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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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



For
the quarterly period ended March 31, 2004



Commission
File Number 000-24051



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UNITED PANAM FINANCIAL CORP.

(Exact
name of Registrant as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|California                                                     |  | 95-3211687                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)



3990 Westerly Place,
Suite 200

Newport Beach, CA 92660

(Address of principal executive offices) (Zip Code)



(949) 224-1917

(Registrants telephone number, including area code)



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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.    Yes  x    No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x



The number of shares outstanding of the Registrants Common Stock as of
April 30, 2004 was 16,144,098 shares.



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##### Table of Contents

UNITED PANAM FINANCIAL CORP.

FORM 10-Q

MARCH 31, 2004



INDEX



|         |  |                                                                                                              |  |     
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|         |  |                                                                                                              |  | Page
|PART I.  |  | FINANCIAL INFORMATION                                                                                        |  |     
|         |  |                                                                                                             
|Item 1.  |  | Financial Statements (unaudited)                                                                             |  |     
|         |  |                                                                                                             
|         |  | Consolidated Statements of Financial Condition as of March 31, 2004 and December 31, 2003                    |  | 1   
|         |  |                                                                                                             
|         |  | Consolidated Statements of Operations for the three months ended March 31, 2004 and March 31, 2003           |  | 2   
|         |  |                                                                                                             
|         |  | Consolidated Statements of Comprehensive Income for the three months ended March 31, 2004 and March 31, 2003 |  | 3   
|         |  |                                                                                                             
|         |  | Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and March 31, 2003           |  | 4   
|         |  |                                                                                                             
|         |  | Notes to Consolidated Financial Statements                                                                   |  | 6   
|         |  |                                                                                                             
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 9   
|         |  |                                                                                                             
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 23  
|         |  |                                                                                                             
|Item 4.  |  | Controls and Procedures                                                                                      |  | 23  
|         |  |                                                                                                             
|PART II. |  | OTHER INFORMATION                                                                                            |  |     
|         |  |                                                                                                             
|Item 1.  |  | Legal Proceedings                                                                                            |  | 24  
|         |  |                                                                                                             
|Item 2.  |  | Changes in Securities and Use of Proceeds                                                                    |  | 24  
|         |  |                                                                                                             
|Item 3.  |  | Defaults Upon Senior Securities                                                                              |  | 24  
|         |  |                                                                                                             
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                          |  | 24  
|         |  |                                                                                                             
|Item 5.  |  | Other Information                                                                                            |  | 24  
|         |  |                                                                                                             
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                                             |  | 24  



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##### Table of Contents

PART I. FINANCIAL INFORMATION



Item 1. Financial Statements.



United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Financial Condition

(Unaudited)



|                                                                                         |  |                |           |   |                   |   |           |  
|---------------------------------------------------------------------------------------- |  | -------------- | --------- | - | ----------------- | - | --------- | -
|(Dollars in thousands)                                                                   |  | March 31, 2004 |           |   | December 31, 2003 |  
|                                                                                         | 
|Assets                                                                                   |  |                |           |   |                   |   |           |  
|                                                                                         |  |               
|Cash and due from banks                                                                  |  | $              | 7,981     |   |                   | $ | 8,376     |  
|Short term investments                                                                   |  |                | 44,702    |   |                   |   | 5,833     |  
|                                                                                         |  |                |           |   |                   |   |           |  
|Cash and cash equivalents                                                                |  |                | 52,683    |   |                   |   | 14,209    |  
|Securities available for sale, at fair value                                             |  |                | 1,115,915 |   |                   |   | 1,202,444 |  
|Loans                                                                                    |  |                | 478,574   |   |                   |   | 440,992   |  
|Less unearned discount                                                                   |  |                | (17,857   | ) |                   |   | (14,368   | )
|Less allowance for loan losses                                                           |  |                | (21,347   | ) |                   |   | (20,384   | )
|                                                                                         |  |                |           |   |                   |   |           |  
|Loans, net                                                                               |  |                | 439,370   |   |                   |   | 406,240   |  
|Premises and equipment, net                                                              |  |                | 3,265     |   |                   |   | 3,163     |  
|Federal Home Loan Bank stock, at cost                                                    |  |                | 11,563    |   |                   |   | 11,563    |  
|Accrued interest receivable                                                              |  |                | 10,732    |   |                   |   | 9,849     |  
|Other assets                                                                             |  |                | 21,242    |   |                   |   | 23,248    |  
|                                                                                         |  |                |           |   |                   |   |           |  
|Total assets                                                                             |  | $              | 1,654,770 |   |                   | $ | 1,670,716 |  
|                                                                                         |  |                |           |   |                   |   |           |  
|Liabilities and Shareholders Equity                                                     |  |                |           |   |                   |   |           |  
|Deposits                                                                                 |  | $              | 526,030   |   |                   | $ | 498,389   |  
|Repurchase Agreements                                                                    |  |                | 1,004,536 |   |                   |   | 1,052,205 |  
|Accrued expenses and other liabilities                                                   |  |                | 5,237     |   |                   |   | 6,795     |  
|Junior subordinated debentures/Trust preferred securities                                |  |                | 10,300    |   |                   |   | 10,000    |  
|                                                                                         |  |                |           |   |                   |   |           |  
|Total liabilities                                                                        |  |                | 1,546,103 |   |                   |   | 1,567,389 |  
|                                                                                         |  |                |           |   |                   |   |           |  
|Common stock (no par value):                                                             |  |                |           |   |                   |   |           |  
|Authorized, 30,000,000 shares                                                            |  |                |           |   |                   |   |           |  
|Issued and outstanding, 16,132,758 at March 31, 2004 and 16,100,204 at December 31, 2003 |  |                | 66,306    |   |                   |   | 66,109    |  
|Retained earnings                                                                        |  |                | 41,884    |   |                   |   | 37,089    |  
|Unrealized gain on securities available for sale, net                                    |  |                | 477       |   |                   |   | 129       |  
|                                                                                         |  |                |           |   |                   |   |           |  
|Total shareholders equity                                                               |  |                | 108,667   |   |                   |   | 103,327   |  
|                                                                                         |  |                |           |   |                   |   |           |  
|Total liabilities and shareholders equity                                               |  | $              | 1,654,770 |   |                   | $ | 1,670,716 |  
|                                                                                         |  |                |           |   |                   |   |           |  



See notes to consolidated financial statements



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United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)



|                                                    |  |                              |        |      |   |       
|--------------------------------------------------- |  | ---------------------------- | ------ | ---- | - | ------
|(In thousands, except per share data)               |  | Three Months Ended March 31,
|                                                    |  | 2004                         |        | 2003
|Interest Income                                     |  |                              |        |      |   |       
|Loans                                               |  | $                            | 27,076 |      | $ | 16,803
|Short term investments                              |  |                              | 5,074  |      |   | 3,714 
|                                                    |  |                              |        |      |   |       
|Total interest income                               |  |                              | 32,150 |      |   | 20,517
|                                                    |  |                              |        |      |   |       
|Interest Expense                                    |  |                              |        |      |   |       
|Deposits                                            |  |                              | 3,519  |      |   | 3,692 
|Repurchase agreements                               |  |                              | 2,859  |      |   | 1,596 
|Junior subordinated debentures                      |  |                              | 120    |      |   |      
|                                                    |  |                              |        |      |   |       
|Total interest expense                              |  |                              | 6,498  |      |   | 5,228 
|                                                    |  |                              |        |      |   |       
|Net interest income                                 |  |                              | 25,652 |      |   | 15,229
|Provision for loan losses                           |  |                              | 6,714  |      |   | 535   
|                                                    |  |                              |        |      |   |       
|Net interest income after provision for loan losses |  |                              | 18,938 |      |   | 14,694
|                                                    |  |                              |        |      |   |       
|Non-interest Income                                 |  |                              |        |      |   |       
|Services charges and fees                           |  |                              | 256    |      |   | 230   
|Loan related charges and fees                       |  |                              | 86     |      |   | 92    
|Gain on sale of securities                          |  |                              | 499    |      |   |      
|Other income                                        |  |                              | 438    |      |   | 898   
|                                                    |  |                              |        |      |   |       
|Total non-interest income                           |  |                              | 1,279  |      |   | 1,220 
|                                                    |  |                              |        |      |   |       
|Non-interest Expense                                |  |                              |        |      |   |       
|Compensation and benefits                           |  |                              | 7,713  |      |   | 6,011 
|Occupancy                                           |  |                              | 1,243  |      |   | 1,031 
|Other                                               |  |                              | 3,206  |      |   | 2,279 
|                                                    |  |                              |        |      |   |       
|Total non-interest expense                          |  |                              | 12,162 |      |   | 9,321 
|                                                    |  |                              |        |      |   |       
|Income before income taxes                          |  |                              | 8,055  |      |   | 6,593 
|Income taxes                                        |  |                              | 3,260  |      |   | 2,683 
|                                                    |  |                              |        |      |   |       
|Net Income                                          |  | $                            | 4,795  |      | $ | 3,910 
|                                                    |  |                              |        |      |   |       
|Earnings per share-basic:                           |  |                              |        |      |   |       
|Net income                                          |  | $                            | 0.30   |      | $ | 0.25  
|                                                    |  |                              |        |      |   |       
|Weighted average shares outstanding                 |  |                              | 16,118 |      |   | 15,868
|                                                    |  |                              |        |      |   |       
|Earnings per share-diluted:                         |  |                              |        |      |   |       
|Net Income                                          |  | $                            | 0.25   |      | $ | 0.22  
|                                                    |  |                              |        |      |   |       
|Weighted average shares outstanding                 |  |                              | 19,153 |      |   | 17,796
|                                                    |  |                              |        |      |   |       



