UPFC Announces Earnings of $0.35 Per Share for the Second Quarter 2006; 2006 And 2007 Earnings Guidance Issued.NEWPORT BEACH Newport Beach, residential and resort city (1990 pop. 66,643), Orange co., S Calif., on Newport Bay and the Pacific Ocean; inc. 1906. It is a popular seaside resort and yachting center. Manufactures include electrical and medical equipment, computers, boats, and adhesives. , Calif. -- United PanAm Financial Corp. (Nasdaq:UPFC UPFC Unified Power Flow Controller ) today announced results for its second quarter ended June June: see month. 30, 2006. For the quarter ended June 30, 2006, UPFC reported income of $6.7 million from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the , compared to income of $6.5 million for the same period a year ago. UPFC reported income of $0.35 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share from continuing operations for the second quarter for both 2006 and 2005. The reported income in 2006 includes an after tax charge of $304,000, or $0.02 per diluted share, as a result of UPFC's adoption of Statement of Financial Accounting Standards No. 123R ("SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 123R"), Share-Based Payment, on January January: see month. 1, 2006. Interest income increased 26% to $47.6 million for the quarter ended June 30, 2006 from $37.9 million for the same period a year ago. The annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. non-interest expense as a percentage of average loans decreased to 10.27% for the quarter ended June 30, 2006 from 10.53% for the same period a year ago. For the six months ended June 30, 2006, UPFC reported income of $13.5 million from continuing operations, compared to income of $11.7 million for the same period a year ago, representing a 15% increase over 2005. UPFC reported income of $0.71 per diluted share from continuing operations for the six months ended June 30, 2006 compared to $0.63 per diluted share for the same period a year ago, representing a 13% increase over 2005. The reported income in 2006 includes an after tax charge of $651,000, or $0.03 per diluted share, as a result of UPFC's adoption of SFAS No. 123R on January 1, 2006 and it also includes an increase from the change in estimate related to the allowance for loan losses. Interest income increased 27% to $91.1 million for the six months ended June 30, 2006 from $71.6 million for the same period a year ago. The annualized non-interest expense as a percentage of average loans decreased to 10.79% for the six months ended June 30, 2006 from 11.20% for the same period a year ago. UPFC purchased $148.5 million of automobile automobile, self-propelled vehicle used for travel on land. The term is commonly applied to a four-wheeled vehicle designed to carry two to six passengers and a limited amount of cargo, as contrasted with a truck, which is designed primarily for the transportation of contracts during the second quarter of 2006, compared with $122.5 million during the same period a year ago, representing a 21% increase. Automobile contracts outstanding totaled $768.0 million at June 30, 2006, compared with $616.2 million at June 30, 2005, representing a 25% increase. During the six months ended June 30, 2006, UPFC opened twelve new auto finance branches bringing its total to 119 branches in 32 states. UPFC intends to continue its philosophy of controlled expansion of the auto finance branch network and expects to open a total of 24 new branches during 2006. The net charge-off Eliminate or write off. The term charge-off is used to describe the process of removing from the records of a company something that was once regarded as an asset but has subsequently become worthless. rate was 4.50% for the last twelve months ended June 30, 2006, compared with 4.74% for the last twelve months ended June 30, 2005. Delinquencies over 30 days amounted to 0.82% of outstanding automobile contracts at June 30, 2006, compared to 0.90% at December December: see month. 31, 2005 and 0.52% at June 30, 2005. Delinquencies and total repossessions over 30 days amounted to 1.26% of outstanding automobile contracts at June 30, 2006, compared to 1.34% at December 31, 2005 and 0.92% at June 30, 2005. The increase in delinquencies from June 30, 2005 to June 30, 2006 is due primarily to changes made in our collection policy. The drop in delinquencies from December 31, 2005 to June 30, 2006 is due to the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of our business where we normally experience higher delinquencies in December. "The second quarter of 2006 showed continued growth of 25% in automobile contracts outstanding and 26% in revenue," said Guillermo For other persons of the same name, see Guillermo Diaz. Guillermo, credited as Guillermo Rodriguez, is a parking lot Security Guard turned talk show personality born January 27, 1972 in Mexico. Bron Bron is a new town in France, approximately 10 km to the east of Lyon. It is a commune Rhône département and the Rhône-Alpes région of France. It is the sixth-largest suburb of the city of Lyon, and is adjacent to its east side. , Chairman. "In addition, we had a reduction in non-interest expense as a percentage of average loans of 26 basis points from the same period in 2005 and charge-off performance was good with a loss rate of 3.94% in the quarter and 4.23% year to date." Mr. Bron added, "Non controllable variables, such as the increase in interest rates and the expense of options, had a diminishing di·min·ish v. di·min·ished, di·min·ish·ing, di·min·ish·es v.tr. 1. a. To make smaller or less or to cause to appear so. b. effect in our financial performance but not on our plans to continue with the controlled growth of our Company." Financial Highlights Selected financial results for the three and six months ended June 30, 2006 and June 30, 2005 are as follows:
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2006 2005 Change 2006 2005 Change
(In thousands, except per share data)
Contracts
purchased $148,515 $122,489 21% $294,309 $243,119 21%
Average loans
outstanding $742,711 $593,823 25% $715,667 $569,045 26%
Interest income $47,617 $37,863 26% $91,094 $71,637 27%
Interest expense $8,388 $5,507 52% $15,910 $9,923 60%
Net interest
margin $39,229 $32,356 21% $75,184 $61,714 22%
Provision for
loan losses $9,741 $6,845 42% $16,539 $12,558 32%
Income from
continuing
operations $6,710 $6,533 3% $13,483 $11,675 15%
Weighted average
diluted shares
outstanding 19,283 18,705 3% 19,119 18,528 3%
Income from
continuing
operations per
diluted share $0.35 $0.35 0% $0.71 $0.63 13%
Provision for
loan loss to
average loans (1) 5.26% 4.62% 0.64% 4.66% 4.45% 0.21%
Non-interest
expense to
average loans (1) 10.27% 10.53% -0.26% 10.79% 11.20% -0.41%
(1) Quarterly and six month information is annualized for
comparability with full year information.
The increase in income from continuing operations for the three months ended June 30, 2006 compared to the same period in 2005 primarily reflects the following: --Interest income increased approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $10.0 million to $47.6 million from $37.9 million primarily due to the 25% growth in average loan portfolio during the period. The increase in the total loan portfolio resulted from the purchase of additional automobile contracts in existing and new markets consistent with the planned growth of these operations. --Interest expense increased 52% to $8.4 million from $5.5 million primarily due to the growth in the loan portfolio and the increase in interest rates, coupled with the pay down of lower priced securitizations. As a result, net interest margin decreased from 85.5% in 2005 to 82.4% in 2006. --Provision for loan losses increased during the quarter primarily due to the growth in the loan portfolio and an increase in the annualized charge-off rate of 3.94% in 2006 compared to 3.68% for 2005. --Non-interest expense decreased as a percentage of average loans. The dollar amount increased primarily as a result of continued overall branch expansion from 97 at June 30, 2005 to 119 at June 30, 2006, and investment in corporate accounting, human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. , training and information technology to support continued branch expansion. Non-interest expense for the three months ended June 30, 2006 also included an after tax charge of $304,000, or $0.02 per diluted share, in share-based compensation expense and an after tax charge of $201,000, or $0.01 per diluted share, in employer payroll taxes Payroll Tax Tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee. In most countries, including the U.S., both state and federal authorities collect some form of payroll tax. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the options exercised by senior executives. Securitizations UPFC closed its fourth securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. on June 15, 2006 for $242.0 million dollars at a weighted average securitization rate of 5.43%. The following table lists each of UPFC's securitizations as of June 30, 2006.
Original
Weighted
Original Average Gross
Balance at Weighted Securit- Interest
Issue Issue Original June 30, Average ization Rate
Number Date Balance 2006 APR Rate spread
(Dollars in thousands)
September
2004A 2004 $420,000 $113,904 22.75% 2.62% 20.13%
April
2005A 2005 $195,000 $100,149 22.80% 3.93% 18.87%
November
2005B 2005 $225,000 $160,991 22.73% 4.78% 17.95%
June
2006A 2006 $242,000 $242,000 22.75% 5.43% 17.32%
----------- -----------
$1,082,000 $617,044
=========== ===========
The average monthly borrowing balance on the warehouse facility for the three months ended June 30, 2006 was $159.4 million and for the six months ended June 30, 2006 was $125.1 million. Financial Outlook During the six months ended June 30, 2006, UPFC opened twelve new auto finance branches bringing its total to 119 branches in 32 states. UPFC intends to continue its philosophy of controlled expansion of the auto finance branch network and expects to open a total of 24 new branches during 2006. Typically, branches reach a mature level of outstanding loans three to four years after opening and, on average, reach approximately 38% of that level after one year and approximately 74% of that level after two years. As a result, branches typically reach break-even profitability by the