##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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



For
the quarterly period ended June 30, 2005



Commission File
Number 000-24051



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UNITED PANAM FINANCIAL CORP.

(Exact
name of Registrant as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|California                                                     |  | 94-3211687                             
|(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  x    No ̈



The number of shares outstanding of the Registrants Common Stock as of
July 19, 2005 was 16,959,694 shares.



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##### Table of Contents

UNITED PANAM FINANCIAL CORP.



FORM 10-Q

June 30, 2005



INDEX



|                               |  |                                                                                                                    |  |     
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------ |  | ----
|                               |  |                                                                                                                    |  | Page
|PART I.  FINANCIAL INFORMATION |  |                                                                                                                   
|                               |  |                                                                                                                   
|Item 1.                        |  | Financial Statements                                                                                               |  |     
|                               |  |                                                                                                                   
|                               |  | Consolidated Statements of Financial Condition as of June 30, 2005 and December 31, 2004                           |  | 1   
|                               |  |                                                                                                                   
|                               |  | Consolidated Statements of Operations for the three and six months ended June 30, 2005 and June 30, 2004           |  | 2   
|                               |  |                                                                                                                   
|                               |  | Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2005 and June 30, 2004 |  | 3   
|                               |  |                                                                                                                   
|                               |  | Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and June 30, 2004                     |  | 4   
|                               |  |                                                                                                                   
|                               |  | Notes to Consolidated Financial Statements                                                                         |  | 5   
|                               |  |                                                                                                                   
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                              |  | 17  
|                               |  |                                                                                                                   
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                         |  | 34  
|                               |  |                                                                                                                   
|Item 4.                        |  | Controls and Procedures                                                                                            |  | 34  
|                               | 
|PART II. OTHER INFORMATION     |  |                                                                                                                   
|                               |  |                                                                                                                   
|Item 1.                        |  | Legal Proceedings                                                                                                  |  | 36  
|                               |  |                                                                                                                   
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                        |  | 36  
|                               |  |                                                                                                                   
|Item 3.                        |  | Defaults Upon Senior Securities                                                                                    |  | 36  
|                               |  |                                                                                                                   
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                                                |  | 36  
|                               |  |                                                                                                                   
|Item 5.                        |  | Other Information                                                                                                  |  | 36  
|                               |  |                                                                                                                   
|Item 6.                        |  | Exhibits                                                                                                           |  | 36  



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------



United PanAm Financial Corp. and Subsidiaries



Consolidated Statements of Financial Condition

(Unaudited)



|                                                                                                                      |  |                        |           |   |                  |   |           |  
|--------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                      |  | June 30,2005           |           |   | December 31,2004 |  
|                                                                                                                      |  | (Dollars in thousands) |          
|Assets                                                                                                                |  |                        |           |   |                  |   |           |  
|Cash and due from banks                                                                                               |  | $                      | 9,512     |   |                  | $ | 4,237     |  
|Short term investments                                                                                                |  |                        | 9,999     |   |                  |   |          |  
|                                                                                                                      |  |                        |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                             |  |                        | 19,511    |   |                  |   | 4,237     |  
|Restricted cash                                                                                                       |  |                        | 49,016    |   |                  |   | 36,729    |  
|Securities available for sale, at fair value                                                                          |  |                        | 418,419   |   |                  |   | 788,090   |  
|Loans                                                                                                                 |  |                        | 585,908   |   |                  |   | 499,343   |  
|Allowance for loan losses                                                                                             |  |                        | (26,374   | ) |                  |   | (25,593   | )
|                                                                                                                      |  |                        |           |   |                  |   |           |  
|Loans, net                                                                                                            |  |                        | 559,534   |   |                  |   | 473,750   |  
|Premises and equipment, net                                                                                           |  |                        | 3,575     |   |                  |   | 3,519     |  
|Accrued interest receivable                                                                                           |  |                        | 7,389     |   |                  |   | 6,901     |  
|Other assets                                                                                                          |  |                        | 25,554    |   |                  |   | 29,601    |  
|Assets of discontinued operations                                                                                     |  |                        |          |   |                  |   | 72,080    |  
|                                                                                                                      |  |                        |           |   |                  |   |           |  
|Total assets                                                                                                          |  | $                      | 1,082,998 |   |                  | $ | 1,414,907 |  
|                                                                                                                      |  |                        |           |   |                  |   |           |  
|                                                                                                                      |  |                       
|Liabilities and Shareholders Equity                                                                                  |  |                        |           |   |                  |   |           |  
|Warehouse line of credit                                                                                              |  | $                      | 90,664    |   |                  | $ | 101,776   |  
|Securitization notes payable                                                                                          |  |                        | 425,872   |   |                  |   | 352,564   |  
|Repurchase agreements                                                                                                 |  |                        | 407,904   |   |                  |   | 745,295   |  
|Accrued expenses and other liabilities                                                                                |  |                        | 6,280     |   |                  |   | 8,793     |  
|Junior subordinated debentures/trust preferred securities                                                             |  |                        | 10,310    |   |                  |   | 10,310    |  
|Liabilities of discontinued operationsdeposits held for sale                                                         |  |                        |          |   |                  |   | 71,916    |  
|                                                                                                                      |  |                        |           |   |                  |   |           |  
|Total liabilities                                                                                                     |  |                        | 941,030   |   |                  |   | 1,290,654 |  
|                                                                                                                      |  |                        |           |   |                  |   |           |  
|Common stock (no par value):                                                                                          |  |                        |           |   |                  |   |           |  
|Authorized, 30,000,000 shares Issued and outstanding, 16,957,694 at June 30, 2005 and 16,526,358 at December 31, 2004 |  |                        | 74,702    |   |                  |   | 70,332    |  
|Retained earnings                                                                                                     |  |                        | 66,845    |   |                  |   | 53,517    |  
|Unrealized gain on securities available for sale, net                                                                 |  |                        | 421       |   |                  |   | 404       |  
|                                                                                                                      |  |                        |           |   |                  |   |           |  
|Total shareholders equity                                                                                            |  |                        | 141,968   |   |                  |   | 124,253   |  
|                                                                                                                      |  |                        |           |   |                  |   |           |  
|Total liabilities and shareholders equity                                                                            |  | $                      | 1,082,998 |   |                  | $ | 1,414,907 |  
|                                                                                                                      |  |                        |           |   |                  |   |           |  



See notes to
consolidated financial statements



1



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries



Consolidated Statements of Operations

(Unaudited)



