United Panam Financial (NASDAQ:UPFC)
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United PanAm Financial Corp. (Nasdaq: UPFC) today announced results for
its third quarter ended September 30, 2008.
For the quarter ended September 30, 2008, UPFC reported net loss of $6.5
million, compared to net income of $2.6 million for the same period a
year ago. Interest income decreased 8.2% to $54.8 million for the
quarter ended September 30, 2008 from $59.7 million for the same period
a year ago. UPFC reported net loss of $0.41 per diluted share for the
quarter ended September 30, 2008 compared to net income of $0.16 per
diluted share for the same period a year ago. The reported net loss for
the quarter ended September 30, 2008 includes an after tax charge of
$8.9 million or $0.56 per diluted share for restructuring charges
associated with the closure of 27 branches in the third quarter of 2008
and other non-recurring charges.
For the nine months ended September 30, 2008, UPFC reported net loss of
$1.1 million, compared to net income of $10.2 million for the same
period a year ago. Interest income increased 0.5% to $170.9 million for
the nine months ended September 30, 2008 from $170.0 million for the
same period a year ago. UPFC reported net loss of $0.07 per diluted
share for the nine months ended September 30, 2008 compared to net
income of $0.62 per diluted share for the same period a year ago. The
reported net loss for the nine months ended September 30, 2008 includes
an after tax charge of $13.2 million or $0.84 per diluted share for
restructuring charges associated with the closure of 63 branches during
the nine months ended September 30, 2008 and other non-recurring charges.
As a result of the continued disruptions in the capital markets,
including the uncertainty for use of securitizations as a source of
financing, as well as the lack of available borrowing capacity under a
warehouse facility for an extended period of time, UPFC determined to
downsize its operations and reduce its branch footprint in order to
lower expenses and meet required liquidity needs. During the quarter
ended September 30, 2008, UPFC closed an additional 27 branches bringing
the total number of branches to 79 branches in operation as of September
30, 2008. The majority of closures were from the consolidation of
branches within the same market. The closures of the 63 branches
year-to-date resulted in a decrease in the number of employees of
approximately 400 or 35% of the work force since December 31, 2007.
These closures will result in a significant reduction in overall
operating expenses. In addition, UPFC has suspended new loan
originations during the end of the third quarter of 2008 to allow UPFC's
outstanding receivables to shrink to a level where UPFC's capital base
will be able to finance future originations at lower advance structures
available in the market.
On August 22, 2008, UPFC entered into an amendment to its $300 million
warehouse facility, which UPFC has historically used to fund its
automobile finance operations to purchase automobile contracts pending
securitization. As part of the amendment to exit the warehouse facility,
UPFC incurred a fee payable in the amount of $7.3 million. The fee has
been recorded as part of the non-recurring charges. The amendment
continued the revolving nature of the warehouse facility through its
previously scheduled maturity of October 16, 2008. Subsequently, the
warehouse facility has now converted to a term loan for an additional
one-year term, which amortizes pursuant to a pre-determined schedule,
providing that UPFC will pay all amounts owed under the warehouse
facility by October 16, 2009. Management is currently pursuing and
evaluating alternative sources of financing and is also considering
selling receivables on a whole-loan basis. At this time, there is no
assurance UPFC will be able to arrange for other types of interim
financing or be able to sell receivables on a whole-loan basis in the
future.
UPFC has obtained temporary waivers from the insurance providers that
insure UPFC’s outstanding securitizations
regarding the approval of the appointment of Mr. James Vagim as UPFC’s
chief executive officer and has also obtained temporary waivers
regarding a covenant that UPFC maintain a $250 million warehouse line.
UPFC is continuing discussions with the insurance providers to obtain
permanent waivers, but there is no assurance UPFC will obtain such
waivers. If UPFC is unable to obtain permanent waivers or continued
temporary waivers for both these items, then each insurance provider may
elect to enforce the various rights and remedies that are governed by
the different transaction documents for each securitization.
On August 8, 2008, UPFC entered into an agreement to sell $10.0 million
of receivables on a whole-loan basis with servicing released.
UPFC purchased $38.1 million of automobile contracts during the third
quarter of 2008, compared with $149.3 million during the same period a
year ago. Contracts outstanding totaled $836.8 million at September 30,
2008, compared with $944.1 million at September 30, 2007, representing
an 11.4% decrease. The decrease is due to UPFC suspending new loan
originations during the end of the third quarter of 2008.
The decrease in net income for the quarter ended September 30, 2008
compared to the same period a year ago primarily reflects the following:
Interest income decreased 8.2% to $54.8 million from $59.7 million due
primarily to a decrease in average loans outstanding as a result of
UPFC’s strategy of downsizing its
operations, suspending new loan originations and reducing its branch
footprint in order to lower expenses and meet required liquidity needs.