end of year one, then continue to increase their profitability in years two and three and generally reach their full profitability three to four years after opening. As of June 30, 2006, 57 of UPFC's branches were less than three years old, with 16 branches between two and three years old, 19 branches between one and two years old and 22 branches less than one year old. Based on UPFC's planned branch expansion, UPFC forecasts that the full year 2006 diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of from continuing operations will range from $1.40 to $1.42, which will represent a 11% increase from income of $1.27 per diluted share from continuing operations for the full year 2005. For the full year 2007, UPFC anticipates opening 26 additional branches and projects fully diluted earnings per share from continuing operations to range from $1.70 to $1.80. This forecast incorporates certain assumptions, including, without limitation, the following: --That net interest margin as a percentage of interest income will be 81.6% for 2006 and 79.5% for 2007; --That annualized charge-offs as a percentage of average loans will be 4.50% for both 2006 and 2007; and --That the average monthly borrowing balance on the warehouse facility will be $112 million for the remainder of 2006 and $120 million during 2007. United PanAm Financial Corp. UPFC is a specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. finance company engaged in non-prime automobile finance, which includes the purchasing, warehousing, securitizing and servicing of automobile installment sales Installment sale The sale of an asset in exchange for a specified series of payments (the installments). installment sale A sale in which the buyer is scheduled to make a series of payments over a period of time. contracts originated by independent and franchised dealers of used automobiles No invention has so transformed the landscape of the United States as the automobile, and no other country has so thoroughly adopted the automobile as its favorite means of transportation. . UPFC conducts its automobile finance business through its wholly-owned subsidiary, United Auto Credit Corporation, with 119 branch offices in 32 states. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Any statements set forth above that are not historical facts are forward-looking statements made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and ("SLRA SLRA South London Refugee Association ") of 1995, including statements concerning the Company's strategies, plans, objectives, intentions and projections. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "realize," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. Such statements are subject to a variety of estimates, risks and uncertainties, known and unknown, which may cause the Company's actual results to differ materially from those anticipated in such forward-looking statements. Potential risks and uncertainties include, but are not limited to, such factors as our recent shift of the funding source of our business; our dependence on securitizations; our need for substantial liquidity to run our business; loans we made to credit-impaired borrowers; reliance on operational systems and controls and key employees; competitive pressures which we face; rapid growth of our business; fluctuations in market rates of interest; general economic conditions; the effects of accounting changes; and other risks discussed in our Company's filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 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: Three pages of selected financial data follow.
United PanAm Financial Corp. and Subsidiaries
Consolidated Statements of Financial Condition
June 30, December 31,
(Dollars in thousands) 2006 2005
(Unaudited) (Audited)
------------ ------------
Assets
Cash $7,151 $8,199
Short term investments 8,440 13,096
------------ ------------
Cash and cash equivalents 15,591 21,295
Restricted cash 65,124 53,058
Loans 729,992 633,656
Allowance for loan losses (30,652) (29,110)
------------ ------------
Loans, net 699,340 604,546
Premises and equipment, net 4,690 3,881
Interest receivable 7,854 7,213
Deferred tax assets 12,956 12,956
Other assets 21,138 10,905
Assets of discontinued operations --- 495,318
------------ ------------
Total assets $826,693 $1,209,172
============ ============
Liabilities and Shareholders' Equity
Warehouse line of credit $18,548 $54,009
Securitization notes payable 617,044 521,613
Accrued expenses and other liabilities 8,924 8,806
Junior subordinated debentures 10,310 10,310
Liabilities of discontinued operations --- 459,519
------------ ------------
Total liabilities 654,826 1,054,257
------------ ------------
Preferred Stock (no par value):
Authorized, 2,000,000 shares; no shares
issued and outstanding at June 30, 2006
and December 31, 2005 --- ---
Common stock (no par value):
Authorized, 30,000,000 shares; 17,778,930
and 17,120,250 shares issued and
outstanding at June 30, 2006 and
December 31, 2005, respectively 78,886 76,054
Retained earnings 92,981 80,182
Unrealized loss on securities available for
sale, net --- (1,321)
------------ ------------
