that the shares were outstanding. The 3,500,000 shares issued in the subscription offering, which was completed on August 31, 2005, were outstanding for 123 days during the year ended December 31, 2005. The relatively short period of time these shares were outstanding during 2005 resulted in a significantly different weighted average number of shares for the year ended December 31, 2005 when compared to the actual number of shares outstanding. Diluted earnings per share include the dilutive effect of warrants that were granted on August 31, 2005 and stock award plans which were issued on June 1, 2006. All stock options outstanding during 2005 and 2004 have been excluded from the earning per share calculation as the effect would have been anti-dilutive. Basic and diluted earnings per share have been computed as follows (dollars in thousands except per share data):

	Years Ended December 31,
	2006		2005		2004
Net income in thousands	$	56,318	$	16,510	$	(7,262	)
Weighted average shares outstanding		3,813,073		1,489,607		310,191
Incremental shares from assumed conversions:
Warrants		57,904		8,942		-
Stock award plans		11,040		-		-
Weighted average shares and assumed incremental shares		3,882,017		1,498,549		310,191
Basic	$	14.77	$	11.08	$	(23.41	)
Diluted	$	14.51	$	11.02	$	(23.41	)

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19.QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of quarterly financial results (dollars in thousands, except per share data):

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Fiscal Year Ended December 31, 2006
Total interest income	$	10,742		$	12,274		$	17,328		$	13,601
Net interest margin	$	7,420		$	9,192		$	14,456		$	11,057
Other revenue (charge)	$	(2,281	)	$	(2,253	)	$	(2,624	)	$	(1,188	)
Other expense	$	4,397		$	4,272		$	3,925		$	3,824
Net income (loss)	$	1,137		$	3,629		$	8,135		$	43,417
Basic earnings per share	$	0.30		$	0.95		$	2.13		$	11.39
Diluted earnings per share	$	0.29		$	0.94		$	2.09		$	11.11
Basic weighted average shares		3,812,822			3,813,155			3,813,155			3,813,155
Diluted weighted average shares		3,864,086			3,868,828			3,900,930			3,907,345
Fiscal Year Ended December 31, 2005
Total interest income	$	6,030		$	9,576		$	10,221		$	11,506
Net interest margin	$	2,007		$	5,256		$	7,032		$	7,834
Other revenue (charge)	$	(1,365	)	$	9,800		$	(1,672	)	$	(4,996	)
Other expense	$	1,401		$	1,173		$	2,358		$	3,919
Net income (loss)	$	(1,208	)	$	12,518		$	1,971		$	3,229
Basic earnings per share	$	(3.89	)	$	40.36		$	1.32		$	0.85
Diluted earnings per share	$	(3.89	)	$	40.36		$	1.32		$	0.84
Basic weighted average shares		310,191			310,191			1,489,503			3,810,155
Diluted weighted average shares		310,191			310,191			1,492,669			3,841,458

20.ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value approximates the fair value due to the nature of the following accounts:

· Cash and cash equivalents

· Restricted cash

The fair value of the creditor notes payable and related accrued interest was determined by discounting estimated future cash payments at appropriate discount rates. The following table represents the estimated fair value for creditor notes payable and related accrued interest at December 31 (in thousands):

	2006				2005
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Creditor notes payable and related accrued interest		$1,484		$2,512		$2,008		$1,972

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The fair value of securitized finance receivables-net, was estimated by discounting the future cash flows, which were reduced by estimated credit losses for the life of the receivables, using the current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities and was approximately $0.1 million greater than the carrying amount as of December 31, 2006 and 2005.

The fair value of collateralized financings was determined by discounting estimated future cash payments at appropriate discount rates and was $0.3 million and $7.1 million less than the carrying amount at December 31, 2006 and 2005, respectively.

The fair value of beneficial interest in Master Trust is calculated by discounting the estimated cash flows released from the Master Trust Account using a discount rate that UAC believes is commensurate with the risks involved. An allowance for estimated credit losses is established and applied. Discount rates utilized are based upon current market conditions and prepayment assumptions are based on historical performance experience. See Notes 2 and 6 for a detailed discussion of each of the components of the fair value of beneficial interest in Master Trust.

