##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



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



For the quarterly period ended March 31, 2005



Commission File Number 000-24051



UNITED PANAM FINANCIAL CORP.

(Exact
name of Registrant as specified in its charter)



|                                                              |  |                                       
|------------------------------------------------------------- |  | --------------------------------------
|California                                                    |  | 94-3211687                            
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification 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)



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  x    No ̈



The number of shares outstanding of the Registrants Common Stock as of April 16, 2005 was 16,562,681 shares.



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##### Table of Contents

UNITED PANAM FINANCIAL CORP.

FORM 10-Q

MARCH 31, 2005



INDEX



|         |  |                                                                                                              |  |     
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|         |  |                                                                                                              |  | Page
|PART I.  |  | FINANCIAL INFORMATION                                                                                        |  |     
|         |  |                                                                                                             
|Item 1.  |  | Financial Statements (unaudited)                                                                             |  |     
|         |  |                                                                                                             
|         |  | Consolidated Statements of Financial Condition as of March 31, 2005 and December 31, 2004                    |  | 1   
|         |  |                                                                                                             
|         |  | Consolidated Statements of Operations for the three months ended March 31, 2005 and March 31, 2004           |  | 2   
|         |  |                                                                                                             
|         |  | Consolidated Statements of Comprehensive Income for the three months ended March 31, 2005 and March 31, 2004 |  | 3   
|         |  |                                                                                                             
|         |  | Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and March 31, 2004           |  | 4   
|         |  |                                                                                                             
|         |  | Notes to Consolidated Financial Statements                                                                   |  | 5   
|         |  |                                                                                                             
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 16  
|         |  |                                                                                                             
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 31  
|         |  |                                                                                                             
|Item 4.  |  | Controls and Procedures                                                                                      |  | 31  
|         |  |                                                                                                             
|PART II. |  | OTHER INFORMATION                                                                                            |  |     
|         |  |                                                                                                             
|Item 1.  |  | Legal Proceedings                                                                                            |  | 33  
|         |  |                                                                                                             
|Item 2.  |  | Changes in Securities and Use of Proceeds                                                                    |  | 33  
|         |  |                                                                                                             
|Item 3.  |  | Defaults Upon Senior Securities                                                                              |  | 33  
|         |  |                                                                                                             
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                          |  | 33  
|         |  |                                                                                                             
|Item 5.  |  | Other Information                                                                                            |  | 33  
|         |  |                                                                                                             
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                                             |  | 34  



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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 31,2005 |           |   | December 31,2004 |  
|Assets                                                                                   |  |               |           |   |                  |   |           |  
|                                                                                         |  |              
|Cash and due from banks                                                                  |  | $             | 4,555     |   |                  | $ | 4,237     |  
|Short term investments                                                                   |  |               | 13,899    |   |                  |   |          |  
|                                                                                         |  |               |           |   |                  |   |           |  
|Cash and cash equivalents                                                                |  |               | 18,454    |   |                  |   | 4,237     |  
|Restricted cash                                                                          |  |               | 45,872    |   |                  |   | 36,729    |  
|Securities available for sale, at fair value                                             |  |               | 444,251   |   |                  |   | 788,090   |  
|Loans                                                                                    |  |               | 542,625   |   |                  |   | 499,343   |  
|Allowance for loan losses                                                                |  |               | (24,980   | ) |                  |   | (25,593   | )
|                                                                                         |  |               |           |   |                  |   |           |  
|Loans, net                                                                               |  |               | 517,645   |   |                  |   | 473,750   |  
|Premises and equipment, net                                                              |  |               | 3,544     |   |                  |   | 3,519     |  
|Accrued interest receivable                                                              |  |               | 6,851     |   |                  |   | 6,901     |  
|Other assets                                                                             |  |               | 24,967    |   |                  |   | 29,601    |  
|Assets of discontinued operations                                                        |  |               | 92        |   |                  |   | 72,080    |  
|                                                                                         |  |               |           |   |                  |   |           |  
|Total assets                                                                             |  | $             | 1,061,676 |   |                  | $ | 1,414,907 |  
|                                                                                         |  |               |           |   |                  |   |           |  
|Liabilities and Shareholders Equity                                                     |  |               |           |   |                  |   |           |  
|                                                                                         |  |              
|Warehouse line of credit                                                                 |  | $             | 189,016   |   |                  | $ | 101,776   |  
|Securitization notes payable                                                             |  |               | 292,961   |   |                  |   | 352,564   |  
|Repurchase agreements                                                                    |  |               | 431,780   |   |                  |   | 745,295   |  
|Accrued expenses and other liabilities                                                   |  |               | 6,801     |   |                  |   | 8,793     |  
|Junior subordinated debentures/trust preferred securities                                |  |               | 10,310    |   |                  |   | 10,310    |  
|Liabilities of discontinued operationsdeposits held for sale                            |  |               |          |   |                  |   | 71,916    |  
|                                                                                         |  |               |           |   |                  |   |           |  
|Total liabilities                                                                        |  |               | 930,868   |   |                  |   | 1,290,654 |  
|                                                                                         |  |               |           |   |                  |   |           |  
|Common stock (no par value):                                                             |  |               |           |   |                  |   |           |  
|Authorized, 30,000,000 shares                                                            |  |               |           |   |                  |   |           |  
|Issued and outstanding, 16,560,681 at March 31, 2005 and 16,526,358 at December 31, 2004 |  |               | 70,686    |   |                  |   | 70,332    |  
|Retained earnings                                                                        |  |               | 59,807    |   |                  |   | 53,517    |  
|Unrealized gain on securities available for sale, net                                    |  |               | 315       |   |                  |   | 404       |  
|                                                                                         |  |               |           |   |                  |   |           |  
|Total shareholders equity                                                               |  |               | 130,808   |   |                  |   | 124,253   |  
|                                                                                         |  |               |           |   |                  |   |           |  
|Total liabilities and shareholders equity                                               |  | $             | 1,061,676 |   |                  | $ | 1,414,907 |  
|                                                                                         |  |               |           |   |                  |   |           |  



See notes to
consolidated financial statements



1



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)



|                                                       |  |                             |        |   |                   |   |       
|------------------------------------------------------ |  | --------------------------- | ------ | - | ----------------- | - | ------
|                                                       |  | Three Months EndedMarch 31,
|(In thousands, except per share data)                  |  | 2005                        |        |   | 2004(As Restated)
|Interest Income                                        |  |                             |        |   |                   |   |       
|Loans                                                  |  | $                           | 34,666 |   |                   | $ | 26,349
|Short term investments                                 |  |                             | 4,407  |   |                   |   | 4,204 
|                                                       |  |                             |        |   |                   |   |       
|Total interest income                                  |  |                             | 39,073 |   |                   |   | 30,553
|                                                       |  |                             |        |   |                   |   |       
|Interest Expense                                       |  |                             |        |   |                   |   |       
|Securitized borrowings                                 |  |                             | 2,898  |   |                   |   |      
|Warehouse credit lines                                 |  |                             | 1,374  |   |                   |   |      
|Repurchase agreements                                  |  |                             | 3,547  |   |                   |   | 2,859 
|Deposits                                               |  |                             |       |   |                   |   | 3,217 
|Junior subordinated debentures                         |  |                             | 143    |   |                   |   | 120   
|                                                       |  |                             |        |   |                   |   |       
|Total interest expense                                 |  |                             | 7,962  |   |                   |   | 6,196 
|                                                       |  |                             |        |   |                   |   |       
|Net interest income                                    |  |                             | 31,111 |   |                   |   | 24,357
|Provision for loan losses                              |  |                             | 5,713  |   |                   |   | 5,859 
|                                                       |  |                             |        |   |                   |   |       
|Net interest income after provision for loan losses    |  |                             | 25,398 |   |                   |   | 18,498
|                                                       |  |                             |        |   |                   |   |       
|Non-interest Income                                    |  |                             |        |   |                   |   |       
|Services charges and fees                              |  |                             |       |   |                   |   | 140   
|Loan related charges and fees                          |  |                             | 116    |   |                   |   | 312   
|Gain on sale of securities                             |  |                             | 1,648  |   |                   |   |      
|Other income                                           |  |                             | 44     |   |                   |   | 439   
|                                                       |  |                             |        |   |                   |   |       
|Total non-interest income                              |  |                             | 1,808  |   |                   |   | 891   
|                                                       |  |                             |        |   |                   |   |       
|Non-interest Expense                                   |  |                             |        |   |                   |   |       
|Compensation and benefits                              |  |                             | 9,529  |   |                   |   | 7,592 
|Occupancy                                              |  |                             | 945    |   |                   |   | 1,237 
|Other                                                  |  |                             | 5,536  |   |                   |   | 3,517 
|                                                       |  |                             |        |   |                   |   |       
|Total non-interest expense                             |  |                             | 16,010 |   |                   |   | 12,346
|                                                       |  |                             |        |   |                   |   |       
|Income from continuing operations before income taxes  |  |                             | 11,196 |   |                   |   | 7,043 
|                                                       |  |                            
|Income taxes                                           |  |                             | 4,574  |   |                   |   | 2,840 
|                                                       |  |                             |        |   |                   |   |       
|Income from continuing operations                      |  |                             | 6,622  |   |                   |   | 4,203 
|                                                       |  |                            
|Income (loss) from discontinued operations, net of tax |  |                             | (332   | ) |                   |   | 428   
|                                                       |  |                             |        |   |                   |   |       
|Net Income                                             |  | $                           | 6,290  |   |                   | $ | 4,631 
|                                                       |  |                             |        |   |                   |   |       
|Earnings per share-basic:                              |  |                             |        |   |                   |   |       
|                                                       |  |                            
|Continuing operations                                  |  | $                           | 0.40   |   |                   | $ | 0.26  
|                                                       |  |                            
|Discontinued operations                                |  |                             | (0.02  | ) |                   |   | 0.03  
|                                                       |  |                             |        |   |                   |   |       
|Net income                                             |  | $                           | 0.38   |   |                   | $ | 0.29  
|                                                       |  |                             |        |   |                   |   |       
|Weighted average shares outstanding                    |  |                             | 16,538 |   |                   |   | 15,868
|                                                       |  |                             |        |   |                   |   |       
|Earnings per share-diluted:                            |  |                             |        |   |                   |   |       
|                                                       |  |                            
|Continuing operations                                  |  | $                           | 0.36   |   |                   | $ | 0.24  
|                                                       |  |                            
|Discontinued operations                                |  |                             | (0.02  | ) |                   |   | 0.02  
|                                                       |  |                             |        |   |                   |   |       
|Net Income                                             |  | $                           | 0.34   |   |                   | $ | 0.26  
|                                                       |  |                             |        |   |                   |   |       
|Weighted average shares outstanding                    |  |                             | 18,385 |   |                   |   | 17,796
|                                                       |  |                             |        |   |                   |   |       



See notes to
consolidated financial statements



2



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)



|                                       |  |                             |       |   |                   |   |      
|-------------------------------------- |  | --------------------------- | ----- | - | ----------------- | - | -----
|                                       |  | Three Months EndedMarch 31,
|(In thousands)                         |  | 2005                        |       |   | 2004(As Restated)
|Net income                             |  | $                           | 6,290 |   |                   | $ | 4,631
|Other comprehensive income, net of tax |  |                             |       |   |                   |   |      
|Unrealized gain (loss) on securities   |  |                             | (89   | ) |                   |   | 348  
|                                       |  |                             |       |   |                   |   |      
|Comprehensive income                   |  | $                           | 6,201 |   |                   | $ | 4,979
|                                       |  |                             |       |   |                   |   |      