Interest expense increased to $13.1 million from $12.5 million due
primarily to higher market interest rates on the warehouse facility.
As a result, net interest margin decreased from 79.0% for the quarter
ended September 30, 2007 to 76.0% for the quarter ended September 30,
2008.
Provision for loan losses increased due to an increase in the
annualized charge-off rate to 9.14% for the quarter ended September
30, 2008 from 6.66% for the same period a year ago. The factors that
impact the increased charge-off rate are the overall deteriorating
economic environment and the adverse effect of a smaller denominator
from a declining automobile receivable balance.
Non-interest expense increased to $33.9 million from $23.7 million for
the same period a year ago. The increase in non-interest expense was
due to a pretax restructuring charge of $4.1 million ($2.6 million
after tax) associated with the closure of 27 branches. The
restructuring charge included severance, fixed asset write-offs,
closure and post-closure costs and a $1.8 million reserve for
estimated future lease obligations. The other non-recurring charge of
$9.9 million ($6.3 million after tax) includes $7.3 million fee
payable on the exit from the warehouse facility and $2.6 million
associated with professional fees paid on discontinued financing
transactions. Non-interest expense, excluding the restructuring
charges and other non-recurring charges as a percentage of average
loans dropped to 8.9% from 10.1% for the same period a year ago.
United PanAm Financial Corp.
UPFC is a specialty finance company engaged in automobile finance, which
includes the purchasing and servicing of automobile installment sales
contracts originated by independent and franchised dealers of used
automobiles. UPFC conducts its automobile finance business through its
wholly-owned subsidiary, United Auto Credit Corporation.
Forward Looking Statements
Any statements set forth above that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act (“SLRA”)
of 1995, including statements concerning the Company’s
strategies, plans, objectives, intentions and projections. Generally,
the words “believe,” “expect,”
“intend,” “estimate,”
“anticipate,” “project,”
“realize,” “will”
and similar expressions identify forward-looking statements, which
generally are not historical in nature. Such statements are subject to a
variety of estimates, risks and uncertainties, known and unknown, which
may cause the Company’s actual results to
differ materially from those anticipated in such forward-looking
statements. Potential risks and uncertainties include, but are not
limited to, such factors as UPFC’s on
securitizations; the lack of a securitization market; UPFC’s
need for substantial liquidity to run its business; loans UPFC made to
credit-impaired borrowers; reliance on operational systems and controls
and key employees; competitive pressures which UPFC faces; changes in
the interest rate environment; general economic conditions; the effects
of accounting changes; inability to manage consolidating operations;
inability to obtain permanent waivers from monoline providers; and other
risks discussed in the Company’s filings with
the Securities and Exchange Commission (SEC), including the Company’s
Annual Report on Form 10-K, which filings are available from the SEC.
You should not place undue reliance on forward-looking statements, which
speak only as of the date they are made. UPFC undertakes no obligation
to publicly update or revise any forward-looking statements.
Editors Note: Four pages of selected financial data follow.
United PanAm Financial Corp. and Subsidiaries
Consolidated Statements of Financial Condition
September 30,2008
December 31,2007
(Dollars in thousands)
Assets
Cash
$
6,981
$
9,909
Short term investments
9,881
7,332
Cash and cash equivalents
16,862
17,241
Restricted cash
75,450
73,633
Loans
801,017
882,651
Allowance for loan losses
(47,800
)
(48,386
)
Loans, net
753,217
834,265
Premises and equipment, net
5,225
6,799
Interest receivable
9,151
10,424
Other assets
34,670
34,819
Total assets
$
894,575
$
977,181
Liabilities and Shareholders’ Equity
Securitization notes payable
$
469,228
$
762,245
Warehouse line of credit
237,378
35,625
Accrued expenses and other liabilities
18,938
9,660
Junior subordinated debentures
10,310
10,310
Total liabilities
735,854
817,840
Preferred stock (no par value):