|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|------------------------------------------------------ |  | ------------------------------------- | ------ | ------------------------- | - | ------ |  | - | ----------------- | - |  | - | ------
|                                                       |  | Three Months EndedJune 30,            |        | Six Months Ended June 30,
|                                                       |  | 2005                                  |        | 2004(As Restated)         |   | 2005   |  |   | 2004(As Restated)
|                                                       |  | (In thousands, except per share data)
|Interest Income                                        |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Loans                                                  |  | $                                     | 38,614 |                           | $ | 28,563 |  | $ | 73,280            |   |  | $ | 54,912
|Short term investments                                 |  |                                       | 3,874  |                           |   | 4,480  |  |   | 8,281             |   |  |   | 8,684 
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Total interest income                                  |  |                                       | 42,488 |                           |   | 33,043 |  |   | 81,561            |   |  |   | 63,596
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Interest Expense                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Securitized borrowings                                 |  |                                       | 4,336  |                           |   |       |  |   | 7,234             |   |  |   |      
|Warehouse credit lines                                 |  |                                       | 1,015  |                           |   |       |  |   | 2,390             |   |  |   |      
|Repurchase agreements                                  |  |                                       | 3,320  |                           |   | 2,791  |  |   | 6,867             |   |  |   | 5,650 
|Deposits                                               |  |                                       |       |                           |   | 3,192  |  |   |                  |   |  |   | 6,409 
|Junior subordinated debentures                         |  |                                       | 156    |                           |   | 109    |  |   | 299               |   |  |   | 229   
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Total interest expense                                 |  |                                       | 8,827  |                           |   | 6,092  |  |   | 16,790            |   |  |   | 12,288
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Net interest income                                    |  |                                       | 33,661 |                           |   | 26,951 |  |   | 64,771            |   |  |   | 51,308
|Provision for loan losses                              |  |                                       | 6,845  |                           |   | 4,346  |  |   | 12,558            |   |  |   | 10,205
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Net interest income after provision for loan losses    |  |                                       | 26,816 |                           |   | 22,605 |  |   | 52,213            |   |  |   | 41,103
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Non-interest Income                                    |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Services charges and fees                              |  |                                       |       |                           |   | 103    |  |   |                  |   |  |   | 243   
|Loan related charges and fees                          |  |                                       | 109    |                           |   | 303    |  |   | 225               |   |  |   | 615   
|Gain on sale of securities                             |  |                                       | 384    |                           |   | 81     |  |   | 2,032             |   |  |   | 81    
|Other income                                           |  |                                       | 145    |                           |   | 182    |  |   | 189               |   |  |   | 621   
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Total non-interest income                              |  |                                       | 638    |                           |   | 669    |  |   | 2,446             |   |  |   | 1,560 
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Non-interest Expense                                   |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Compensation and benefits                              |  |                                       | 9,760  |                           |   | 7,877  |  |   | 19,289            |   |  |   | 15,469
|Occupancy                                              |  |                                       | 942    |                           |   | 1,292  |  |   | 1,885             |   |  |   | 2,529 
|Market lossderivative instruments                     |  |                                       |       |                           |   | 297    |  |   |                  |   |  |   | 297   
|Other                                                  |  |                                       | 4,887  |                           |   | 3,360  |  |   | 10,422            |   |  |   | 6,877 
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Total non-interest expense                             |  |                                       | 15,589 |                           |   | 12,826 |  |   | 31,596            |   |  |   | 25,172
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Income from continuing operations before income taxes  |  |                                       | 11,865 |                           |   | 10,448 |  |   | 23,063            |   |  |   | 17,491
|Income taxes                                           |  |                                       | 4,827  |                           |   | 4,218  |  |   | 9,400             |   |  |   | 7,058 
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Income from continuing operations                      |  |                                       | 7,038  |                           |   | 6,230  |  |   | 13,663            |   |  |   | 10,433
|Income (loss) from discontinued operations, net of tax |  |                                       |       |                           |   | 400    |  |   | (333              | ) |  |   | 828   
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Net Income                                             |  | $                                     | 7,038  |                           | $ | 6,630  |  | $ | 13,330            |   |  | $ | 11,261
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Earnings per share-basic:                              |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Continuing operations                                  |  | $                                     | 0.42   |                           | $ | 0.39   |  | $ | 0.82              |   |  | $ | 0.65  
|Discontinued operations                                |  |                                       |       |                           |   | 0.02   |  |   | (0.02             | ) |  |   | 0.05  
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Net income                                             |  | $                                     | 0.42   |                           | $ | 0.41   |  | $ | 0.80              |   |  | $ | 0.70  
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Weighted average shares outstanding                    |  |                                       | 16,798 |                           |   | 16,151 |  |   | 16,668            |   |  |   | 16,135
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Earnings per share-diluted:                            |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Continuing operations                                  |  | $                                     | .38    |                           | $ | .35    |  | $ | 0.74              |   |  | $ | 0.58  
|Discontinued operations                                |  |                                       |       |                           |   | .02    |  |   | (0.02             | ) |  |   | 0.05  
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Net Income                                             |  | $                                     | .38    |                           | $ | .37    |  | $ | 0.72              |   |  | $ | 0.63  
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       
|Weighted average shares outstanding                    |  |                                       | 18,705 |                           |   | 17,959 |  |   | 18,528            |   |  |   | 18,008
|                                                       |  |                                       |        |                           |   |        |  |   |                   |   |  |   |       



See notes to
consolidated financial statements



2



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries



Consolidated Statements of Comprehensive Income

(Unaudited)



|                                                                            |  |                            |       |                   |                           |        |      |  |                   |        |  |   |        |  
|--------------------------------------------------------------------------- |  | -------------------------- | ----- | ----------------- | ------------------------- | ------ | ---- |  | ----------------- | ------ |  | - | ------ | -
|                                                                            |  | Three Months EndedJune 30, |       |                   | Six Months Ended June 30, |       
|                                                                            |  | 2005                       |       | 2004(As Restated) |                           |        | 2005 |  | 2004(As Restated) |       
|                                                                            |  | (In thousands)             |      
|Net income                                                                  |  | $                          | 7,038 |                   | $                         | 6,630  |      |  | $                 | 13,330 |  | $ | 11,261 |  
|Other comprehensive income, net of tax Unrealized gain (loss) on securities |  |                            | 106   |                   |                           | (2,794 | )    |  |                   | 17     |  |   | (2,446 | )
|                                                                            |  |                            |       |                   |                           |        |      |  |                   |        |  |   |        |  
|Comprehensive income                                                        |  | $                          | 7,144 |                   | $                         | 3,836  |      |  | $                 | 13,347 |  | $ | 8,815  |  
|                                                                            |  |                            |       |                   |                           |        |      |  |                   |        |  |   |        |  



See notes to
consolidated financial statements



3



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries



Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                         |  |                           |          |   |                   |   |          |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ----------------- | - | -------- | -
|                                                                                                         |  | Six Months Ended June 30, |         
|                                                                                                         |  | 2005                      |          |   | 2004(As Restated) |  
|                                                                                                         |  | (Dollars in thousands)    |         
|Cash Flows from Operating Activities                                                                     |  |                           |          |   |                   |   |          |  
|Income from continuing operations                                                                        |  | $                         | 13,663   |   |                   | $ | 10,433   |  
|Adjustments to reconcile income from continuing operations to net cash provided by operating activities: |  |                           |          |   |                   |   |          |  
|Net gain on sales of securities available for sale                                                       |  |                           | (2,032   | ) |                   |   | (98      | )
|Provision for loan losses                                                                                |  |                           | 12,558   |   |                   |   | 10,205   |  
|Accretion of discount on loans                                                                           |  |                           | (9,047   | ) |                   |   | (5,089   | )
|FHLB stock dividend                                                                                      |  |                           | (164     | ) |                   |   | (347     | )
|Depreciation and amortization                                                                            |  |                           | 731      |   |                   |   | 638      |  
|Increase in accrued interest receivable                                                                  |  |                           | (488     | ) |                   |   | (334     | )
|Increase (decrease) in other assets                                                                      |  |                           | 4,359    |   |                   |   | (1,617   | )
|Amortization of premiums/discounts on securities                                                         |  |                           | 60       |   |                   |   | 931      |  
|(Decrease) increase in accrued expenses and other liabilities                                            |  |                           | (2,513   | ) |                   |   | 546      |  
|                                                                                                         |  |                           |          |   |                   |   |          |  
|Net cash provided by operating activities of continuing operations                                       |  |                           | 17,127   |   |                   |   | 15,268   |  
|Income (loss) from discontinued operations                                                               |  |                           | (333     | ) |                   |   | 828      |  
|                                                                                                         |  |                           |          |   |                   |   |          |  
|Net cash flows provided by operating activities                                                          |  |                           | 16,794   |   |                   |   | 16,096   |  
|                                                                                                         |  |                           |          |   |                   |   |          |  
|Cash Flows from Investing Activities                                                                     |  |                           |          |   |                   |   |          |  
|Purchase of securities available for sale                                                                |  |                           | (30,000  | ) |                   |   | (150,939 | )
|Proceeds from maturities of investment securities available for sale                                     |  |                           | 50,799   |   |                   |   | 137,318  |  
|Proceeds from sale of investment securities available for sale                                           |  |                           | 360,805  |   |                   |   | 90,205   |  
|Purchases, net of repayments, of non-mortgage loans                                                      |  |                           | (89,295  | ) |                   |   | (76,425  | )
|Change in assets of discontinued operations                                                              |  |                           | 49,921   |   |                   |   | 2,540    |  
|Purchase of premises and equipment                                                                       |  |                           | (787     | ) |                   |   | (877     | )
|Proceeds from redemption of FHLB stock                                                                   |  |                           | 12,067   |   |                   |   |         |  
|Other                                                                                                    |  |                           | (2       | ) |                   |   |         |  
|                                                                                                         |  |                           |          |   |                   |   |          |  
|Net cash flows provided by investing activities                                                          |  |                           | 353,508  |   |                   |   | 1,822    |  
|                                                                                                         |  |                           |          |   |                   |   |          |  
|Cash Flows from Financing Activities                                                                     |  |                           |          |   |                   |   |          |  
|Net increase (decrease) in deposits                                                                      |  |                           | (71,916  | ) |                   |   | 22,587   |  
|Repayment of repurchase agreements                                                                       |  |                           | (337,391 | ) |                   |   | (31,621  | )
|Repayment of warehouse line                                                                              |  |                           | (11,112  | ) |                   |   |         |  
|Increase in securitization notes payable                                                                 |  |                           | 73,308   |   |                   |   |         |  
|Increase in restricted cash                                                                              |  |                           | (12,287  | ) |                   |   |         |  
|Proceeds from exercise of stock options                                                                  |  |                           | 4,370    |   |                   |   | 132      |  
|                                                                                                         |  |                           |          |   |                   |   |          |  
|Net cash flows used in financing activities                                                              |  |                           | (355,028 | ) |                   |   | (8,902   | )
|                                                                                                         |  |                           |          |   |                   |   |          |  
|Net increase in cash and cash equivalents                                                                |  |                           | 15,274   |   |                   |   | 9,016    |  
|Cash and cash equivalents at beginning of period                                                         |  |                           | 4,237    |   |                   |   | 14,209   |  
|                                                                                                         |  |                           |          |   |                   |   |          |  
|Cash and cash equivalents at end of period                                                               |  | $                         | 19,511   |   |                   | $ | 23,225   |  
|                                                                                                         |  |                           |          |   |                   |   |          |  
|Supplemental Disclosures of Cash Flow Information                                                        |  |                           |          |   |                   |   |          |  
|Cash paid for:                                                                                           |  |                           |          |   |                   |   |          |  
|Interest                                                                                                 |  | $                         | 16,821   |   |                   | $ | 12,243   |  
|                                                                                                         |  |                           |          |   |                   |   |          |  
|Income taxes                                                                                             |  | $                         | 798      |   |                   | $ | 9,340    |  
|                                                                                                         |  |                           |          |   |                   |   |          |  
|Deconsolidation of trust preferred securities                                                            |  | $                         |         |   |                   | $ | 300      |  
|                                                                                                         |  |                           |          |   |                   |   |          |  