See notes to
consolidated financial statements



3



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                         |  |                             |          |   |                   |   |          |  
|-------------------------------------------------------------------------------------------------------- |  | --------------------------- | -------- | - | ----------------- | - | -------- | -
|                                                                                                         |  | Three Months EndedMarch 31, |         
|(Dollars in thousands)                                                                                   |  | 2005                        |          |   | 2004(As Restated) |  
|Cash Flows from Operating Activities                                                                     |  |                             |          |   |                   |   |          |  
|Income from continuing operations                                                                        |  | $                           | 6,622    |   |                   | $ | 4,203    |  
|Adjustments to reconcile income from continuing operations to net cash provided by operating activities: |  |                             |          |   |                   |   |          |  
|Net gain on sales of securities available for sale                                                       |  |                             | (1,648   | ) |                   |   |         |  
|Provision for loan losses                                                                                |  |                             | 5,713    |   |                   |   | 5,859    |  
|Accretion of discount on loans                                                                           |  |                             | (4,174   | ) |                   |   | (2,254   | )
|Depreciation and amortization                                                                            |  |                             | 359      |   |                   |   | 323      |  
|(Increase) decrease in accrued interest receivable                                                       |  |                             | 50       |   |                   |   | (10      | )
|Decrease in other assets                                                                                 |  |                             | 4,686    |   |                   |   | 1,996    |  
|Amortization of premiums/discounts on securities                                                         |  |                             | 39       |   |                   |   | 506      |  
|Decrease in accrued expenses and other liabilities                                                       |  |                             | (1,992   | ) |                   |   | (1,142   | )
|                                                                                                         |  |                             |          |   |                   |   |          |  
|Net cash provided by operating activities of continuing operations                                       |  |                             | 9,655    |   |                   |   | 9,481    |  
|Income (loss) from discontinued operations                                                               |  |                             | (332     | ) |                   |   | 428      |  
|                                                                                                         |  |                             |          |   |                   |   |          |  
|Net cash provided by operating activities                                                                |  |                             | 9,323    |   |                   |   | 9,909    |  
|                                                                                                         |  |                             |          |   |                   |   |          |  
|Cash Flows from Investing Activities                                                                     |  |                             |          |   |                   |   |          |  
|Purchase of securities available for sale                                                                |  |                             |         |   |                   |   | (265,254 | )
|Proceeds from maturities of investment securities available for sale                                     |  |                             | 24,744   |   |                   |   | 119,932  |  
|Proceeds from sale of investment securities available for sale                                           |  |                             | 330,563  |   |                   |   | 231,929  |  
|Purchases, net of repayments, of non-mortgage loans                                                      |  |                             | (45,434  | ) |                   |   | (41,247  | )
|Change in assets of discontinued operations                                                              |  |                             | 49,921   |   |                   |   | 3,526    |  
|Purchase of premises and equipment                                                                       |  |                             | (384     | ) |                   |   | (425     | )
|Proceeds from redemption of FHLB stock                                                                   |  |                             | 12,067   |   |                   |   |         |  
|                                                                                                         |  |                             |          |   |                   |   |          |  
|Net cash provided by investing activities                                                                |  |                             | 371,477  |   |                   |   | 48,461   |  
|                                                                                                         |  |                             |          |   |                   |   |          |  
|Cash Flows from Financing Activities                                                                     |  |                             |          |   |                   |   |          |  
|Net increase (decrease) in deposits                                                                      |  |                             | (71,916  | ) |                   |   | 27,641   |  
|Repayment from repurchase agreements                                                                     |  |                             | (313,515 | ) |                   |   | (47,669  | )
|Proceeds from warehouse line                                                                             |  |                             | 87,240   |   |                   |   |         |  
|Payments on securitization notes payable                                                                 |  |                             | (59,603  | ) |                   |   |         |  
|Increase in restricted cash                                                                              |  |                             | (9,143   | ) |                   |   |         |  
|Proceeds from exercise of stock options                                                                  |  |                             | 354      |   |                   |   | 132      |  
|                                                                                                         |  |                             |          |   |                   |   |          |  
|Net cash used in financing activities                                                                    |  |                             | (366,583 | ) |                   |   | (19,896  | )
|                                                                                                         |  |                             |          |   |                   |   |          |  
|Net increase in cash and cash equivalents                                                                |  |                             | 14,217   |   |                   |   | 38,474   |  
|Cash and cash equivalents at beginning of period                                                         |  |                             | 4,237    |   |                   |   | 14,209   |  
|                                                                                                         |  |                             |          |   |                   |   |          |  
|Cash and cash equivalents at end of period                                                               |  | $                           | 18,454   |   |                   | $ | 52,683   |  
|                                                                                                         |  |                             |          |   |                   |   |          |  
|Supplemental Disclosures of Cash Flow Information                                                        |  |                             |          |   |                   |   |          |  
|Cash paid for:                                                                                           |  |                             |          |   |                   |   |          |  
|                                                                                                         |  |                            
|Interest                                                                                                 |  | $                           | 8,131    |   |                   | $ | 7,010    |  
|                                                                                                         |  |                             |          |   |                   |   |          |  
|Income taxes                                                                                             |  | $                           | 68       |   |                   | $ | 941      |  
|                                                                                                         |  |                             |          |   |                   |   |          |  



See notes to
consolidated financial statements



4



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements

Three Months Ended March 31, 2005 and 2004

(Unaudited)



|1. | Organization
|-- | ------------



United PanAm Financial Corp. (UPFC or the Company) was incorporated in California on April 9, 1998 for the purpose of
reincorporating its business in California, through the merger of United PanAm Financial Corp., a Delaware corporation, into UPFC. Unless the context indicates otherwise, all references to UPFC include the previous Delaware corporation. UPFC was
originally organized as a holding company for PAFI, Inc. (PAFI) and Pan American Bank, FSB (the Bank) to purchase certain assets and assume certain liabilities of Pan American Federal Savings Bank.



At March 31, 2005, PAFI was a direct wholly-owned subsidiary of UPFC. United
Auto Credit Corp. (UACC) was a direct wholly-owned subsidiary of PAFI, and UPFC Auto Receivables Corporation and UPFC Funding Corporation were direct wholly-owned subsidiaries of UACC. On April 22, 2005, PAFI was merged with and into
UPFC, and UACC became a direct wholly-owned subsidiary of UPFC.



Prior to its dissolution on February 11, 2005, the Bank was a wholly-owned subsidiary of PAFI, and UACC was a direct wholly-owned subsidiary of the Bank.



|2. | Basis of Presentation
|-- | ---------------------



The accompanying unaudited consolidated financial statements include the accounts of UPFC, PAFI and UACC. Significant inter-company accounts and
transactions have been eliminated in consolidation.



These
unaudited 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 GAAP 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, 2004.



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



|3. | Restatements of Consolidated Financial Statements
|-- | -------------------------------------------------



During the first quarter of 2005, as part of the audit of the Companys consolidated financial statements for the year ended December 31, 2004,
management made the following corrections to such consolidated financial statements:



| |  |  | The methodology used to implement Practice Bulletin 6 prior to January 1, 2003 was incorrect. The Company previously treated any expected credit loss over the life
of a pool of loans in excess of the amount of discount on the purchased loans as an adjustment of interest income over the life of the loans. Such excess losses should properly have been charged to the provision for loan losses. The impact of this
correction was an increase in net income in 2004 of $769,000 after tax ($1,290,000 pre tax) and in
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



5



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements(Continued)

Three Months Ended March 31, 2005 and 2004

(Unaudited)



| | 2003 of $1,996,000 after tax ($3,349,000 pre tax) and a decrease in net income in 2002 of $ 2,294,000 after tax ($3,712,000 pre tax) and in 2001 of $430,000
after tax ($698,000 pre tax).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The methodology used to accrete discount on purchased loans did not properly reflect the level yield method of reporting interest income. The method which had been previously used
resulted in an overstatement of accreted discount during earlier periods in the life of a loan, with a corresponding understatement of accreted discount in the later periods of a loan. The impact of this change decreased interest income on loans in
2004 by $521,000 after tax ($884,000 pre tax) and in 2003 by $333,000 after tax ($564,000 pre tax) and will result in an increase in future years as this discount is accreted into income in the future.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An error occurred in the Companys calculation of the provision for loan losses for the fourth quarter of 2004 as a result of applying a higher loss rate to our individual
static pools than the rates specified in the model, which resulted in an overstatement of the provision for loan losses of $ 441,000 for the year ended December 31, 2004.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An accrual of repossession costs for repossession activities in progress which are currently recorded on a cash basis resulted in an increase in expenses for the year ended December
31, 2004 of $534,000.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A reduction of interest income for the uncollectibility of accrued interest on loans over 30 days delinquent and for current loans in repossession status resulted in a decrease in
income for the year ended December 31, 2004 of $352,000.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Aggregate miscellaneous adjustments resulted in a decrease income for the year ended December 31, 2004 of $311,000 and did not affect the income statement of the three months ended
March 31, 2004.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Changes to Unaudited Consolidated Statements
of Financial Condition



|                                                              |  |                      |           |   |             |   |           |  
|------------------------------------------------------------- |  | -------------------- | --------- | - | ----------- | - | --------- | -
|                                                              |  | As of March 31, 2004 |          
|                                                              |  | Unaudited            |          
|                                                              |  | As Reported          |           |   | As Restated |  
|Loans                                                         |  | $                    | 478,701   |   |             | $ | 438,364   |  
|Unearned discount                                             |  | $                    | (17,857   | ) |             | $ | (18,089   | )
|Allowance for loan losses                                     |  | $                    | (24,713   | ) |             | $ | (25,130   | )
|Loans, net                                                    |  | $                    | 436,131   |   |             | $ | 395,145   |  
|FHLB stock, at cost                                           |  | $                    | 11,563    |   |             | $ |          |  
|Accrued interest receivable                                   |  | $                    | 6,211     |   |             | $ | 5,903     |  
|Other assets                                                  |  | $                    | 24,193    |   |             | $ | 25,825    |  
|Assets of discontinued operations                             |  | $                    | 49,009    |   |             | $ | 37,446    |  
|Total assets                                                  |  | $                    | 1,649,961 |   |             | $ | 1,647,745 |  
|Deposits                                                      |  | $                    | 526,030   |   |             | $ |          |  
|Accrued expenses and other liabilities                        |  | $                    | 5,237     |   |             | $ | 5,653     |  
|Liabilities of discontinued operationsdeposits held for sale |  | $                    |          |   |             | $ | 526,030   |  
|Total liabilities                                             |  | $                    | 1,546,103 |   |             | $ | 1,546,519 |  
|Retained earnings                                             |  | $                    | 37,075    |   |             | $ | 34,443    |  
|Total shareholders equity                                     |  | $                    | 103,858   |   |             | $ | 101,226   |  
|Total liabilities and shareholders equity                     |  | $                    | 1,649,961 |   |             | $ | 1,647,745 |  



As of March 31, 2004
assets and liabilities of discontinued operations were reclassified and the accounting for dealer discount for loans booked prior to January 1, 2003 was corrected and the accretion of discount was



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements(Continued)

Three Months Ended March 31, 2005 and 2004

(Unaudited)



changed to reflect the level yield method. The accrued liabilities for collection expenses were also increased. The adjustments resulted in a decrease in
total assets of $2,216,000 and retained earnings of $2,632,000 and an increase in liabilities