See notes to consolidated financial statements



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United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)



|                                                                            |  |                             |       |      |   |       |  
|--------------------------------------------------------------------------- |  | --------------------------- | ----- | ---- | - | ----- | -
|(In thousands)                                                              |  | Three MonthsEnded March 31, |      
|                                                                            |  | 2004                        |       | 2003 |  
|Net income                                                                  |  | $                           | 4,795 |      | $ | 3,910 |  
|Other comprehensive income, net of tax Unrealized gain (loss) on securities |  |                             | 348   |      |   | (264  | )
|                                                                            |  |                             |       |      |   |       |  
|Comprehensive income                                                        |  | $                           | 5,143 |      | $ | 3,646 |  
|                                                                            |  |                             |       |      |   |       |  



See notes to consolidated financial statements



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United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                  |  |                              |          |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | ---------------------------- | -------- | - | ---- | - | -------- | -
|(Dollars in thousands)                                                            |  | Three Months Ended March 31, |         
|                                                                                  |  | 2004                         |          |   | 2003 |  
|Cash Flows from Operating Activities                                              |  |                              |          |   |      |   |          |  
|Net income                                                                        |  | $                            | 4,795    |   |      | $ | 3,910    |  
|                                                                                  |  |                             
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |          |   |      |   |          |  
|Gain of sale of investment securities                                             |  |                              | (499     | ) |      |   |         |  
|Provision for loan losses                                                         |  |                              | 6,714    |   |      |   | 535      |  
|Depreciation and amortization                                                     |  |                              | 323      |   |      |   | 248      |  
|FHLB stock dividend                                                               |  |                              |         |   |      |   | (51      | )
|(Increase) decrease in accrued interest receivable                                |  |                              | (883     | ) |      |   | 50       |  
|Decrease in other assets                                                          |  |                              | 1,835    |   |      |   | 4,602    |  
|Accretion of discount on loans                                                    |  |                              | (2,486   | ) |      |   |         |  
|Decrease in accrued expenses and other liabilities                                |  |                              | (1,558   | ) |      |   | (2,671   | )
|Amortization of premiums on investment securities                                 |  |                              | 506      |   |      |   | 978      |  
|                                                                                  |  |                              |          |   |      |   |          |  
|Net cash provided by operating activities                                         |  |                              | 8,747    |   |      |   | 7,601    |  
|                                                                                  |  |                              |          |   |      |   |          |  
|Cash Flows from Investing Activities                                              |  |                              |          |   |      |   |          |  
|Purchase of investment securities                                                 |  |                              | (265,254 | ) |      |   | (464,509 | )
|Proceeds from maturities of investment securities                                 |  |                              | 119,932  |   |      |   | 261,407  |  
|Proceeds from sale of investment securities                                       |  |                              | 232,428  |   |      |   |         |  
|Originations, net of repayments, of non-mortgage loans                            |  |                              | (37,358  | ) |      |   | (26,397  | )
|Purchase of premises and equipment                                                |  |                              | (425     | ) |      |   | (262     | )
|Purchase of FHLB stock                                                            |  |                              |         |   |      |   | (5,680   | )
|                                                                                  |  |                              |          |   |      |   |          |  
|Net cash provided by (used in) investing activities                               |  |                              | 49,323   |   |      |   | (235,441 | )
|                                                                                  |  |                              |          |   |      |   |          |  
|Cash Flows from Financing Activities                                              |  |                              |          |   |      |   |          |  
|Net increase in deposits                                                          |  |                              | 27,641   |   |      |   | 2,573    |  
|(Repayment) proceeds of repurchase agreements                                     |  |                              | (47,669  | ) |      |   | 240,553  |  
|Deconsolidation of trust preferred securities                                     |  |                              | 300      |   |      |   |         |  
|Exercise of stock options                                                         |  |                              | 132      |   |      |   | 4        |  
|                                                                                  |  |                              |          |   |      |   |          |  
|Net cash (used in) provided by financing activities                               |  |                              | (19,596  | ) |      |   | 243,130  |  
|                                                                                  |  |                              |          |   |      |   |          |  
|Net increase in cash and cash equivalents                                         |  |                              | 38,474   |   |      |   | 15,290   |  
|                                                                                  |  |                             
|Cash and cash equivalents at beginning of period                                  |  |                              | 14,209   |   |      |   | 13,554   |  
|                                                                                  |  |                              |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                        |  | $                            | 52,683   |   |      | $ | 28,844   |  
|                                                                                  |  |                              |          |   |      |   |          |  



See notes to consolidated financial statements



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United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

(Unaudited)



|                                                  |  |                             |       |      |   |      
|------------------------------------------------- |  | --------------------------- | ----- | ---- | - | -----
|(Dollars in thousands)                            |  | Three Months EndedMarch 31,
|                                                  |  | 2004                        |       | 2003
|Supplemental Disclosures of Cash Flow Information |  |                             |       |      |   |      
|Cash paid for:                                    |  |                             |       |      |   |      
|Interest                                          |  | $                           | 7,010 |      | $ | 5,338
|                                                  |  |                             |       |      |   |      
|Income taxes                                      |  | $                           | 941   |      | $ | 642  
|                                                  |  |                             |       |      |   |      



See notes to consolidated financial statements



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United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements

Three Months Ended March 31, 2004 and 2003

(Unaudited)



1. Organization



United PanAm Financial Corp. (the Company) was incorporated in
California on April 9, 1998 for the purpose of reincorporating its business in that state, through the merger of United PanAm Financial Corp., a Delaware corporation (the Predecessor), into the Company. Unless the context indicates
otherwise, all references herein to the Company include the Predecessor.



The Company was originally organized as a holding company for Pan American Financial, Inc. (PAFI) and Pan American Bank, FSB (the Bank) to purchase certain assets and assume certain liabilities
of Pan American Federal Savings Bank from the Resolution Trust Corporation (the RTC) on April 29, 1994. The Company, PAFI and the Bank are considered to be Hispanic owned. PAFI is a wholly owned subsidiary of the Company, and the Bank is
a wholly owned subsidiary of PAFI.



2. Basis of Presentation



The accompanying unaudited consolidated financial statements include the
accounts of United PanAm Financial Corp., Pan American Financial, Inc. and Pan American Bank, FSB. Substantially all of the Companys revenues are derived from the operations of the Bank and they represent substantially all of the
Companys consolidated assets and liabilities as of March 31, 2004 and December 31, 2003. Significant inter-company accounts and transactions have been eliminated in consolidation.



These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Companys financial condition and
results of operations for the interim periods presented in this Form 10-Q have been included. Operating results for the interim periods are not necessarily indicative of financial results for the full year. These unaudited consolidated financial
statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2003.



The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.



3. Earnings Per Share



Basic EPS and diluted EPS are calculated as follows for the three months ended March 31, 2004 and March 31, 2003:



|                                            |  |                              |        |      |   |       
|------------------------------------------- |  | ---------------------------- | ------ | ---- | - | ------
|                                            |  | Three Months Ended March 31,
|(In thousands, except per share amounts)    |  | 2004                         |        | 2003
|Earnings per share  basic:                 |  |                              |        |      |   |       
|Net income                                  |  | $                            | 4,795  |      | $ | 3,910 
|                                            |  |                              |        |      |   |       
|Average common shares outstanding           |  |                              | 16,118 |      |   | 15,868
|                                            |  |                              |        |      |   |       
|Per share                                   |  | $                            | 0.30   |      | $ | 0.25  
|                                            |  |                              |        |      |   |       
|Earnings per share  diluted:               |  |                              |        |      |   |       
|Net income                                  |  | $                            | 4,795  |      | $ | 3,910 
|                                            |  |                              |        |      |   |       
|Average common shares outstanding           |  |                              | 16,118 |      |   | 15,868
|Add: Stock options                          |  |                              | 3,035  |      |   | 1,928 
|                                            |  |                              |        |      |   |       
|Average common shares outstanding  diluted |  |                              | 19,153 |      |   | 17,796
|                                            |  |                              |        |      |   |       
|Per share                                   |  | $                            | 0.25   |      | $ | 0.22  
|                                            |  |                              |        |      |   |       





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4. Stock-Based Compensation



At March 31, 2004 and 2003, the Company has issued stock options to certain of its employees and directors. The Company
accounts for these options under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all
options granted had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. Had compensation cost for the Companys stock option plan been determined based on the fair value consistent
with the Provisions of SFAS No. 123, Accounting for Stock-Based Compensation, the Companys net income and income per share would have been reduced to the pro forma amounts indicated below for the three months ended March 31, 2004 and 2003:



|                                                                                                                |  |                             |       |      |   |      
|--------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ----- | ---- | - | -----
|                                                                                                                |  | Three MonthsEnded March 31,
|(In thousands, except per share amounts)                                                                        |  | 2004                        |       | 2003
|Net income as reported                                                                                          |  | $                           | 4,795 |      | $ | 3,910
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards |  | $                           | 302   |      | $ | 257  
|                                                                                                                |  |                             |       |      |   |      
|Net income  pro forma                                                                                          |  | $                           | 4,493 |      | $ | 3,653
|                                                                                                                |  |                             |       |      |   |      
|Net income per share as reported  basic                                                                        |  | $                           | 0.30  |      | $ | 0.25 
|                                                                                                                |  |                             |       |      |   |      
|Net income per share  pro forma  basic                                                                        |  | $                           | 0.28  |      | $ | 0.23 
|                                                                                                                |  |                             |       |      |   |      
|Net income per share as reported - fully diluted                                                                |  | $                           | 0.25  |      | $ | 0.22 
|                                                                                                                |  |                             |       |      |   |      
|Net income per share  pro forma  fully diluted                                                                |  | $                           | 0.24  |      | $ | 0.22 
|                                                                                                                |  |                             |       |      |   |      



5. Allowance for Loan Losses



The total allowance for loan losses was $21.3 million at
March 31, 2004 compared with $19.2 million at March 31, 2003, representing 4.63% of loans at March 31, 2004 and 5.43% at March 31, 2003.