Finance receivables-net and subordinated debentures approximate the fair value due to minimal change in interest rates related to these types of accounts.

21.COMMITMENTS AND CONTINGENCIES

White River and its subsidiaries, as consumer finance companies, are subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, breach of contract and discriminatory treatment of credit applicants. Some litigation against White River and its subsidiaries could take the form of class action complaints by consumers. As the assignee of finance contracts originated by dealers, White River and its subsidiaries may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. The relief requested by the plaintiffs varies but can include requests for compensatory, statutory and punitive damages. White River and its subsidiaries believe that it has taken prudent steps to address and mitigate the litigation risks associated with its business activities.

White River and its subsidiaries’ obligations under operating lease agreements were $0.6 million for the year ended December 31, 2006. The following table represents obligations under current operating lease agreements (in thousands):

Year	Total
2007	$533
2008	425
2009	275
2010	21
2011	-
Thereafter	-

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22.SUBSEQUENT EVENTS

Effective January 1, 2007, the line of credit was extended two years. The new maturity date for the line of credit is December 31, 2011. In addition, the interest rate has been reduced to LIBOR plus 2.60%.

On January 3, 2007, White River issued 21,320 shares of common stock to certain employees as part of stock awards in accordance with agreements under the 2005 Stock Incentive Plan.

On January 3, 2007, UAC received net sales tax refund proceeds totaling $323,000 from the state of California related to charged-off loans that were originated in California. $146,000 of the sales tax refund proceeds related to securitized receivables and was transferred to the Master Trust Account.

On January 5, 2007, UAC has “fully administered” its Chapter 11 plan of reorganization and the U.S. Bankruptcy Court for the Southern District of Indiana issued a final decree and closed UAC’s Chapter 11 bankruptcy case.

On February 16, 2007, UAC sold charged-off loans that have deficiency balances remaining to a third party (the “Buyer”) for $169,000, net of broker fees. Of the proceeds received, $120,000, net of broker fees, was collateral for the various securitization pools and these funds were deposited in the Master Trust Account. The Buyer has sixty days from the date of Purchase to notify UAC of non-conforming accounts.

On March 7, 2007 White River issued 5,012 shares to directors in accordance with the Directors Stock Compensation Plan for services rendered during 2006.

ITEM 9A. CONTROLS AND PROCEDURES

White River carried out an evaluation, under the supervision of its Chief Executive Officer, President and Chief Financial Officer, of the effectiveness of the design and operation of White River’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 and 15d-15 as of December 31, 2006. Based upon that evaluation, the Chief Executive Officer, President and Chief Financial Officer concluded that, at December 31, 2006, White River’s disclosure controls and procedures are effective in accumulating and communicating to management (including such officers) the information required to be included in White River’s periodic SEC filings.

White River’s management, including its Chief Executive Officer, President and Chief Financial Officer also have concluded that during White River’s fiscal quarter ended December 31, 2006, there were no changes in White River’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect White River’s internal control over financial reporting.

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PART III 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Officers

Information contained under the captions “Proposal 1: Election of Directors,” “Executive Officers,” “Executive Compensation” and “Section 16(a) Beneficial Ownership Reporting Compliance” in White River’s proxy statement for the 2007 annual meeting of shareholders (“Proxy Statement”) is incorporated herein by reference.

Code of Ethics

 White River has adopted the White River Capital, Inc. Code of Business Conduct and Ethics (“code of ethics”), a code of ethics that applies to the Chief Executive Officer, President and Chief Financial Officer.

Audit Committee and Audit Committee Financial Expert

The information with respect to White River’s audit committee and its audit committee financial expert contained under the caption ”Corporate Governance and Board Committees - Audit Committee” in White River’s Proxy Statement is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information contained under the captions “Compensation Discussion and Analysis,” “Executive Compensation” and “Compensation of Directors” in the Proxy Statement is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Security Ownership

Information contained under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated herein by reference.