See notes to
consolidated financial statements



4



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries



Notes to Consolidated Financial Statements

(Unaudited)



1. Organization



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



On April 22, 2005, PAFI was merged with and into UPFC, and
UACC became a direct wholly-owned subsidiary of UPFC. Prior to its dissolution on February 11, 2005, the Bank was a wholly-owned subsidiary of PAFI, and UACC was a direct wholly-owned subsidiary of the Bank.



At June 30, 2005, United Auto Credit Corp. (UACC) was a direct
wholly-owned subsidiary of UPFC, and UPFC Auto Receivables Corporation (UARC) and UPFC Funding Corporation (UFC) were direct wholly-owned subsidiaries of UACC. UARC is a special purpose entity used to purchase automobile
contracts from UACC in connection with securitization of such contracts and UFC is a special purpose entity used to purchase such contracts from UACC in connection with warehouse funding of such contracts.



2. Basis of Presentation



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



These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Companys financial condition and results of operations for the interim periods presented in
this Form 10-Q have been included. Operating results for the interim periods are not necessarily indicative of financial results for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2004.



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



3. Restatements of Consolidated Financial Statements



During the first quarter of 2005, as part of the audit of the Companys consolidated financial statements for the year ended December 31, 2004,
management made corrections to such consolidated financial statements. These changes are reflected in the consolidated financial statements for prior periods.



5



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries



Notes to Consolidated Financial Statements(Continued)

(Unaudited)



Changes to Unaudited Consolidated Statements of Financial Condition



|                                                              |  |                     |           |   |             |   |           |  
|------------------------------------------------------------- |  | ------------------- | --------- | - | ----------- | - | --------- | -
|                                                              |  | As of June 30, 2004 |          
|                                                              |  | Unaudited           |          
|                                                              |  | As Reported         |           |   | As Restated |  
|Loans                                                         |  | $                   | 514,456   |   |             | $ | 473,827   |  
|Unearned discount                                             |  | $                   | (20,396   | ) |             | $ | (20,871   | )
|Allowance for loan losses                                     |  | $                   | (24,493   | ) |             | $ | (24,144   | )
|Loans, net                                                    |  | $                   | 469,567   |   |             | $ | 428,812   |  
|FHLB stock, at cost                                           |  | $                   | 11,910    |   |             | $ |          |  
|Accrued interest receivable                                   |  | $                   | 6,549     |   |             | $ | 6,227     |  
|Other assets                                                  |  | $                   | 30,244    |   |             | $ | 31,403    |  
|Assets of discontinued operations                             |  | $                   |          |   |             | $ | 50,342    |  
|Total assets                                                  |  | $                   | 1,665,897 |   |             | $ | 1,664,411 |  
|Deposits                                                      |  | $                   | 520,976   |   |             | $ |          |  
|Accrued expenses and other liabilities                        |  | $                   | 6,887     |   |             | $ | 7,342     |  
|Liabilities of discontinued operationsdeposits held for sale |  | $                   |          |   |             | $ | 520,976   |  
|Total liabilities                                             |  | $                   | 1,558,747 |   |             | $ | 1,559,202 |  
|Retained earnings                                             |  | $                   | 43,014    |   |             | $ | 41,073    |  
|Total shareholders equity                                     |  | $                   | 107,150   |   |             | $ | 105,209   |  
|Total liabilities and shareholders equity                     |  | $                   | 1,665,897 |   |             | $ | 1,664,411 |  



As of June 30, 2004
assets and liabilities of discontinued operations were reclassified and the accounting for dealer discount for loans booked prior to January 1, 2003 was corrected and the accretion of discount was changed to reflect the level yield method. The
accrued liabilities for collection expenses were also increased. The adjustments resulted in a decrease in total assets of $1,486,000 and retained earnings of $1,941,000 and an increase in liabilities of $455,000



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries



Notes to Consolidated Financial Statements(Continued)

(Unaudited)