6. Recent Accounting Developments



In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities,which addresses
how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, which was issued in January 2003. We are required to apply FIN 46R to variable interests in variable interest entities created after December 31, 2003. For variable interest in variable interest entities created before
January 1, 2004 the Interpretation is applied beginning January 1, 2005. For any variable interest entities that must be consolidated under FIN 46R that were created before January 1, 2004, the assets, liabilities and noncontrolling interest of the
variable interest entity initially are measured at their



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carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized
interest being recognized as the cumulative effect of an account change. If determining the carrying amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities and noncontrolling interest
of the variable interest entity. The Company has evaluated the impact of applying FIN 46R to existing variable interest entities in which it has variable interests. The adoption of FIN 46R did not have a material impact on the Companys
financial statements.



In December 2003, the Accounting
Standards Executive Committee of the American Institute of Certified Public Accounts issued Statement of Position 03-03. Accounting for Certain Loans or Debt Securities Acquired in a Transfer, or SOP 03-03. This SOP addresses accounting for
differences between contractual cash flows and cash flows expected to be collected from an investors initial investment in loans or debt securities (loans) acquired in a transfer if those differences are attributable, at least in part, to
credit quality. It includes such loans acquired in purchase business combinations and applies to all nongovernmental entities, including not-for-profit organizations. This SOP does not apply to loans originated by an entity. This SOP limits the
yield that may be accreted (accretable yield) to the excess of the investors estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the investors initial
investment in the loan. This SOP requires that the excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) not be recognized as an adjustment of yield, loss accrual, or valuation allowance. This SOP
prohibits investors from displaying accretable yield and nonaccretable difference in the balance sheet. Subsequent increases in cash flows expected to be collected generally should be recognized prospectively through adjustment of loans yield
over its remaining life. Decreases in cash flows expected to be collected should be recognized as impairment. This SOP prohibits carrying over or creation of valuation allowances in the initial accounting of all loans acquired in a
transfer that are within the scope of this SOP. The prohibition of the valuation allowance carryover applies to the purchase of an individual loan, a pool of loans, a group of loans, and loans acquired in a purchase business combination. This SOP is
effective for loans acquired in fiscal years beginning after December 15, 2004. Management has not completed its evaluation of the impact this pronouncement may have on our consolidated financial position and results of operations.



7. Operating Segments



The Company has three reportable segments: automobile finance, insurance premium finance and banking. The automobile finance
segment acquires, holds for investment and services nonprime retail automobile installment sales contracts generated by franchised and independent dealers of used automobiles. The insurance premium finance segment underwrites and finances automobile
and commercial insurance premiums in California. The banking segment operates a three-branch federal savings bank and is the principal funding source for the Companys automobile and insurance premium finance segments. The Company is in the
process of implementing a strategic plan to no longer use insured deposits of the Bank as a funding source and, instead, to fund the automobile and insurance premium finance segments through securitizations and warehouse lines of credit.



For the insurance premium finance segment the allowance for loan losses
was reduced during the first quarter of 2003, resulting in a recovery in provision for loan losses in this segment. This reduction reflects a substantial reduction in loan losses in this segment and in expected losses. This resulted from a change in
loan mix from automobile insurance premium loans to commercial insurance premium loans, which have lower expected losses.



The accounting policies of the segments are the same as those of the Companys except for funds provided by the banking segment to the other
operating segments which are accounted for at a predetermined transfer price (including certain overhead costs).



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The Companys reportable segments are strategic business units that offer different products and
services. They are managed and reported upon separately within the Company.



|                          |  |                                             |         |                         |   |         |  |       |           |  |   |          
|------------------------- |  | ------------------------------------------- | ------- | ----------------------- | - | ------- |  | ----- | --------- |  | - | ---------
|                          |  | At or For Three Months Ended March 31, 2004
|                          |  | AutomobileFinance                           |         | InsurancePremiumFinance |   | Banking |  | Total
|Net interest income       |  | $                                           | 22,336  |                         | $ | 622     |  | $     | 2,694     |  | $ | 25,652   
|Provision for loan losses |  |                                             | 6,700   |                         |   | 14      |  |       |          |  |   | 6,714    
|Non-interest income       |  |                                             | 128     |                         |   | 152     |  |       | 999       |  |   | 1,279    
|Non-interest expense      |  |                                             | 10,037  |                         |   | 40      |  |       | 2,085     |  |   | 12,162   
|                          |  |                                             |         |                         |   |         |  |       |           |  |   |          
|Segment profit, pre-tax   |  | $                                           | 5,727   |                         | $ | 720     |  | $     | 1,608     |  | $ | 8,055    
|                          |  |                                             |         |                         |   |         |  |       |           |  |   |          
|Total assets              |  | $                                           | 415,001 |                         | $ | 37,446  |  | $     | 1,202,323 |  | $ | 1,654,770
|                          |  |                                             |         |                         |   |         |  |       |           |  |   |          
|                          | 
|                          |  | At or For Three Months Ended March 31, 2003
|                          |  | AutomobileFinance                           |         | InsurancePremiumFinance |   | Banking |  | Total
|Net interest income       |  | $                                           | 13,280  |                         | $ | 623     |  | $     | 1,326     |  | $ | 15,229   
|Provision for loan losses |  |                                             | 737     |                         |   | -202    |  |       |          |  |   | 535      
|Non-interest income       |  |                                             | 94      |                         |   | 126     |  |       | 1,000     |  |   | 1,220    
|Non-interest expense      |  |                                             | 7,631   |                         |   | 54      |  |       | 1,636     |  |   | 9,321    
|                          |  |                                             |         |                         |   |         |  |       |           |  |   |          
|Segment profit, pre-tax   |  | $                                           | 5,006   |                         | $ | 897     |  | $     | 690       |  | $ | 6,593    
|                          |  |                                             |         |                         |   |         |  |       |           |  |   |          
|Total assets              |  | $                                           | 305,753 |                         | $ | 34,881  |  | $     | 854,759   |  | $ | 1,195,393
|                          |  |                                             |         |                         |   |         |  |       |           |  |   |          



For the reportable
segment information presented, substantially all expenses are recorded directly to each industry segment.



For discussion of change in provision for loan loss see Provision and Allowance for Loan Loss on Page 14.



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.



Certain statements in this Quarterly Report on Form 10-Q, including statements regarding United PanAm Financial Corp.s (UPFC) strategies, plans,
objectives, expectations and intentions, may include forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following
factors: loans we made to credit-impaired borrowers; our need for additional sources of financing; concentration of our banking business in California; reliance on operational systems and controls and key employees; competitive pressure we face in
the banking industry; changes in the interest rate environment; rapid growth of our businesses; impact of inflation and changing prices; and other risks, some of which may be identified from time to time in our filings with the Securities and
Exchange Commission (the SEC).



General



Company



We are a specialty finance company engaged primarily in non-prime automobile
finance and insurance premium finance. We provide financing to borrowers who typically have limited or impaired credit histories that restrict their ability to obtain loans through traditional sources.



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Our automobile finance business is conducted through United Auto Credit Corporation, or UACC. UACC
purchases and holds for investment nonprime automobile installment sales contracts, or automobile contracts, originated by independent and franchised dealers of used automobiles. Our insurance premium finance business is conducted through an
agreement with BPN Corporation, or BPN. Under this agreement, we finance automobile and small business insurance premiums. BPN markets this financing primarily to independent insurance agents in California.



We have historically funded our automobile finance and our insurance premium
finance businesses mainly with retail and wholesale bank deposits held by our wholly-owned subsidiary, Pan American Bank, FSB, a federally chartered savings association, or the Bank. While we currently use bank deposits to fund our automobile
finance and insurance premium finance businesses, we are in the process of shifting the funding source of these businesses and have implemented a plan to exit the Banks federal thrift charter because of the increasing regulatory requirements
associated with financing our non-prime automobile finance business with insured deposits. Non-prime lending has been and continues to be an area of lending which has been the subject of extraordinary regulatory concern and scrutiny among all of the
federal banking regulatory authorities, including the Office of Thrift Supervision, or OTS, which supervises the Bank.



As part of our strategic plan, we have retained and are in the process of retaining financial advisors to assist with structuring and executing our plan.
Our plan is to exit the federal thrift charter and concurrently receive cash proceeds from third parties to finance the automobile and insurance premium receivables. As part of our strategic plan, we may require the Bank to dividend all non-cash
assets and excess capital to us, including the automobile finance and insurance premium finance businesses. Until our strategic plan is implemented, we are continuing with our planned expansion of the automobile finance branch network and may, from
time to time, sell automobile receivables in order to control the amount of non-prime automobile loans in our portfolio and reduce our reliance on insured deposits of the Bank. For more information see Liquidity and Capital Resources 
Strategic Plan Relating to Shift In Funding Sources.



Automobile Finance Business



We entered the
nonprime automobile finance business in February 1996 by establishing UACC as a subsidiary of the Bank. UACC purchases automobile contracts primarily from dealers in used automobiles.



We provide financing to borrowers who typically have limited or impaired credit histories that restrict their ability to
obtain loans through traditional sources. Financing arms of automobile manufacturers generally do not make these loans to non-prime borrowers, nor do many other traditional automotive lenders. Nonprime borrowers generally pay higher interest rates
and loan fees than do prime borrowers.



UACCs business
strategy includes controlled expansion through a national retail branch network and branches are generally located proximate to dealers and borrowers. The branch manager of each branch is responsible for underwriting and purchasing automobile
contracts and providing focused servicing and collections. The branch network is closely managed and supervised by our Regional Managers and Divisional Vice Presidents. We believe UACCs branch network operations enable branch managers to
develop strong relationships with our primary customers, the automobile dealers. Through our branches, we provide a high level of service to the dealers by providing consistent credit decisions, typically same-day funding and frequent management
contact. We believe that this branch network and management structure also enhances our risk management and collection functions.



Insurance Premium Finance Business



We entered the insurance premium finance business in May 1995 through an agreement with BPN. Under this ongoing agreement, we underwrite and finance
consumer automobile and small business, or commercial, insurance premiums. BPN markets this financing primarily to independent insurance agents in California and services such insurance premium loans.



