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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q/A



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

For the quarterly period ended March 31, 2004



Commission File Number 000-24051



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UNITED PANAM FINANCIAL CORP.

(Exact name of Registrant as specified in its charter)



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



3990 Westerly Place,
Suite 200

Newport Beach, CA 92660

(Address of principal executive offices) (Zip Code)



(949) 224-1917

(Registrants telephone number, including area code)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



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



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



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EXPLANATORY NOTE



This amended quarterly report on Form 10-Q/A amends and restates in its entirety our original quarterly report on
Form 10-Q for the quarter ended March 31, 2004 as of the date of filing the original Form 10-Q on May 11, 2004. We are amending and restating the Form 10-Q in its entirety to correct and restate the consolidated financial statements for the quarters
ended March 31, 2004 and 2003.



Within this document are
results that include a restatement of our financial condition and results of operations. The restatements were necessary to conform with accounting principles generally accepted in the United States of America (GAAP) and reflect the
following:



| |  | A correction of an error in the application of the individual static pool methodology utilized in estimating the appropriate amount of the allowance for loan losses and the related
provision for loan losses for the quarters ended March 31, 2004 and 2003, and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | A correction in the computation of earnings per share to consider the tax benefit that the Company will receive as part of the assumed proceeds under the treasury stock
method.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



This quarterly report on Form
10-Q/A for the quarter ended March 31, 2004 reflects corrections and restatements of the following financial statements: (a) unaudited consolidated statements of financial condition as of March 31, 2004 and 2003; (b) unaudited consolidated
statements of operations for the three months ended March 31, 2004 and 2003, (c) unaudited consolidated statements of comprehensive income for the three months ended March 31, 2004 and 2003; and (d) unaudited consolidated statements of cash flows
for the three months ended March 31, 2004 and 2003. For a more detailed description of the statements and reclassification, see Note 2. Restatements to the accompanying notes to the consolidated financial statements in this Form 10-Q/A.



In addition to the changes discussed above, we have also made
the following changes: (a) we added a cross reference in Note 6. Allowance for Loan Losses to the Notes to Consolidated Financial Statements and Note 8. Operating Segments to the Notes to Consolidated Financial Statements;
(b) we added Note 2. Restatements to the Notes to Consolidated Financial Statements; (c) we clarified our discussion about our allowance for loan losses under Managements Discussion and Analysis of Financial Condition and
Results of OperationsCritical Accounting Policies and under Managements Discussion and Analysis of Financial Condition and Results of OperationsClassified Assets and Allowance for Loan Losses and we deleted
language that was no longer applicable about our allowance for loan losses under Managements Discussion and Analysis of Financial Condition and Results of OperationsComparison of Operating Results for the Three Months Ended March
31, 2004 and March 31, 2003Provision and Allowance for Loan Losses; (d) we discussed and corrected the computation of earnings per share under Managements Discussion and Analysis of Financial Condition and Results of
Operations and (e) we updated our discussion under Item 4. Disclosure of Controls and Procedures.



This quarterly report on Form 10-Q/A speaks as of the three months ended March 31, 2004 as required by Form 10-Q or as of the date of filing the original
Form 10-Q. It does not update any of the statements contained herein. This quarterly report on Form 10-Q/A contains forward looking statements when were made at the time the original Form 10-Q was filed on May 11, 2004 and is subject to the factors
described in Item 1. Business  Factors That May Affect Future Results of Operations in our Annual Report on Form 10-K/A for the year ended December 31, 2003 and must be considered in light of any subsequent statements including
forward looking statements in any written statement subsequent to the filing of the original Form 10-Q including statements made in filings on reports on Form 8-K and Form 10-Q.



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UNITED PANAM FINANCIAL CORP.



FORM 10-Q/A

MARCH 31, 2004



INDEX



|         |  |                                                                                                                           |  |     
|-------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                                                           |  | Page
|PART I.  |  | FINANCIAL INFORMATION                                                                                                     |  |     
|         |  |                                                                                                                          
|Item 1.  |  | Financial Statements (unaudited)                                                                                          |  |     
|         |  |                                                                                                                          
|         |  | Consolidated Statements of Financial Condition as of March 31, 2004 and December 31, 2003, as restated                    |  | 1   
|         |  |                                                                                                                          
|         |  | Consolidated Statements of Operations for the three months ended March 31, 2004 and March 31, 2003, as restated           |  | 2   
|         |  |                                                                                                                          
|         |  | Consolidated Statements of Comprehensive Income for the three months ended March 31, 2004 and March 31, 2003, as restated |  | 3   
|         |  |                                                                                                                          
|         |  | Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and March 31, 2003, as restated           |  | 4   
|         |  |                                                                                                                          
|         |  | Notes to Consolidated Financial Statements                                                                                |  | 5   
|         |  |                                                                                                                          
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                     |  | 12  
|         |  |                                                                                                                          
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                                |  | 25  
|         |  |                                                                                                                          
|Item 4.  |  | Controls and Procedures                                                                                                   |  | 25  
|         |  |                                                                                                                          
|PART II. |  | OTHER INFORMATION                                                                                                         |  |     
|         |  |                                                                                                                          
|Item 1.  |  | Legal Proceedings                                                                                                         |  | 27  
|         |  |                                                                                                                          
|Item 2.  |  | Changes in Securities and Use of Proceeds                                                                                 |  | 27  
|         |  |                                                                                                                          
|Item 3.  |  | Defaults Upon Senior Securities                                                                                           |  | 27  
|         |  |                                                                                                                          
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                                       |  | 27  
|         |  |                                                                                                                          
|Item 5.  |  | Other Information                                                                                                         |  | 27  
|         |  |                                                                                                                          
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                                                          |  | 27  



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PART I.    FINANCIAL INFORMATION



Item 1.    Financial Statements.



UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)



|                                                                                                                       |  |                        |           |   |                  |   |           |  
|---------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                       |  | March 31,2004          |           |   | December 31,2003 |  
|                                                                                                                       |  | (As Restated)          |           |   | (As Restated)    |  
|                                                                                                                       |  | (Dollars in thousands) |          
|ASSETS                                                                                                                 |  |                        |           |   |                  |   |           |  
|                                                                                                                       |  |                       
|Cash and due from banks                                                                                                |  | $                      | 7,981     |   |                  | $ | 8,376     |  
|Short term investments                                                                                                 |  |                        | 44,702    |   |                  |   | 5,833     |  
|                                                                                                                       |  |                        |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                              |  |                        | 52,683    |   |                  |   | 14,209    |  
|Securities available for sale, at fair value                                                                           |  |                        | 1,115,915 |   |                  |   | 1,202,444 |  
|Loans                                                                                                                  |  |                        | 478,574   |   |                  |   | 440,992   |  
|Less unearned discount                                                                                                 |  |                        | (17,857   | ) |                  |   | (14,368   | )
|Less allowance for loan losses                                                                                         |  |                        | (24,713   | ) |                  |   | (25,253   | )
|                                                                                                                       |  |                        |           |   |                  |   |           |  
|Loans, net                                                                                                             |  |                        | 436,004   |   |                  |   | 401,371   |  
|Premises and equipment, net                                                                                            |  |                        | 3,265     |   |                  |   | 3,163     |  
|Federal Home Loan Bank stock, at cost                                                                                  |  |                        | 11,563    |   |                  |   | 11,563    |  
|Accrued interest receivable                                                                                            |  |                        | 10,732    |   |                  |   | 9,849     |  
|Other assets                                                                                                           |  |                        | 22,500    |   |                  |   | 25,107    |  
|                                                                                                                       |  |                        |           |   |                  |   |           |  
|Total assets                                                                                                           |  | $                      | 1,652,662 |   |                  | $ | 1,667,706 |  
|                                                                                                                       |  |                        |           |   |                  |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                   |  |                        |           |   |                  |   |           |  
|                                                                                                                       |  |                       
|Deposits                                                                                                               |  | $                      | 526,030   |   |                  | $ | 498,389   |  
|Repurchase Agreements                                                                                                  |  |                        | 1,004,536 |   |                  |   | 1,052,205 |  
|Accrued expenses and other liabilities                                                                                 |  |                        | 5,237     |   |                  |   | 6,795     |  
|Junior subordinated debentures/Trust preferred securities                                                              |  |                        | 10,300    |   |                  |   | 10,000    |  
|                                                                                                                       |  |                        |           |   |                  |   |           |  
|Total liabilities                                                                                                      |  |                        | 1,546,103 |   |                  |   | 1,567,389 |  
|                                                                                                                       |  |                        |           |   |                  |   |           |  
|Common stock (no par value):                                                                                           |  |                        |           |   |                  |   |           |  
|Authorized, 30,000,000 shares issued and outstanding, 16,132,758 at March 31, 2004 and 16,100,204 at December 31, 2003 |  |                        | 66,306    |   |                  |   | 66,109    |  
|Retained earnings                                                                                                      |  |                        | 39,776    |   |                  |   | 34,079    |  
|Unrealized gain on securities available for sale, net                                                                  |  |                        | 477       |   |                  |   | 129       |  
|                                                                                                                       |  |                        |           |   |                  |   |           |  
|Total shareholders equity                                                                                             |  |                        | 106,559   |   |                  |   | 100,317   |  
|                                                                                                                       |  |                        |           |   |                  |   |           |  
|Total liabilities and shareholders equity                                                                             |  | $                      | 1,652,662 |   |                  | $ | 1,667,706 |  
|                                                                                                                       |  |                        |           |   |                  |   |           |  