Changes to Unaudited Consolidated Statements of Income



|                                                      |  |                                  |        |                                |   |             |  |             |        |  |   |       
|----------------------------------------------------- |  | -------------------------------- | ------ | ------------------------------ | - | ----------- |  | ----------- | ------ |  | - | ------
|                                                      |  | Three Months Ended June 30, 2004 |        | Six Months Ended June 30, 2004
|                                                      |  | Unaudited                        |        | Unaudited                     
|                                                      |  | As Reported                      |        | As Restated                    |   | As Reported |  | As Restated
|Interestloans                                        |  | $                                | 29,175 |                                | $ | 28,563      |  | $           | 55,814 |  | $ | 54,912
|Short term investment                                 |  | $                                | 4,655  |                                | $ | 4,480       |  | $           | 9,729  |  | $ | 8,684 
|Total interest income                                 |  | $                                | 33,830 |                                | $ | 33,043      |  | $           | 65,543 |  | $ | 63,596
|Deposits                                              |  | $                                | 3,494  |                                | $ | 3,192       |  | $           | 7,013  |  | $ | 6,409 
|Repurchase agreements                                 |  | $                                | 2,705  |                                | $ | 2,791       |  | $           | 5,564  |  | $ | 5,650 
|Total interest expense                                |  | $                                | 6,308  |                                | $ | 6,092       |  | $           | 12,806 |  | $ | 12,288
|Net interest income                                   |  | $                                | 27,522 |                                | $ | 26,951      |  | $           | 52,737 |  | $ | 51,308
|Provision for loan losses                             |  | $                                | 5,114  |                                | $ | 4,346       |  | $           | 10,325 |  | $ | 10,205
|Net interest income after provision for loan losses   |  | $                                | 22,408 |                                | $ | 22,605      |  | $           | 42,412 |  | $ | 41,103
|Service charges and fees                              |  | $                                | 218    |                                | $ | 103         |  | $           | 474    |  | $ | 243   
|Loan related charges and fees                         |  | $                                | 78     |                                | $ | 303         |  | $           | 164    |  | $ | 615   
|Gain on sale of securities                            |  | $                                | 98     |                                | $ | 81          |  | $           | 597    |  | $ | 81    
|Other income                                          |  | $                                |       |                                | $ |            |  | $           | 620    |  | $ | 621   
|Total non-interest income (loss)                      |  | $                                | 576    |                                | $ | 669         |  | $           | 1,855  |  | $ | 1,560 
|Compensation of benefits                              |  | $                                | 7,998  |                                | $ | 7,877       |  | $           | 15,711 |  | $ | 15,469
|Occupancy                                             |  | $                                | 1,297  |                                | $ | 1,292       |  | $           | 2,540  |  | $ | 2,529 
|Market lossderivative instruments                    |  | $                                | 297    |                                | $ | 297         |  | $           | 297    |  | $ | 297   
|Other expenses                                        |  | $                                | 3,425  |                                | $ | 3,360       |  | $           | 6,631  |  | $ | 6,877 
|Total non-interest expense                            |  | $                                | 13,017 |                                | $ | 12,826      |  | $           | 25,179 |  | $ | 25,172
|Income from continuing operations before income taxes |  | $                                | 9,967  |                                | $ | 10,448      |  | $           | 19,088 |  | $ | 17,491
|Income taxes                                          |  | $                                | 4,028  |                                | $ | 4,218       |  | $           | 7,712  |  | $ | 7,058 
|Income from continuing operations                     |  | $                                | 5,939  |                                | $ | 6,230       |  | $           | 11,376 |  | $ | 10,433
|Income from discontinued operations, net of tax       |  |                                  |       |                                | $ | 400         |  | $           |       |  | $ | 828   
|Net income                                            |  | $                                | 5,939  |                                | $ | 6,630       |  | $           | 11,376 |  | $ | 11,261
|Comprehensive income                                  |  | $                                | 3,145  |                                | $ | 3,836       |  | $           | 8,907  |  | $ | 8,815 
|Earnings per share-basic:                             |  |                                  |        |                                |   |             |  |             |        |  |   |       
|Continuing operations                                 |  | $                                | 0.37   |                                | $ | 0.39        |  | $           | 0.71   |  | $ | 0.65  
|Discontinued operations                               |  | $                                |       |                                | $ | .02         |  | $           |       |  | $ | .05   
|Net income                                            |  | $                                | 0.37   |                                | $ | 0.41        |  | $           | 0.71   |  | $ | 0.70  
|Earnings per share-diluted:                           |  |                                  |        |                                |   |             |  |             |        |  |   |       
|Continuing operations                                 |  | $                                | 0.33   |                                | $ | 0.35        |  | $           | 0.63   |  | $ | 0.58  
|Discontinued operations                               |  | $                                |       |                                | $ | .02         |  | $           |       |  | $ | .05   
|Net income                                            |  | $                                | 0.33   |                                | $ | 0.37        |  | $           | 0.63   |  | $ | 0.63  



For the three months
ended June 30, 2004 income and expenses of the Companys insurance premium finance operations were reclassified to income from discontinued operations, net of tax and the accounting for dealer discount and the accretion of income was corrected.
An adjustment was made to the provision for loan losses and additional collection expenses were accrued. These changes resulted in an increase in income from continuing operations after tax of $291,000 and in net income of $691,000.



For the six months ended June 30, 2004 income and expenses of the
Companys insurance premium finance operations were reclassified to income from discontinued operations, net of tax, and the accounting for dealer



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries



Notes to Consolidated Financial Statements(Continued)

(Unaudited)



discount and the accretion of income was corrected. An adjustment was made to the provision for loan losses and additional collection expenses were accrued.
These changes resulted in a decrease in income from continuing operations after tax of $943,000 and in net income of $115,000.



4. Discontinued Operations



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



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



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



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



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



|                                                                                                                        |  |                             |      |   |                  |   |       
|----------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---- | - | ---------------- | - | ------
|                                                                                                                        |  | June 30,2005                |      |   | December 31,2004
|                                                                                                                        |  | (Dollars in Thousands)     
|Assets of discontinued operations                                                                                       |  | $                           |     |   |                  | $ | 72,080
|Liabilities of discontinued operationsdeposits held for sale                                                           |  | $                           |     |   |                  | $ | 71,916
|                                                                                                                        | 
|                                                                                                                        |  | Three Months Ended June 30,
|                                                                                                                        |  | 2005                        |      |   | 2004            
|Revenue                                                                                                                 |  | $                           |     |   |                  | $ | 1,230 
|Income from discontinued operations (after applicable income (tax benefits) taxes of $(0), $274, respectively)          |  | $                           |     |   |                  | $ | 400   
|                                                                                                                        | 
|                                                                                                                        |  | Six Months Ended June 30,  
|                                                                                                                        |  | 2005                        |      |   | 2004            
|Revenue                                                                                                                 |  | $                           | 133  |   |                  | $ | 2,100 
|(Loss) Income from discontinued operations (after applicable income (tax benefits) taxes of $(233), $566, respectively) |  | $                           | (333 | ) |                  | $ | 828   



Discontinued
operations had $196,000 as of June 30, 2005 and $342,000 as of December 31, 2004 of accrued liabilities, respectively.



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries



Notes to Consolidated Financial Statements(Continued)

(Unaudited)



5. Earnings per Share



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



|                                          |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|----------------------------------------- |  | ---------------------------------------- | ------ | ------------------------- | - | ------ |  | - | ----------------- | - |  | - | ------
|                                          |  | Three Months Ended June 30,              |        | Six Months Ended June 30,
|                                          |  | 2005                                     |        | 2004(As Restated)         |   | 2005   |  |   | 2004(As Restated)
|                                          |  | (In thousands, except per share amounts)
|Earnings per sharebasic:                 |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|Income from continuing operations         |  | $                                        | 7,038  |                           | $ | 6,230  |  | $ | 13,663            |   |  | $ | 10,433
|Discontinued operations                   |  |                                          |       |                           |   | 400    |  |   | (333              | ) |  |   | 828   
|                                          |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|Net income                                |  | $                                        | 7,038  |                           | $ | 6,630  |  | $ | 13,330            |   |  | $ | 11,261
|                                          |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|Average common shares outstanding         |  |                                          | 16,798 |                           |   | 16,151 |  |   | 16,668            |   |  |   | 16,135
|                                          |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|Per share from continuing operations      |  | $                                        | 0.42   |                           | $ | 0.39   |  | $ | 0.82              |   |  | $ | 0.65  
|Discontinued operations                   |  |                                          |       |                           |   | 0.02   |  |   | (0.02             | ) |  |   | 0.05  
|                                          |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|Per share                                 |  | $                                        | 0.42   |                           | $ | 0.41   |  | $ | 0.80              |   |  | $ | 0.70  
|                                          |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|Earnings per sharediluted:               |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|Income from continuing operations         |  | $                                        | 7,038  |                           | $ | 6,230  |  | $ | 13,663            |   |  | $ | 10,433
|Discontinued operations                   |  |                                          |       |                           |   | 400    |  |   | (333              | ) |  |   | 828   
|                                          |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|Net income                                |  | $                                        | 7,038  |                           | $ | 6,630  |  | $ | 13,330            |   |  | $ | 11,261
|                                          |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|Average common shares outstanding         |  |                                          | 16,798 |                           |   | 16,151 |  |   | 16,668            |   |  |   | 16,135
|Add: Stock options                        |  |                                          | 1,907  |                           |   | 1,808  |  |   | 1,860             |   |  |   | 1,873 
|                                          |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|Average common shares outstandingdiluted |  |                                          | 18,705 |                           |   | 17,959 |  |   | 18,528            |   |  |   | 18,008
|                                          |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|Per share from continuing operations      |  | $                                        | 0.38   |                           | $ | 0.35   |  | $ | 0.74              |   |  | $ | 0.58  
|Discontinued operations                   |  |                                          |       |                           |   | 0.02   |  |   | (0.02             | ) |  |   | 0.05  
|                                          |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       
|Per share                                 |  | $                                        | 0.38   |                           | $ | 0.37   |  | $ | 0.72              |   |  | $ | 0.63  
|                                          |  |                                          |        |                           |   |        |  |   |                   |   |  |   |       



For the three months
ended June 30, 2005 and 2004, 110,500 and 481,800 shares and for the six months ended June 30, 2005, 204,250 and 425,400 average shares attributable to outstanding stock options were excluded from the calculation of diluted earnings per share
because the exercise prices of the stock options were greater than or equal to the average price of the common shares, and therefore their inclusion would have been anti-dilutive.