Securities Authorized for Issuance under Equity Compensation Plans

As of December 31, 2006, the following shares were authorized to be issued under White River’s equity compensation plans:

Equity Compensation Plan Information
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance
Equity compensation plans approved by security holders		236,4001	$	10.002		210,6003
Equity compensation plans not approved by security holders		0		0		0
Total		236,4001	$	10.002		210,6003

¹ Includes 86,400 shares issuable pursuant to outstanding performance awards under the 2005 Stock Incentive Plan and 150,000 shares issuable upon exercise of outstanding warrants.

² Based on the exercise price of the outstanding warrants only and does not take into account the shares issuable pursuant to outstanding performance awards.

3 Includes 163,600 shares issuable pursuant to the 2005 Stock Incentive Plan in the form of stock options, restricted stock awards, or performance stock awards, and 47,000 shares issuable pursuant to the 2005 Directors Stock Compensation Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information contained under the captions “Certain Relationships and Related Party Transactions” and “Corporate Governance and Board Committees - Director Independence” in the Proxy Statement is incorporated herein by reference in response to this Item 13.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information contained under the caption “Independent Public Accountants” in the Proxy Statement is incorporated herein by reference in response to this Item 14.

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PART IV

ITEM 15. EXHIBITS

1.Financial Statements

The consolidated financial statements of White River Capital, Inc. and its subsidiaries and independent auditors’ report are included in Part II (Item 8) of this Form 10-K.

2.Financial Statement Schedules

Not applicable.

3.Exhibits

The following documents are included or incorporated by reference in this Annual Report on Form 10K:

2.1	Agreement and Plan of Share Exchange dated March 9, 2005 between registrant and Union Acceptance Corporation (incorporated by reference to Exhibit 2.1 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
2.2	Limited Liability Company Interests Purchase Agreement dated March 9, 2005 among registrant, Coastal Credit, LLC and the members of Coastal Credit, LLC (incorporated by reference to Exhibit 2.2 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
3.1	Articles of Incorporation of registrant (incorporated by reference to Exhibit 3.1 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
3.2	Code of By-laws of registrant (incorporated by reference to Exhibit 3.2 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.1	Form of common stock certificate of registrant (incorporated by reference to Exhibit 4.1 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.2	Article 5 - “Number of Shares,” Article 6 - “Terms of Shares,” Article 10 - “Transfer and Ownership Restrictions” and Article 11 - “Miscellaneous Provisions” (concerning the applicability of the Indiana Control Share Acquisitions Chapter and the Indiana Business Combinations Chapter) of registrant’s Articles of Incorporation (contained in registrant’s Articles of Incorporation filed with this annual report as Exhibit 3.1)
4.3	Article III - “Shareholder Meetings,” Article VI - “Certificates for Shares” and Article VII, Section 3 - “Corporate Books and Records” of registrant’s Code of By-laws (contained in registrant’s Code of By-laws filed with this annual report as Exhibit 3.2)
4.4(a)	Note Purchase Agreement dated March 9, 2005, between registrant and the note purchaser named therein (incorporated by reference to Exhibit 4.4(a) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.4(b)	Form of Secured Note of registrant due April 1, 2010 (incorporated by reference to Exhibit 4.4(b) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.4(c)	Form of Subordinated Guaranty between Coastal Credit, LLC and the note purchaser (incorporated by reference to Exhibit 4.4(c) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.4(d)	Form of Pledge Agreement between the registrant and the note purchaser (incorporated by reference to Exhibit 4.4(d) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))