See accompanying
notes to consolidated financial statements



1



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UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                      |  |                                      |        |               |   |       
|----------------------------------------------------- |  | ------------------------------------ | ------ | ------------- | - | ------
|                                                      |  | Three Months Ended March 31,        
|                                                      |  | 2004                                 |        | 2003         
|                                                      |  | (As Restated)                        |        | (As Restated)
|                                                      |  | (In thousands, except pershare data)
|Interest Income                                       |  |                                      |        |               |   |       
|Loans                                                 |  | $                                    | 27,076 |               | $ | 16,803
|Short term investments                                |  |                                      | 5,074  |               |   | 3,714 
|                                                      |  |                                      |        |               |   |       
|Total interest income                                 |  |                                      | 32,150 |               |   | 20,517
|                                                      |  |                                      |        |               |   |       
|Interest Expense                                      |  |                                      |        |               |   |       
|Deposits                                              |  |                                      | 3,519  |               |   | 3,692 
|Repurchase agreements                                 |  |                                      | 2,859  |               |   | 1,596 
|Junior subordinated debentures                        |  |                                      | 120    |               |   |      
|                                                      |  |                                      |        |               |   |       
|Total interest expense                                |  |                                      | 6,498  |               |   | 5,288 
|                                                      |  |                                      |        |               |   |       
|Net interest income                                   |  |                                      | 25,652 |               |   | 15,229
|Provision for loan losses                             |  |                                      | 5,211  |               |   | 2,703 
|                                                      |  |                                      |        |               |   |       
|Net interest income after provision for loan losses   |  |                                      | 20,441 |               |   | 12,526
|                                                      |  |                                      |        |               |   |       
|Non-interest Income                                   |  |                                      |        |               |   |       
|Services charges and fees                             |  |                                      | 256    |               |   | 230   
|Loan related charges and fees                         |  |                                      | 86     |               |   | 92    
|Gain on sale of securities                            |  |                                      | 499    |               |   |      
|Other income                                          |  |                                      | 438    |               |   | 174   
|                                                      |  |                                      |        |               |   |       
|Total non-interest income                             |  |                                      | 1,279  |               |   | 496   
|                                                      |  |                                      |        |               |   |       
|Non-interest Expense                                  |  |                                      |        |               |   |       
|Compensation and benefits                             |  |                                      | 7,713  |               |   | 6,011 
|Occupancy                                             |  |                                      | 1,243  |               |   | 1,031 
|Other                                                 |  |                                      | 3,206  |               |   | 2,279 
|                                                      |  |                                      |        |               |   |       
|Total non-interest expense                            |  |                                      | 12,162 |               |   | 9,321 
|                                                      |  |                                      |        |               |   |       
|Income from continuing operations before income taxes |  |                                      | 9,558  |               |   | 3,701 
|Income taxes                                          |  |                                      | 3,861  |               |   | 1,497 
|                                                      |  |                                      |        |               |   |       
|Income from continuing operations                     |  | $                                    | 5,697  |               | $ | 2,204 
|Income from discontinued operations, net of tax       |  |                                      |       |               |   | 432   
|                                                      |  |                                      |        |               |   |       
|Net income                                            |  | $                                    | 5,697  |               | $ | 2,636 
|                                                      |  |                                      |        |               |   |       
|Earnings per share-basic:                             |  |                                      |        |               |   |       
|Continuing operations                                 |  | $                                    | 0.35   |               | $ | 0.14  
|Discontinued operations                               |  |                                      |       |               |   | 0.03  
|                                                      |  |                                      |        |               |   |       
|Net income                                            |  | $                                    | 0.35   |               | $ | 0.17  
|                                                      |  |                                      |        |               |   |       
|Weighted average shares outstanding                   |  |                                      | 16,118 |               |   | 15,868
|                                                      |  |                                      |        |               |   |       
|Earnings per share-diluted:                           |  |                                      |        |               |   |       
|Continuing operations                                 |  | $                                    | 0.32   |               | $ | 0.13  
|Discontinued operations                               |  |                                      |       |               |   | 0.02  
|                                                      |  |                                      |        |               |   |       
|Net Income                                            |  | $                                    | 0.32   |               | $ | 0.15  
|                                                      |  |                                      |        |               |   |       
|Weighted average shares outstanding                   |  |                                      | 18,058 |               |   | 17,100
|                                                      |  |                                      |        |               |   |       



See accompanying
notes to consolidated financial statements



2



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UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



|                                       |  |                              |       |               |   |       |  
|-------------------------------------- |  | ---------------------------- | ----- | ------------- | - | ----- | -
|                                       |  | Three Months Ended March 31, |      
|                                       |  | 2004                         |       | 2003          |  
|                                       |  | (As Restated)                |       | (As Restated) |  
|                                       |  | (In thousands)               |      
|Net income                             |  | $                            | 5,697 |               | $ | 2,636 |  
|Other comprehensive income, net of tax |  |                              |       |               |   |       |  
|Unrealized gain (loss) on securities   |  |                              | 348   |               |   | (264  | )
|                                       |  |                              |       |               |   |       |  
|Comprehensive income                   |  | $                            | 6,045 |               | $ | 2,372 |  
|                                       |  |                              |       |               |   |       |  