Changes to Unaudited Consolidated Statements of Income



|                                                      |  |                                  |        |             |   |       
|----------------------------------------------------- |  | -------------------------------- | ------ | ----------- | - | ------
|                                                      |  | Three Months EndedMarch 31, 2004
|                                                      |  | Unaudited                       
|                                                      |  | As Reported                      |        | As Restated
|Interestloans                                        |  | $                                | 26,639 |             | $ | 26,349
|Short term investment                                 |  | $                                | 5,074  |             | $ | 4,204 
|Total interest income                                 |  | $                                | 31,713 |             | $ | 30,553
|Deposits                                              |  | $                                | 3,519  |             | $ | 3,217 
|Total interest expense                                |  | $                                | 6,498  |             | $ | 6,196 
|Net interest income                                   |  | $                                | 25,215 |             | $ | 24,357
|Provision for loan losses                             |  | $                                | 5,211  |             | $ | 5,859 
|Net interest income after provision for loan losses   |  | $                                | 20,004 |             | $ | 18,498
|Service charges and fees                              |  | $                                | 256    |             | $ | 140   
|Loan related charges and fees                         |  | $                                | 86     |             | $ | 312   
|Gain on sale of securities                            |  | $                                | 499    |             | $ |      
|Other income                                          |  | $                                | 438    |             | $ | 439   
|Total non-interest income (loss)                      |  | $                                | 1,279  |             | $ | 891   
|Compensation of benefits                              |  | $                                | 7,713  |             | $ | 7,592 
|Occupancy                                             |  | $                                | 1,243  |             | $ | 1,237 
|Other expenses                                        |  | $                                | 3,206  |             | $ | 3,517 
|Total non-interest expense                            |  | $                                | 12,162 |             | $ | 12,346
|Income from continuing operations before income taxes |  | $                                | 9,121  |             | $ | 7,043 
|Income taxes                                          |  | $                                | 3,684  |             | $ | 2,840 
|Income from continuing operations                     |  | $                                | 5,437  |             | $ | 4,203 
|Income from discontinued operations, net of tax       |  |                                  |       |             | $ | 428   
|Net income                                            |  | $                                | 5,437  |             | $ | 4,631 
|Comprehensive income                                  |  | $                                | 5,785  |             | $ | 4,979 
|Earnings per share-basic:                             |  |                                  |        |             |   |       
|Income before discontinued operations                 |  | $                                | 0.34   |             | $ | 0.26  
|Discontinued operations                               |  | $                                |       |             | $ |      
|Net income                                            |  | $                                | 0.34   |             | $ | 0.29  
|Earnings per share-diluted:                           |  |                                  |        |             |   |       
|Income before discontinued operations                 |  | $                                | 0.30   |             | $ | 0.24  
|Discontinued operations                               |  | $                                |       |             | $ |      
|Net income                                            |  | $                                | 0.30   |             | $ | 0.26  



For the three months
ended March 31, 2004, income and expenses of the Companys insurance premium finance operations were reclassified to income from discontinued operations, net of tax. The accounting for dealer discount and the accretion of income was corrected
resulting in a net decrease in interest income of $290,000. An adjustment was made to increase the provision for loan losses by $662,000 and additional collection expenses of $416,000 were accrued. These changes resulted in a decrease in net income
after tax of $806,000.



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements(Continued)

Three Months Ended March 31, 2005 and 2004

(Unaudited)



|4. | Discontinued Operations
|-- | -----------------------



In August 2004, the Bank adopted a plan of voluntary dissolution (the Plan) to dissolve and ultimately exit its federal thrift charter. The
Office of Thrift Supervision (the OTS) conditionally approved the Plan in August 2004, subject to the Bank satisfying certain conditions imposed by the OTS.



In September 2004, the Company sold its three retail bank branches (with total deposits of $223.4 million) and its brokered
deposit portfolio (with deposits of $184.3 million). In February 2005, the Company sold its remaining internet originated deposits. The Company recognized a gain on sale of the three retail branches and the brokered deposit portfolio of $2.7 million
after tax. The normal net operating costs and interest expense on deposits of the Bank have not been reclassified as discontinued operations from prior periods because the associated loans funded by these deposits are not discontinued and the cost
of the replacement funds from the securitization and the warehouse line are very similar to the net cost of deposits including operating costs.



On March 7, 2005, the Company received confirmation that the Federal Deposit Insurance Corporation (FDIC) terminated the insured status of the
Bank effective February 7, 2005. On March 8, 2005, the Company received confirmation from the OTS that the Banks federal charter was cancelled effective February 11, 2005. In connection with the Plan and to facilitate the dissolution, the
Company has irrevocably guaranteed all remaining obligations of the Bank.



In connection with the dissolution of the Bank, and in order to concentrate the Companys efforts on its non-prime automobile finance business, the Company sold its portfolio of insurance premium finance loans to
Classic Plan Premium Financing, Inc. in November 2004 at a nominal premium over par.



The following amounts have been segregated from continuing operations and reflected as discontinued operations.



|                                                                                                                        |  |                              |      |   |                  |   |       
|----------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ---- | - | ---------------- | - | ------
|(Dollars in Thousands)                                                                                                  |  | March 31,2005                |      |   | December 31,2004
|Assets of discontinued operations                                                                                       |  | $                            | 92   |   |                  | $ | 72,080
|Liabilities of discontinued operationsdeposits held for sale                                                           |  | $                            |     |   |                  | $ | 71,916
|                                                                                                                        | 
|                                                                                                                        |  | Three Months Ended March 31,
|                                                                                                                        |  | 2005                         |      |   | 2004            
|Revenue                                                                                                                 |  | $                            | 133  |   |                  | $ | 1,077 
|Income (loss) from discontinued operations (after applicable income (tax benefits) taxes of $(232), $292, respectively) |  | $                            | (332 | ) |                  | $ | 428   



Discontinued
operations had $377,000 as of March 31, 2005 and $342,000 as of December 31, 2004 of accrued liabilities, respectively.



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements(Continued)

Three Months Ended March 31, 2005 and 2004

(Unaudited)



|5. | Earnings per Share
|-- | ------------------



Basic earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted earnings
per share is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include
outstanding stock options, stock awards, and shared performance stock awards.



|                                          |  |                             |        |   |                   |   |       
|----------------------------------------- |  | --------------------------- | ------ | - | ----------------- | - | ------
|                                          |  | Three Months EndedMarch 31,
|(In thousands, except per share amounts)  |  | 2005                        |        |   | 2004(As Restated)
|Earnings per sharebasic:                 |  |                             |        |   |                   |   |       
|Income before discontinued operations     |  | $                           | 6,622  |   |                   | $ | 4,203 
|Discontinued operations                   |  |                             | (332   | ) |                   |   | 428   
|                                          |  |                             |        |   |                   |   |       
|Net income                                |  | $                           | 6,290  |   |                   | $ | 4,631 
|                                          |  |                             |        |   |                   |   |       
|Average common shares outstanding         |  |                             | 16,538 |   |                   |   | 15,868
|                                          |  |                             |        |   |                   |   |       
|Per share before discontinued operations  |  | $                           | 0.40   |   |                   | $ | 0.26  
|Discontinued operations                   |  |                             | (0.02  | ) |                   |   | 0.03  
|                                          |  |                             |        |   |                   |   |       
|Per share                                 |  | $                           | 0.38   |   |                   | $ | 0.29  
|                                          |  |                             |        |   |                   |   |       
|Earnings per sharediluted:               |  |                             |        |   |                   |   |       
|Income before discontinued operations     |  | $                           | 6,622  |   |                   | $ | 4,203 
|Discontinued operations                   |  |                             | (332   | ) |                   |   | 428   
|                                          |  |                             |        |   |                   |   |       
|Net income                                |  | $                           | 6,290  |   |                   | $ | 4,631 
|                                          |  |                             |        |   |                   |   |       
|Average common shares outstanding         |  |                             | 16,538 |   |                   |   | 15,868
|Add: Stock options                        |  |                             | 1,847  |   |                   |   | 1,928 
|                                          |  |                             |        |   |                   |   |       
|Average common shares outstandingdiluted |  |                             | 18,385 |   |                   |   | 17,796
|                                          |  |                             |        |   |                   |   |       
|Per share before discontinued operations  |  | $                           | 0.36   |   |                   | $ | 0.24  
|Discontinued operations                   |  |                             | (0.02  | ) |                   |   | 0.02  
|                                          |  |                             |        |   |                   |   |       
|Per share                                 |  | $                           | 0.34   |   |                   | $ | 0.26  
|                                          |  |                             |        |   |                   |   |       



For the three months
ended March 31, 2005 and 2004, 298,000 and 369,000 shares attributable to outstanding stock options were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the
average price of the common shares, and therefore their inclusion would have been anti-dilutive.



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements(Continued)

Three Months Ended March 31, 2005 and 2004

(Unaudited)



|6. | Stock-Based Compensation
|-- | ------------------------



At March 31, 2005 and 2004, 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 No. 25. 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, 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, 2005 and 2004:



|                                                                                                                |  |                             |       |                   |   |      
|--------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ----- | ----------------- | - | -----
|                                                                                                                |  | Three Months EndedMarch 31,
|(In thousands, except per share amounts)                                                                        |  | 2005                        |       | 2004(As Restated)
|Net income as reported                                                                                          |  | $                           | 6,290 |                   | $ | 4,631
|                                                                                                                |  |                            
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards |  |                             | 261   |                   |   | 201  
|                                                                                                                |  |                             |       |                   |   |      
|Net incomepro forma                                                                                            |  | $                           | 6,029 |                   | $ | 4,430
|                                                                                                                |  |                             |       |                   |   |      
|Net income per share as reportedbasic                                                                          |  | $                           | 0.38  |                   | $ | 0.29 
|                                                                                                                |  |                             |       |                   |   |      
|Net income per sharepro formabasic                                                                            |  | $                           | 0.36  |                   | $ | 0.28 
|                                                                                                                |  |                             |       |                   |   |      
|Net income per share as reportedfully diluted                                                                  |  | $                           | 0.34  |                   | $ | 0.26 
|                                                                                                                |  |                             |       |                   |   |      
|Net income per sharepro formafully diluted                                                                    |  | $                           | 0.33  |                   | $ | 0.25 
|                                                                                                                |  |                             |       |                   |   |      



|7. | Allowance for Loan Losses
|-- | -------------------------



UACC purchases automobile contracts at a discount from face value. Prior to 2003, we had accounted for the purchase of automobile contracts by recording
the automobile contract at face value, and allocated the remainder to the allowance for credit losses and unearned income. This method resulted in estimated expected credit losses over the life of the contract being provided at the date of purchase
and the credit-adjusted yield being recorded as interest income over the life of the contract.



Commencing January 1, 2003, after consultation with the OTS, we began to allocate the purchase price entirely to automobile contracts and unearned income at the date of purchase. The unearned income is now accreted as
an adjustment to yield over the life of the contract. An allowance for credit losses is established through provisions for losses recorded in income as necessary to provide for estimated contract losses (net of remaining unearned income) at each
reporting date.



The total allowance for loan losses was $25.0
million at March 31, 2005 compared with $25.1 million at March 31, 2004, representing 4.38% of loans at March 31, 2005 and 5.98% at March 31, 2004. Additionally, unearned discounts on loans totaled $27.9 million at March 31, 2005 compared with $18.7
million at March 31, 2004, representing 4.89% of loans at March 31, 2005 compared with 4.25% of loans at March 31, 2004.



|8. | Recent Accounting Developments
|-- | ------------------------------



In December 2003, the Financial Accounting Standards Board (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



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements(Continued)

Three Months Ended March 31, 2005 and 2004

(Unaudited)



and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation of Variable Interest Entities, which was issued in
January 2003. The Company is required to apply FIN 46R to variable interests in variable interest entities created after December 31, 2003. For variable interests 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 non-controlling interest of the variable interest entity initially
are measured at their 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 accounting change. If determining the carrying
amounts is not practical, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities and non-controlling 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 consolidated financial statements. As of March 31, 2005 this pronouncement had no impact on the consolidated
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 a 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 believes that this pronouncement will not have a material impact on the Companys consolidated financial position and results of operations. As of March
31, 2005 this pronouncement had no impact on the consolidated financial statements.



In March 2004, the FASB issued Emerging Issues Task Force Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. This EITF describes a model that
involves three steps: (a) determination of whether an investment is impaired, (b) determination of whether the impairment is other-than-temporary, and (c) recognition of the impairment loss in earnings. The EITF also requires several additional
disclosures for cost-method investments. The EITFs impairment accounting guidance is effective for reporting periods beginning after June 15, 2004. The Companys adoption of this EITF will not have a material impact on its consolidated
financial statements. As of March 31, 2005 this pronouncement had no impact on the consolidated financial statements.