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BPN markets the automobile insurance financing to drivers who are classified by insurance companies as
non-standard or high risk for a variety of reasons, including age, driving record, a lapse in insurance coverage or ownership of high performance automobiles. We also provide commercial insurance financing to small businesses for property/casualty
and specialty classes of insurance. Our collateral for both consumer and commercial loans is the unearned insurance premium held by the insurance provider. We do not sell or have the risk of underwriting the underlying insurance policy.



The Bank



The Bank is a federally chartered stock savings bank, which was formed in
1994 and has three retail branch offices in California and $526.0 million in deposits at March 31, 2004. During 2003, the Bank sold one of its retail bank branches in a transaction that closed on February 7, 2004. The deposits sold were
approximately $35 million. The Bank has focused its branch marketing efforts on building a middle-income customer base, including some efforts targeted at local Hispanic communities.



Under federal regulatory requirements, the Bank must maintain at least 60% of its assets in mortgage-related securities. The
Bank has chosen to meet this requirement by investing solely in AAA-rated, United States Government Agency securities. The mortgage-related securities we purchase are typically adjustable-rate investments, which we finance through similarly indexed
adjustable rate repurchase agreements. As of March 31, 2004, we had approximately $1.3 billion in available repurchase contracts, typically one year committed lines, with staggered maturities to reduce our risk of liquidity shortfalls. We manage our
investment securities portfolio with an emphasis on preserving capital by locking in a net spread between our asset yields and our cost of funds.



We have historically funded our automobile finance and our insurance premium finance businesses mainly with retail and wholesale bank deposits held by the
Bank. However, we have implemented a strategic plan to shift the funding source of our automobile finance and insurance premium finance business to a source outside of the federal thrift charter. Our plan is to exit the federal thrift charter and
concurrently receive cash proceeds from third parties to finance the automobile and insurance premium receivables. As part of our strategic plan, we may require the Bank to dividend all non-cash assets and excess capital to us, including the
automobile finance and insurance premium finance businesses (which currently operate as subsidiaries of the Bank) and United States Government Agency Securities. For more information see Liquidity and Capital Resources  Strategic Plan
Relating to Shift In Funding Sources.



Critical Accounting Policies



We have established various accounting policies, which
govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements. Our accounting policies are integral to understanding the results reported. Accounting policies are
described in detail in Note 2 to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS presented in our 2003 Annual Report on Form 10-K. Certain accounting policies require us to make significant estimates and assumptions, which have a material impact on
the carrying value of certain assets and liabilities, and we consider these to be critical accounting policies. The estimates and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the
circumstances. Actual results could differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the
reporting periods. The following is a brief description of our current accounting policies involving significant management valuation judgments



Allowance for Loan Losses



Our loan loss allowances are monitored by management based on a variety of factors including an assessment of the credit risk inherent in the portfolio,
prior loss experience, the levels and trends of nonperforming loans, current and prospective economic conditions and other factors. Management also



11



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undertakes a review of various quantitative and qualitative analyses. Quantitative analyses include the review of
charge-off trends by loan type, analysis of cumulative losses and evaluation of credit loss experienced by credit tier and geographic location. Other quantitative analyses include the concentration of any credit tier, the level of nonperformance and
the percentage of delinquency. Qualitative analysis include trends in charge-offs over various time periods and at various statistical midpoints and high points, the severity of depreciated values of repossession and trends in the economy generally
or in specific geographic locations.



We established our
allowance for loan losses by using the greater of the Expected 12 month Charge Off Method which establishes allowances based on an analysis that sums the expected charge-offs for the next 12 months in each static loss pool or the
Classification Reserve Method which establishes allowances based on satisfactory, substandard and doubtful loan classifications. The classification reserve method ensures that changes over the next 12 months in loan concentrations,
quality and terms are reflected in the allowance. The classification reserve method also ensures that changes and trends in non-performing loans over the next 12 months are included in the allowance. Non-performing changes affect the allowance
through the classification reserve method, in which a percent of satisfactory, substandard and doubtful accounts are totaled to determine the overall classification reserve method requirement. The classification reserve requirement is compared to
the expected net charge-offs for the next 12 months and the greater of the two is the policy reserve level, which is then compared to the allowance level to ensure adequacy.



Despite these analyses, we recognize that establishing an allowance is an estimate, which is inherently uncertain and
depends on the outcome of further events. Our operating results and financial conditions are sensitive to changes in our estimate for loan losses and the estimates underlying assumptions. Our operating results and financial condition are
immediately impacted as changes in estimates for calculating loan loss reserves immediately pass through our income statement as an additional provision expense. Management updates our loan loss estimates quarterly to reflect current charge-offs.



The Banks most recent examination by the Office of
Thrift Supervisions (OTS) was completed in July 2003 and resulted in an adjustment to the Banks allowance for loan losses in the amount of $6.4 million to cover estimated net charge-offs for the next 12 months, as suggested by the
OTS, as opposed to the previous policy to cover estimated net charge-offs for the next 6 months. For a further discussion about this change in estimate, please see the discussion under Managements Discussion and Analysis of Financial
Condition and Results of Operations  Critical Accounting Policies presented in our 2003 Annual Report on Form 10-K.



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Average Balance Sheets



The following table sets forth information relating to our operations for the three months ended March 31, 2004 and 2003. The yields and costs are
derived by dividing annualized income or expense by the average balance of assets or liabilities for the periods shown. The yields and costs include fees, which are considered adjustments to yields.



|                                                                 |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|---------------------------------------------------------------- |  | ---------------------------- | --------- | -------- | ---- | ----------------- |  | ----- | ----------------- |  | -------- | --------- | ----------------- | - | ------ |  | ----- | -
|                                                                 |  | Three Months Ended March 31, |          
|                                                                 |  | 2004                         |           |          | 2003 |                  
|(Dollars in thousands)                                           |  | AverageBalance (1)           |           | Interest |      | AverageYield/Cost |  |       | AverageBalance(1) |  | Interest |           | AverageYield/Cost |  
|Assets                                                           |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Interest earning assets                                          |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Securities and short term investments                            |  | $                            | 1,183,760 |          | $    | 5,074             |  | 1.72  | %                 |  | $        | 692,871   |                   | $ | 3,714  |  | 2.17  | %
|IPF loans, net(3)                                                |  |                              | 38,884    |          |      | 1,089             |  | 11.26 | %                 |  |          | 34,449    |                   |   | 1,041  |  | 12.26 | %
|Automobile installment Contracts, net(4)                         |  |                              | 381,772   |          |      | 25,987            |  | 27.38 | %                 |  |          | 285,028   |                   |   | 15,762 |  | 22.43 | %
|                                                                 |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total interest earning assets                                    |  |                              | 1,604,416 |          | $    | 32,150            |  | 8.06  | %                 |  |          | 1,012,348 |                   | $ | 20,517 |  | 8.22  | %
|                                                                 |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Non-interest earnings assets                                     |  |                              | 61,936    |          |      |                   |  |       |                   |  |          | 38,350    |                   |   |        |  |       |  
|                                                                 |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total assets                                                     |  | $                            | 1,666,352 |          |      |                   |  |       |                   |  | $        | 1,050,698 |                   |   |        |  |       |  
|                                                                 |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Liabilities and Equity                                           |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Interest bearing liabilities                                     |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Customer deposits                                                |  | $                            | 522,466   |          | $    | 3,519             |  | 2.71  | %                 |  | $        | 470,895   |                   | $ | 3,692  |  | 3.18  | %
|Repurchase agreements                                            |  |                              | 1,022,316 |          |      | 2,859             |  | 1.12  | %                 |  |          | 479,426   |                   |   | 1,596  |  | 1.35  | %
|Junior subordinated debentures                                   |  |                              | 10,300    |          |      | 120               |  | 4.69  | %                 |  |          |          |                   |   |       |  |      | %
|                                                                 |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total interest bearing liabilities                               |  |                              | 1,555,082 |          | $    | 6,498             |  | 1.69  | %                 |  |          | 950,321   |                   | $ | 5,288  |  | 2.26  | %
|                                                                 |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Non-interest bearing liabilities                                 |  |                              | 5,396     |          |      |                   |  |       |                   |  |          | 8,807     |                   |   |        |  |       |  
|                                                                 |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total liabilities                                                |  |                              | 1,560,478 |          |      |                   |  |       |                   |  |          | 959,128   |                   |   |        |  |       |  
|Equity                                                           |  |                              | 105,874   |          |      |                   |  |       |                   |  |          | 91,570    |                   |   |        |  |       |  
|                                                                 |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total liabilities and equity                                     |  | $                            | 1,666,352 |          |      |                   |  |       |                   |  | $        | 1,050,698 |                   |   |        |  |       |  
|                                                                 |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Net interest income before provision for loan losses             |  |                              |           |          | $    | 25,652            |  |       |                   |  |          |           |                   | $ | 15,229 |  |       |  
|                                                                 |  |                              |           |          |      |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Net interest rate spread(5)                                      |  |                              |           |          |      |                   |  | 6.36  | %                 |  |          |           |                   |   |        |  | 5.96  | %
|Net interest margin(6)                                           |  |                              |           |          |      |                   |  | 6.43  | %                 |  |          |           |                   |   |        |  | 6.10  | %
|Ratio of interest earning assets to interest bearing liabilities |  |                              |           |          |      |                   |  | 103   | %                 |  |          |           |                   |   |        |  | 107   | %

---

|(1) | Average balances computed on a monthly basis.
|--- | ---------------------------------------------

|(2) | Net of allowance for loan losses; includes non-performing loans.
|--- | ----------------------------------------------------------------

|(3) | Net of allowance for losses; includes non-performing loans.
|--- | -----------------------------------------------------------

|(4) | Net of unearned finance charges, unearned discounts and allowance for losses; includes non-performing loans.
|--- | ------------------------------------------------------------------------------------------------------------

|(5) | Net interest rate spread represents the difference between the yield on interest earning assets and the cost of interest bearing liabilities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Net interest margin represents net interest income divided by average interest earning assets.
|--- | ----------------------------------------------------------------------------------------------



Comparison of Operating Results for the Three Months Ended March 31, 2004 and March 31, 2003



General



For the three months ended March 31, 2004, our net income increased $890,000
to $4.80 million from $3.91 million for the three months ended March 31, 2003.