See accompanying notes to consolidated financial statements



3



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UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                  |  |                              |          |   |               |   |          |  
|--------------------------------------------------------------------------------- |  | ---------------------------- | -------- | - | ------------- | - | -------- | -
|                                                                                  |  | Three Months Ended March 31, |         
|                                                                                  |  | 2004                         |          |   | 2003          |  
|                                                                                  |  | (As Restated)                |          |   | (As Restated) |  
|                                                                                  |  | (Dollars in thousands)       |         
|Cash Flows from Operating Activities                                              |  |                              |          |   |               |   |          |  
|Net income                                                                        |  | $                            | 5,697    |   |               | $ | 2,636    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |          |   |               |   |          |  
|Gain of sale of investment securities                                             |  |                              | (499     | ) |               |   |         |  
|Provision for loan losses                                                         |  |                              | 5,211    |   |               |   | 2,703    |  
|Depreciation and amortization                                                     |  |                              | 323      |   |               |   | 248      |  
|FHLB stock dividend                                                               |  |                              |         |   |               |   | (51      | )
|(Increase) decrease in accrued interest receivable                                |  |                              | (883     | ) |               |   | 50       |  
|Decrease in other assets                                                          |  |                              | 2,736    |   |               |   | 3,708    |  
|Accretion of discount on loans                                                    |  |                              | (2,486   | ) |               |   |         |  
|Decrease in accrued expenses and other liabilities                                |  |                              | (1,558   | ) |               |   | (2,671   | )
|Amortization of premiums on investment securities                                 |  |                              | 506      |   |               |   | 978      |  
|                                                                                  |  |                              |          |   |               |   |          |  
|Net cash provided by operating activities                                         |  |                              | 9,047    |   |               |   | 7,601    |  
|                                                                                  |  |                              |          |   |               |   |          |  
|Cash Flows from Investing Activities                                              |  |                              |          |   |               |   |          |  
|Purchase of investment securities                                                 |  |                              | (265,254 | ) |               |   | (464,509 | )
|Proceeds from maturities of investment securities                                 |  |                              | 119,932  |   |               |   | 261,407  |  
|Proceeds from sale of investment securities                                       |  |                              | 232,428  |   |               |   |         |  
|Originations, net of repayments, of non-mortgage loans                            |  |                              | (37,358  | ) |               |   | (26,397  | )
|Purchase of premises and equipment                                                |  |                              | (425     | ) |               |   | (262     | )
|Purchase of FHLB stock                                                            |  |                              |         |   |               |   | (5,680   | )
|                                                                                  |  |                              |          |   |               |   |          |  
|Net cash provided by (used in) investing activities                               |  |                              | 49,323   |   |               |   | (235,441 | )
|                                                                                  |  |                              |          |   |               |   |          |  
|Cash Flows from Financing Activities                                              |  |                              |          |   |               |   |          |  
|Net increase in deposits                                                          |  |                              | 27,641   |   |               |   | 2,573    |  
|(Repayment) proceeds of repurchase agreements                                     |  |                              | (47,669  | ) |               |   | 240,553  |  
|Exercise of stock options                                                         |  |                              | 132      |   |               |   | 4        |  
|                                                                                  |  |                              |          |   |               |   |          |  
|Net cash (used in) provided by financing activities                               |  |                              | (19,896  | ) |               |   | 243,130  |  
|                                                                                  |  |                              |          |   |               |   |          |  
|Net increase in cash and cash equivalents                                         |  |                              | 38,474   |   |               |   | 15,290   |  
|Cash and cash equivalents at beginning of period                                  |  |                              | 14,209   |   |               |   | 13,554   |  
|                                                                                  |  |                              |          |   |               |   |          |  
|Cash and cash equivalents at end of period                                        |  | $                            | 52,683   |   |               | $ | 28,844   |  
|                                                                                  |  |                              |          |   |               |   |          |  
|Supplemental Disclosures of Cash Flow Information                                 |  |                              |          |   |               |   |          |  
|Cash paid for:                                                                    |  |                              |          |   |               |   |          |  
|Interest                                                                          |  | $                            | 7,010    |   |               | $ | 5,338    |  
|                                                                                  |  |                              |          |   |               |   |          |  
|Income taxes                                                                      |  | $                            | 941      |   |               | $ | 642      |  
|                                                                                  |  |                              |          |   |               |   |          |  
|Deconsolidation of trust preferred securities                                     |  | $                            | 300      |   |               | $ |         |  
|                                                                                  |  |                              |          |   |               |   |          |  



See accompanying
notes to consolidated financial statements



4



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UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(Unaudited)



1. Organization



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



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



2. Restatements



In August 2004, it came to the attention of the Company that an error had occurred in the application of the individual
static pool methodology utilized in estimating the appropriate amount of the allowance for loan losses and the related provision for loan losses and, as a result of the discovery of this error, the Company has restated its consolidated financial
statements as of and for the three-month periods ended March 31, 2004 and 2003. The Company has also filed a Form 10-K/A to restate its financial statements for the years ended December 31, 2003 and 2002. The error in the application of the
individual static pool methodology was such that deficiencies in the allowance for loan losses for individual static pools did not always result in an appropriate corresponding provision for loan losses to increase the allowance for that pool. The
Companys pool by pool analysis was not sufficiently rigorous to identify, on a timely basis, the additional provisions for loan losses required to compensate for allowance shortfalls on an individual pool basis. As a result, management applied
the methodology, as described in the Companys Accounting Policy note in its recently filed Form 10-K/A for 2003, consistently for all periods and determined that an additional provision for loan losses in the amount of $2,168,000 was required
for the three months ended March 31, 2003 and that a reduction in the provision for loan losses in the amount of $1,503,000 was required for the three-months ended March 31, 2004. This restatement changed the level of the allowance for loan losses
and the balance of deferred taxes and decreased retained earnings, as shown below. The restatement also changed the provision for loan losses and changed income taxes and net income for the periods shown below.



Commencing January 1, 2003, the Company began to allocate 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 now 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. Initially, the Company maintained an allowance for incurred losses estimated to be equal to net charge-offs for the
next six months (estimated loss confirmation period) for contracts purchased after January 1, 2003. In the third quarter of 2003, after consultation with the OTS, this estimate of the loss confirmation period was changed to maintain an
allowance for all contracts in this portfolio to cover estimated charge-offs for the next 12 months instead of 6 months. In connection with the aforementioned restatement, quarterly provisions for 2003 were determined by applying the revised
individual static pool methodology discussed above and estimated charge-offs for the next 12 months for all quarters. Management expects that future results will reflect higher yields and provisions for credit losses being recorded from purchased
automobile contracts.



5



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UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(Unaudited)



The Company has also restated its Financial Statements for the periods ended March 31, 2004 and
2003 to a) restate its consolidated financial statements to exclude the gain on sale of residual interests in securitization in 2003 from income from continuing operations and reporting it net of taxes, as income from discontinued operations
and b) restate its consolidated financial statements for the three-month periods ended March 31, 2004 and 2003 to correct errors in the computation of the dilutive effect of outstanding stock options to consider the tax benefit the Company
receives as part of the assumed proceeds under the treasury stock method.



Within this document the Company restates a correction in the computation of earnings per share to consider the tax benefit that the Company will receive as part of the assumed proceeds under the treasury stock
method.



A summary of the aggregate effects of these
restatements on Companys Consolidated Statement of Financial Condition and Consolidated Statement of Operations for the periods presented herein is shown below and is restating the unaudited quarterly financial statements for the three months
ended March 31, 2004.



Changes to Consolidated Statement of Financial
Condition



|                                           |  |                                               |           |   |                         |   |           |             |  |   |             |   |  |   |           |  
|------------------------------------------ |  | --------------------------------------------- | --------- | - | ----------------------- | - | --------- | ----------- |  | - | ----------- | - |  | - | --------- | -
|                                           |  | As of March 31, 2004                          |           |   | As of December 31, 2003 |  
|                                           |  | Unaudited                                     |           |   |                         |   |           |             | 
|                                           |  | As Reported                                   |           |   | As Restated             |   |           | As Reported |  |   | As Restated |  
|                                           |  | (Dollars in thousands, except per share data) |          
|Allowance for loan losses                  |  | $                                             | (21,347   | ) |                         | $ | (24,713   | )           |  | $ | (20,384     | ) |  | $ | (25,253   | )
|Other assets                               |  | $                                             | 21,242    |   |                         | $ | 22,500    |             |  | $ | 23,248      |   |  | $ | 25,107    |  
|Total Assets                               |  | $                                             | 1,654,770 |   |                         | $ | 1,652,662 |             |  | $ | 1,670,716   |   |  | $ | 1,667,706 |  
|                                           |  |                                               |           |  
|Retained earnings                          |  | $                                             | 41,884    |   |                         | $ | 39,776    |             |  | $ | 37,089      |   |  | $ | 34,079    |  
|Total Shareholders Equity                  |  | $                                             | 108,667   |   |                         | $ | 106,559   |             |  | $ | 103,327     |   |  | $ | 100,317   |  
|Total Liabilities and Shareholders Equity |  | $                                             | 1,654,770 |   |                         | $ | 1,652,662 |             |  | $ | 1,670,716   |   |  | $ | 1,667,706 |  