6. Stock-Based Compensation



At June 30, 2005 and 2004, the Company has issued stock options to certain of its employees and directors. The Company accounts for these options under
the recognition and measurement principles of APB No. 25. No stock-based employee compensation cost is reflected in net income, as all options granted had an exercise price



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries



Notes to Consolidated Financial Statements(Continued)

(Unaudited)



equal to or greater than the market value of the underlying common stock on the date of grant. Compensation cost for the Companys stock option plan
been determined based on the fair value consistent with the provisions of SFAS No. 123, the Companys net income and income per share would have been reduced to the pro forma amounts indicated below for the three and six months ended June 30,
2005 and 2004:



|                                                                                                                |  |                                          |       |                           |   |       |  |                   |        |  |   |       
|--------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ----- | ------------------------- | - | ----- |  | ----------------- | ------ |  | - | ------
|                                                                                                                |  | Three Months EndedJune 30,               |       | Six Months Ended June 30,
|                                                                                                                |  | 2005                                     |       | 2004(As Restated)         |   | 2005  |  | 2004(As Restated)
|                                                                                                                |  | (In thousands, except per share amounts)
|Net income as reported                                                                                          |  | $                                        | 7,038 |                           | $ | 6,630 |  | $                 | 13,330 |  | $ | 11,261
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards |  |                                          | 267   |                           |   | 313   |  |                   | 525    |  |   | 617   
|                                                                                                                |  |                                          |       |                           |   |       |  |                   |        |  |   |       
|Net incomepro forma                                                                                            |  | $                                        | 6,771 |                           | $ | 6,317 |  | $                 | 12,805 |  | $ | 10,644
|                                                                                                                |  |                                          |       |                           |   |       |  |                   |        |  |   |       
|Net income per share as reportedbasic                                                                          |  | $                                        | 0.42  |                           | $ | 0.41  |  | $                 | 0.80   |  | $ | 0.70  
|                                                                                                                |  |                                          |       |                           |   |       |  |                   |        |  |   |       
|Net income per sharepro formabasic                                                                            |  | $                                        | 0.40  |                           | $ | 0.39  |  | $                 | 0.77   |  | $ | 0.66  
|                                                                                                                |  |                                          |       |                           |   |       |  |                   |        |  |   |       
|Net income per share as reportedfully diluted                                                                  |  | $                                        | 0.38  |                           | $ | 0.37  |  | $                 | 0.72   |  | $ | 0.63  
|                                                                                                                |  |                                          |       |                           |   |       |  |                   |        |  |   |       
|Net income per sharepro formafully diluted                                                                    |  | $                                        | 0.36  |                           | $ | 0.35  |  | $                 | 0.69   |  | $ | 0.59  
|                                                                                                                |  |                                          |       |                           |   |       |  |                   |        |  |   |       



7. Allowance for Loan Losses



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



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



The total allowance for loan losses was $26.4 million at June 30, 2005 compared with $24.1 million at June 30, 2004,
representing 4.50% of loans at June 30, 2005 and 5.33% at June 30, 2004. Additionally, unearned discounts on loans totaled $30.3 million at June 30, 2005 compared with $20.9 million at June 30, 2004, representing 4.91% of loans at June 30, 2005
compared with 4.40% of loans at June 30, 2004.



8. Recent Accounting
Developments



In December 2003, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, which addresses how a business enterprise should evaluate whether it has a controlling financial
interest in an entity through means other than voting rights



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United PanAm Financial Corp. and Subsidiaries



Notes to Consolidated Financial Statements(Continued)

(Unaudited)



and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation of Variable Interest Entities, which was issued in
January 2003. The Company is required to apply FIN 46R to variable interests in variable interest entities created after December 31, 2003. For variable interests in variable interest entities created before January 1, 2004 FIN 46R is applied
beginning January 1, 2005. For any variable interest entities that must be consolidated under FIN 46R that were created before January 1, 2004, the assets, liabilities and non-controlling interest of the variable interest entity initially are
measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change. If determining the carrying amounts is
not practical, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities and non-controlling interest of the variable interest entity. The Company has evaluated the impact of applying FIN 46R to existing variable
interest entities in which it has variable interests. The adoption of FIN 46R did not have a material impact on the Companys consolidated financial statements. As of June 30, 2005 this pronouncement had no impact on the consolidated financial
statements.



In December 2003, the Accounting Standards
Executive Committee of the American Institute of Certified Public Accounts issued Statement of Position 03-03, Accounting for Certain Loans or Debt Securities Acquired in a Transfer, or SOP 03-03. This SOP addresses accounting for differences
between contractual cash flows and cash flows expected to be collected from an investors initial investment in loans or debt securities (loans) acquired in a transfer if those differences are attributable, at least in part, to credit quality.
It includes such loans acquired in purchase business combinations and applies to all nongovernmental entities, including not-for-profit organizations. This SOP does not apply to loans originated by an entity. This SOP limits the yield that may be
accreted (accretable yield) to the excess of the investors estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the investors initial investment in the
loan. This SOP requires that the excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) not be recognized as an adjustment of yield, loss accrual, or valuation allowance. This SOP prohibits investors
from displaying accretable yield and nonaccretable difference in the balance sheet. Subsequent increases in cash flows expected to be collected generally should be recognized prospectively through adjustment of a loans yield over its remaining
life. Decreases in cash flows expected to be collected should be recognized as impairment. This SOP prohibits carrying over or creation of valuation allowances in the initial accounting of all loans acquired in a transfer that are within
the scope of this SOP. The prohibition of the valuation allowance carryover applies to the purchase of an individual loan, a pool of loans, a group of loans, and loans acquired in a purchase business combination. This SOP is effective for loans
acquired in fiscal years beginning after December 15, 2004. The adoption of SOP 03-03 did not have a material impact on the Companys consolidated financial position and results of operations. As of June 30, 2005 this pronouncement had no
impact on the consolidated financial statements.



In March
2004, the FASB issued Emerging Issues Task Force Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. This EITF describes a model that involves three steps: (a) determination of
whether an investment is impaired, (b) determination of whether the impairment is other-than-temporary, and (c) recognition of the impairment loss in earnings. The EITF also requires several additional disclosures for cost-method investments. The
EITFs impairment accounting guidance is effective for reporting periods beginning after June 15, 2004. The Companys adoption of this EITF did not have a material impact on its consolidated financial statements. As of June 30, 2005 this
pronouncement had no impact on the consolidated financial statements.



In December 2004, the FASB issued SFAS No. 123-R, Share-Based Payment, which requires that the compensation cost relating to share-based payment transactions (including the cost of all employee stock options) be recognized in the
financial statements. That cost will be measured based on the estimated fair value of the



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##### Table of Contents

United PanAm Financial Corp. and Subsidiaries



Notes to Consolidated Financial Statements(Continued)

(Unaudited)



equity or liability instruments issued. SFAS No. 123-R covers a wide range of share-based compensation arrangements including share options, restricted share
plans, performance-based awards, share appreciation rights, and employee share purchase plans.



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



Publicly held companies that are not Small Business Issuers are required to apply SFAS No. 123-R at the beginning of the first interim or annual reporting
period that begins after December 15, 2005. Thus, the Companys consolidated financial statements will reflect an expense for (a) all share-based compensation arrangements granted after January 1, 2006 and for any such arrangements that are
modified, cancelled, or repurchased after that date, and (b) the portion of previous share-based awards for which the requisite service has not been rendered as of that date, based on the grant-date estimated fair value of those awards. Management
believes the adoption of this pronouncement will not have a material effect on our consolidated financial statements. As of June 30, 2005 this pronouncement had no impact on the consolidated financial statements.