The increase in net income was due primarily to a $10.4 million increase in net interest income, which increased to $25.6 million in the first quarter of 2004 from $15.2 million during the same quarter of 2003,
partially offset by a $6.2 million increase in the provision for loan losses and a $2.8 million increase in non-interest expense. The provision expense for UACC in 2004 is largely due to a change in accounting estimates related to the allowance for
loan losses that took effect in 2003. Net interest income was favorably impacted by the continued expansion and growth of our automobile finance business.



Automobile contracts purchased, including unearned finance charges, increased $44.2 million to $150.4 million for the three months ended March 31, 2004
from $106.2 million for the three months ended March 31, 2003, as a result of our planned growth in the automobile finance business. Our insurance premium finance originations increased $2.9 million to $27.3 million for the three months ended March
31, 2004 from $24.4 million for the three months ended March 31, 2003.



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Interest Income



Interest income increased to $32.2 million for the three months ended March 31, 2004 from $20.5 million for the three months
ended March 31, 2003 due primarily to a $592.1 million increase in average interest earning assets. The largest components of growth in average interest earning assets were investment securities, which increased by $490.9 million and automobile
installment contracts, which increased by $96.7 million. The increase in investment securities was a result of an increase in commercial borrowings, reflecting the need to increase assets required for the Bank to meet the 30% qualified thrift lender
requirement of the OTS. The increase in automobile contracts principally resulted from the purchasing of additional dealer contracts in existing and new markets consistent with the planned growth of this business unit.



Interest Expense



Interest expense increased to $6.5 million for the three months ended March
31, 2004 from $5.3 million for the three months ended March 31, 2003 due to a $604.8 million increase in average interest bearing liabilities, partially offset by a 57 basis point decrease in the weighted average interest rate on interest bearing
liabilities. The largest components of the increase in interest bearing liabilities were deposits of the Bank, which increased to an average balance of $522.5 million during the quarter ended March 31, 2004 from $470.9 million during the quarter
ended March 31, 2003 and borrowings under repurchase agreements which increased to an average balance of $1.0 billion for the quarter ended March 31, 2004 from $479.4 million during the quarter ended March 31, 2003. The average cost of liabilities
decreased to 1.69% for the three months ended March 31, 2004 from 2.26% for the comparable period in 2003, generally as a result of a decrease in market interest rates and a greater concentration in repurchase agreements with lower funding costs.



Provision and Allowance for Loan Losses



Provision for loan losses was $6.7 million for the three months ended March
31, 2004 compared to $535,000 for the three months ending March 31, 2003. The provision for 2004 reflects a provision expense of $14,000 in our insurance premium finance business and $6.7 million in UACC. The provision expense for UACC in 2004 is
largely due to a change in accounting estimate relating to the allowance for loan losses that took effect in 2003. For a discussion about this change in estimate, please see the discussion under Managements Discussion and Analysis of
Financial Condition and Results of Operations  Critical Accounting Policies presented in our 2003 Annual Report on Form 10-K.



The total allowance for loan losses was $21.3 million at March 31, 2004 compared with $19.2 million at March 31, 2003, representing 4.63% of loans at
March 31, 2004 and 5.43% at March 31, 2003. Additionally, unearned discounts on loans totaled $17.9 million at March 31, 2004 compared with $14.3 million at March 31, 2003, representing 3.73% of loans at March 31, 2004 and 1.21% at March 31, 2003.



Annualized net charge-offs to average loans were 5.38% for the
three months ended March 31, 2004 compared with 5.73% for the three months ended March 31, 2003. This rate was favorably impacted in 2003 by the recovery of $536,000 from the State of California for refund of sales taxes on repossessed autos. We
applied for this refund of sales taxes based on a memorandum of opinion issued by the Board of Equalization of the state of California in 2000 wherein the state of California was required to refund sales taxes that had been paid on the loss portion
of a repossessed automobile since January 1999. All amounts charged off on an automobile loan are charged to the allowance for loan losses. Thus, when we received a refund of sales taxes from the state of California, we returned the entire portion
of the sales tax refund to the allowance account.



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Non-interest Income



Non-interest income increased $59,000 to $1.3 million for the three months ended March 31, 2004 from $1.2 million for the three months ended March 31,
2003. This increase was the result of a $499,000 gain on sale of investment securities and a slight increase in services charges and fees, which was partially offset by a decrease in other income primarily related to the sale of the remaining
portions of the mortgage securitization pools and the disposition of the remaining assets related to mortgage servicing that occurred in 2003 and was not repeated in 2004.



Non-interest Expense



Non-interest expense increased $2.9 million to $12.2 million for the three months ended March 31, 2004 from $9.3 million for the three months ended March
31, 2003. The increase in non-interest expense was driven primarily by an increase in salaries, employee benefit costs and occupancy expenses associated with the planned growth of the automobile finance business. During the last 12 months, we
continued with the planned expansion of our automobile finance operations, resulting in an increase to 535 employees in 74 offices, as of March 31, 2004, from 411 employees in 58 offices, as of March 31, 2003.



Income Taxes



Income taxes increased $577,000 to $3.3 million for the three months ended
March 31, 2004 from $2.7 million for the three months ended March 31, 2003. This increase occurred as a result of a $1.5 million increase in income before income taxes between the two periods.



Comparison of Financial Condition at March 31, 2004 and December 31, 2003



Total assets decreased $16 million, to $1.65 billion at March 31, 2004
from $1.67 billion at December 31, 2003. The decrease resulted primarily from a $86.5 million decrease in securities available for sale to $1.1 billion at March 31, 2004 from $1.2 billion at December 31, 2003 and a $2.0 million decrease in other
assets partially offset by a $38.5 million increase in cash and cash equivalents and a $33.1 million increase in loans to $439.4 million at March 31, 2004 from $406.2 million at March 31, 2003. The decrease in securities and corresponding increase
in cash and cash equivalents is primarily due to pay-downs and maturities in the portfolio. The increase in loans principally resulted from the purchasing of additional dealer contracts in existing and new markets consistent with planned growth in
our automobile finance business unit.



Deposits increased $27.6
million overall to $526.0 million at March 31, 2004 from $498.4 million at December 31, 2003. Retail deposits decreased $22.6 million to $321.8 million at March 31, 2004 from $344.4 million at December 31, 2003. Brokered deposits increased $49.9
million to $204.3 million at March 31, 2004 from $154.4 million at December 31, 2003.



Repurchase agreements decreased $47.7 million to $1.00 billion at March 31, 2004 from $1.05 billion at December 31, 2003. This decrease is the result of excess funds from pay downs and maturities in the securities
portfolio, which were used to repay repurchase agreements.



Shareholders equity increased to $108.7 million at March 31, 2004 from $103.3 million at December 31, 2003, primarily as a result of net income of $4.8 million during the three months ended March 31, 2004.



Management of Interest Rate Risk



The principal objective of our interest rate risk management program is to
evaluate the interest rate risk inherent in our business activities, determine the level of appropriate risk given our operating environment, capital and liquidity requirements and performance objectives and manage the risk consistent with
guidelines approved by our board of directors. Through such management, we seek to reduce the exposure of our operations to changes in interest rates. Our board of directors reviews on a quarterly basis our asset/liability position, including
simulation of the effect on capital of various interest rate scenarios.



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Our profits depend, in part, on the difference, or spread, between the effective rate of
interest received on the loans we originate and the interest rates paid on deposits and other financing facilities, which can be adversely affected by movements in interest rates.



As discussed below under Liquidity and Capital Resources  Strategic Plan Relating to Shift in Funding
Sources we are in the process of shifting the funding source of our automobile finance and insurance premium finance businesses to warehouse credit lines and securitizations so we will no longer rely on insured deposits of the Bank as a
funding source. When this shift in funding sources occurs, we will continue to manage our interest rate risk as described herein.



Our interest rate sensitivity is monitored by our board of directors and management through the use of a model, which estimates the change in our net
portfolio value (NPV) over a range of interest rate scenarios. NPV is the present value of expected cash flows from assets and liabilities, and NPV Ratio is defined as the NPV in that scenario divided by the market value of
assets in the same scenario. We utilize a market value model based on quarterly financial information.



At December 31, 2003, the Banks sensitivity measure resulting from a 100 basis point decrease in interest rates was +3 basis points and would result
in a $1.1 million increase in the NPV of the Bank and a 200 basis point increase in interest rates was -7 basis points and would result in a $2.4 million decrease in the NPV of the Bank.



Although the NPV measurement provides an indication of our interest rate risk exposure at a particular point in time, such
measurement is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results. Management monitors the results of this modeling, which are
presented to our board of directors on a quarterly basis.



The
following table shows the NPV and projected change in the NPV of the Bank at December 31, 2003 assuming an instantaneous and sustained change in market interest rates of 100, 200 and 300 basis points (bp).