6



---

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(Unaudited)



|                                                                                                                         |  |                                  |        |                                  |   |            |  |            |        |  |   |       
|------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------- | ------ | -------------------------------- | - | ---------- |  | ---------- | ------ |  | - | ------
|Changes to Unaudited Consolidated Statement of Operations                                                                |  |                                  |        |                                  |   |            |  |            |       
|                                                                                                                         |  |                                 
|                                                                                                                         |  | Three months endedMarch 31, 2004 |        | Three months endedMarch 31, 2003
|                                                                                                                         |  | Unaudited                       
|                                                                                                                         |  | AsReported                       |        | AsRestated                       |   | AsReported |  | AsRestated
|Provision for loan losses                                                                                                |  | $                                | 6,714  |                                  | $ | 5,211      |  | $          | 535    |  | $ | 2,703 
|Net interest income after provision for loan losses                                                                      |  | $                                | 18,938 |                                  | $ | 20,441     |  | $          | 14,694 |  | $ | 12,526
|Non-interest income                                                                                                      |  | $                                | 1,279  |                                  | $ | 1,279      |  | $          | 1,220  |  | $ | 496   
|Income from continuing operations before income taxes and discontinued operations                                        |  | $                                | 8,055  |                                  | $ | 9,558      |  | $          | 6,593  |  | $ | 3,701 
|Income taxes                                                                                                             |  | $                                | 3,260  |                                  | $ | 3,861      |  | $          | 2,683  |  | $ | 1,497 
|Income from continuing operations before cumulative effect of change in accounting principle and discontinued operations |  | $                                | 5,697  |                                  | $ | 5,697      |  | $          | 3,910  |  | $ | 2,204 
|Income from discontinued operations, net of tax                                                                          |  | $                                |       |                                  | $ |           |  | $          |       |  | $ | 432   
|                                                                                                                         |  |                                  |        |                                  |   |            |  |            |        |  |   |       
|Net income                                                                                                               |  | $                                | 4,795  |                                  | $ | 5,697      |  | $          | 3,910  |  | $ | 2,636 
|                                                                                                                         |  |                                  |        |                                  |   |            |  |            |        |  |   |       
|Earnings per share-basic:                                                                                                |  |                                  |        |                                  |   |            |  |            |        |  |   |       
|Net income before cumulative of change in accounting principle and discounted operations                                 |  | $                                | 0.30   |                                  | $ | 0.35       |  | $          | 0.25   |  | $ | 0.14  
|Discontinued operations                                                                                                  |  | $                                |       |                                  | $ |           |  | $          |       |  | $ | 0.03  
|Net income                                                                                                               |  | $                                | 0.30   |                                  | $ | 0.35       |  | $          | 0.25   |  | $ | 0.17  
|Earnings per share-diluted:                                                                                              |  |                                  |        |                                  |   |            |  |            |        |  |   |       
|Net income before cumulative of change in accounting principle and discounted operations                                 |  | $                                | 0.25   |                                  | $ | 0.32       |  | $          | 0.22   |  | $ | 0.12  
|Discontinued operations                                                                                                  |  | $                                |       |                                  | $ |           |  | $          |       |  | $ | 0.03  
|Net income                                                                                                               |  | $                                | 0.25   |                                  | $ | 0.32       |  | $          | 0.22   |  | $ | 0.15  
|Weighted average shares outstanding                                                                                      |  |                                  | 19,153 |                                  |   | 18,058     |  |            | 17,796 |  |   | 17,100
|                                                                                                                         |  |                                  |       
|Changes to Unaudited Consolidated Statements of Cash Flows                                                               |  |                                  |        |                                  |   |            |  |            |       
|                                                                                                                         |  |                                 
|                                                                                                                         |  | Three months endedMarch 31, 2004 |        | Three months endedMarch 31, 2003
|                                                                                                                         |  | Unaudited                        |        | Unaudited                       
|                                                                                                                         |  | AsReported                       |        | AsRestated                       |   | AsReported |  | AsRestated
|Net income                                                                                                               |  | $                                | 4,795  |                                  | $ | 5,697      |  | $          | 3,910  |  | $ | 2,636 
|Provision for loan losses                                                                                                |  | $                                | 6,714  |                                  | $ | 5,211      |  | $          | 535    |  | $ | 2,703 
|Decrease in other assets                                                                                                 |  | $                                | 1,835  |                                  | $ | 2,736      |  | $          | 4,602  |  | $ | 3,708 



3. Basis of Presentation



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



These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the



7



---

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(Unaudited)



information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Companys financial condition and results of operations for the interim periods presented in this Form 10-Q/A 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/A for the year ended December 31, 2003.



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



4. Earnings Per Share



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



|                                            |  |                                         |        |               |   |       
|------------------------------------------- |  | --------------------------------------- | ------ | ------------- | - | ------
|                                            |  | Three Months Ended March31,            
|                                            |  | 2004                                    |        | 2003         
|                                            |  | (As Restated)                           |        | (As Restated)
|                                            |  | (In thousands, except pershare amounts)
|Earnings per sharebasic:                   |  |                                         |        |               |   |       
|Income before discontinued operations       |  | $                                       | 5,697  |               | $ | 2,204 
|Discontinued operations                     |  |                                         |       |               |   | 432   
|                                            |  |                                         |        |               |   |       
|Net income                                  |  | $                                       | 5,697  |               | $ | 2,636 
|                                            |  |                                         |        |               |   |       
|Average common shares outstanding           |  |                                         | 16,118 |               |   | 15,868
|                                            |  |                                         |        |               |   |       
|Per share before discontinued operations    |  | $                                       | 0.35   |               | $ | 0.14  
|Discontinued operations                     |  |                                         |       |               |   | 0.03  
|                                            |  |                                         |        |               |   |       
|Per share                                   |  | $                                       | 0.35   |               | $ | 0.17  
|                                            |  |                                         |        |               |   |       
|Earnings per sharediluted:                 |  |                                         |        |               |   |       
|Income before discontinued operations       |  | $                                       | 5,697  |               | $ | 2,204 
|Discontinued operations                     |  |                                         |       |               |   | 432   
|                                            |  |                                         |        |               |   |       
|Net income                                  |  | $                                       | 5,697  |               | $ | 2,636 
|                                            |  |                                         |        |               |   |       
|Average common shares outstanding           |  |                                         | 16,118 |               |   | 15,868
|Add: Stock options                          |  |                                         | 1,940  |               |   | 1,232 
|                                            |  |                                         |        |               |   |       
|Average common shares outstanding  diluted |  |                                         | 18,058 |               |   | 17,100
|                                            |  |                                         |        |               |   |       
|Per share before discontinued operations    |  | $                                       | 0.32   |               | $ | 0.13  
|Discontinued operations                     |  |                                         |       |               |   | 0.02  
|                                            |  |                                         |        |               |   |       
|Per share                                   |  | $                                       | 0.32   |               | $ | 0.15  
|                                            |  |                                         |        |               |   |       



5. Stock-Based Compensation



At March 31, 2004 and 2003, the Company has issued stock
options to certain of its employees and directors. The Company accounts for these options under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock issued to Employees, and related Interpretations. No stock-based
employee compensation cost is reflected in net income, as all options granted had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. Had compensation cost for



8



---

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(Unaudited)



the Companys stock option plan been determined based on the fair value consistent with the Provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, the Companys net income and income per share would have been reduced to the pro forma amounts indicated below for the three months ended March 31, 2004 and 2003:

|                                                                                                                |  |                                         |       |               |   |      
|--------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ----- | ------------- | - | -----
|                                                                                                                |  | Three Months Ended March 31,           
|                                                                                                                |  | 2004                                    |       | 2003         
|                                                                                                                |  | (As Restated)                           |       | (As Restated)
|                                                                                                                |  | (In thousands, except per shareamounts)
|Net income as reported                                                                                          |  | $                                       | 5,697 |               | $ | 2,636
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards |  | $                                       | 302   |               | $ | 257  
|                                                                                                                |  |                                         |       |               |   |      
|Net incomepro forma                                                                                            |  | $                                       | 5,395 |               | $ | 2,379
|Net income per share as reportedbasic                                                                          |  | $                                       | 0.35  |               | $ | 0.17 
|                                                                                                                |  |                                         |       |               |   |      
|Net income per sharepro formabasic                                                                            |  | $                                       | 0.33  |               | $ | 0.15 
|                                                                                                                |  |                                         |       |               |   |      
|Net income per share as reportedfully diluted                                                                  |  | $                                       | 0.32  |               | $ | 0.15 
|                                                                                                                |  |                                         |       |               |   |      
|Net income per sharepro formafully diluted                                                                    |  | $                                       | 0.30  |               | $ | 0.14 
|                                                                                                                |  |                                         |       |               |   |      



6. Allowance for Loan Losses



The total allowance for loan losses was $24.7 million at
March 31, 2004 compared with $26.2 million at March 31, 2003, representing 5.36% of loans at March 31, 2004 and 7.42% at March 31, 2003. Of the total allowance for losses related to automobile contracts of $24.5 million at March 31, 2004, $13.5
million and $11.0 million related to contracts acquired subsequent to January 1, 2003 and contracts acquired prior to January 1, 2003, respectively. Of the total allowance for losses related to automobile contracts of $26.0 million at March 31,
2003, $2.9 million and $23.1 million related to contracts acquired subsequent to January 1, 2003 and contracts acquired prior to January 1, 2003, respectively. The allowance for loan losses has been restated as further described in Note 2.
Restatements.