In December 2004, the FASB issued SFAS No. 123-R, Share-Based Payment, which requires that the compensation cost relating to share-based payment
transactions (including the cost of all employee stock options)



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements(Continued)

Three Months Ended March 31, 2005 and 2004

(Unaudited)



be recognized in the financial statements. That cost will be measured based on the estimated fair value of the equity or liability instruments issued. SFAS
No. 123-R covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.



SFAS No. 123-R replaces SFAS No. 123, Accounting for Stock-Based
Compensation, and supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.As originally issued, SFAS No. 123 established as preferable a fair-value-based method of accounting for share-based
payment transactions with employees. However, that pronouncement permitted entities to continue applying the intrinsic-value-based model of Opinion 25, provided that the financial statements disclosed the pro forma net income or loss based on the
preferable fair-value method.



Publicly held companies that are
not Small Business Issuers are required to apply SFAS No. 123-R at the beginning of their next fiscal year. Thus, the Companys consolidated financial statements will reflect an expense for (a) all share-based compensation arrangements granted
after June 30, 2004 and for any such arrangements that are modified, cancelled, or repurchased after that date, and (b) the portion of previous share-based awards for which the requisite service has not been rendered as of that date, based on the
grant-date estimated fair value of those awards. Management believes the adoption of this pronouncement will not have material effect on our consolidated financial statements. As of March 31, 2005 this pronouncement had no impact on the consolidated
financial statements



Also, in December 2004, the FASB issued
SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions. The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be
measured using the estimated fair value of the assets exchanged. SFAS No. 153 eliminates the narrow exception for nonmonetary exchanges of similar productive assets, and replaces it with a broader exception for exchanges of nonmonetary assets that
do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the transaction. This pronouncement is effective for nonmonetary
exchanges in fiscal periods beginning after June 15, 2005. Management believes the adoption of this pronouncement will not have material effect on our consolidated financial statements. As of March 31, 2005 this pronouncement had no impact on the
consolidated financial statements.



Other recent accounting
pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Companys present or future consolidated financial statements.



|9. | Due from Shareholder
|-- | --------------------



At March 31, 2005, the Company held an amount receivable from its major shareholders BVG West Corp. and Pan American Financial, L.P. in the amount of
$672,000 (2004-$487,669). This amount is receivable pursuant to the Amended and Restated Registration Rights Agreement entered into on September 29, 2004 and effective as of July 1, 2004. Pursuant to this agreement, we will pay the costs associated
with the secondary offering and will receive reimbursement at the time of completion of the offering. Guillermo Bron, Chairman of the Board of Directors, is the sole general partner of BVG West Corporation, which is the sole general partner of Pan
American Financial, L.P. The Company has accrued $150,000 (2004-$150,000) for bonuses payable to Guillermo Bron.



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements(Continued)

Three Months Ended March 31, 2005 and 2004

(Unaudited)



|10. | Restricted Cash
|--- | ---------------



Restricted cash related to $9.333 million of deposits held as collateral for securitized obligations at March 31, 2005 and at December 31, 2004.
Additionally, $36.539 million relates to cash that is in process of being applied to the pay down of securitized obligations and warehouse liabilities compared with $27.396 million at December 31, 2004.



|11. | Assets Sold Under Agreement to Repurchase
|--- | -----------------------------------------



U.S. Government Agency Obligations



|                     |  |                                        |   |   |               |   |        |               |  |   |              |   |  |        |         |   |       |   |   |   |  |   |         |  
|-------------------- |  | -------------------------------------- | - | - | ------------- | - | ------ | ------------- |  | - | ------------ | - |  | ------ | ------- | - | ----- | - | - | - |  | - | ------- | -
|                     |  | Original term of repurchase obligation |  
|                     |  | Overnight                              |   |   | Up to 30 days |   |        | 31 to 90 days |  |   | Over 90 days |   |  | Demand |         |   | Total |  
|Securities sold      |  |                                        |   |   |               |   |        |               |  |   |              |   |  |        |         |   |       |   |   |   |  |   |         |  
|Book and mkt value   |  | $                                      |  |   |               | $ | 44,216 |               |  | $ |             |   |  | $      | 400,035 |   |       | $ |  |   |  | $ | 444,251 |  
|Accrued interest     |  |                                        |  |   |               |   | 243    |               |  |   |             |   |  |        | 576     |   |       |   |  |   |  |   | 819     |  
|                     |  |                                        |   |   |               |  
|Repurchase liability |  |                                        |   |   |               |   |        |               |  |   |              |   |  |        |         |   |       |   |   |   |  |   |         |  
|Principal payable    |  | $                                      |  |   |               | $ | 43,199 |               |  | $ |             |   |  | $      | 388,581 |   |       | $ |  |   |  | $ | 431,780 |  
|Interest rate        |  |                                        |  | % |               |   | 3.09   | %             |  |   |             | % |  |        | 2.84    | % |       |   |  | % |  |   | 2.87    | %



|12. | Borrowings
|--- | ----------



Securitizations



We completed one securitization transaction in the third quarter of 2004. This transaction is structured as an on-balance sheet transaction, recorded as a
secured financing. Regular contract securitizations are an integral part of our business plan for the future so we will increase our liquidity and reduce risks associated with interest rate fluctuations. We have developed a securitization program
that involves selling interests in pools of our automobile contracts to investors through the public issuance of AAA/Aaa rated asset-backed securities. Automobile securitizations are used by many financial institutions and are part of a
multi-billion dollar annual market for asset-backed securities. As part of this process, management considers the relative risks and returns prior to initiating a securitization. These risks include, but are not limited to, interest rate
fluctuations during the warehouse period, increased prepayment speeds and losses, loss of servicing rights and adverse economic conditions. These factors are explained in further detail in the section Risks Related to our Business. The
table below provides information about the outstanding trust assets and liabilities as of March 31, 2005 and December 31, 2004.



|                  |  |               |         |                  |   |        
|----------------- |  | ------------- | ------- | ---------------- | - | -------
|(In thousands)    |  | March 31,2005 |         | December 31,2004
|Total assets      |  | $             | 334,577 |                  | $ | 392,632
|Total liabilities |  | $             | 292,961 |                  | $ | 352,564



In the securitization,
we sold our automobile contracts to a newly formed owner trust, which issued notes. The net proceeds of the securitization were used to fund the sale of the Banks deposit liabilities.



To improve the level of profitability from the sale of securitized automobile
contracts, we arranged for credit enhancement to improve the credit rating on the asset-backed securities issued. This credit enhancement



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements(Continued)

Three Months Ended March 31, 2005 and 2004

(Unaudited)



was in the form of a financial guaranty insurance policy insuring the payment of principal and interest due on the asset-backed securities. The policy was
issued by AMBAC Insurance Corporation.



Warehouse Facility



As of March 31, 2005 we were party to one $250 million
warehouse facility, which we used to fund our automobile finance operations to purchase automobile contracts pending securitization. This facility was increased from its original amount of $200 million to its present level during the first quarter
of 2005. Under the terms of the facility, our indirect subsidiary, UPFC Funding Corp., may obtain advances on a revolving basis by issuing notes to the participating lenders and pledging for each advance a portfolio of automobile receivables. UPFC
Funding Corp. purchases the automobile receivables from UACC and UACC services the automobile receivables, which are held by a custodian. We have agreed to provide an absolute and unconditional and irrevocable guaranty of the full and punctual
payment and performance, of all liabilities, agreements and other obligations of UACC under the warehouse facility. This facility is used to fund the purchase of automobile contracts and will be used as ongoing credit until we can structure another
securitization.



Other Sources of Funds



The collection of principal and interest from contracts originated and
securitized and the release of cash from the securitization spread account is another source of significant funds for us. Pursuant to the securitization, we receive cash released from the trustee from the spread account on the securitization once
the spread account reaches a predetermined funding level. The amount released from the spread account represents the return of the initial deposits to such accounts as well as the release of the excess spread on the securitized contract.



For future securitizations, collections of principal and interest may be
deposited into collection accounts established in connection with the securitization. We may receive access to the amounts deposited into collection accounts and amounts held in the spread account for these securitizations. We would use the amounts
received in our daily operations, although delinquency or charge off rates in a securitization that exceeds established triggers, will require that amounts being held in spread accounts increase.



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.



|13. | Operating Segments
|--- | ------------------



The Company has two reportable segments: automobile finance and investment. The automobile finance segment acquires, holds for investment and services
non-prime retail automobile installment sales contracts generated by franchised and independent dealers of used automobiles. The investment segment acquires bonds funded through repurchase agreements with major investment bankers and includes
corporate administration.



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United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements(Continued)

Three Months Ended March 31, 2005 and 2004

(Unaudited)



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, 2005             
|                          |  | AutomobileFinance                                        |         | Investment |   | Total    
|Net interest income       |  | $                                                        | 30,367  |            | $ | 744       |  | $ | 31,111   
|Provision for loan losses |  |                                                          | 5,713   |            |   |          |  |   | 5,713    
|Non-interest income       |  |                                                          | 148     |            |   | 1,660     |  |   | 1,808    
|Non-interest expense      |  |                                                          | 15,738  |            |   | 272       |  |   | 16,010   
|Segment profit, pre-tax   |  | $                                                        | 9,064   |            | $ | 2,132     |  | $ | 11,196   
|Total assets              |  | $                                                        | 586,073 |            | $ | 475,603   |  | $ | 1,061,676
|                          | 
|                          |  | At or For Three Months Ended March 31, 2004(As Restated)
|                          |  | AutomobileFinance                                        |         | Investment |   | Total    
|Net interest income       |  | $                                                        | 21,610  |            | $ | 2,747     |  | $ | 24,357   
|Provision for loan losses |  |                                                          | 5,859   |            |   |          |  |   | 5,859    
|Non-interest income       |  |                                                          | 128     |            |   | 763       |  |   | 891      
|Non-interest expense      |  |                                                          | 12,157  |            |   | 189       |  |   | 12,346   
|Segment profit, pre-tax   |  | $                                                        | 3,722   |            | $ | 3,321     |  | $ | 7,043    
|Total assets              |  | $                                                        | 407,976 |            | $ | 1,239,769 |  | $ | 1,647,745



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



|14. | Subsequent Events
|--- | -----------------



On April 7, 2005, we completed our second securitization of $195 million of automobile receivable backed securities. We intend to complete a new
securitization approximately each 6 months.



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|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 (the Company)
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: our recent shift of the funding source of our business; our dependence on securitizations; our need for substantial liquidity to run our business; loans we made to credit-impaired borrowers; reliance on operational
systems and controls and key employees; competitive pressure we face; changes in the interest rate environment; rapid growth of our businesses; general economic conditions; 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



We are a specialty finance company
engaged primarily in non-prime automobile finance. 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. Non-prime borrowers generally pay higher interest rates and loan fees than do prime borrowers. We conduct our automobile
finance business through our direct wholly-owned subsidiary UACC. UACC purchases and holds for investment non-prime automobile installment sales contracts, or automobile contracts, originated by independent and franchised dealers of used
automobiles.



We fund our automobile finance business through
securitizations and warehouse financing. In September 2004 we closed our first securitization composed of a $420 million offering of automobile receivable backed securities. In April 2005 we closed our second securitization composed of a $195
million offering of automobile receivable backed securities. We plan to close a new securitization approximately each 6 months.



We have arranged a warehouse line with Deutsche Bank to fund our ongoing operations. This facility was originally $200 million but was increased to $250
million in the first quarter of 2005.



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.



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. Certain accounting policies are described in detail in Note 4 to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS presented in
our 2004 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



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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.



Securitization Transactions



The transfer of our automobile contracts to the securitization trust is treated as a secured financing under accounting principles generally accepted in
the United States of America, also known as GAAP. For GAAP purposes, the contracts are retained on the balance sheet with the securities issued to finance the contracts recorded as securitized notes payable. We record interest income on the
securitized contracts and interest expense on the notes issued through the securitization transactions.