Interest Rate Sensitivity of Net Portfolio Value



|                |  |                        |         |          |                                      |        |          |  |       |           |  |      |          |  |       
|--------------- |  | ---------------------- | ------- | -------- | ------------------------------------ | ------ | -------- |  | ----- | --------- |  | ---- | -------- |  | ------
|                |  | Net Portfolio Value    |         |          | NPV as % of PortfolioValue of Assets
|Change in Rates |  | $ Amount               |         | $ Change |                                      |        | % Change |  |       | NPV Ratio |  |      | % Change
|                |  | (Dollars in thousands)
|+300 bp         |  | $                      | 153,618 |          | $                                    | (3,746 | )        |  | -2.38 | %         |  | 9.09 | %        |  | -11 bp
|+200 bp         |  |                        | 54,961  |          |                                      | (2,403 | )        |  | -1.53 | %         |  | 9.13 | %        |  | -7 bp 
|+100 bp         |  |                        | 156,210 |          |                                      | (1,154 | )        |  | -0.73 | %         |  | 9.17 | %        |  | -3 bp 
|0 bp            |  |                        | 157,364 |          |                                      |       |          |  |      | %         |  | 9.20 | %        |  |   bp 
|-100 bp         |  |                        | 158,432 |          |                                      | 1,068  |          |  | +0.68 | %         |  | 9.22 | %        |  | +3 bp 
|-200 bp         |  |                        | 159,042 |          |                                      | 1,679  |          |  | +1.07 | %         |  | 9.22 | %        |  | +3 bp 
|-300 bp         |  |                        | 159,117 |          |                                      | 1,753  |          |  | +1.11 | %         |  | 9.20 | %        |  |   bp 



Liquidity and Capital Resources



Overview



We require substantial capital resources and cash to support our business.
Currently, our primary source of funds are deposits at the Bank and commercial repurchase agreements, and, to a lesser extent, FHLB advances, interest payments on short-term investments and proceeds from the maturation of securities. However, we are
in the process of implementing a strategic plan to shift the funding source of our automobile finance and insurance premium finance businesses to warehouse credit lines and securitizations so we will no longer rely on insured deposits of the Bank or
FHLB advances as a funding source.





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##### Table of Contents

Strategic Plan Relating to Shift In Funding Sources



We are in the process of shifting the funding source of our automobile
finance and insurance premium finance businesses. We currently fund our automobile finance and our insurance premium finance businesses primarily with retail and wholesale bank deposits held by the Bank. However, we have implemented a plan to exit
the Banks federal thrift charter because of the increasing regulatory requirements associated with financing our non-prime automobile finance business with insured deposits.



As part of our strategic plan, we have retained and are in the process of retaining financial advisors to assist with
structuring and executing our plan. Our plan is to exit the federal thrift charter and concurrently receive cash proceeds from third parties to finance the automobile and insurance premium receivables. We plan to receive the cash proceeds through
warehouse credit lines, securitizations and the sale of whole loans from time to time. As part of our strategic plan, we may require the Bank to dividend all non-cash assets and excess capital to us, including the automobile finance and insurance
premium finance businesses and United States Government Agency Securities. We plan to coordinate timing so we exit the federal thrift charter at or about the same time we receive cash proceeds through warehouse credit lines and securitizations.
Accordingly, we will not have an interim period where we phase out reliance on insured deposits over time.



As we implement strategies to reduce our reliance on insured deposits of the Bank as a major source of funds, management intends to continue to use the
most cost-effective source of funds whenever possible. Implementing our strategic plan, however, could increase our all-in cost of funds as our proposed alternative sources of financing are more susceptible to changes in interest rates. The pricing
of warehouse lines and securitizations will depend on current market interest rates. Deposits of the Bank are generally less sensitive to changes in interest rates because the Bank has access to long-term deposits (such as certificates of deposit)
that mature over time. As a result of the shift in funding sources, deposits will no longer be shown as a liability on our balance sheet; instead, we expect that securitizations and warehouse lines will appear as liabilities.



We will continue to maintain an allowance for loan losses, monitor interest
rate risk and service the automobile finance and insurance premium finance contracts.



Principal Sources of Cash



Currently, our primary source of funds are deposits at the Bank and commercial repurchase agreements, and, to a lesser extent, FHLB advances, interest payments on short-term investments and proceeds from the maturation of securities. Once
we exit the federal thrift charter, our primary source of funds will no longer be deposits at the Bank or FHLB advances, but will instead be securitizations and warehouse lines of credit.



While maturities and scheduled amortization of loans are a predictable source of funds, deposit flows and loan prepayments
are greatly influenced by general interest rates, economic conditions and competition. We have continued to maintain adequate levels of liquid assets to fund our operations. Management, through its asset and liability committee, monitors rates and
terms of competing sources of funds to use the most cost-effective source of funds wherever possible.



Deposits



The Bank obtains deposits through its retail branches in California. The Bank offers checking accounts, various money market accounts, regular passbook
accounts, fixed interest rate certificates with varying maturities and retirement accounts. Deposit account terms vary by interest rate, minimum balance requirements and the duration of the account. Interest rates paid, maturity terms, service fees
and withdrawal penalties are established by the Bank periodically based on liquidity and financing requirements, rates paid by competitors, growth goals and federal regulations. At March 31, 2004, such retail deposits were $321.8 million or 61.2% of
total deposits.



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##### Table of Contents

The Bank uses broker-originated deposits to supplement its retail deposits and, at March 31, 2004, these
deposits totaled $204.3 million or 38.8% of total deposits. Broker deposits are originated through major dealers specializing in such products. We use several major dealers to originate these deposits so if deposits are not renewed at the end of
their term, we will negotiate obtaining deposits from another dealer. Until we exit the Banks federal thrift charter, if we are unable to retain a sufficient amount of deposits from all of the dealers, we would consider raising deposits
through means of the Internet.



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##### Table of Contents

The following table sets forth the balances and rates paid on each category of deposits for the dates
indicated.



|                        |  |                             |         |                     |                         |   |         |      |                     |  |      |         |  |                     |         |  |      |  
|----------------------- |  | --------------------------- | ------- | ------------------- | ----------------------- | - | ------- | ---- | ------------------- |  | ---- | ------- |  | ------------------- | ------- |  | ---- | -
|                        |  | Three Months EndedMarch 31, |         |                     | Years EndedDecember 31, |  
|                        |  | 2004                        |         |                     | 2003                    |   |         | 2002 |                    
|                        |  | Balance                     |         | WeightedAverageRate |                         |   | Balance |      | WeightedAverageRate |  |      | Balance |  | WeightedAverageRate |        
|                        |  | (Dollars in thousands)      |        
|Passbook accounts       |  | $                           | 61,572  |                     | 1.29                    | % |         | $    | 72,990              |  | 1.45 | %       |  | $                   | 52,911  |  | 1.72 | %
|Checking accounts       |  |                             | 17,243  |                     | 0.70                    | % |         |      | 19,331              |  | 0.71 | %       |  |                     | 16,854  |  | 1.00 | %
|Certificates of deposit |  |                             |         |                     |                         |   |         |      |                     |  |      |         |  |                     |         |  |      |  
|Under $100,000          |  |                             | 349,836 |                     | 2.82                    | % |         |      | 310,535             |  | 3.00 | %       |  |                     | 314,130 |  | 3.63 | %
|$100,000 and over       |  |                             | 97,379  |                     | 2.51                    | % |         |      | 95,533              |  | 2.53 | %       |  |                     | 84,563  |  | 3.13 | %
|                        |  |                             |         |                     |                         |   |         |      |                     |  |      |         |  |                     |         |  |      |  
|Total                   |  | $                           | 526,030 |                     | 2.51                    | % |         | $    | 498,389             |  | 2.59 | %       |  | $                   | 468,458 |  | 3.23 | %
|                        |  |                             |         |                     |                         |   |         |      |                     |  |      |         |  |                     |         |  |      |  



The following table
sets forth the time remaining until maturity for all CDs for the dates indicated.



|                              |  |                        |         |                  |   |                  |  |   |        
|----------------------------- |  | ---------------------- | ------- | ---------------- | - | ---------------- |  | - | -------
|                              |  | March 31,2004          |         | December 31,2003 |   | December 31,2002
|                              |  | (Dollars in thousands)
|Maturity within one year      |  | $                      | 216,537 |                  | $ | 184,292          |  | $ | 185,295
|Maturity within two years     |  |                        | 98,349  |                  |   | 86,812           |  |   | 58,852 
|Maturity within three years   |  |                        | 87,726  |                  |   | 79,332           |  |   | 41,628 
|Maturity over three years     |  |                        | 44,603  |                  |   | 55,632           |  |   | 112,918
|                              |  |                        |         |                  |   |                  |  |   |        
|Total certificates of deposit |  | $                      | 447,215 |                  | $ | 406,068          |  | $ | 398,693
|                              |  |                        |         |                  |   |                  |  |   |        



The Bank has made
significant progress in extending maturities of its deposits. However, the Bank has a significant amount of deposits maturing in less than one year, we believe that the Banks current pricing strategy will enable it to retain a significant
portion of these accounts at maturity and that it will continue to have access to sufficient amounts of CDs which, together with other funding sources, will provide the necessary level of liquidity to finance its lending businesses. However, as a
result of these shorter-term deposits, the rates on these accounts may be more sensitive to movements in market interest rates, which may result in a higher cost of funds.



Subordinated Debentures



In 2003, we issued junior subordinated debt of $10.3 million to a subsidiary trust, UPFC Trust I, to enhance our liquidity. UPFC Trust I in turn issued
$10 million of company obligated mandatorily redeemable preferred securities. In the first quarter we implemented FIN 46R, as a result the balance sheet now reflects Junior Subordinated Debentures as opposed to Trust Preferred Securities



Capital Requirements



At March 31, 2004, the Bank exceeded all of its regulatory capital
requirements with tangible capital of $107.0 million, or 6.48% of total adjusted assets, which is above the required level of $24.8 million, or 1.5%; the Bank had core capital of $107.0 million, or 6.48% of total adjusted assets, which is above the
required level of $82.6 million, or 5.0%; and the Bank had risk-based capital of $115.3 million, or 17.40% of risk-weighted assets, which is above the required level of $66.3 million, or 10.0% for a well-capitalized institution.



As used herein, leverage or core ratio means the ratio of core capital to
adjusted total assets and total risk-based capital ratio means the ratio of total capital to risk-weighted assets, in each case as calculated in accordance with current OTS capital regulations. Under the Federal Deposit Insurance Corporation Act of
1991 (FDICIA), the Bank is deemed to be well capitalized at March 31, 2004.