The following is a summary of the changes
in the allowance for loan losses on auto loans allocated to loans purchased before January 1, 2003.



|                             |  |        |         |  
|---------------------------- |  | ------ | ------- | -
|Allowance for loan Losses    |  | Amount |        
|Balance at December 31, 2003 |  | $      | 13,482  |  
|Provision for loan losses    |  |        | 925     |  
|Net charge offs              |  |        | (3,450  | )
|                             |  |        |         |  
|Balance at March 31, 2004    |  | $      | 10,957  |  
|                             |  |        |         |  
|                             | 
|Balance at December 31, 2002 |  | $      | 27,582  |  
|Provision for loan losses    |  |        | 5       |  
|Net charge offs              |  |        | (44,457 | )
|                             |  |        |         |  
|Balance at March 31, 2003    |  | $      | 23,130  |  
|                             |  |        |         |  



7. Recent Accounting Developments



In December 2003, the FASB issued FASB Interpretation No.
46 (revised December 2003), Consolidation of Variable Interest Entities,which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and
accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation of Variable Interest Entities,



9



---

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(Unaudited)



which was issued in January 2003. We are required to apply FIN 46R to variable interests in variable interest entities created after December 31, 2003. For
variable interest in variable interest entities created before January 1, 2004 the Interpretation is applied beginning January 1, 2005. For any variable interest entities that must be consolidated under FIN 46R that were created before January 1,
2004, the assets, liabilities and noncontrolling interest of the variable interest entity initially are measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest
being recognized as the cumulative effect of an account change. If determining the carrying amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities and 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 financial
statements.



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



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: (1) determine whether an investment is impaired, (2) determine
whether the impairment is other-than-temporary, and (3) to recognize 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 expects that the adoption of this EITF will not have a material impact on its consolidated financial statements.



8. Operating Segments



The Company has three reportable segments: automobile finance, insurance premium finance and banking. The automobile finance segment acquires, holds for
investment and services nonprime retail automobile installment sales contracts generated by franchised and independent dealers of used automobiles. The insurance premium finance segment underwrites and finances automobile and commercial insurance
premiums in California. The banking segment operates a three-branch federal savings bank and is the principal funding source



10



---

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(Unaudited)



for the Companys automobile and insurance premium finance segments. The Company is in the process of implementing a strategic plan to no longer use
insured deposits of the Bank as a funding source and, instead, to fund the automobile and insurance premium finance segments through securitizations and warehouse lines of credit.



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



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



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



|                          |  |                                                           |         |                         |   |        |         |  |       |           |  |   |          
|------------------------- |  | --------------------------------------------------------- | ------- | ----------------------- | - | ------ | ------- |  | ----- | --------- |  | - | ---------
|                          |  | At or For Three Months Ended March 31, 2004 (As Restated)
|                          |  | AutomobileFinance                                         |         | InsurancePremiumFinance |   |        | Banking |  | Total
|Net interest income       |  | $                                                         | 22,336  |                         | $ | 622    |         |  | $     | 2,694     |  | $ | 25,652   
|Provision for loan losses |  |                                                           | 5,197   |                         |   | 14     |         |  |       |          |  |   | 5,211    
|Non-interest income       |  |                                                           | 128     |                         |   | 152    |         |  |       | 999       |  |   | 1,279    
|Non-interest expense      |  |                                                           | 10,037  |                         |   | 40     |         |  |       | 2,085     |  |   | 12,162   
|                          |  |                                                           |         |                         |   |        |         |  |       |           |  |   |          
|Segment profit, pre-tax   |  | $                                                         | 7,230   |                         | $ | 720    |         |  | $     | 1,608     |  | $ | 9,558    
|                          |  |                                                           |         |                         |   |        |         |  |       |           |  |   |          
|Total assets              |  | $                                                         | 412,893 |                         | $ | 37,446 |         |  | $     | 1,202,323 |  | $ | 1,652,662
|                          |  |                                                           |         |                         |   |        |         |  |       |           |  |   |          
|                          | 
|                          |  | At or For Three Months Ended March 31, 2003 (As Restated)
|                          |  | AutomobileFinance                                         |         | InsurancePremiumFinance |   |        | Banking |  | Total
|Net interest income       |  | $                                                         | 13,280  |                         | $ | 623    |         |  | $     | 1,326     |  | $ | 15,229   
|Provision for loan losses |  |                                                           | 2,905   |                         |   | (202   | )       |  |       |          |  |   | 2,703    
|Non-interest income       |  |                                                           | 94      |                         |   | 126    |         |  |       | 1,000     |  |   | 1,220    
|Non-interest expense      |  |                                                           | 7,631   |                         |   | 54     |         |  |       | 1,636     |  |   | 9,321    
|                          |  |                                                           |         |                         |   |        |         |  |       |           |  |   |          
|Segment profit, pre-tax   |  | $                                                         | 2,838   |                         | $ | 897    |         |  | $     | 690       |  | $ | 4,425    
|                          |  |                                                           |         |                         |   |        |         |  |       |           |  |   |          
|Total assets              |  | $                                                         | 301,469 |                         | $ | 34,881 |         |  | $     | 854,759   |  | $ | 1,191,109
|                          |  |                                                           |         |                         |   |        |         |  |       |           |  |   |          



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



For a discussion of a change in the provision for loan losses see Provision and Allowance for Loan Losses on Page 16 within this document. The
allowance for loan losses has been restated as further described in Note 2. Restatements.



11



---

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



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



General



Company



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



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



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



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



Automobile Finance Business



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



12



---

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



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



Insurance Premium Finance Business



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



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



The Bank



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



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



We have historically funded our automobile finance and our insurance premium
finance businesses mainly with retail and wholesale bank deposits held by the Bank. However, we have implemented a strategic plan to shift the funding source of our automobile finance and insurance premium finance business to a source outside of the
federal thrift charter. Our plan is to exit the federal thrift charter and concurrently receive cash proceeds from third parties to finance the automobile and insurance premium receivables. As part of our strategic plan, we may require the Bank to
dividend all non-cash assets and excess capital to us, including the automobile finance and insurance premium finance businesses (which currently operate as subsidiaries of the Bank) and United States



13



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Government Agency Securities. For more information see Liquidity and Capital ResourcesStrategic Plan Relating to Shift In Funding Sources.



Critical Accounting Policies



We have established various accounting policies, which govern the
application of accounting principles generally accepted in the United States of America in the preparation of our financial statements. Our accounting policies are integral to understanding the results reported. Accounting policies are described in
detail in Note 3 to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS presented in our 2003 Annual Report on Form 10-K/A.



Certain accounting policies require us to make significant estimates and assumptions, which have a material impact on the carrying value of certain assets
and liabilities, and we consider these to be critical accounting policies. The estimates and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Actual results could
differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods. The following is a
brief description of our current accounting policies involving significant management valuation judgments



As discussed elsewhere, the Company has restated its financial condition and results of operations for the three-months ended March 31, 2004 and 2003 to
reflect the following: 1) a correction of an error in the application of the individual static pool methodology utilized in estimating the appropriate amount of the allowance for loan losses and the related provision for loan losses, 2) a
reclassification of a gain on sale of residual interests in 2003 as discontinued operations and 3) a correction in the computation of earnings per share to consider the tax benefit that the Company will receive as part of the assumed proceeds under
the treasury stock method. For more information see Note 2. Restatements to the accompanying notes to the consolidated financial statements in this Form 10-Q/A.



Provision and 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 by static pool 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.



We established our allowance for loan losses for auto contracts purchased after January 1, 2003 by using the Expected 12 month Charge Off
Method which establishes allowances based on an analysis that sums the expected charge-offs for the next 12 months in each static loss pool.