Authorized, 2,000,000 shares; no shares issued and outstanding
—
—
Common stock (no par value):
Authorized, 30,000,000 shares; 15,737,399 shares issued and
outstanding at September 30, 2008 and December 31, 2007
50,025
49,504
Retained earnings
108,696
109,837
Total shareholders’ equity
158,721
159,341
Total liabilities and shareholders’ equity
$
894,575
$
977,181
United PanAm Financial Corp. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
Three Months
Ended September 30,
Nine Months
Ended September 30,
2008
2007
2008
2007
Interest Income
Loans
$
54,281
$
58,668
$
169,078
$
166,966
Short term investments and restricted cash
482
1,058
1,781
3,039
Total interest income
54,763
59,726
170,859
170,005
Interest Expense
Securitization notes payable
7,995
10,171
28,187
27,922
Warehouse line of credit
5,004
2,058
8,552
5,924
Other interest expense
149
303
488
801
Total interest expense
13,148
12,532
37,227
34,647
Net interest income
41,615
47,194
133,632
135,358
Provision for loan losses
18,822
20,031
51,544
48,536
Net interest income after provision for loan losses
22,793
27,163
82,088
86,822
Non-interest Income
877
469
1,916
1,316
Non-interest Expense
Compensation and benefits
13,032
15,054
44,851
45,987
Occupancy
2,037
2,372
6,641
6,818
Other non-interest expense
4,816
6,303
16,234
18,659
Restructuring charges
4,139
—
7,924
—
Other non-recurring charges
9,890
—
9,890
—
Total non-interest expense
33,914
23,729
85,540
71,464
(Loss) income before income taxes
(10,244
)
3,903
(1,536
)
16,674
Income taxes
(3,765
)
1,345
(395
)
6,453
Net (loss) income
$
(6,479
)
$
2,558
$
(1,141
)
$
10,221
Earnings per share-basic:
Net (loss) income
$
(0.41
)
$
0.16
$
(0.07
)
$
0.64
Weighted average basic shares outstanding
15,737
15,732
15,737
15,990
Earnings per share-diluted:
Net (loss) income
$
(0.41
)
$
0.16
$
(0.07
)
$
0.62
Weighted average diluted shares outstanding
15,789
16,044
15,811
16,558
Numberof Shares
CommonStock
RetainedEarnings
TotalShareholders’Equity
(Dollars in thousands)
Balance, December 31, 2007
15,737,399
$
49,504
$
109,837
$
159,341
Net loss
—
—
(1,141
)
(1,141
)
Stock-based compensation expense
—
521
—
521
Balance, September 30, 2008
15,737,399
$
50,025
$
108,696
$
158,721
United PanAm Financial Corp. and Subsidiaries
Selected Financial Data
(Dollars in thousands)
At or For the
Three Months Ended
At or For the
Nine Months Ended
September 30,
2008
September 30,
2007
September 30,
2008
September 30,
2007
Operating Data
Contracts purchased
$
38,136
$
149,294
$
266,574
$
484,741
Contracts outstanding
$
836,792
$
944,101
$
836,792
$
944,101
Unearned acquisition discounts
$
(35,775
)
$
(45,728
)
$
(35,775
)
$
(45,728
)
Average loan balance
$
884,433
$
934,334
$
910,319
$
887,548
Unearned acquisition discounts to gross loans
4.28
%
4.84
%
4.28
%
4.84
%
Average percentage rate to borrowers
22.72
%
22.62
%
22.72
%
22.62
%
Loan Quality Data
Allowance for loan losses
$
(47,800
)
$
(46,050
)
$
(47,800
)
$
(46,050
)
Allowance for loan losses to gross loans net of unearned
acquisition discounts
5.97
%
5.13
%
5.97
%
5.13
%
Delinquencies (% of net contracts)
31-60 days
1.13
%
0.71
%
1.13
%
0.71
%
61-90 days
0.29
%
0.28
%
0.29
%
0.28
%
90+ days
0.15
%
0.18
%
0.15
%
0.18
%
Total
1.57
%
1.17
%
1.57
%
1.17
%
Repossessions over 30 days past due (% of net contracts)
1.08
%
0.76
%
1.08
%
0.76
%
Annualized net charge-offs to average loans (1)
9.14
%
6.66
%
7.65
%
5.80
%
Other Data
Number of branches
79
142
79
142
Number of employees
750
1,095
750
1,095
Interest income
$
54,763
$
59,726
$
170,859
$
170,005
Interest expense
$
13,148
$
12,532
$
37,227
$
34,647
Interest margin
$
41,615
$
47,194
$
133,632
$
135,358
Net interest margin as a percentage of interest income
75.99
%
79.02
%
78.21
%
79.62
%
Net interest margin as a percentage of average loans (1)
18.72
%
20.04
%
19.61
%
20.39
%
Non-interest expense to average loans (1)
15.25
%
10.08
%
12.55
%
10.77
%
Non-interest expense to average loans (2)
8.94
%
10.08
%
9.94
%
10.77
%
Return on average assets (1)
(2.74
%)
1.03
%
(0.16
%)
1.45
%
Return on average shareholders’ equity (1)
(15.59
%)
6.46
%
(0.94
%)
8.72
%
Consolidated capital to assets ratio
17.74
%
16.01
%
17.74
%
16.01
%
_____________________________________
(1) Quarterly information is annualized for comparability with full year
information.
(2) Excluding restructuring charges and other non-recurring charges.