Also, in December 2004, the FASB issued SFAS No. 153, Exchanges of
Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions. The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured using the estimated fair
value of the assets exchanged. SFAS No. 153 eliminates the narrow exception for nonmonetary exchanges of similar productive assets, and replaces it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the transaction. This pronouncement is effective for nonmonetary exchanges in fiscal periods
beginning after June 15, 2005. Management believes the adoption of this pronouncement will not have a material effect on our consolidated financial statements. As of June 30, 2005 this pronouncement had no impact on the consolidated financial
statements.



In May 2005, the FASB issued Statement No. 154,
Accounting Changes and Error Corrections (FAS 154). This new standard replaces APB Opinion No. 20, Accounting Changes in Interim Financial Statements, and FASB Statement No. 3, Reporting Accounting Changes in Interim
Financial Statements, and represents another step in the FASBs goal to converge its standards with those issued by the IASB. Among other changes, FAS 154 requires that a voluntary change in accounting principle be applied retrospectively
with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. FAS 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted
for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a restatement. The new standard is effective for
accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005.
Management does not expect the adoption of FAS 154 to have a material effect on the consolidated financial statements. As of June 30, 2005 this pronouncement had no impact on the consolidated financial statements.



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



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United PanAm Financial Corp. and Subsidiaries



Notes to Consolidated Financial Statements(Continued)

(Unaudited)



9. Due from Shareholder



At June 30, 2005, the Company held an amount receivable from its major shareholders BVG West Corp. and Pan American
Financial, L.P. in the amount of $649,000 (2004-$518,000). This amount is receivable pursuant to the Second Amended and Restated Registration Rights Agreement entered on July 26, 2005 (which amended and restated that certain Amended and Restated
Registration Rights Agreement entered into on September 29, 2004 and effective as of July 1, 2004). Pursuant to this agreement, the Company will pay the costs associated with the secondary offering and will receive reimbursement upon the earlier to
occur of (a) certain dates which are delineated in the agreement, and (b) the completion of the offering. Guillermo Bron, Chairman of the Board of Directors, is the controlling stockholder of BVG West Corp., which was the sole general partner of Pan
American Financial, L.P. at June 30, 2005.



10. Restricted Cash



Restricted cash related to $20.0 million of deposits held
as collateral for securitized obligations at June 30, 2005 compared with $9.3 million at December 31, 2004. Additionally, $29.0 million relates to cash that is in process of being applied to the pay down of securitized obligations and warehouse
liabilities compared with $27.4 million at December 31, 2004.



11. Assets
Sold Under Agreement to Repurchase



U.S. Government Agency Obligations



|                     |  |                                        |   |   |               |   |        |               |  |   |              |   |  |        |         |   |       |   |   |   |  |   |         |  
|-------------------- |  | -------------------------------------- | - | - | ------------- | - | ------ | ------------- |  | - | ------------ | - |  | ------ | ------- | - | ----- | - | - | - |  | - | ------- | -
|                     |  | Original term of repurchase obligation |  
|                     |  | Overnight                              |   |   | Up to 30 days |   |        | 31 to 90 days |  |   | Over 90 days |   |  | Demand |         |   | Total |  
|Securities sold      |  |                                        |   |   |               |   |        |               |  |   |              |   |  |        |         |   |       |   |   |   |  |   |         |  
|Book and mkt value   |  | $                                      |  |   |               | $ | 43,563 |               |  | $ |             |   |  | $      | 374,856 |   |       | $ |  |   |  | $ | 418,419 |  
|Accrued interest     |  |                                        |  |   |               |   | 548    |               |  |   |             |   |  |        | 581     |   |       |   |  |   |  |   | 1,129   |  
|                     |  |                                        |   |   |               |  
|Repurchase liability |  |                                        |   |   |               |   |        |               |  |   |              |   |  |        |         |   |       |   |   |   |  |   |         |  
|Principal payable    |  | $                                      |  |   |               | $ | 43,210 |               |  | $ |             |   |  | $      | 364,694 |   |       | $ |  |   |  | $ | 407,904 |  
|Interest rate        |  |                                        |  | % |               |   | 3.76   | %             |  |   |             | % |  |        | 3.27    | % |       |   |  | % |  |   | 3.32    | %



12. Lending Activities



Summary of Loan Portfolio



At June 30, 2005, our net loan portfolio constituted $559.5 million, or
51.7% of our total assets.



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



|                                 |  |                        |         |   |                  |   |         |  
|-------------------------------- |  | ---------------------- | ------- | - | ---------------- | - | ------- | -
|                                 |  | June 30,2005           |         |   | December 31,2004 |  
|                                 |  | (Dollars in thousands) |        
|Consumer loans:                  |  |                        |         |   |                  |   |         |  
|Automobile installment contracts |  | $                      | 620,370 |   |                  | $ | 528,761 |  
|Other consumer                   |  |                        |        |   |                  |   | 4       |  
|                                 |  |                        |         |   |                  |   |         |  
|Total loans and contracts        |  |                        | 620,370 |   |                  |   | 528,765 |  
|                                 |  |                        |         |   |                  |   |         |  
|Unearned discount                |  |                        | (30,268 | ) |                  |   | (24,827 | )
|Unearned finance charges         |  |                        | (4,194  | ) |                  |   | (4,595  | )
|Allowance for loan losses        |  |                        | (26,374 | ) |                  |   | (25,593 | )
|                                 |  |                        |         |   |                  |   |         |  
|Total loans and contracts, net   |  | $                      | 559,534 |   |                  | $ | 473,750 |  
|                                 |  |                        |         |   |                  |   |         |  



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United PanAm Financial Corp. and Subsidiaries



Notes to Consolidated Financial Statements(Continued)

(Unaudited)



13. Borrowings



Securitizations



We completed one securitization transaction in the third quarter of 2004 and a second securitization transaction in the second quarter of 2005. These
securitization transactions are structured as on-balance sheet transactions, recorded as a secured financings. Regular contract securitizations are an integral part of our business plan for the future so we will increase our liquidity and reduce
risks associated with interest rate fluctuations. We have developed a securitization program that involves selling interests in pools of our automobile contracts to investors through the public issuance of AAA/Aaa rated asset-backed securities.
Automobile securitizations are used by many financial institutions and are part of a multi-billion dollar annual market for asset-backed securities. As part of this process, management considers the relative risks and returns prior to initiating a
securitization. These risks include, but are not limited to, interest rate fluctuations during the warehouse period, increased prepayment speeds and losses, loss of servicing rights and adverse economic conditions. These factors are explained in
further detail in the section Risks Related to our Business. The table below provides information about the outstanding trust assets and liabilities as of June 30, 2005 and December 31, 2004.



|                  |  |                |         |                  |   |        
|----------------- |  | -------------- | ------- | ---------------- | - | -------
|                  |  | June 30,2005   |         | December 31,2004
|                  |  | (In thousands)
|Total assets      |  | $              | 536,342 |                  | $ | 392,632
|Total liabilities |  | $              | 425,873 |                  | $ | 352,564



In the
securitizations, we sold our automobile contracts to newly formed owner trusts, which issued notes.



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



Warehouse Facility



As of June 30, 2005 we were party to one $250 million warehouse facility,
which we used to fund our automobile finance operations to purchase automobile contracts pending securitization. Under the terms of the facility, our indirect subsidiary, UPFC Funding Corp., may obtain advances on a revolving basis by issuing notes
to the participating lenders and pledging for each advance a portfolio of automobile receivables. UPFC Funding Corp. purchases the automobile receivables from UACC and UACC services the automobile receivables, which are held by a custodian. We have
agreed to provide an absolute and unconditional and irrevocable guaranty of the full and punctual payment and performance of all liabilities, agreements and other obligations of UACC under the warehouse facility. This facility is used to fund the
purchase of automobile contracts and will be used as ongoing credit until we can structure another securitization.



Other Sources of Funds



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



For future securitizations, collections of principal and interest may be deposited into collection accounts established in connection with the
securitization. We may receive access to the amounts deposited into collection



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United PanAm Financial Corp. and Subsidiaries



Notes to Consolidated Financial Statements(Continued)

(Unaudited)



accounts and amounts held in the spread account for these securitizations. We would use the amounts received in our daily operations, although delinquency or
charge off rates in a securitization that exceeds established triggers will require that amounts being held in spread accounts increase.