Commencing January 1, 2003, the Bank began to allocate 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 now established through provisions for losses record in income as necessary to provide for estimated contract losses (net of
remaining unearned income) at each reporting date. Management expects that future results will reflect higher yields and provisions for credit losses being recorded from purchased automobile contracts



For automobile contracts purchased prior to January 1, 2003 the Company
accounts for such contracts by static pool, stratified into six-month buckets, so that the credit risk in each individual static pool can be evaluated



14



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independently, on a periodic basis, in order to estimate the future losses within each static pool. Additional provisions for credit losses are recognized
immediately for pools whereby the remaining amount of the initial amount set aside was determined to be insufficient to cover losses expected to be incurred based on an analysis of projected losses.



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



Average Balance Sheets



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



|                                                                 |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|---------------------------------------------------------------- |  | ---------------------------- | --------- | -------- | ------------- | ----------------- |  | ----- | ----------------- |  | -------- | --------- | ------------------- | - | ------ |  | ----- | -
|                                                                 |  | Three Months Ended March 31, |          
|                                                                 |  | 2004                         |           |          | 2003          |                  
|                                                                 |  | (As Restated)                |           |          | (As Restated) |                  
|                                                                 |  | AverageBalance(1)            |           | Interest |               | AverageYield/Cost |  |       | AverageBalance(1) |  | Interest |           | Average Yield/ Cost |  
|                                                                 |  | (Dollars in thousands)       |          
|Assets                                                           |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Interest earning assets                                          |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Securities and short term investments                            |  | $                            | 1,183,760 |          | $             | 5,074             |  | 1.72  | %                 |  | $        | 692,871   |                     | $ | 3,714  |  | 2.17  | %
|IPF loans, net(3)                                                |  |                              | 38,884    |          |               | 1,089             |  | 11.26 | %                 |  |          | 34,449    |                     |   | 1,041  |  | 12.26 | %
|Automobile installment Contracts, net(4)                         |  |                              | 382,943   |          |               | 25,987            |  | 27.52 | %                 |  |          | 278,715   |                     |   | 15,762 |  | 22.94 | %
|                                                                 |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Total interest earning assets                                    |  |                              | 1,605,587 |          | $             | 32,150            |  | 8.12  | %                 |  |          | 1,006,035 |                     | $ | 20,517 |  | 8.27  | %
|                                                                 |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Non-interest earnings assets                                     |  |                              | 58,329    |          |               |                   |  |       |                   |  |          | 40,930    |                     |   |        |  |       |  
|                                                                 |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Total assets                                                     |  | $                            | 1,663,916 |          |               |                   |  |       |                   |  | $        | 1,046,965 |                     |   |        |  |       |  
|                                                                 |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Liabilities and Equity                                           |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Interest bearing liabilities                                     |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Customer deposits                                                |  | $                            | 522,466   |          | $             | 3,519             |  | 2.71  | %                 |  | $        | 470,895   |                     | $ | 3,692  |  | 3.18  | %
|Repurchase agreements                                            |  |                              | 1,022,316 |          |               | 2,859             |  | 1.12  | %                 |  |          | 479,426   |                     |   | 1,596  |  | 1.35  | %
|Junior subordinated debentures                                   |  |                              | 10,300    |          |               | 120               |  | 4.69  | %                 |  |          |          |                     |   |       |  |      | %
|                                                                 |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Total interest bearing liabilities                               |  |                              | 1,555,082 |          | $             | 6,498             |  | 1.69  | %                 |  |          | 950,321   |                     | $ | 5,288  |  | 2.26  | %
|                                                                 |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Non-interest bearing liabilities                                 |  |                              | 5,396     |          |               |                   |  |       |                   |  |          | 8,807     |                     |   |        |  |       |  
|                                                                 |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Total liabilities                                                |  |                              | 1,560,478 |          |               |                   |  |       |                   |  |          | 959,128   |                     |   |        |  |       |  
|Equity                                                           |  |                              | 103,438   |          |               |                   |  |       |                   |  |          | 87,837    |                     |   |        |  |       |  
|                                                                 |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Total liabilities and equity                                     |  | $                            | 1,663,916 |          |               |                   |  |       |                   |  | $        | 1,046,965 |                     |   |        |  |       |  
|                                                                 |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Net interest income before provision for loan losses             |  |                              |           |          | $             | 25,652            |  |       |                   |  |          |           |                     | $ | 15,229 |  |       |  
|                                                                 |  |                              |           |          |               |                   |  |       |                   |  |          |           |                     |   |        |  |       |  
|Net interest rate spread(5)                                      |  |                              |           |          |               |                   |  | 6.43  | %                 |  |          |           |                     |   |        |  | 6.01  | %
|Net interest margin(6)                                           |  |                              |           |          |               |                   |  | 6.48  | %                 |  |          |           |                     |   |        |  | 6.14  | %
|Ratio of interest earning assets to interest bearing liabilities |  |                              |           |          |               |                   |  | 103   | %                 |  |          |           |                     |   |        |  | 106   | %

---

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

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

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

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

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

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



15



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



General



For the three months ended March 31, 2004, our net income increased $3.1
million to $5.7 million from $2.6 million for the three months ended March 31, 2003.



The increase in net income was due primarily to a $10.4 million increase in net interest income, which increased to $25.7 million in the first quarter of 2004 from $15.2 million during the same quarter of 2003,
partially offset by a $2.5 million increase in the provision for loan losses and a $2.8 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, including unearned finance
charges, increased $44.2 million to $150.4 million for the three months ended March 31, 2004 from $106.2 million for the three months ended March 31, 2003, as a result of our planned growth in the automobile finance business. Our insurance
premium finance originations increased $2.9 million to $27.3 million for the three months ended March 31, 2004 from $24.4 million for the three months ended March 31, 2003.



Interest Income



Interest income increased to $32.2 million for the three months ended March 31, 2004 from $20.5 million for the three months ended March 31, 2003 due
primarily to a $599.6 million increase in average interest earning assets. The largest components of growth in average interest earning assets were investment securities, which increased by $490.9 million and automobile installment contracts, which
increased by $104.2 million. The increase in investment securities was a result of an increase in commercial borrowings, reflecting the need to increase assets required for the Bank to meet the 30% qualified thrift lender requirement of the OTS. The
increase in automobile contracts principally resulted from the purchasing of additional dealer contracts in existing and new markets consistent with the planned growth of this business unit.



Interest Expense



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



Provision and Allowance for Loan Losses



Provision for loan losses was $5.2 million for the
three months ended March 31, 2004 compared to $2.7 million for the three months ending March 31, 2003. The provision for 2004 reflects a provision expense of $14,000 in our insurance premium finance business and $5.2 million in UACC.



The total allowance for loan losses was $24.7 million at March
31, 2004 compared with $26.2 million at March 31, 2003, representing 5.36% of loans at March 31, 2004 and 7.42% at March 31, 2003. Additionally, unearned discounts on loans totaled $17.9 million at March 31, 2004 compared with $4.3 million at March
31, 2003, representing 3.73% of loans at March 31, 2004 and 1.21% at March 31, 2003.



16



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Annualized net charge-offs to average loans were 5.53% for the three months ended March 31, 2004 compared
with 5.76% for the three months ended March 31, 2003. This rate was favorably impacted in 2003 by the recovery of $536,000 from the State of California for refund of sales taxes on repossessed autos. We applied for this refund of sales taxes based
on a memorandum of opinion issued by the Board of Equalization of the state of California in 2000 wherein the state of California was required to refund sales taxes that had been paid on the loss portion of a repossessed automobile since January
1999. All amounts charged off on an automobile loan are charged to the allowance for loan losses. Thus, when we received a refund of sales taxes from the state of California, we returned the entire portion of the sales tax refund to the allowance
account.



Non-interest Income



Non-interest income increased $783,000 to $1.3 million for the three months
ended March 31, 2004 from $0.5 million for the three months ended March 31, 2003. This increase was mainly the result of a $499,000 gain on sale of investment securities.



Non-interest Expense



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



Income Taxes



Income taxes increased $2.1 million to $3.9 million for the three months
ended March 31, 2004 from $1.8 million for the three months ended March 31, 2003. This increase occurred as a result of a $5.1 million increase in income before income taxes between the two periods.