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##### Table of Contents

Through the Bank, we can obtain advances from the FHLB, collateralized by its securities. The FHLB
functions as a central reserve bank providing credit for thrifts and certain other member financial institutions. Advances are made pursuant to several programs, each of which has its own interest rate and range of maturities. Limitations on
the amount of advances are based generally on a fixed percentage of total assets or on the FHLBs assessment of an institutions credit-worthiness. As of March 31, 2004, the Banks total borrowing capacity under this credit facility
was $496.4 million, of which $183.5 million was utilized to fund repurchase agreements and $312.9 million was available.



The following table sets forth certain information regarding our short-term borrowed funds (consisting of FHLB advances and repurchase agreements) at or
for the periods ended on the dates indicated.



|                                                             |  |                        |           |   |              |      |           |   |  |   |         |  
|------------------------------------------------------------ |  | ---------------------- | --------- | - | ------------ | ---- | --------- | - |  | - | ------- | -
|                                                             |  | March 31, 2004         |           |   | December 31, |     
|                                                             |  |                        | 2003      |   |              | 2002 |          
|                                                             |  | (Dollars in thousands) |          
|FHLB operating advances                                      |  |                        |           |   |              |      |           |   |  |   |         |  
|Maximum month-end balance                                    |  | $                      |          |   |              | $    |          |   |  | $ | 130,000 |  
|Balance at end of period                                     |  |                        |          |   |              |      |          |   |  |   |        |  
|Average balance for period                                   |  |                        |          |   |              |      |          |   |  |   | 38,974  |  
|Weighted average interest rate on balance at end of period   |  |                        |          | % |              |      |          | % |  |   |        | %
|Weighted average interest rate on average balance for period |  |                        |          | % |              |      |          | % |  |   | 2.11    | %
|Repurchase agreements                                        |  |                        |           |   |              |      |           |   |  |   |         |  
|Maximum month-end balance                                    |  | $                      | 1,082,061 |   |              | $    | 1,052,205 |   |  | $ | 410,234 |  
|Balance at end of period                                     |  |                        | 1,004,536 |   |              |      | 1,052,205 |   |  |   | 384,624 |  
|Average balance for period                                   |  |                        | 1,022,316 |   |              |      | 755,755   |   |  |   | 260,139 |  
|Weighted average interest rate on balance at end of period   |  |                        | 1.09      | % |              |      | 1.14      | % |  |   | 1.40    | %
|Weighted average interest rate on average balance for period |  |                        | 1.12      | % |              |      | 1.20      | % |  |   | 1.79    | %



Aggregate
Contractual Obligations



The following table provides the
amounts due under specified obligations for the periods indicated as of March 31, 2004.



|                               |  |                        |           |                  |   |                   |  |                  |        |       |   |        |  |   |          
|------------------------------ |  | ---------------------- | --------- | ---------------- | - | ----------------- |  | ---------------- | ------ | ----- | - | ------ |  | - | ---------
|                               |  | Less than1 Years       |           | 1 Yearto 3 Years |   | 4 Yearsto 5 Years |  | More Than5 Years |        | Total
|                               |  | (Dollars in thousands)
|Deposits                       |  | $                      | 295,352   |                  | $ | 186,075           |  | $                | 44,603 |       | $ |       |  | $ | 526,030  
|Repurchase agreements          |  |                        | 1,004,536 |                  |   |                  |  |                  |       |       |   |       |  |   | 1,004,536
|Operating lease obligations    |  |                        | 2,408     |                  |   | 6,611             |  |                  | 603    |       |   |       |  |   | 9,622    
|Junior subordinated debentures |  |                        |          |                  |   |                  |  |                  |       |       |   | 10,300 |  |   | 10,300   
|                               |  |                        |           |                  |   |                   |  |                  |        |       |   |        |  |   |          
|Total                          |  | $                      | 1,302,296 |                  | $ | 192,686           |  | $                | 45,206 |       | $ | 10,300 |  | $ | 1,550,488
|                               |  |                        |           |                  |   |                   |  |                  |        |       |   |        |  |   |          



The obligations are
categorized by their contractual due dates. Certain deposit accounts have no stated maturity but have been presented here as maturing in less than one year therefore; the total commitments do not necessarily represent future cash requirements. We
may, at our option, prepay the junior subordinated debentures prior to their maturity date. Furthermore, the actual payment of certain current liabilities may be deferred into future periods



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##### Table of Contents

Lending Activities



Summary of Loan Portfolio.



At March 31, 2004, our net loan portfolio constituted $439.4 million, or 26.6% of our total assets.



The following table sets forth the composition of our loan portfolio at the
dates indicated.



|                                 |  |                        |         |   |                  |   |         |                  |  |   |         |  
|-------------------------------- |  | ---------------------- | ------- | - | ---------------- | - | ------- | ---------------- |  | - | ------- | -
|                                 |  | March 31,2004          |         |   | December 31,2003 |   |         | December 31,2002 | 
|                                 |  | (Dollars in thousands) |        
|Consumer Loans                   |  |                        |         |   |                  |   |         |                  |  |   |         |  
|Automobile installment contracts |  | $                      | 445,531 |   |                  | $ | 405,085 |                  |  | $ | 293,440 |  
|Insurance premium finance        |  |                        | 10,299  |   |                  |   | 12,984  |                  |  |   | 17,922  |  
|Other consumer loans             |  |                        | 48      |   |                  |   | 49      |                  |  |   | 80      |  
|                                 |  |                        |         |   |                  |   |         |                  |  |   |         |  
|Total consumer loans             |  |                        | 455,878 |   |                  |   | 418,118 |                  |  |   | 311,442 |  
|                                 |  |                        |         |   |                  |   |         |                  |  |   |         |  
|Commercial Loans                 |  |                        |         |   |                  |   |         |                  |  |   |         |  
|Insurance premium finance        |  |                        | 27,392  |   |                  |   | 28,259  |                  |  |   | 18,400  |  
|                                 |  |                        |         |   |                  |   |         |                  |  |   |         |  
|Total commercial loans           |  |                        | 27,392  |   |                  |   | 28,259  |                  |  |   | 18,400  |  
|                                 |  |                        |         |   |                  |   |         |                  |  |   |         |  
|Total loans                      |  |                        | 483,270 |   |                  |   | 446,377 |                  |  |   | 329,842 |  
|Unearned finance charges         |  |                        | (4,696  | ) |                  |   | (5,385  | )                |  |   | (3,490  | )
|Unearned discounts               |  |                        | (17,857 | ) |                  |   | (14,368 | )                |  |   |        |  
|Allowance for loan losses        |  |                        | (21,347 | ) |                  |   | (20,384 | )                |  |   | (23,179 | )
|                                 |  |                        |         |   |                  |   |         |                  |  |   |         |  
|Total loans, net                 |  | $                      | 439,370 |   |                  | $ | 406,240 |                  |  | $ | 303,173 |  
|                                 |  |                        |         |   |                  |   |         |                  |  |   |         |  



Loan Maturities.



The following table sets forth the dollar amount of loans
maturing in our loan portfolio at March 31, 2004 based on scheduled contractual amortization. Loan balances are reflected before unearned discounts and premiums, unearned finance charges and allowance for loan losses. All loans maturing over one
year are fixed rate loans.



|                 |  |                        |        |                            |   |                            |  |                              |         |                              |   |                   |  |            |   |  |   |   |  |   |        
|---------------- |  | ---------------------- | ------ | -------------------------- | - | -------------------------- |  | ---------------------------- | ------- | ---------------------------- | - | ----------------- |  | ---------- | - |  | - | - |  | - | -------
|                 |  | March 31, 2004        
|                 |  | One Year orLess        |        | More Than1 Year to 3 Years |   | More Than3 Years to5 Years |  | More Than 5Years to 10 Years |         | More Than10 Years to20 Years |   | More Than20 Years |  | TotalLoans
|                 |  | (Dollars in thousands)
|Consumer Loans   |  | $                      | 20,177 |                            | $ | 146,003                    |  | $                            | 288,533 |                              | $ | 1,165             |  | $          |  |  | $ |  |  | $ | 455,878
|Commercial loans |  |                        | 27,392 |                            |   |                           |  |                              |        |                              |   |                  |  |            |  |  |   |  |  |   | 27,392 
|                 |  |                        |        |                            |   |                            |  |                              |         |                              |   |                   |  |            |   |  |   |   |  |   |        
|Total            |  | $                      | 47,569 |                            | $ | 146,003                    |  | $                            | 288,533 |                              | $ | 1,165             |  | $          |  |  | $ |  |  | $ | 483,270
|                 |  |                        |        |                            |   |                            |  |                              |         |                              |   |                   |  |            |   |  |   |   |  |   |        



Classified Assets
and Allowance for Loan Losses



Our policy is to maintain
an allowance for loan losses to absorb inherent losses, which may be realized on our loan portfolio. These allowances are general valuation allowances for estimates for probable losses not specifically identified. The total allowance for loan losses
was $21.4 million at March 31, 2004 compared with $20.4 million at December 31, 2003 representing 4.63% of loans at March 31, 2004 and 4.78% at December 31, 2003. Additionally, unearned discounts on loans totaled $17.9 million at March 31, 2004
compared with $14.4 million at December 31, 2003, representing 3.73% of loans at March 31, 2004 and 3.26% at December 31, 2003.



For the insurance premium finance business loans, management established a level of allowance for loan losses based on recent trends in delinquencies and
historical charge offs, currently 0.65% of loans, that it feels adequate for the risk in the portfolio. Each month an amount necessary to reach that level is charged against current earnings and added to allowance for loan losses.



For a discussion about our allowance for loan losses see Critical
Accounting Policies, Allowance for Loan Losses.