Subordinated Debentures



In 2003, we issued junior subordinated debt of $10.3 million to a subsidiary trust, UPFC Trust I, to enhance our liquidity. UPFC Trust I in turn issued
$10 million of company obligated mandatorily redeemable preferred securities.



14. Operating Segments



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



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 June 30, 2005             
|                          |  | AutomobileFinance                                       |         | Investment |   | Total    
|Net interest income       |  | $                                                       | 33,204  |            | $ | 457       |  | $ | 33,661   
|Provision for loan losses |  |                                                         | 6,845   |            |   |          |  |   | 6,845    
|Non-interest income       |  |                                                         | 262     |            |   | 376       |  |   | 638      
|Non-interest expense      |  |                                                         | 15,390  |            |   | 199       |  |   | 15,589   
|Segment profit, pre-tax   |  | $                                                       | 11,231  |            | $ | 634       |  | $ | 11,865   
|Total assets              |  | $                                                       | 631,889 |            | $ | 451,109   |  | $ | 1,082,998
|                          | 
|                          |  | At or For Three Months Ended June 30, 2004(As Restated)
|                          |  | AutomobileFinance                                       |         | Investment |   | Total    
|Net interest income       |  | $                                                       | 24,111  |            | $ | 2,840     |  | $ | 26,951   
|Provision for loan losses |  |                                                         | 4,346   |            |   |          |  |   | 4,346    
|Non-interest income       |  |                                                         | 361     |            |   | 308       |  |   | 669      
|Non-interest expense      |  |                                                         | 12,625  |            |   | 201       |  |   | 12,826   
|Segment profit, pre-tax   |  | $                                                       | 7,501   |            | $ | 2,947     |  | $ | 10,448   
|Total assets              |  | $                                                       | 479,916 |            | $ | 1,184,495 |  | $ | 1,664,411
|                          | 
|                          |  | At or For Six Months Ended June 30, 2005               
|                          |  | AutomobileFinance                                       |         | Investment |   | Total    
|Net interest income       |  | $                                                       | 63,604  |            | $ | 1,167     |  | $ | 64,771   
|Provision for loan losses |  |                                                         | 12,558  |            |   |          |  |   | 12,558   
|Non-interest income       |  |                                                         | 410     |            |   | 2,036     |  |   | 2,446    
|Non-interest expense      |  |                                                         | 31,125  |            |   | 471       |  |   | 31,596   
|Segment profit, pre-tax   |  | $                                                       | 20,331  |            | $ | 2,732     |  | $ | 23,063   
|Total assets              |  | $                                                       | 631,889 |            | $ | 451,109   |  | $ | 1,082,998



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United PanAm Financial Corp. and Subsidiaries



Notes to Consolidated Financial Statements(Continued)

(Unaudited)



|                          |  |                                                        |         |            |   |           |  |   |          
|------------------------- |  | ------------------------------------------------------ | ------- | ---------- | - | --------- |  | - | ---------
|                          | 
|                          |  | At or For Six Months Ended June 30, 2004 (As Restated)
|                          |  | AutomobileFinance                                      |         | Investment |   | Total    
|Net interest income       |  | $                                                      | 45,773  |            | $ | 5,535     |  | $ | 51,308   
|Provision for loan losses |  |                                                        | 10,205  |            |   |          |  |   | 10,205   
|Non-interest income       |  |                                                        | 253     |            |   | 1,307     |  |   | 1,560    
|Non-interest expense      |  |                                                        | 24,763  |            |   | 410       |  |   | 25,173   
|Segment profit, pre-tax   |  | $                                                      | 11,058  |            | $ | 6,432     |  | $ | 17,490   
|Total assets              |  | $                                                      | 479,916 |            | $ | 1,184,495 |  | $ | 1,664,411



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



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



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



General



We are a specialty finance company engaged primarily in non-prime automobile finance. We provide financing to borrowers who typically have limited or
impaired credit histories that restrict their ability to obtain loans through traditional sources. Financing arms of automobile manufacturers generally do not make these loans to non-prime borrowers, nor do many other traditional automotive lenders.
Non-prime borrowers generally pay higher interest rates and loan fees than do prime borrowers. We conduct our automobile finance business through our direct wholly-owned subsidiary UACC. UACC purchases and holds for investment non-prime automobile
installment sales contracts, or automobile contracts, originated by independent and franchised dealers of used automobiles.



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



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



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



Critical Accounting Policies



We have established various accounting policies, which govern the
application of accounting principles generally accepted in the United States of America in the preparation of our financial statements. Our accounting policies are integral to understanding the results reported. Certain accounting policies are
described in detail in Note 4 to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS presented in our 2004 Annual Report on Form 10-K.



Certain accounting policies require us to make significant estimates and assumptions, which have a material impact on the carrying value of certain assets
and liabilities, and we consider these to be critical accounting



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



Securitization Transactions



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



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



Allowance for Loan Losses



Our loan loss allowances are monitored by management based on a variety of
factors including an assessment of the credit risk inherent in the portfolio, prior loss experience, the levels and trends of nonperforming loans, current and prospective economic conditions and other factors. Management also undertakes a review of
various quantitative and qualitative analyses. Quantitative analyses include the review of charge-off trends by loan type, analysis of cumulative losses and evaluation of credit loss experienced by credit tier and geographic location. Other
quantitative analyses include the concentration of any credit tier, the level of nonperformance and the percentage of delinquency. Qualitative analysis includes trends in charge-offs over various time periods and at various statistical midpoints and
high points, the severity of depreciated values of repossession and trends in the economy generally or in specific geographic locations.



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



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



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



Despite these analyses, we recognize that establishing an allowance is an estimate, which is inherently uncertain and depends on the outcome of further events. Our operating results and financial conditions are sensitive to changes in our
estimate for loan losses and the estimates underlying assumptions. Our operating



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results and financial condition are immediately impacted as changes in estimates for calculating loan loss reserves immediately pass through our income
statement as an additional provision expense. Management updates our loan loss estimates quarterly to reflect current charge-offs.



Derivatives and Hedging Activities



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



Factors Affecting Future Results
of Operations



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



Risks Related to Our Business



We require substantial liquidity to run our business.



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



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



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



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



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We face risks related to our recent accounting restatements.



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



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



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



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



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



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



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



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



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



We
depend on securitizations to generate revenue.



We rely on
our ability to aggregate and pledge receivables to securitization trusts and sell securities in the asset-backed securities market to generate cash proceeds for repayment of our automobile warehouse credit facility and to create availability to
purchase additional automobile contracts. Our ability to complete securitizations of our automobile contracts is affected by many factors, including, among other things:



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



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



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



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



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



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



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



If we do not remediate the material weakness found during the December 31, 2004 audit and develop an effective system of internal and disclosure controls, we may not
be able to accurately report our financial results or prevent fraud. As a result, current and potential shareholders could lose confidence in our financial reporting.



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



As a result of the material weaknesses we have identified in our internal controls, we also identified certain deficiencies
in some of our disclosure controls and procedures that require remediation. We cannot be certain that our efforts to improve our internal and disclosure controls will be successful or that we will be able to maintain adequate controls over our
financial processes and reporting in the future. Any failure to maintain effective controls



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or timely effect any necessary improvement of our internal and disclosure controls could harm operating results or cause us to fail to meet our reporting
obligations, which could affect our ability to remain listed with the NASDAQ National Market. Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a
negative effect on the trading price of our securities.



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



The results
of our operations and our financial condition are dependent upon the business activities of our principal consolidated subsidiary, UACC. In addition, our ability to fund our operations, meet our obligations for payment of principal and interest on
our outstanding debt obligations and pay dividends on our common stock is dependent upon the earnings from the businesses conducted by our subsidiaries. Our ability to pay dividends on our common stock is also subject to the restrictions of the
California Corporations Code. As of June 30, 2005, we had approximately $10.3 million of subordinated debt issued to a subsidiary trust, UPFC Trust I, which, in turn, had $10 million of company obligated mandatorily redeemable preferred securities
outstanding. The maturity of the subordinated debt is 2033. However, subject to receiving any required regulatory approval, we may call the debt any time on or after July 7, 2008 and may call it before July 7, 2008 if certain events occur as
described in the subordinated debt. The redemption price is par plus accrued and unpaid interest, except in the case of redemption if the debt is called before July 7, 2008. It is possible that we may not have sufficient funds to repay that debt at
the required time. Our subsidiaries are separate and distinct legal entities and have no obligation to provide us with funds for our payment obligations, whether by dividends, distributions, loans or other payments. Any distribution of funds to us
from our subsidiaries is subject to statutory, regulatory or contractual restrictions, subsidiaries earnings and various other business considerations.