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4.5(a)	Revolving Note of registrant dated April 21, 2005 (incorporated by reference to Exhibit 4.5(a) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.5(b)	Revolving Note of registrant dated April 21, 2005 (incorporated by reference to Exhibit 4.5(b) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.6	Second Amended and Restated Plan of Reorganization of Union Acceptance Corporation dated August 8, 2003 (incorporated by reference to Exhibit 4.6 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.7(a)	Note Purchase Agreement dated October 7, 2003, among UAC Securitization Corporation, Wachovia Capital Markets, LLC, the note purchasers named therein, Wachovia Bank, National Association and Variable Funding Capital Corporation (incorporated by reference to Exhibit 4.7(a) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.7(b)	Indenture dated October 7, 2003 among UAC Securitization Corporation, Wilmington Trust Company and JPMorgan Chase Bank (related to UAC Securitization Corporation Asset-Backed Notes) (incorporated by reference to Exhibit 4.7(b) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.7(c)	UAC Securitization Corporation Series 2003-A Asset Backed Note (incorporated by reference to Exhibit 4.7(c) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.7(d)	UAC Securitization Corporation Series 2004-A, Class A-1 Asset Backed Note (incorporated by reference to Exhibit 4.7(d) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.7(e)	UAC Securitization Corporation Series 2004-A, Class A-2 Asset Backed Note (incorporated by reference to Exhibit 4.7(e) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.7(f)	UAC Securitization Corporation Series 2004-B Asset Backed Note (incorporated by reference to Exhibit 4.7(f) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.7(g)	UAC Securitization Corporation Series 2004-C Asset Backed Note (incorporated by reference to Exhibit 4.7(g) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.7(h)	UAC Securitization Corporation Series 2005-A Asset Backed Note (incorporated by reference to Exhibit 4.7(h) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.7(i)	UAC Securitization Corporation Series 2005-B Asset Backed Note (incorporated by reference to Exhibit 4.7(i) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.8(a)	Amended Finance Agreement dated April 16, 2001, between Coastal Credit, LLC and Wells Fargo Financial Preferred Capital, Inc. (incorporated by reference to Exhibit 4.8(a) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.8(b)	First Amendment to Finance Agreement dated March 22, 2004, between Coastal Credit, LLC and Wells Fargo Financial Preferred Capital, Inc. (incorporated by reference to Exhibit 4.8(b) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.8(c)	Second Amendment to Finance Agreement, dated August 24, 2005, between Coastal Credit LLC and Wells Fargo Financial Preferred Capital, Inc. (including replacement Promissory Note and White River Capital Inc. Guaranty) (incorporated by reference to Exhibit 4.1 of registrant’s Form 8-K filed September 2, 2005)

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4.8(d)	Third Amendment to Finance Agreement, dated January 2, 2007, between Coastal Credit LLC and Wells Fargo Financial Preferred Capital, Inc.
4.9	Regulation S-K, Item 601(b)(4)(iii) undertaking to furnish debt instruments to the Commission upon request (incorporated by reference to Exhibit 4.9 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.10(a)	Secured Bridge Note of registrant, dated June 22, 2005, to Castle Creek Capital Partners Fund IIa (incorporated by reference to Exhibit 4.10(a) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.10(b)	Secured Bridge Note of registrant, dated June 22, 2005, to Castle Creek Capital Partners Fund IIb (incorporated by reference to Exhibit 4.10(b) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
4.10(c)	Pledge and Security Agreement, dated June 22, 2005, among registrant, Castle Creek Capital, LLC, Castle Creek Capital Partners Fund IIa and Castle Creek Capital Partners Fund IIb (incorporated by reference to Exhibit 4.10(c) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
10.1	Warrant Issuance Agreement dated March 9, 2005, between registrant, Union Acceptance Corporation, Castle Creek Capital, L.L.C., Castle Creek Capital Partners Fund IIa, LP and Castle Creek Capital Partners Fund IIb, LP, as amended (incorporated by reference to Exhibit 10.1 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
10.2	Memorandum of Understanding dated February 15, 2005, among registrant, Union Acceptance Corporation and the Plan Committee under Union Acceptance Corporation’s Second Amended and Restated Plan of Reorganization (incorporated by reference to Exhibit 10.2 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
10.3	Form of Tender Agreement for Restructured Senior Noteholders of Union Acceptance Corporation (incorporated by reference to Exhibit 10.3 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
10.4	Form of Tender Agreement for Restructured Subordinated Noteholders of Union Acceptance Corporation (incorporated by reference to Exhibit 10.4 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
10.5	Summary of arrangement between Union Acceptance Corporation and Castle Creek Capital, LLC (incorporated by reference to Exhibit 10.5 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
10.6(a)	Employment Agreement dated April 1, 1998, between Coastal Credit, LLC and William E. McKnight (incorporated by reference to Exhibit 10.6 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
10.6(b)	Restated Employment Agreement, as of December 28, 2005, between William E. McKnight and Coastal Credit LLC (incorporated by reference to Exhibit 10.1 of registrant’s Form 8-K filed January 10, 2006
10.7(a)	Master Trust Account Agreement dated April 17, 2003 among Union Acceptance Corporation, UAC Securitization Corporation, Performance Securitization Corporation, Official Committee of Unsecured Creditors of Union Acceptance Corporation, MBIA Insurance Corporation, BNY Midwest Trust Company, The Bank of New York, Systems & Services Technologies, Inc., JPMorgan Chase Bank and Wilmington Trust Company (incorporated by reference to Exhibit 10.7(1b) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
10.7(b)	Amendment No. 1 to Master Trust Account Agreement dated October 7, 2003 (incorporated by reference to Exhibit 10.7(b) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))