As servicer of these contracts, we remit funds collected from the borrowers on behalf of the trustee to the trustee and direct the trustee how the funds
should be invested until the distribution dates. We have retained an interest in the securitized contracts, and have the ability to receive future cash flows as a result of that retained interest.



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 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 includes 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.



For all contracts purchased after December 31, 2002, we established our allowance for loan losses by using the Expected 12 month Charge Off
Method which establishes allowances based on the incurred loss method that sums the expected charge-offs for the next 12 months in each static loss pool.



For all contracts purchased after December 31, 2002, the Bank allocated the purchase price entirely to automobile contracts and unearned income at the
date of purchase. The unearned income is accreted as an adjustment to yield over the life of the contract. An allowance for credit losses is established through provisions for losses recorded in income as necessary to provide for estimated contract
losses at each reporting date.



For automobile contracts
purchased prior to January 1, 2003 we contributed all or a portion of the original discount to allowance for loan losses to estimate the expected losses over the life of the loan. We account for such contracts by static pool, stratified into
six-month pools, so that the credit risk in each individual static pool can be evaluated independently, on a periodic basis, in order to estimate the future losses within each static pool over the remaining life of the loans. Additional provisions
for credit losses for these pools purchased prior to 2003 were recognized immediately for pools where the remaining amount of the initial discount set aside was determined to be insufficient to cover losses expected to be incurred based on an
analysis of projected losses during the entire life of the loans.



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



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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.



Derivatives and Hedging Activities



The contracts originated and held by us are fixed rate and, accordingly, we have exposure to changes in interest rates. To protect against potential
changes in interest rates affecting interest payments on future securitization transactions, we have entered into various agreements prior to closing a transaction. We entered into forward agreements in order to reduce the risk of incurring larger
interest payments on our notes payable on automobile secured financing. The market value of these agreements was designed to respond inversely to changes in interest rates. Because of this inverse relationship, we can effectively lock in a gross
interest rate spread at the time of entering into the transaction. Gains and losses on these agreements were recorded on our Consolidated Statements of Operations, because the derivative transactions did not meet the accounting literature
requirements to qualify for hedge accounting. Credit risk related to these instruments is minimal. We are not currently utilizing hedging instruments because our securitization borrowings are fixed rate borrowings and we plan to enter into a new
securitization every 6 months.



Factors Affecting Future Results of
Operations



This quarterly report on Form 10-Q contains
forward-looking statements, including statements regarding our strategies, objectives, expectations and intentions, which are subject to a variety of risks and uncertainties. You should carefully consider the following risks in your evaluation of us
and our common stock. The risks and uncertainties described below may not be the only ones we face.



Risks Related to Our Business



We
require substantial liquidity to run our business.



We
require a substantial amount of liquidity to operate our business and we require substantial cash to fund growth of our automobile finance operations. Among other things, we use such liquidity to acquire automobile contracts, pay securitization
costs and fund related accounts, satisfy working capital requirements and pay operating expenses and to pay interest expense. We depend on warehouse financing to fund our operations and there is no assurance that we will be able to obtain warehouse
financing in the future. If we are unable to obtain acceptable warehouse financing or access the capital markets, our financial position, liquidity and results of operations would be materially adversely affected.



We recently shifted the funding source of our business and so do not have experience in
managing our new sources of funding.



During the third
quarter of 2004, we shifted the funding source of our automobile finance business to the public capital markets through warehouse facilities and securitizations. Historically, we have funded the purchase of automobile contracts business principally
through deposits of the Bank. However, our Board of Directors decided to implement the 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 of the Bank. Non-prime lending has been and continues to be an area of lending that has been the subject of extraordinary regulatory concern and scrutiny among all of the federal banking regulatory authorities,
including the OTS. The Banks federal thrift charter was cancelled effective February 11, 2005 by the OTS.



As a result of this shift in our funding source, we now rely on the public capital markets to obtain acceptable terms of financing, rather than relying on
obtaining Bank deposits. We are not experienced in managing warehouse facilities and securitizations. If we are unable to successfully manage our sources of funding, our ability to access liquidity could be adversely impacted.



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We face risks related to our recent accounting restatements.



On November 5, 2004, we publicly announced that we had discovered accounting
inaccuracies in previously reported consolidated financial statements. As a result, following consultation with our auditors, we decided to restate our consolidated financial statements for the three and six months ended June 30, 2004 and 2003,
three months ended March 31, 2004 and 2003, three and nine months ended September 30, 2003 and each of the years ended December 31, 2003, 2002 and 2001 to correct accounting entries.



As a result, the restatement of these consolidated financial statements may lead to litigation claims and/or regulatory
proceedings against us. The defense of any such claims or proceedings may cause the diversion of managements attention and resources, and we may be required to pay damages if any such claims or proceedings are not resolved in our favor. Any
litigation or regulatory proceeding, even if resolved in our favor, could cause us to incur significant legal and other expenses. We also may have difficulty obtaining other financing such as lines of credit or otherwise. We may not be able to
effectuate our current operating strategy, including the ability to acquire contracts at projected levels. Moreover, we may be the subject of negative publicity focusing on the financial statement inaccuracies and resulting restatements and negative
reactions from our stockholders, creditors or others with which we do business. The occurrence of any of the foregoing could harm our business and reputation and cause the price of our common stock to decline.



We depend on our warehouse facility to finance the purchase of automobile contracts
pending a new securitization. Our business strategy requires that such financing continue to be available during the warehousing period.



Our primary source of operating cash comes from a $250 million warehouse facility, which we use to fund our automobile finance operations to purchase
automobile contracts pending securitization. Under the terms of the facility, our indirect subsidiary, UPFC Funding Corp., may obtain advances on a revolving basis by issuing notes to the participating lenders and pledging for each advance a
portfolio of automobile receivables. UPFC Funding Corp. purchases the automobile receivables from UACC and UACC services the automobile receivables, which are held by a custodian. We have agreed to provide an absolute and unconditional and
irrevocable guaranty of the full and punctual payment and performance, of all liabilities, agreements and other obligations of UACC under the warehouse facility.



Whether our $250 million warehouse facility continues to be available to us depends on, among other things, whether we
maintain a target net yield for the automobile receivables that are pledged under the facility and comply with certain financial covenants contained in the sale and servicing agreement. The timing and amount of cash flows from automobile contracts
varies based on a number of factors, including:



| |  |  | the rates and amounts of loan delinquencies, defaults and net credit losses;
| | - |  | ----------------------------------------------------------------------------



| |  |  | how quickly and at what price repossessed vehicles can be resold; and
| | - |  | ---------------------------------------------------------------------



| |  |  | how quickly new automobile finance branches become cash-flow positive.
| | - |  | ----------------------------------------------------------------------



Any adverse change in these factors could adversely affect our ability to obtain warehouse financing. There is no assurance that our automobile finance
warehouse facility will be available to us or that it will be available on favorable terms. If we are unable to arrange new warehousing credit facilities or extend our existing credit facility when it expires, our results of operations, financial
condition and cash flows could be materially and adversely affected.



We
depend on securitizations to generate revenue.



We rely on
our ability to aggregate and pledge receivables to securitization trusts and sell securities in the asset-backed securities market to generate cash proceeds for repayment of our automobile warehouse credit



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facility and to create availability to purchase additional automobile contracts. Our ability to complete securitizations of our automobile contracts is
affected by many factors, including, among other things:



| |  |  | conditions in the securities markets generally;
| | - |  | -----------------------------------------------



| |  |  | conditions in the asset-backed securities market specifically;
| | - |  | --------------------------------------------------------------



| |  |  | the credit quality of our portfolio of automobile contracts; and
| | - |  | ----------------------------------------------------------------



| |  |  | our ability to obtain credit enhancement.
| | - |  | -----------------------------------------



If we are unable to securitize a sufficient number of our contracts in a timely manner, our liquidity position could be adversely affected, as we will
continue to require the execution of securitization transactions in order to fund our future liquidity needs. In addition, unanticipated delays in closing a securitization could also increase our interest rate risk by increasing the warehousing
period for our contracts. There can be no assurance that funding will be available to us through these sources or, if available, that it will be on terms acceptable to us. If these sources of funding are not available to us on a regular basis for
any reason, including the occurrence of events of default, deterioration in loss experience on the receivables, breach of financial covenants or otherwise, we will be required to revise the scale of our business, which would have a material adverse
effect on our ability to achieve our business and financial objectives.



The
terms of our securitization depends on credit enhancement and there is no assurance we will be able to continue to obtain credit enhancement.



Our securitization utilized credit enhancement in the form of a financial guaranty insurance policy in order to achieve AAA/Aaa rating. This
form of credit enhancement reduces the cost of the securitizations relative to alternative forms of credit enhancement currently available to us and enhances the marketability of these transactions to investors in asset-backed securities. The
willingness of an insurance provider to insure our future securitizations is subject to many factors outside our control including the insurance providers own rating considerations. As a result, there can be no assurance that we will be able
to continue to obtain credit enhancements in any form or on acceptable terms or that future securitizations will be similarly rated.



If we fail to maintain an effective system of internal and disclosure controls, we may not be able to accurately report our financial results or prevent fraud. As a
result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our securities.



Effective internal and disclosure controls are necessary for us to provide reliable financial reports and effectively
prevent fraud and to operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. We have in the past discovered, and may in the future discover,
material weaknesses in our internal controls as defined under interim standards adopted by the Public Company Accounting Oversight Board (PCAOB) that require remediation. Furthermore, our former and current independent auditors have, in
the past, advised us that it had noted certain material weaknesses in our internal financial reporting and accounting controls and we have also noted material weaknesses. Additionally, it is possible that as we continue our ongoing review and
analysis of internal controls over financial reporting for Sarbanes-Oxley compliance, additional weaknesses in internal controls may be discovered. Under the PCAOB standards, a material weakness is a significant deficiency or combination
of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. A significant deficiency is a control deficiency or
combination of control deficiencies, that adversely affect a companys ability to initiate, authorize, record, process, or report external financial data reliably in accordance with generally accepted accounting principles such that there is a
more than remote likelihood that a misstatement of a companys annual or interim financial statements that is more than inconsequential will not be prevented or detected.



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As a result of the material weaknesses we have identified in our internal controls, we also identified
certain deficiencies in some of our disclosure controls and procedures that require remediation. We cannot be certain that our efforts to improve our internal and disclosure controls will be successful or that we will be able to maintain adequate
controls over our financial processes and reporting in the future. Any failure to maintain effective controls or timely effect any necessary improvement of our internal and disclosure controls could harm operating results or cause us to fail to meet
our reporting obligations, which could affect our ability to remain listed with the NASDAQ National Market. Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would
likely have a negative effect on the trading price of our securities.



We
are a holding company with limited operations of our own.



The results of our operations and our financial condition are dependent upon the business activities of our principal consolidated subsidiary, UACC. In addition, our ability to fund our operations, meet our obligations for payment of
principal and interest on our outstanding debt obligations and pay dividends on our common stock is dependent upon the earnings from the businesses conducted by our subsidiaries. Our ability to pay dividends on our common stock is also subject to
the restrictions of the California Corporations Code. As of March 31, 2005, we had approximately $10.3 million of subordinated debt issued to a subsidiary trust, UPFC Trust I, which, in turn, had $10 million of company obligated mandatorily
redeemable preferred securities outstanding. The maturity of the subordinated debt is 2033. However, subject to receiving any required regulatory approval, we may call the debt any time on or after July 7, 2008 and may call it before July 7, 2008 if
certain events occur as described in the subordinated debt. The redemption price is par plus accrued and unpaid interest, except in the case of redemption if the debt is called before July 7, 2008. It is possible that we may not have sufficient
funds to repay that debt at the required time. Our subsidiaries are separate and distinct legal entities and have no obligation to provide us with funds for our payment obligations, whether by dividends, distributions, loans or other payments. Any
distribution of funds to us from our subsidiaries is subject to statutory, regulatory or contractual restrictions, subsidiaries earnings and various other business considerations.