Total shareholders' equity 171,867 154,915
------------ ------------
Total liabilities and shareholders'
equity $826,693 $1,209,172
============ ============
United PanAm Financial Corp. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share Three Months Six Months
data) Ended June 30, Ended June 30,
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
Interest Income
Loans $47,615 $37,819 $91,071 $71,547
Short term investments 2 44 23 90
-------- -------- -------- --------
Total interest income 47,617 37,863 91,094 71,637
-------- -------- -------- --------
Interest Expense
Securitization notes payable 5,695 4,336 11,632 7,234
Warehouse line of credit 2,488 1,015 3,882 2,390
Junior subordinated debentures 205 156 396 299
-------- -------- -------- --------
Total interest expense 8,388 5,507 15,910 9,923
-------- -------- -------- --------
Net interest
income 39,229 32,356 75,184 61,714
Provision for loan losses 9,741 6,845 16,539 12,558
-------- -------- -------- --------
Net interest income
after provision for
loan losses 29,488 25,511 58,645 49,156
-------- -------- -------- --------
Non-interest Income
Loan related charges and fees 737 950 1,496 1,958
Other income 155 145 807 189
-------- -------- -------- --------
Total non-interest income 892 1,095 2,303 2,147
-------- -------- -------- --------
Non-interest Expense
Compensation and benefits 12,470 9,756 24,694 19,289
Occupancy 1,787 1,381 3,464 2,742
Other 4,761 4,452 10,139 9,565
-------- -------- -------- --------
Total non-interest expense 19,018 15,589 38,297 31,596
-------- -------- -------- --------
Income from continuing operations
before income taxes 11,362 11,017 22,651 19,707
Income taxes 4,652 4,484 9,168 8,032
-------- -------- -------- --------
Income from continuing operations 6,710 6,533 13,483 11,675
Income (loss) from discontinued
operations, net of tax --- 505 (684) 1,655
-------- -------- -------- --------
Net income $6,710 $7,038 $12,799 $13,330
======== ======== ======== ========
Earnings (loss) per share-basic:
Continuing operations $0.38 $0.39 $0.77 $0.70
Discontinued operations 0.00 0.03 (0.04) 0.10
-------- -------- -------- --------
Net income $0.38 $0.42 $0.73 $0.80
======== ======== ======== ========
Weighted average basic shares
outstanding 17,797 16,798 17,479 16,668
======== ======== ======== ========
Earnings (loss) per share-diluted:
Continuing operations $0.35 $0.35 $0.71 $0.63
Discontinued operations 0.00 0.03 (0.04) 0.09
-------- -------- -------- --------
Net income $0.35 $0.38 $0.67 $0.72
======== ======== ======== ========
Weighted average diluted
shares outstanding 19,283 18,705 19,119 18,528
======== ======== ======== ========
Net income for the three and six months ended June 30, 2006 included
stock-based compensation expense recognized under SFAS No. 123R of
$304,000 and $651,000 net of tax, respectively. There was no
stock-based compensation expense recognized during the three and six
months ended June 30, 2005 because the Company did not adopt the
recognition provisions of SFAS No. 123R until January 1, 2006.
United PanAm Financial Corp. and Subsidiaries
Selected Financial Data
(Dollars and shares in At or For the At or For the
thousands) Three Months Ended Six Months Ended
------------------- -------------------
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
--------- --------- --------- ---------
Operating Data
Contracts purchased $148,515 $122,489 $294,309 $243,119
Contracts outstanding $767,961 $616,176 $767,961 $616,176
Unearned discount $(37,969) $(30,268) $(37,969) $(30,268)
Unearned discount to gross
loans 4.94% 4.91% 4.94% 4.91%
Average percentage rate to
customers 22.70% 22.74% 22.70% 22.74%
Average yield on automobile
contracts, net 28.23% 28.36% 28.21% 28.40%
Loan Quality Data
Allowance for loan losses $(30,652) $(26,374) $(30,652) $(26,374)
Allowance for loan losses to
gross loans net of unearned
discount 4.20% 4.50% 4.20% 4.50%
Delinquencies (% of net
contracts)
31-60 days 0.54% 0.37% 0.54% 0.37%
61-90 days 0.19% 0.09% 0.19% 0.09%
90+ days 0.09% 0.06% 0.09% 0.06%
--------- --------- --------- ---------
Total 0.82% 0.52% 0.82% 0.52%
Repossessions over 30 days past
due (% of net contracts) 0.44% 0.40% 0.44% 0.40%
Total Delinquencies and
repossessions over 30 days
past due (% of net contracts) 1.26% 0.92% 1.26% 0.92%
Annualized net charge-offs to
average loans (1) 3.94% 3.68% 4.23% 4.17%
Other Data
Number of branches 119 97 119 97
Interest Income $47,617 $37,863 $91,094 $71,637
Interest Expense $8,388 $5,507 $15,910 $9,923
Net interest margin $39,229 $32,356 $75,184 $61,714
Net interest margin as a
percentage of interest income 82.38% 85.46% 82.53% 86.15%
Net interest margin as a
percentage of average loans (1) 21.19% 21.85% 21.19% 21.87%
Non-interest expense to average
loans (1) 10.27% 10.53% 10.79% 11.20%
Return on average assets from
continuing operations (1) 3.39% 4.11% 3.56% 3.77%
Return on average shareholders'
equity from continuing
operations (1) 15.99% 21.04% 17.54% 20.19%
Consolidated capital to assets
ratio 20.79% 13.11% 20.97% 13.11%
(1) Quarterly and six month information is annualized for
comparability with full year information.
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