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



Total assets decreased $15 million, to $1.65 billion at March 31, 2004
from $1.67 billion at December 31, 2003. The decrease resulted primarily from a $86.5 million decrease in securities available for sale to $1.1 billion at March 31, 2004 from $1.2 billion at December 31, 2003 and a $2.6 million decrease in other
assets partially offset by a $38.5 million increase in cash and cash equivalents and a $34.6 million increase in loans to $436.0 million at March 31, 2004 from $401.4 million at March 31, 2003. The decrease in securities and corresponding
increase in cash and cash equivalents is primarily due to pay-downs and maturities in the portfolio. The increase in loans principally resulted from the purchasing of additional dealer contracts in existing and new markets consistent with planned
growth in our automobile finance business unit.



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



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



Shareholders equity increased to $106.6 million at March 31, 2004 from $100.3 million at December 31, 2003, primarily as a result of net income of
$5.7 million during the three months ended March 31, 2004.



17



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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.



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



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



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



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



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



Interest Rate Sensitivity of Net Portfolio Value



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



18



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Liquidity and Capital Resources



Overview



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



Strategic Plan Relating to Shift In Funding Sources



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



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



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



Principal Sources of Cash



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



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



19



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Deposits



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



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



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



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



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



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



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



20



---

Subordinated Debentures



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



Capital Requirements



At March 31, 2004, the Bank exceeded all of its regulatory capital
requirements with tangible capital of $105.0 million, or 6.36% of total adjusted assets, which is above the required level of $24.8 million, or 1.5%; the Bank had core capital of $105.0 million, or 6.36% of total adjusted assets, which is above the
required level of $82.5 million, or 5.0%; and the Bank had risk-based capital of $113.3 million, or 17.2% of risk-weighted assets, which is above the required level of $66.3 million, or 10.0% for a well-capitalized institution.



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



Through the Bank, we can obtain advances from the FHLB, collateralized by its securities. The FHLB functions as a central reserve bank providing credit
for thrifts and certain other member financial institutions. Advances are made pursuant to several programs, each of which has its own interest rate and range of maturities. Limitations on the amount of advances are based generally on a fixed
percentage of total assets or on the FHLBs assessment of an institutions credit-worthiness. As of March 31, 2004, the Banks total borrowing capacity under this credit facility was $495.8 million, of which $183.5 million was
utilized to fund repurchase agreements and $312.3 million was available.



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



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



21



---

Aggregate Contractual Obligations



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



|                               |  |                        |           |                  |   |                   |  |                  |        |       |   |        |  |   |          
|------------------------------ |  | ---------------------- | --------- | ---------------- | - | ----------------- |  | ---------------- | ------ | ----- | - | ------ |  | - | ---------
|                               |  | Less than 1Years       |           | 1 Year to3 Years |   | 4 Yearsto 5 Years |  | More Than5 Years |        | Total
|                               |  | (Dollars in thousands)
|Deposits                       |  | $                      | 295,352   |                  | $ | 186,075           |  | $                | 44,603 |       | $ |       |  | $ | 526,030  
|Repurchase agreements          |  |                        | 1,004,536 |                  |   |                  |  |                  |       |       |   |       |  |   | 1,004,536
|Operating lease obligations    |  |                        | 2,408     |                  |   | 6,611             |  |                  | 603    |       |   |       |  |   | 9,622    
|Junior subordinated debentures |  |                        |          |                  |   |                  |  |                  |       |       |   | 10,300 |  |   | 10,300   
|                               |  |                        |           |                  |   |                   |  |                  |        |       |   |        |  |   |          
|Total                          |  | $                      | 1,302,296 |                  | $ | 192,686           |  | $                | 45,206 |       | $ | 10,300 |  | $ | 1,550,488
|                               |  |                        |           |                  |   |                   |  |                  |        |       |   |        |  |   |          



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



Lending Activities



Summary of Loan Portfolio.



At March 31, 2004, our net loan portfolio constituted $436.0 million, or 26.4% of our total assets. The following table sets forth the composition of
our loan portfolio at the dates indicated.



|                                 |  |                        |         |   |                  |   |         |                   |  |   |         |  
|-------------------------------- |  | ---------------------- | ------- | - | ---------------- | - | ------- | ----------------- |  | - | ------- | -
|                                 |  | March 31,2004          |         |   | December 31,2003 |   |         | December 31, 2002 | 
|                                 |  | (As Restated)          |        
|                                 |  | (Dollars in thousands) |        
|Consumer Loans                   |  |                        |         |   |                  |   |         |                   |  |   |         |  
|Automobile installment contracts |  | $                      | 445,531 |   |                  | $ | 405,085 |                   |  | $ | 293,440 |  
|Insurance premium finance        |  |                        | 10,299  |   |                  |   | 12,984  |                   |  |   | 17,922  |  
|Other consumer loans             |  |                        | 48      |   |                  |   | 49      |                   |  |   | 80      |  
|                                 |  |                        |         |   |                  |   |         |                   |  |   |         |  
|Total consumer loans             |  |                        | 455,878 |   |                  |   | 418,118 |                   |  |   | 311,442 |  
|                                 |  |                        |         |   |                  |   |         |                   |  |   |         |  
|Commercial Loans                 |  |                        |         |   |                  |   |         |                   |  |   |         |  
|Insurance premium finance        |  |                        | 27,392  |   |                  |   | 28,259  |                   |  |   | 18,400  |  
|                                 |  |                        |         |   |                  |   |         |                   |  |   |         |  
|Total commercial loans           |  |                        | 27,392  |   |                  |   | 28,259  |                   |  |   | 18,400  |  
|                                 |  |                        |         |   |                  |   |         |                   |  |   |         |  
|Total loans                      |  |                        | 483,270 |   |                  |   | 446,377 |                   |  |   | 329,842 |  
|Unearned finance charges         |  |                        | (4,696  | ) |                  |   | (5,385  | )                 |  |   | (3,490  | )
|Unearned discounts               |  |                        | (17,857 | ) |                  |   | (14,368 | )                 |  |   |        |  
|Allowance for loan losses        |  |                        | (24,713 | ) |                  |   | (25,253 | )                 |  |   | (28,048 | )
|                                 |  |                        |         |   |                  |   |         |                   |  |   |         |  
|Total loans, net                 |  | $                      | 436,004 |   |                  | $ | 401,371 |                   |  | $ | 298,304 |  
|                                 |  |                        |         |   |                  |   |         |                   |  |   |         |  



22



---

Loan Maturities.



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



|                 |  |                        |        |                           |   |                            |  |                             |         |                   |   |            |  |   |   |  |   |        
|---------------- |  | ---------------------- | ------ | ------------------------- | - | -------------------------- |  | --------------------------- | ------- | ----------------- | - | ---------- |  | - | - |  | - | -------
|                 |  | March 31, 2004        
|                 |  | OneYear orLess         |        | More Than1 Year to3 Years |   | More Than3 Years to5 Years |  | More Than5 Years to10 Years |         | More Than10 Years |   | TotalLoans
|                 |  | (Dollars in thousands)
|Consumer Loans   |  | $                      | 20,177 |                           | $ | 146,003                    |  | $                           | 288,533 |                   | $ | 1,165      |  | $ |  |  | $ | 455,878
|Commercial loans |  |                        | 27,392 |                           |   |                           |  |                             |        |                   |   |           |  |   |  |  |   | 27,392 
|                 |  |                        |        |                           |   |                            |  |                             |         |                   |   |            |  |   |   |  |   |        
|Total            |  | $                      | 47,569 |                           | $ | 146,003                    |  | $                           | 288,533 |                   | $ | 1,165      |  | $ |  |  | $ | 483,270
|                 |  |                        |        |                           |   |                            |  |                             |         |                   |   |            |  |   |   |  |   |        



Classified Assets and Allowance for
Loan Losses



Our policy is to maintain an allowance for
loan losses to absorb inherent losses, which may be realized on our loan portfolio. These allowances are general valuation allowances for estimates for probable losses not specifically identified. The total allowance for loan losses was $24.7
million at March 31, 2004 compared with $25.3 million at December 31, 2003 representing 5.36% of loans at March 31, 2004 and 5.92% at December 31, 2003. Additionally, unearned discounts on loans totaled $17.9 million at March 31, 2004 compared with
$14.4 million at December 31, 2003, representing 3.73% of loans at March 31, 2004 and 3.26% at December 31, 2003.