A significant portion of our cash flow comes from our principal consolidated subsidiary UACC. UACC is a direct wholly owned
subsidiary of UPFC. Any amounts owed to other creditors of UACC may impair our ability to have funds available for dividend to us. Furthermore, UACC is party to a $250 million warehouse facility, which it uses to fund its operations. We have agreed
to provide an absolute and unconditional and irrevocable guaranty of the full and punctual payment and performance, of all liabilities, agreements and other obligations of UACC under the warehouse facility. If UACC defaults on its obligations under
the warehouse facility, it is possible that we may not have sufficient funds to satisfy this guarantee.



The ownership of our common stock is concentrated, which may result in conflicts of interest and it may be capable of preventing the consummation of corporate transactions that may be in the best interests of other
shareholders.



As of March 31, 2005, Pan American
Financial, L.P. and its general partner, BVG West Corp., together owned 10,050,000 shares of our common stock, representing more than 60% of our total outstanding common stock. Our Chairman, Guillermo Bron, beneficially owns these shares through his
majority ownership of and executive position held at BVG.



As a
result, our officers and directors, acting together, will have substantial influence over our management and affairs, including the ability to control substantially all matters submitted to our shareholders for approval, the election and removal of
our Board of Directors, any amendment of our articles of incorporation or bylaws and the adoption of measures that could delay or prevent a change in control or impede a merger. This concentration of ownership could adversely affect the price of our
common stock or lessen any premium over market price that an acquirer might otherwise pay.



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Our automobile finance business would be harmed if we cannot maintain relationships with independent dealers and
franchisees of automobile manufacturers.



We purchase
automobile contracts primarily from dealers in used automobiles. Many of our competitors have long standing relationships with automobile dealers and may offer dealers or their customers other forms of financing that we currently do not provide. If
we are unsuccessful in maintaining and expanding our relationships with dealers, our automobile finance business would be materially and adversely affected.



Because we loan money to credit-impaired borrowers, we may have a higher risk of delinquency and default.



Substantially all of our automobile contracts involve loans made to
individuals with impaired or limited credit histories, or higher debt-to-income ratios than are permitted by traditional lenders. Loans made to borrowers who are restricted in their ability to obtain financing from traditional lenders generally
entail a higher risk of delinquency, default and repossession, and higher losses than loans made to borrowers with better credit. Delinquency interrupts the flow of projected interest income from a loan, and default can ultimately lead to a loss if
the net realizable value of the automobile securing the loan is insufficient to cover the principal and interest due on the loan. Although we believe that our underwriting criteria and collection methods enable us to manage the higher risks inherent
in loans made to nonprime borrowers, no assurance can be given that such criteria or methods will afford adequate protection against such risks. If we experience higher losses than anticipated, our financial condition, results of operations and
business prospects would be materially and adversely affected.



We expect
our operating results to continue to fluctuate, which may adversely impact our business.



Our results of operations have fluctuated in the past and are expected to fluctuate in the future. Factors that could affect our quarterly earnings include:



| |  |  | seasonal variations in the volume of automobile contracts purchased, which historically tend to be higher in the first and second quarters of the year;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | interest rate spreads;
| | - |  | ----------------------



| |  |  | credit losses, which historically tend to be higher in the third and fourth quarters of the year; and
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | operating costs.
| | - |  | ----------------



If we do not retain our key employees and we fail to attract new employees, our business will be impaired.



We are dependent upon the continued services of our key employees. In addition, our growth strategy depends in part on our ability to attract and retain
qualified branch managers. The loss of the services of any key employee, or our failure to attract and retain other qualified personnel, could also have a material adverse effect on our financial condition, results of operations and business
prospects.



Competition may adversely affect our performance.



Our business is highly competitive. Competition in our
markets can take many forms, including convenience in obtaining a loan, customer service, marketing and distribution channels, amount and terms of the loan and interest rates. Many of our competitors are substantially larger and have considerably
greater financial, technical and marketing resources than us. We compete in the non-prime automobile finance industry primarily with independent companies specializing in non-prime automobile finance and, to a lesser extent, with commercial banks,
the captive finance affiliates of automobile manufacturers and savings associations.



Fluctuations in interest rates and general and localized economic conditions also may affect the competition we face. Competitors with lower costs of capital have a competitive advantage over us.



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As we expand into new geographic markets, we will face additional competition from lenders already
established in these markets. There can be no assurance that we will be able to compete successfully with these lenders.



We may be unable to manage our growth.



Our operations have rapidly expanded over the past seven years and we remain vulnerable to a variety of business risks generally associated with rapidly
growing companies. We intend to pursue growth for the foreseeable future, particularly in our automobile finance business by opening new branches. In addition, we may broaden our product offerings to include additional types of consumer loans or may
enter other specialty finance businesses. This growth strategy will require that we successfully obtain acceptable warehouse financing and access the capital markets to fund the growth. It will require additional capital and human resources as well
as improvements to our infrastructure and management information systems. Our failure to implement our planned growth strategy or the failure of our automated systems, including a failure of data integrity or accuracy, would have a material adverse
effect on our financial condition, results of operations and business prospects.



We may be unable to sustain UACCs prior rate of growth.



We have realized substantial growth in our automobile finance business since its inception in 1996. Of UACCs 92 branches as of March 31, 2005, 64 opened after January 1, 2001 and the amount of gross automobile
contracts purchased has increased from $233.4 million for 2001 to $314.6 million for 2002 to $442.2 million for 2003 to $573.9 million for 2004. In the future, UACCs rate of growth will be dependent upon, among other things, the continued
success of its efforts to expand the number of branches, attract qualified branch managers, and expand its relationships with independent and franchised dealers of used automobiles.



The ability to grow our automobile finance business has been affected in the past by the fact that we historically used
insured deposits of the Bank to fund our operations. Non-prime lending has been and continues to be an area of lending that has been the subject of extraordinary regulatory concern and scrutiny among all of the federal banking regulatory
authorities, including the OTS. As a result of the increased regulatory scrutiny, we caused the Bank to exit its federal thrift charter effective February 11, 2005. While we have pursued strategic financing and other alternatives to enable us to
conduct UACCs non-prime automobile lending business outside a federal thrift charter, UACCs current expansion and future growth will depend to a significant extent our ability to successfully manage our new sources of financing.



Risks Related to Regulatory Factors



The scope of our operations exposes us to risks of noncompliance with an increasing and
inconsistent body of complex state and local regulations and laws.



Because we operate in 29 states, we must comply with the laws and regulations, as well as judicial and administrative decisions, for all of these jurisdictions. The volume of new or modified laws and regulations has increased in recent
years, and in some cases there is conflict among jurisdictions. From time to time, legislation, as well as regulations, are enacted which have the effect of increasing the cost of doing business, limiting or expanding permissible activities, or
affecting the competitive balance between banks and other financial services providers. Proposals to change the laws and regulations governing the operations and taxation of financial institutions and financial services providers are frequently made
in the U.S. Congress, in the state legislatures, and before various regulatory agencies. This legislation may change statutes and our operating environment and that of our subsidiaries in substantial and unpredictable ways. If enacted, such
legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among financial institutions. We cannot predict whether any of this potential legislation will be enacted,
and if enacted, the effect that it, or any implementing regulations, would have on the financial condition or results of operations of us or any of our subsidiaries. Furthermore, as our operations continue to grow, it may be more difficult to
comprehensively identify, accurately interpret and properly train our personnel with respect to all of



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these laws and regulations, thereby potentially increasing our exposure to the risks of noncompliance with these laws and regulations which could have a
material adverse effect on our results of operations, financial condition and business prospects.



We believe that we maintain all material licenses and permits required for our current operations and are in substantial compliance with all applicable
local, state and federal regulations. There can be no assurance, however, that we will be able to maintain all requisite licenses and permits, and the failure to satisfy those and other regulatory requirements could have a material adverse effect on
our operations.



Risks Related to Factors Outside Our Control



Adverse economic conditions could adversely affect our business.



Each of our businesses is affected directly by changes in
general economic conditions, including changes in employment rates, prevailing interest rates and real wages. During periods of economic slowdown or recession, we may experience a decrease in demand for our products and services, an increase in our
servicing costs, a decline in collateral values and an increase in delinquencies and defaults. A decline in collateral values and an increase in delinquencies and defaults increase the possibility and severity of losses. Any sustained period of
increased delinquencies, defaults or losses would materially and adversely affect our financial condition, results of operations and business prospects.



Fluctuations in interest rates could adversely affect our margin spread and the profitability of our lending activities.



Our results of operations depend to a large extent upon our net interest
income, which is the difference between interest received by us on the automobile contracts acquired and the interest rates payable under our credit facilities.



Interest rates are highly sensitive to many factors, including governmental monetary policies and domestic and international economic and political
conditions, which are beyond our control. Several factors affect our ability to manage interest rate risk. First, the contracts are purchased or originated at fixed interest rates, while amounts borrowed under our warehouse facilities bear interest
at variable rates that are subject to frequent adjustment to reflect prevailing rated for short-term borrowings. In addition, the interest rates charged on the automobile contracts purchased from dealers are limited by statutory maximums,
restricting our opportunity to pass on increased interest costs.



Also, the interest rate demanded by investors in securitizations is a function of prevailing market rates for comparable transactions and the general interest rate environment. Because the contracts purchased by us have fixed rates, we bear
the risk of spreads narrowing because of interest rate increases during the period from the date the contracts are purchased until the pricing of our securitization of such contracts.



Decrease in wholesale auction proceeds could adversely impact our recovery rates.



We sell repossessed automobiles at wholesale auction markets located
throughout the United States. Auction proceeds from the sale of repossessed vehicles and other recoveries usually do not cover the outstanding balance of the automobile contracts, and the resulting deficiencies are charged off. Decreased auction
proceeds resulting from the depressed prices at which used automobiles may be sold during periods of economic slowdown, recession or otherwise will result in higher credit losses for us. Furthermore, depressed wholesale prices for used automobiles
may result from significant liquidations of rental or fleet inventories and from increased volume of trade-ins due to promotional financing programs offered by new vehicle manufacturers. There can be no assurance that our recovery rates will stay at
current levels or improve in the future.



