United PanAm Financial Corp. Reports 1Q 2009 Results

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Apr 25, 2009 (Close-Up Media via COMTEX) -- UPFC | Quote | Chart | News | PowerRating -- United PanAm Financial Corp. has announced results for its first quarter ended March 31.

For the quarter ended March 31, UPFC reported net loss of $4.0 million, compared to net income of $1.3 million for the same period a year ago. Interest income decreased to $40.8 million for the quarter ended March 31, from $58.5 million for the same period a year ago. UPFC reported net loss of $0.25 per diluted share for the quarter ended March 31, compared to net income of $0.08 per diluted share for the same period a year ago.

In a release on April 22, the company noted the reported net loss for the quarter ended March 31, includes an after tax charge of $4.1 million or $0.26 per diluted share for restructuring charges associated with the closure of 40 branches during the first quarter of 2009. The reported net income for the quarter ended March 31, 2008 includes an after tax charge of $0.6 million or $0.04 per diluted share for restructuring charges associated with the closure of 14 branches during the first quarter of 2008.

The decrease in net income for the quarter ended March 31, compared to the same period a year ago primarily reflects the following:

-Interest income decreased 30.3 percent to $40.8 million from $58.5 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 during the third quarter of 2008 and reducing its branch footprint in order to lower expenses and meet required liquidity needs.ense decreased 10.3 percent to $11.3 million from $12.6 million primarily due to lower average debt outstanding, partially offset by higher market interest rates on the new term facility. Net interest margin as a percentage of interest income decreased from 78.4 percent for the quarter ended March 31, 2008 to 72.3 percent for the quarter ended March 31.

-Provision for loan losses decreased due to a decrease in loans outstanding and suspension of new loan originations, offset by an increase in the annualized charge-off rate to 11.70 percent for the quarter ended March 31, from 7.14 percent 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 from a declining receivable balance.

-Non-interest expense decreased 16.5 percent to $22.2 million from $26.6 million for the same period a year ago. The decrease in non-interest expense was due primarily to a decrease in compensation and benefits expense as a result of the branch closures, offset by pretax restructuring charges of $6.5 million ($4.1 million after tax). The restructuring charges, included severance, fixed asset write-offs, closure, post-closure costs and lease termination costs. Non-interest expense, excluding the restructuring charges, as a percentage of average loans dropped to 9.29 percent from 11.09 percent for the same period a year ago.

In the release, the company also noted:

As a result of the continued disruptions in the capital markets, UPFC has continued its strategy to further downsize its operations and reduce its branch footprint in order to lower expenses and meet required liquidity needs. During the quarter ended March 31, UPFC closed an additional 40 branches bringing the total number of branches to 27 branches in operation as of March 31. The closures of the 40 branches year-to-date resulted in a decrease in the number of employees of approximately 170 or 25 percent of the work force since December 31, 2008. In addition, UPFC has suspended new loan originations since the end of the third quarter of 2008 to allow UPFC's outstanding receivables to decrease to a level where UPFC's capital base will be able to finance future originations at lower advance structures available in the market.

UPFC has historically used a warehouse facility to fund its automobile finance operations to purchase automobile contracts pending securitization. In August 2008, the warehouse facility was amended and converted to a term loan. The amended loan amortizes pursuant to a pre-determined schedule, payable monthly with any remaining balance due October 16. UPFC is currently pursuing and evaluating alternative sources of financing and is also considering additional sales of receivables on a whole-loan basis. At this time, there is no assurance UPFC will be able to arrange for other types of 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 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 for these matters, 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 matters, then each insurance provider may elect to enforce the various rights and remedies that are governed by the different transaction documents for each securitization, such as terminating servicing rights.

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 Corp.

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