The Company has made the following restatements: (a) restated its consolidated financial statements to exclude the gain on sale of residual interests in
securitization in 2003 from income from continuing operations and reporting it, net of taxes, as income from discontinued operations, and (b) restated its consolidated financial statements for the year ended December 31, 2003 and 2002 to correct
errors in the computation of the dilutive effect of outstanding stock options to consider the tax benefit of the Company receives as part of the assumed proceeds under the treasury stock method, which decreased the number of fully
diluted shares outstanding to be utilized in the earnings per share calculations.



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



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



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



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



23



---

Nonaccrual and Past Due Loans.



Interest income is accrued as it is earned. The Companys policy is to charge-off loans delinquent 120 days or more.
Interest income deemed uncollectible is reversed. Income is subsequently recognized only to the extent cash payments are received, until in managements judgment, the borrowers ability to make periodic interest and principal payments is
in accordance with the loan terms, at which time the loan is returned to accrual status.



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



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



Allowance for Loan
Losses.



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



|                                                         |  |                                          |        |   |                                       |   |         |      |  |   |         |  
|-------------------------------------------------------- |  | ---------------------------------------- | ------ | - | ------------------------------------- | - | ------- | ---- |  | - | ------- | -
|                                                         |  | At or For theThree MonthsEnded March 31, |        |   | At or For the Year Ended December 31, |  
|                                                         |  | 2004                                     |        |   | 2003                                  |   |         | 2002 | 
|                                                         |  | (As Restated)                            |       
|                                                         |  | (Dollars in thousands)                   |       
|Allowance for Loan Losses                                |  |                                          |        |   |                                       |   |         |      |  |   |         |  
|Balance at beginning of period                           |  | $                                        | 25,253 |   |                                       | $ | 28,048  |      |  | $ | 17,460  |  
|Provision for loan losses                                |  |                                          | 5,211  |   |                                       |   | 17,737  |      |  |   | 5,508   |  
|Charge-offs                                              |  |                                          | (6,145 | ) |                                       |   | (22,320 | )    |  |   | (18,411 | )
|Recoveries                                               |  |                                          | 394    |   |                                       |   | 1,788   |      |  |   | 1,077   |  
|                                                         |  |                                          |        |   |                                       |   |         |      |  |   |         |  
|Net charge-offs                                          |  |                                          | (5,751 | ) |                                       |   | (20,532 | )    |  |   | (17,334 | )
|Acquisition discounts allocated to loss allowance        |  |                                          |       |   |                                       |   |        |      |  |   | 22,414  |  
|                                                         |  |                                          |        |   |                                       |   |         |      |  |   |         |  
|Balance at end of period                                 |  | $                                        | 24,713 |   |                                       | $ | 25,253  |      |  | $ | 28,048  |  
|                                                         |  |                                          |        |   |                                       |   |         |      |  |   |         |  
|Annualized net charge-offs to average loans              |  |                                          | 5.53   | % |                                       |   | 5.69    | %    |  |   | 6.37    | %
|Allowance for loan losses as a percentage of total loans |  |                                          | 5.36   | % |                                       |   | 5.92    | %    |  |   | 8.59    | %



24



---

Cash Equivalents and Securities Portfolio



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



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



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



Item 3.    Quantitative and Qualitative Disclosures About Market Risk



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



Item 4.    Controls and Procedures



(a) Evaluation of Disclosure Controls and Procedures



As of quarter ended March 31, 2004, UPFC evaluated the effectiveness of the design and operation of its disclosure controls and procedures. This evaluation was done under the supervision and with the participation of
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.



Subsequent to filing our original Form 10-Q, and in connection with the preparation and review of our consolidated financial statements for the quarter ended June 30, 2004, management corrected an error in the
application of the individual static pool methodology utilized for determining the adequacy of our allowance for loan losses and the related provision for loan losses. The identified errors on the computation of our allowance for loan losses and
corresponding provision for loan losses led to a decision to restate our financial statements for the years ended December 31, 2003 and 2002 and subsequent quarterly periods. Management also determined that it was necessary to correct the
classification of a gain on sale of a residual interest as discontinued operations and the computation of earnings per share. The restatements are further discussed in Note 2. Restatements.



25



---

Subsequent to managements identification of the errors in our financial statements and after
discussing the error with our independent registered public accounting firm, KPMG, we have identified certain material weaknesses in our internal controls over financial reporting. These material weaknesses include inadequate independent monitoring
over financial accounting standards that have been implemented and inadequate controls to appropriately interpret and implement financial accounting standards in accordance with generally acceptable accounting principles.



In connection with restating our consolidated financial statements as
provided in this report, our Chief Executive Officer and Chief Financial Officer supervised and participated with other management in re-evaluating the effectiveness of our disclosure controls and procedures for the quarter ended March 31, 2004 and
based on the re-evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the quarter ended March 31, 2004 there were material weaknesses in our disclosure controls and procedures, which has resulted in the conclusion
that the disclosure controls were ineffective.



As a result of
the findings described above, we have implemented the following actions:



| |  | We sought to thoroughly understand the nature of the issues through discussions with KPMG and our audit committee. As part of both our disclosure control procedures and internal
control procedures, we have enhanced documentation relating to our critical accounting policies, including the methodology for calculating our allowance for loan losses, and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | We have begun to establish and continue to establish internal controls to allow independent monitoring of financial accounting standards and improve our skill sets and expertise in
accounting policy and accounting operations.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We
believe that our disclosure controls and procedures have improved due to the scrutiny of such matters by our management and Audit Committee. However, 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.



The Company, as of September 3, 2004, has re-evaluated the effectiveness of the design of the Companys disclosure controls and procedures (as defined in Rule 13a-14(c) or 15d-14(c) under the Exchange Act). Based
on that evaluation, the Companys management, including the CEO and the CFO, has concluded that the design of our disclosure controls and procedures is effective in ensuring that information required to be disclosed in the reports we file under
the Exchange Act is recorded, processed summarized and reported within time periods specified in SEC rules and forms. The Company has not yet evaluated (tested) the operating effectiveness of such controls.



(b) Changes in Internal Controls



During the quarter ended March 31, 2004, there have been no changes in our
internal controls over financial reporting that has materially affected, or are reasonably likely to materially affect, these controls. Subsequent to March 31, 2004, however, we revised the methodology for determining the adequacy of our allowance
for loan losses and the related provisions for loan losses. We also began implementing changes described above. These actions have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
When fully implemented, we will test the operating effectiveness of such controls, as performed, in the normal course of business.



26



---

PART II.    OTHER INFORMATION



Item 1.    Legal Proceedings



Not applicable



Item 2.    Changes in Securities and Use of Proceeds



Not applicable



Item 3.    Defaults Upon Senior Securities



Not applicable



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



Not applicable



Item 5.    Other Information



Not applicable



Item 6.    Exhibits and Reports on Form 8-K



| | (a) | List of Exhibits
| | --- | ----------------



|       |  |                                                                                                                          
|------ |  | -------------------------------------------------------------------------------------------------------------------------
|       | 
|10.115 |  | Employment Agreement dated March 1, 2004 between Pan American Bank, FSB and Garland Koch.*                               
|       | 
|31.1   |  | Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.                            
|       | 
|31.2   |  | Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.                            
|       | 
|32     |  | Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

---

|* | Previously filed
|- | ----------------



| | (b) | Reports on Form 8-K
| | --- | -------------------



Filed March 30, 2004Press releaseAnnouncing plan to exit federal thrift charter.



Filed April 23, 2004Press release1stquarter earnings.



27



---

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.



|                        |  |  |  |                              |  |                                                                                  |  | 
|----------------------- |  |  |  | ---------------------------- |  | -------------------------------------------------------------------------------- |  | 
|Date: September 3, 2004 |  |  |  | United PanAm Financial Corp.
|                        |  |  | 
|                        |  |  |  |                              |  | /S/    RAY
THOUSAND                                                             
|                        |  |  |  |                              |  | Ray Thousand Chief Executive Officer (Principal Executive Officer) and President





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