24



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##### Table of Contents

Average Balance Sheets



The following table sets forth information relating to our operations for the three months ended March 31, 2005 and 2004. 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, |          
|                                                                 |  | 2005                         |           |          | 2004 (As Restated) |                  
|(Dollars in thousands)                                           |  | AverageBalance(1)            |           | Interest |                    | AverageYield/Cost |  |       | AverageBalance(1) |  | Interest |           | AverageYield/Cost |  
|Assets                                                           |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Interest earning assets                                          |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Securities and short term investments                            |  | $                            | 572,482   |          | $                  | 4,407             |  | 3.12  | %                 |  | $        | 1,183,760 |                   | $ | 4,204  |  | 1.43  | %
|Automobile installment Contracts, net(2)                         |  |                              | 494,460   |          |                    | 34,666            |  | 28.46 | %                 |  |          | 374,500   |                   |   | 26,349 |  | 28.30 | %
|                                                                 |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total interest earning assets                                    |  |                              | 1,066,942 |          | $                  | 39,073            |  | 14.87 | %                 |  |          | 1,558,260 |                   | $ | 30,553 |  | 7.89  | %
|                                                                 |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Non-interest earnings assets                                     |  |                              | 89,728    |          |                    |                   |  |       |                   |  |          | 100,856   |                   |   |        |  |       |  
|                                                                 |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total assets                                                     |  | $                            | 1,156,670 |          |                    |                   |  |       |                   |  | $        | 1,659,116 |                   |   |        |  |       |  
|                                                                 |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Liabilities and Equity                                           |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Interest bearing liabilities                                     |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Warehouse line of credit                                         |  |                              | 141,006   |          |                    | 1,374             |  | 3.95  | %                 |  |          |          |                   |   |        |  |      |  
|Securitization notes payable                                     |  |                              | 321,134   |          |                    | 2,898             |  | 3.66  | %                 |  |          |          |                   |   |        |  |      |  
|Repurchase agreements                                            |  |                              | 548,008   |          |                    | 3,547             |  | 2.62  | %                 |  |          | 1,022,316 |                   |   | 2,859  |  | 1.12  | %
|Deposits                                                         |  |                              |          |          |                    |                  |  |      |                   |  |          | 522,466   |                   |   | 3,217  |  | 2.48  | %
|Junior subordinated debentures                                   |  |                              | 10,310    |          |                    | 143               |  | 5.63  | %                 |  |          | 10,300    |                   |   | 120    |  | 4.69  | %
|                                                                 |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total interest bearing liabilities                               |  |                              | 1,020,458 |          | $                  | 7,962             |  | 3.16  | %                 |  |          | 1,555,082 |                   | $ | 6,196  |  | 1.60  | %
|                                                                 |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Non-interest bearing liabilities                                 |  |                              | 6,978     |          |                    |                   |  |       |                   |  |          | 5,396     |                   |   |        |  |       |  
|                                                                 |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total liabilities                                                |  |                              | 1,027,436 |          |                    |                   |  |       |                   |  |          | 1,560,478 |                   |   |        |  |       |  
|Equity                                                           |  |                              | 129,234   |          |                    |                   |  |       |                   |  |          | 98,638    |                   |   |        |  |       |  
|                                                                 |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total liabilities and equity                                     |  | $                            | 1,156,670 |          |                    |                   |  |       |                   |  | $        | 1,659,116 |                   |   |        |  |       |  
|                                                                 |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Net interest income before provision for loan losses             |  |                              |           |          | $                  | 31,111            |  |       |                   |  |          |           |                   | $ | 24,357 |  |       |  
|                                                                 |  |                              |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Net interest rate spread(3)                                      |  |                              |           |          |                    |                   |  | 11.70 | %                 |  |          |           |                   |   |        |  | 6.28  | %
|Net interest margin(4)                                           |  |                              |           |          |                    |                   |  | 11.84 | %                 |  |          |           |                   |   |        |  | 6.29  | %
|Ratio of interest earning assets to interest bearing liabilities |  |                              |           |          |                    |                   |  | 105   | %                 |  |          |           |                   |   |        |  | 100   | %

---

|(1) | Average balances computed on a monthly basis including effects of any restatements.
|--- | -----------------------------------------------------------------------------------

|(2) | Net of unearned finance charges, unearned discounts and allowance for losses; includes non-performing loans.
|--- | ------------------------------------------------------------------------------------------------------------

|(3) | Net interest rate spread represents the difference between the yield on interest earning assets and the cost of interest bearing liabilities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Net interest margin represents net interest income divided by average interest earning assets.
|--- | ----------------------------------------------------------------------------------------------



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##### Table of Contents

Comparison of Operating Results for the Three Months Ended March 31, 2005 and March 31, 2004 (as restated)



General



For the three months ended March 31, 2005, our net income increased $1.66
million to $6.29 million from $4.63 million for the three months ended March 31, 2004.



The increase in net income was due primarily to a $6.8 million increase in net interest income, which increased to $31.1 million in the first quarter of 2005 from $24.4 million during the same quarter of 2004, and a
$146,000 decrease in the provision for loan losses and a $3.7 million increase in non-interest expense. Net interest income was favorably impacted by the continued expansion and growth of our automobile finance business.



Automobile contracts purchased increased $24.8 million to $120.6 million for
the three months ended March 31, 2005 from $95.8 million for the three months ended March 31, 2004, as a result of our planned growth in the automobile finance business.



Interest Income



Interest income increased to $39.1 million for the three months ended March 31, 2005 from $30.6 million for the three months ended March 31, 2004 due
primarily to a $120.0 million increase in average auto contracts, partially offset by a $611.3 million decrease in average securities.



Interest Expense



Interest expense increased to $8.0 million for the three months ended March 31, 2005 from $6.2 million for the three months ended March 31, 2004 due to a
156 basis point increase in weighted average interest rate on interest bearing liabilities, partially offset by a $534.8 million decrease in average interest bearing liabilities. The average cost of liabilities increased to 3.16% for the three
months ended March 31, 2005 from 1.60% for the comparable period in 2004, generally as a result of an increase in market interest rates and a smaller concentration in repurchase agreements with lower funding costs.



Provision and Allowance for Loan Losses



Provision for loan losses was $5.7 million for the three months ended March
31, 2005 compared to $5.9 million for the three months ending March 31, 2004.



The total allowance for loan losses was $25.0 million at March 31, 2005 compared with $25.6 million at March 31, 2004, representing 4.38% of loans at March 31, 2005 and 4.88% at March 31, 2004. Additionally, unearned
discounts on loans totaled $27.9 million at March 31, 2005 compared with $24.8 million at March 31, 2004, representing 4.89% of loans at March 31, 2005 and 4.74% at March 31, 2004.



Annualized net charge-offs to average loans were 4.71% for the three months ended March 31, 2005 compared with 5.51% for the
three months ended March 31, 2004.



Non-interest Income



Non-interest income increased to $1.8 million for the
three months ended March 31, 2005 from $891,000 for the three months ended March 31, 2004. This increase was the result of a $1.6 million gain on sale of investment securities which was partially offset by a decrease in charges and fees related to
deposit accounts.



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##### Table of Contents

Non-interest Expense



Non-interest expense increased $3.7 million to $16.0 million for the three months ended March 31, 2005 from $12.3 million
for the three months ended March 31, 2004. 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 683 employees in 92 offices, as of March 31, 2005, from 535 employees in 74 offices, as of March 31, 2004.



Income Taxes



Income taxes before taxes on discontinued operations increased $1.8 million
to $4.6 million for the three months ended March 31, 2005 from $2.8 million for the three months ended March 31, 2004. This increase occurred as a result of a $4.2 million increase in income before income taxes between the two periods.



Comparison of Financial Condition at March 31, 2005 and December 31, 2004



Total assets decreased $353 million, to $1.06 billion at
March 31, 2005, from $1.41 billion at December 31, 2004. The decrease resulted primarily from a $343.8 million decrease in securities available for sale to $444 million at March 31, 2005 from $788 million at December 31, 2004 and a $72.0 million
decrease in assets of discontinued operations, partially offset by a $14.2 million increase in cash and cash equivalents and a $46.2 million increase in loans to $574.9 million at March 31, 2005 from $528.8 million at December 31, 2004. 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.



Warehouse line of credit borrowing increased to $189.0 million as of March 31, 2005 from $101.8 million as of December 31,
2004 due to borrowings to fund new loans.



Securitization notes
payable declined to $293.0 million at March 31, 2005 from $ 352.6 million at December 31, 2004 due to payments on the loans backing the securitized borrowings.



Repurchase agreements decreased $313.5 million to $431.8 million at March 31, 2005 from $745.3 million at December 31, 2004. This decrease is the
result of excess funds from pay downs and maturities in the securities portfolio, as well as the sale of some of the securities, which were used to repay repurchase agreements.



Shareholders equity increased to $130.8 million at March 31, 2005 from $124.3 million at December 31, 2004, primarily
as a result of net income of $6.3 million during the three months ended March 31, 2005.



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.



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.



The automobile contracts originated by us are fixed rate. We expect to implement a new securitization each 6 months, which are also fixed rate borrowings.
We have interest rate risk on our fixed rate loans while they are funded with warehouse borrowings because the warehouse borrowings are variable rate. We limit this exposure through the use of frequent securitizations.



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##### Table of Contents

Liquidity and Capital Resources



General



We require substantial cash and capital resources to operate our business. Our primary funding sources are warehouse credit lines and securitizations.



Our primary uses of cash include:



| |  |  | acquisition of automobile contracts,
| | - |  | ------------------------------------



| |  |  | securitization costs,
| | - |  | ---------------------



| |  |  | operating expenses, and
| | - |  | -----------------------



| |  |  | interest expense.
| | - |  | -----------------



The capital resources available to us include:



| |  |  | interest income on automobile contracts,
| | - |  | ----------------------------------------



| |  |  | servicing fees that we earn for under the automobile securitizations,
| | - |  | ---------------------------------------------------------------------



| |  |  | releases from the spread account relating to the securitization,
| | - |  | ----------------------------------------------------------------



| |  |  | automobile loan securitization proceeds,
| | - |  | ----------------------------------------



| |  |  | borrowings under our credit facilities,
| | - |  | ---------------------------------------



| |  |  | commercial repurchase agreements, and
| | - |  | -------------------------------------



| |  |  | our securities portfolio.
| | - |  | -------------------------



Management believes that the resources available to us will provide the needed capital to fund purchases of automobile contracts, investments in
origination and servicing capabilities and ongoing operations.



Securitizations



We completed one
securitization transaction in the third quarter of 2004. This transaction is structured as an on-balance sheet transaction, recorded as secured financing. Regular contract securitizations are an integral part of our business plan for the future so
we will increase our liquidity and reduce risks associated with interest rate fluctuations. We have developed a securitization program that involves selling interests in pools of our auto contracts to investors through the public issuance of AAA/Aaa
rated asset-backed securities. Automobile securitizations are used by many financial institutions and are part of a multi-billion dollar annual market for asset-backed securities. As part of this process, management considers the relative risks and
returns prior to initiating a securitization. These risks include, but are not limited to, interest rate fluctuations during the warehouse period, increased prepayments speeds and losses, loss of servicing rights and adverse economic conditions.
These factors are explained in further detail in the section Risks Related to our Business. The table below provides information about the outstanding trust assets and liabilities as of March 31, 2005 and December 31, 2004.



|                  |  |               |         |                  |   |        
|----------------- |  | ------------- | ------- | ---------------- | - | -------
|(In thousands)    |  | March 31,2005 |         | December 31,2004
|Total assets      |  | $             | 334,577 |                  | $ | 392,632
|Total liabilities |  | $             | 292,961 |                  | $ | 352,564



In the securitization
we sold our automobile contracts to a newly formed owner trust, which issued notes. The net proceeds of the securitization were used to fund the sale of the Banks deposit liabilities.



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To improve the level of profitability from the sale of securitized automobile contracts, we arranged for
credit enhancement to improve the credit rating on the asset-backed securities issued. This credit enhancement was in the form of a financial guaranty insurance policy insuring the payment of principal and interest due on the asset-backed
securities. The policy was issued by AMBAC Insurance Corporation.



Warehouse Facility



As of March 31, 2005 we
were party to one $250 million warehouse facility, which we used to fund our automobile finance operations to purchase automobile contracts pending securitization. This warehouse facility was increased from its original $200 million to its present
level during the first quarter of 2005. Under the terms of the facility, our indirect subsidiary, UPFC Funding Corp., may obtain advances on a revolving basis by issuing notes to the participating lenders and pledging for each advance a portfolio of
automobile receivables. UPFC Funding Corp. purchases the automobile receivables from UACC and UACC services the automobile receivables, which are held by a custodian. We have agreed to provide an absolute and unconditional and irrevocable guaranty
of the full and punctual payment and performance, of all liabilities, agreements and other obligations of UACC under the warehouse facility. This facility is used to fund the purchase of automobile contracts and will be used as ongoing credit until
we can structure another securitization.



Other Sources of
Funds



The collection of principal and interest from
contracts originated and securitized and the release of cash from the securitization spread account is another source of significant funds for us. Pursuant to the securitization, we receive cash released from the trustee from the spread account on
the securitization once the spread account reaches a predetermined funding level. The amount released from the spread account represents the return of the initial deposits to such accounts as well as the release of the excess spread on the
securitized contract.