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##### Table of Contents

The following table sets forth the remaining balances of all loans that were more than 30 days delinquent
at March 31, 2004, December 31, 2003 and 2002.



|                   |  |                        |       |                 |     |   |                  |   |                 |  |     |                  |  |                  |       |  |     |  
|------------------ |  | ---------------------- | ----- | --------------- | --- | - | ---------------- | - | --------------- |  | --- | ---------------- |  | ---------------- | ----- |  | --- | -
|Loan Delinquencies |  | March 31,2004          |       | % of TotalLoans |     |   | December 31,2003 |   | % of TotalLoans |  |     | December 31,2002 |  | % of Total Loans |      
|                   |  | (Dollars in thousands) |      
|30 to 59 days      |  | $                      | 1,802 |                 | 0.4 | % |                  | $ | 2,548           |  | 0.6 | %                |  | $                | 1,778 |  | 0.5 | %
|60 to 89 days      |  |                        | 756   |                 | 0.1 | % |                  |   | 942             |  | 0.2 | %                |  |                  | 808   |  | 0.3 | %
|90+ days           |  |                        | 401   |                 | 0.1 | % |                  |   | 394             |  | 0.1 | %                |  |                  | 480   |  | 0.1 | %
|                   |  |                        |       |                 |     |   |                  |   |                 |  |     |                  |  |                  |       |  |     |  
|Total              |  | $                      | 2,959 |                 | 0.6 | % |                  | $ | 3,884           |  | 0.9 | %                |  | $                | 3,066 |  | 0.9 | %
|                   |  |                        |       |                 |     |   |                  |   |                 |  |     |                  |  |                  |       |  |     |  



Nonaccrual and Past
Due Loans.



A loan is placed on nonaccrual status when it
is delinquent for 120 days or more. When a loan is reclassified from accrual to nonaccrual status, all previously accrued interest is reversed. Interest income on nonaccrual loans is subsequently recognized only to the extent that cash payments are
received or the borrowers ability to make periodic interest and principal payments is in accordance with the loan terms, at which time the loan is returned to accrual status. Accounts, which are deemed fully or partially uncollectible by
management, are generally fully reserved or charged off for the amount that exceeds the estimated fair value (net of selling costs) of the underlying collateral.



The following table sets forth the aggregate amount of nonaccrual loans (net of unearned discounts, premiums and unearned
finance charges.) at March 31, 2004, December 31, 2003 and 2002.



|                                                 |  |                        |      |   |              |      |      |   |  |   |      |  
|------------------------------------------------ |  | ---------------------- | ---- | - | ------------ | ---- | ---- | - |  | - | ---- | -
|                                                 |  | March 31, 2004         |      |   | December 31, |     
|                                                 |  |                        | 2003 |   |              | 2002 |     
|                                                 |  | (Dollars in thousands) |     
|Nonaccrual loans                                 |  | $                      | 132  |   |              | $    | 139  |   |  | $ | 172  |  
|                                                 |  |                        |      |   |              |      |      |   |  |   |      |  
|Total                                            |  | $                      | 132  |   |              | $    | 139  |   |  | $ | 172  |  
|                                                 |  |                        |      |   |              |      |      |   |  |   |      |  
|Non accrual loans as a percentage of total loans |  |                        | 0.03 | % |              |      | 0.03 | % |  |   | 0.05 | %



Allowance for Loan
Losses.



The following is a summary of the changes in our
consolidated allowance for loan losses for the periods indicated.



|                                                         |  |                                               |        |   |                                       |      |         |   |  |   |         |  
|-------------------------------------------------------- |  | --------------------------------------------- | ------ | - | ------------------------------------- | ---- | ------- | - |  | - | ------- | -
|                                                         |  | At or For theThree MonthsEnded March 31, 2004 |        |   | At or For the Year Ended December 31, |     
|                                                         |  |                                               | 2003   |   |                                       | 2002 |        
|                                                         |  | (Dollars in thousands)                        |       
|Allowance for Loan Losses                                |  |                                               |        |   |                                       |      |         |   |  |   |         |  
|Balance at beginning of period                           |  | $                                             | 20,384 |   |                                       | $    | 23,179  |   |  | $ | 17,460  |  
|Provision for loan losses                                |  |                                               | 6,714  |   |                                       |      | 17,737  |   |  |   | 638     |  
|Charge-offs                                              |  |                                               | (6,145 | ) |                                       |      | (22,320 | ) |  |   | (18,411 | )
|Recoveries                                               |  |                                               | 394    |   |                                       |      | 1,788   |   |  |   | 1,078   |  
|                                                         |  |                                               |        |   |                                       |      |         |   |  |   |         |  
|Net charge-offs                                          |  |                                               | (5,751 | ) |                                       |      | (20,532 | ) |  |   | (17,333 | )
|Acquisition discounts allocated to loss allowance        |  |                                               |       |   |                                       |      |        |   |  |   | 22,414  |  
|                                                         |  |                                               |        |   |                                       |      |         |   |  |   |         |  
|Balance at end of period                                 |  | $                                             | 21,347 |   |                                       | $    | 20,384  |   |  | $ | 23,179  |  
|                                                         |  |                                               |        |   |                                       |      |         |   |  |   |         |  
|Annualized net charge-offs to average loans              |  |                                               | 5.38   | % |                                       |      | 5.67    | % |  |   | 5.88    | %
|Allowance for loan losses as a percentage of total loans |  |                                               | 4.63   | % |                                       |      | 4.78    | % |  |   | 7.10    | %



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Cash Equivalents and Securities Portfolio



Our short term investments and securities portfolios are used primarily for liquidity purposes and secondarily for
investment income. Cash equivalents and securities satisfy regulatory requirements for liquidity that are imposed on the Bank.



The following is a summary of our cash equivalents and securities portfolios as of the dates indicated.



|                                           |  |                        |            |   |              |      |            |   |  |   |            |  
|------------------------------------------ |  | ---------------------- | ---------- | - | ------------ | ---- | ---------- | - |  | - | ---------- | -
|                                           |  | March 31, 2004         |            |   | December 31, |     
|                                           |  |                        | 2003       |   |              | 2002 |           
|                                           |  | (Dollars in thousands) |           
|Balance at end of period                   |  |                        |            |   |              |      |            |   |  |   |            |  
|Overnight deposits                         |  | $                      | 4,702      |   |              | $    | 5,833      |   |  | $ | 3,590      |  
|U.S. agency securities                     |  |                        | 79,732     |   |              |      | 105,277    |   |  |   | 288,193    |  
|U. S. agency mortgage backed securities    |  |                        | 1,036,183  |   |              |      | 1,097,167  |   |  |   | 315,075    |  
|                                           |  |                        |            |   |              |      |            |   |  |   |            |  
|Total                                      |  | $                      | 1,120,617  |   |              | $    | 1,208,277  |   |  | $ | 606,858    |  
|                                           |  |                        |            |   |              |      |            |   |  |   |            |  
|Weighted average yield at end of period    |  |                        |            |   |              |      |            |   |  |   |            |  
|Overnight deposits                         |  |                        | 0.68       | % |              |      | 0.55       | % |  |   | 0.69       | %
|U.S. agency securities                     |  |                        | 1.64       | % |              |      | 1.29       | % |  |   | 2.10       | %
|U.S. agency mortgage backed securities     |  |                        | 1.58       | % |              |      | 1.66       | % |  |   | 2.43       | %
|Weighted average maturity at end of period |  |                        |            |   |              |      |            |   |  |   |            |  
|Overnight deposits                         |  |                        | 1 day      |   |              |      | 1 day      |   |  |   | 1 day      |  
|U.S. agency securities                     |  |                        | 79 months  |   |              |      | 36 months  |   |  |   | 55 months  |  
|U.S. agency mortgage-backed securities     |  |                        | 320 months |   |              |      | 313 months |   |  |   | 286 months |  



Item 3. Quantitative and Qualitative Disclosures About Market Risk.



See Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  Management of Interest Rate Risk.



Item 4. Controls and Procedures



(a) Evaluation of Disclosure Controls and Procedures



In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act), as of the end of the quarter ended September 30, 2003, we carried out an evaluation under the supervision and
with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under
the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.



(b) Changes in Internal Controls



During the quarter ended March 31, 2004, there have been no changes in our internal controls over financial reporting that
has materially affected, or are reasonably likely to materially affect, these controls.



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##### Table of Contents

PART II. OTHER INFORMATION



Item 1. Legal Proceedings.



Not applicable



Item 2. Changes in Securities and Use of Proceeds.



Not applicable



Item 3. Defaults Upon Senior Securities.



Not applicable



Item 4. Submission of Matters to a Vote of Security Holders.



Not applicable



Item 5. Other Information.



Not applicable



Item 6. Exhibits and Reports on Form 8-K.



(a) List of Exhibits



| | 10.115 | Employment Agreement dated March 1, 2004 between Pan American Bank, FSB and Garland Koch.
| | ------ | -----------------------------------------------------------------------------------------



| | 31.1 | Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
| | ---- | ---------------------------------------------------------------------------------------------



| | 31.2 | Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
| | ---- | ---------------------------------------------------------------------------------------------



| | 32.1 | Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
| | ---- | ---------------------------------------------------------------------------------------------



| | 32.2 | Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
| | ---- | ---------------------------------------------------------------------------------------------



(b) Reports on Form 8-K



Filed March 30, 2004



Filed April 23, 2004



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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.



|                  |  |  |  |     |  |                              |  |                                                  
|----------------- |  |  |  | --- |  | ---------------------------- |  | -------------------------------------------------
|                  |  |  |  |     |  | United PanAm Financial Corp.
|                  |  |  | 
|Date:May 12, 2004 |  |  |  | By: |  | /s/    Guillermo Bron       
|                  |  |  |  |     |  |                              |  | Guillermo Bron                                   
|                  |  |  |  |     |  |                              |  | Chairman and Chief Executive Officer             
|                  |  |  |  |     |  |                              |  | (Principal Executive Officer)                    
|                  |  |  | 
|May 12, 2004      |  |  |  | By: |  | /s/    Garland W. Koch      
|                  |  |  |  |     |  |                              |  | Garland W. Koch                                  
|                  |  |  |  |     |  |                              |  | Senior Vice President and Chief Financial Officer
|                  |  |  |  |     |  |                              |  | (Principal Financial and Accounting Officer)     



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