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10.7(c)	Amendment No. 2 to Master Trust Account Agreement dated May 21, 2004 (incorporated by reference to Exhibit 10.7(c) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
10.7(d)	Amendment No. 3 to Master Trust Account Agreement dated August 1, 2004 (incorporated by reference to Exhibit 10.7(d) of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
10.8	Servicing Transfer Agreement dated April 17, 2003, among Union Acceptance Corporation, UAC Securitization Corporation, Performance Securitization Corporation, Systems & Services Technologies, Inc., MBIA Insurance Corporation and the Official Committee of Unsecured Creditors of Union Acceptance Corporation (incorporated by reference to Exhibit 10.8 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
10.9	White River Capital, Inc. 2005 Stock Incentive Plan (incorporated by reference to Exhibit 4.4 of registrant’s Form S-8 (File No. 333-130187))
10.10	Letter Agreement between registrant and Martin J. Szumski dated April 8, 2005 (incorporated by reference to Exhibit 10.10 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
10.11	Expense Sharing Agreement, dated November 8, 2005, between White River Capital, Inc. and Castle Creek Capital, LLC and Castle Creek Advisors LLC (incorporated by reference to Exhibit 10.1 of registrant’s Form 10-Q for the period ended September 30, 2005)
10.12	White River Capital Inc. Directors Stock Compensation Plan (incorporated by reference to Exhibit 10.2 of registrant’s Form 10-Q for the period ended September 30, 2005)
14.1	Code of Ethics (incorporated by reference to Exhibit 14.1 of registrant’s Form 10-K for the year ended December 31, 2005)
21.1	Subsidiaries of White River Capital, Inc. (incorporated by reference to Exhibit 21.1 of registrant’s Form 10-K for the year ended December 31, 2005)
23.1	Consent of Deloitte & Touche LLP
31.1	Certification by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act
31.2	Certification by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act
32.1	Section 1350 Certifications

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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.

	White River Capital, Inc.
	(Registrant)
March 16, 2007	By:	/s/ Martin J. Szumski
		Martin J. Szumski
		Chief Financial Officer
		(Signing on behalf of the registrant as Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Date
/s/ John M. Eggemeyer	Chairman and Chief Executive Officer, Director (Principal Executive Officer)	March 16, 2007
John M. Eggemeyer
/s/ Mark R. Ruh	President, Chief Operating Officer and Director	March 16, 2007
Mark R. Ruh
/s/  Martin J. Szumski	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March 16, 2007
Martin J. Szumski
/s/ Thomas C. Heagy	Director	March 16, 2007
Thomas C. Heagy
/s/ William E. McKnight	Director	March 16, 2007
William E. McKnight
/s/ Daniel W. Porter	Director	March 16, 2007
Daniel W. Porter
/s/ John W. Rose	Director	March 16, 2007
John W. Rose
/s/ Richard D. Waterfield		March 16, 2007
Richard D. Waterfield	Director

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