For future securitizations, collections
of principal and interest may be deposited into collection accounts established in connection with the securitization. We may receive access to the amounts deposited into collection accounts and amounts held in the spread account for these
securitizations. We would use the amounts received in our daily operations, although delinquency or charge off rates in a securitization that exceeds established triggers, will require that amounts being held in spread accounts increase.



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.



Aggregate Contractual Obligations



The following table provides the amounts due under specified obligations for the periods indicated as of March 31, 2005.



|                               |  |                        |         |                  |   |                   |  |                  |       |       |   |        |  |   |        
|------------------------------ |  | ---------------------- | ------- | ---------------- | - | ----------------- |  | ---------------- | ----- | ----- | - | ------ |  | - | -------
|                               |  | Less than1 Years       |         | 1 Yearto 3 Years |   | 4 Yearsto 5 Years |  | More Than5 Years |       | Total
|                               |  | (Dollars in thousands)
|Warehouse line of credit       |  |                        | 189,016 |                  |   |                  |  |                  |      |       |   |       |  |   | 189,016
|Securitization borrowings      |  |                        | 144,082 |                  |   | 148,834           |  |                  |       |       |   |        |  |   | 292,916
|Repurchase agreements          |  |                        | 431,780 |                  |   |                  |  |                  |      |       |   |       |  |   | 431,780
|Operating lease obligations    |  |                        | 3,566   |                  |   | 5,012             |  |                  | 2,243 |       |   |       |  |   | 10,821 
|Junior subordinated debentures |  |                        |        |                  |   |                  |  |                  |      |       |   | 10,310 |  |   | 10,310 
|                               |  |                        |         |                  |   |                   |  |                  |       |       |   |        |  |   |        
|Total                          |  | $                      | 768,444 |                  | $ | 153,846           |  | $                | 2,243 |       | $ | 10,310 |  | $ | 934,843
|                               |  |                        |         |                  |   |                   |  |                  |       |       |   |        |  |   |        



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##### Table of Contents

The obligations are categorized by their contractual due dates, except securitization borrowings that are
categorized by the expected repayment dates. 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.



Lending Activities



Summary of Loan Portfolio



At March 31, 2005, our net loan portfolio constituted $517.3 million, or
48.7% of our total assets.



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



|                                 |  |                        |         |   |                               |   |         |                               |  |   |         |  
|-------------------------------- |  | ---------------------- | ------- | - | ----------------------------- | - | ------- | ----------------------------- |  | - | ------- | -
|                                 |  | March 31,2005          |         |   | December 31,2004(As Restated) |   |         | December 31,2003(As Restated) | 
|                                 |  | (Dollars in thousands) |        
|Consumer Loans                   |  |                        |         |   |                               |   |         |                               |  |   |         |  
|Automobile installment contracts |  | $                      | 574,933 |   |                               | $ | 528,761 |                               |  | $ | 405,085 |  
|Other consumer loans             |  |                        |        |   |                               |   | 4       |                               |  |   | 49      |  
|                                 |  |                        |         |   |                               |   |         |                               |  |   |         |  
|Total loans                      |  |                        | 574,933 |   |                               |   | 528,765 |                               |  |   | 405,134 |  
|Unearned finance charges         |  |                        | (4,419  | ) |                               |   | (4,595  | )                             |  |   | (7,717  | )
|Unearned discounts               |  |                        | (27,889 | ) |                               |   | (24,827 | )                             |  |   | (14,932 | )
|Allowance for loan losses        |  |                        | (24,980 | ) |                               |   | (25,593 | )                             |  |   | (24,982 | )
|                                 |  |                        |         |   |                               |   |         |                               |  |   |         |  
|Total loans, net                 |  | $                      | 517,645 |   |                               | $ | 473,750 |                               |  | $ | 357,503 |  
|                                 |  |                        |         |   |                               |   |         |                               |  |   |         |  



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 $25.0 million at March 31, 2005 compared with $25.6 million at December 31, 2004 representing 4.38% of loans at March 31, 2005 and 5.98% at December 31, 2004. Additionally, unearned discounts on loans totaled $27.9 million at March 31, 2005
compared with $24.8 million at December 31, 2004, representing 4.89% of loans at March 31, 2005 and 4.25% at December 31, 2004.



The following table sets forth the remaining balances of all loans that were more than 30 days delinquent at March 31, 2005, December 31, 2004 and 2003.



|                   |  |                        |       |                 |     |   |                  |   |                 |  |     |                  |  |                 |       |  |     |  
|------------------ |  | ---------------------- | ----- | --------------- | --- | - | ---------------- | - | --------------- |  | --- | ---------------- |  | --------------- | ----- |  | --- | -
|Loan Delinquencies |  | March 31,2005          |       | % of TotalLoans |     |   | December 31,2004 |   | % of TotalLoans |  |     | December 31,2003 |  | % of TotalLoans |      
|                   |  | (Dollars in thousands) |      
|30 to 59 days      |  | $                      | 1,353 |                 | 0.2 | % |                  | $ | 2,522           |  | 0.5 | %                |  | $               | 2,015 |  | 0.5 | %
|60 to 89 days      |  |                        | 529   |                 | 0.1 | % |                  |   | 856             |  | 0.5 | %                |  |                 | 674   |  | 0.2 | %
|90+ days           |  |                        | 340   |                 | 0.1 | % |                  |   | 416             |  | 0.1 | %                |  |                 | 390   |  | 0.1 | %
|                   |  |                        |       |                 |     |   |                  |   |                 |  |     |                  |  |                 |       |  |     |  
|Total              |  | $                      | 2,221 |                 | 0.4 | % |                  | $ | 3,079           |  | 0.7 | %                |  | $               | 3,079 |  | 0.8 | %
|                   |  |                        |       |                 |     |   |                  |   |                 |  |     |                  |  |                 |       |  |     |  



Nonaccrual and Past
Due Loans



A loan is placed on nonaccrual status when it
is delinquent for over 30 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



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##### Table of Contents

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,
2005, December 31, 2004 and 2003.



|                                                 |  |                        |       |   |              |      |       |   |  |   |       |  
|------------------------------------------------ |  | ---------------------- | ----- | - | ------------ | ---- | ----- | - |  | - | ----- | -
|                                                 |  | March 31,2005          |       |   | December 31, |     
|                                                 |  |                        | 2004  |   |              | 2003 |      
|                                                 |  | (Dollars in thousands) |      
|Nonaccrual loans                                 |  | $                      | 4,825 |   |              | $    | 7,169 |   |  | $ | 5,713 |  
|                                                 |  |                        |       |   |              |      |       |   |  |   |       |  
|Total                                            |  | $                      | 4,825 |   |              | $    | 7,169 |   |  | $ | 5,713 |  
|                                                 |  |                        |       |   |              |      |       |   |  |   |       |  
|Non accrual loans as a percentage of total loans |  |                        | 0.85  | % |              |      | 1.36  | % |  |   | 1.40  | %



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 31,2005 |                   |   | At or For the Year EndedDecember 31, |                  
|                                                         |  |                                              | 2004(As Restated) |   |                                      | 2003(As Restated) |        
|                                                         |  | (Dollars in thousands)                       |                  
|Allowance for Loan Losses                                |  |                                              |                   |   |                                      |                   |         |   |  |   |         |  
|Balance at beginning of period                           |  | $                                            | 25,593            |   |                                      | $                 | 24,982  |   |  | $ | 27,586  |  
|Provision for loan losses                                |  |                                              | 5,713             |   |                                      |                   | 25,516  |   |  |   | 17,771  |  
|Charge-offs                                              |  |                                              | (6,852            | ) |                                      |                   | (26,386 | ) |  |   | (22,000 | )
|Recoveries                                               |  |                                              | 526               |   |                                      |                   | 1,481   |   |  |   | 1,625   |  
|                                                         |  |                                              |                   |   |                                      |                   |         |   |  |   |         |  
|Net charge-offs                                          |  |                                              | (6,326            | ) |                                      |                   | (24,905 | ) |  |   | (20,375 | )
|                                                         |  |                                              |                   |   |                                      |                   |         |   |  |   |         |  
|Balance at end of period                                 |  | $                                            | 24,980            |   |                                      | $                 | 25,593  |   |  | $ | 24,982  |  
|                                                         |  |                                              |                   |   |                                      |                   |         |   |  |   |         |  
|Annualized net charge-offs to average loans              |  |                                              | 4.71              | % |                                      |                   | 5.42    | % |  |   | 5.65    | %
|Allowance for loan losses as a percentage of total loans |  |                                              | 4.38              | % |                                      |                   | 5.98    | % |  |   | 6.53    | %



|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
|------- | -----------------------



Disclosure Controls and Procedures



As of the
quarter ended March 31, 2005, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was done under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer.



Disclosure
controls and procedures are defined in SEC rules as controls and other procedures designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified
in the SECs rules and forms. While we believe that our disclosure controls and procedures have improved due to the scrutiny of the matters discussed below under Internal Control Over Financial Reporting, which scrutiny occurred
during the quarters ended December 31, 2004 and



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March 31, 2005, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that the design and operation of our
disclosure controls and procedures were not effective at March 31, 2005. We note that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are
met.



Internal Control Over Financial Reporting



Our management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. As we reported in our Annual Report on Form 10-K for the year ended December 31, 2004, in connection with
managements assessment of the effectiveness of our system of internal control over financial reporting as of December 31, 2004, our management concluded that we had material weaknesses in internal controls over financial reporting attributable
to insufficient resources in financial reporting and accounting departments and a lack of formalized procedures and controls over accounting and financial reporting. Accordingly, and as reported in our Annual Report on Form 10-K for the year ended
December 31, 2004, management intends to implement remediation measures during the course of 2005 pursuant to a formal remediation plan to be approved by our Audit Committee and Board of Directors. We expect the completion of remediation measures to
occur on a quarterly basis through September 30, 2005.



We have
made the following changes to strengthen our internal control over financial reporting during the quarter ended March 31, 2005:



| |  |  | We have employed additional support personnel, including an experienced Controller with appropriate financial reporting background, to allow existing resources in the our financial
reporting and accounting functions to perform the enhanced internal control activities described above and are currently in the process of further adding accounting staff.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have engaged outside financial and auditing resources to supplement the finance and accounting departments to support the preparation of consolidated financial statements and
reports that are to be filed with the SEC and to implement appropriate control activities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have established a management task force to devise a comprehensive program for the remediation of other deficiencies identified as part of our ongoing analysis and review for
Sarbanes-Oxley compliance, including a timetable for execution and completion, all of which will be approved by our Audit Committee.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, we have hired a Director of Financial Reporting, a Treasury Manager and two staff accountants to strengthen our internal control over
financial reporting subsequent to March 31, 2005.



Except as
described above, there was no change in our internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) or in other factors that could affect these controls during our last fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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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
|------- | --------



|       |  |                                                                                                  
|------ |  | -------------------------------------------------------------------------------------------------
|10.127 |  | Employment agreement dated March 1, 2005 between United PanAm Financial Corp. and Garland Koch.  
|       | 
|10.128 |  | Employment agreement dated March 1, 2005 between United PanAm Financial Corp. and Mario Radrigan.
|       | 
|31.1   |  | Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act 2002.       
|       | 
|31.2   |  | Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act 2002.       
|       | 
|32.1   |  | Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act 2002.       
|       | 
|32.2   |  | Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act 2002.       



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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 6, 2005 |  |  |  | By:                          |  | /s/    RAY THOUSAND                                                                                              
|      |  |             |  |  |  |                              |  | Ray Thousand Chief Executive Officer and President (Principal Executive Officer)                                 
|      |  |             |  | 
|      |  | May 6, 2005 |  |  |  | By:                          |  | /s/    GARLAND W. KOCH                                                                                           
|      |  |             |  |  |  |                              |  | Garland W. Koch Executive Vice President and Chief Financial Officer (Principal Financial and Accounting
Officer)



34