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



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



As of June 30, 2005, Pan American Financial, L.P. and its
general partner, BVG West Corp., together owned 10,050,000 shares of our common stock, representing more than 60% of our total outstanding common stock. Our Chairman, Guillermo Bron, beneficially owns these shares through his majority ownership of
and executive position held at BVG.



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



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



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



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



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



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



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



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



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



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



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



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



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



Competition may adversely affect our performance.



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



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



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



We may be unable to manage our growth.



Our operations have rapidly expanded over the past nine years and we remain vulnerable to a variety of business risks generally associated with rapidly
growing companies. We intend to pursue growth for the



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



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



We have realized substantial growth in our automobile finance business since its inception in 1996. Of UACCs 97 branches as of June 30, 2005, 69
opened after January 1, 2001 and the amount of gross automobile contracts purchased has increased from $233.4 million for 2001 to $314.6 million for 2002 to $442.2 million for 2003 to $573.9 million for 2004. In the future, UACCs rate of
growth will be dependent upon, among other things, the continued success of its efforts to expand the number of branches, attract qualified branch managers, and expand its relationships with independent and franchised dealers of used automobiles.



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



Risks Related to
Regulatory Factors



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



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



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



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Risks Related to Factors Outside Our Control



Adverse economic conditions could adversely affect our business.



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



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



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



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



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



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



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



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Average Balance Sheets



The following table sets forth information relating to our operations for the three and six month periods ended June 30, 2005 and 2004. The yields and
costs are derived by dividing annualized income or expense by the average balance of assets or liabilities for the periods shown. The yields and costs include fees, which are considered adjustments to yields.



|                                                                 |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|---------------------------------------------------------------- |  | --------------------------- | --------- | -------- | ------------------ | ----------------- |  | ----- | ----------------- |  | -------- | --------- | ----------------- | - | ------ |  | ----- | -
|                                                                 |  | Three Months Ended June 30, |          
|                                                                 |  | 2005                        |           |          | 2004 (As Restated) |                  
|                                                                 |  | AverageBalance(1)           |           | Interest |                    | AverageYield/Cost |  |       | AverageBalance(1) |  | Interest |           | AverageYield/Cost |  
|                                                                 |  | (Dollars in thousands)      |          
|Assets                                                           |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Interest earning assets                                          |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Securities and short term investments                            |  | $                           | 498,312   |          | $                  | 3,874             |  | 3.12  | %                 |  | $        | 1,136,341 |                   | $ | 4,480  |  | 1.58  | %
|Automobile installment Contracts, net(2)                         |  |                             | 546,138   |          |                    | 38,614            |  | 28.36 | %                 |  |          | 417,267   |                   |   | 28,563 |  | 27.46 | %
|                                                                 |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total interest earning assets                                    |  |                             | 1,044,450 |          | $                  | 42,488            |  | 16.32 | %                 |  |          | 1,553,608 |                   | $ | 33,043 |  | 8.53  | %
|                                                                 |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Non-interest earnings assets                                     |  |                             | 40,221    |          |                    |                   |  |       |                   |  |          | 84,658    |                   |   |        |  |       |  
|                                                                 |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total assets                                                     |  | $                           | 1,084,670 |          |                    |                   |  |       |                   |  | $        | 1,638,266 |                   |   |        |  |       |  
|                                                                 |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Liabilities and Equity                                           |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Interest bearing liabilities                                     |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Warehouse line of credit                                         |  |                             | 54,512    |          |                    | 1,015             |  | 7.47  | %                 |  |          |          |                   |   |        |  |      |  
|Securitization notes payable                                     |  |                             | 448,485   |          |                    | 4,336             |  | 3.88  | %                 |  |          |          |                   |   |        |  |      |  
|Repurchase agreements                                            |  |                             | 426,562   |          |                    | 3,320             |  | 3.12  | %                 |  |          | 988,853   |                   |   | 2,791  |  | 1.13  | %
|Deposits                                                         |  |                             |          |          |                    |                  |  |      |                   |  |          | 523,260   |                   |   | 3,192  |  | 2.45  | %
|Junior subordinated debentures                                   |  |                             | 10,310    |          |                    | 156               |  | 6.07  | %                 |  |          | 10,300    |                   |   | 109    |  | 4.24  | %
|                                                                 |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total interest bearing liabilities                               |  |                             | 939,869   |          | $                  | 8,827             |  | 3.77  | %                 |  |          | 1,522,413 |                   | $ | 6,092  |  | 1.61  | %
|                                                                 |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Non-interest bearing liabilities                                 |  |                             | 6,545     |          |                    |                   |  |       |                   |  |          | 5,706     |                   |   |        |  |       |  
|                                                                 |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total liabilities                                                |  |                             | 946,414   |          |                    |                   |  |       |                   |  |          | 1,528,119 |                   |   |        |  |       |  
|Equity                                                           |  |                             | 138,256   |          |                    |                   |  |       |                   |  |          | 110,147   |                   |   |        |  |       |  
|                                                                 |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total liabilities and equity                                     |  | $                           | 1,084,670 |          |                    |                   |  |       |                   |  | $        | 1,638,266 |                   |   |        |  |       |  
|                                                                 |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Net interest income before provision for loan losses             |  |                             |           |          | $                  | 33,661            |  |       |                   |  |          |           |                   | $ | 26,951 |  |       |  
|                                                                 |  |                             |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Net interest rate spread(3)                                      |  |                             |           |          |                    |                   |  | 12.55 | %                 |  |          |           |                   |   |        |  | 6.92  | %
|Net interest margin(4)                                           |  |                             |           |          |                    |                   |  | 12.93 | %                 |  |          |           |                   |   |        |  | 6.96  | %
|Ratio of interest earning assets to interest bearing liabilities |  |                             |           |          |                    |                   |  | 111   | %                 |  |          |           |                   |   |        |  | 102   | %

---

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

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

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

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



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|                                                                 |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|---------------------------------------------------------------- |  | ------------------------- | --------- | -------- | ------------------ | ----------------- |  | ----- | ----------------- |  | -------- | --------- | ----------------- | - | ------ |  | ----- | -
|                                                                 |  | Six Months Ended June 30, |          
|                                                                 |  | 2005                      |           |          | 2004 (As Restated) |                  
|                                                                 |  | AverageBalance(1)         |           | Interest |                    | AverageYield/Cost |  |       | AverageBalance(1) |  | Interest |           | AverageYield/Cost |  
|                                                                 |  | (Dollars in thousands)    |          
|Assets                                                           |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Interest earning assets                                          |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Securities and short term investments                            |  | $                         | 549,087   |          | $                  | 8,281             |  | 3.04  | %                 |  | $        | 1,160,051 |                   | $ | 8,684  |  | 1.51  | %
|Automobile installment Contracts, net(2)                         |  |                           | 520,299   |          |                    | 73,280            |  | 28.4  | %                 |  |          | 399,519   |                   |   | 54,912 |  | 27.72 | %
|                                                                 |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total interest earning assets                                    |  |                           | 1,069,386 |          | $                  | 81,561            |  | 15.38 | %                 |  |          | 1,559,570 |                   | $ | 63,596 |  | 8.22  | %
|                                                                 |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Non-interest earnings assets                                     |  |                           | 64,975    |          |                    |                   |  |       |                   |  |          | 89,121    |                   |   |        |  |       |  
|                                                                 |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total assets                                                     |  | $                         | 1,134,361 |          |                    |                   |  |       |                   |  | $        | 1,648,691 |                   |   |        |  |       |  
|                                                                 |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Liabilities and Equity                                           |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Interest bearing liabilities                                     |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Warehouse line of credit                                         |  |                           | 97,759    |          |                    | 2,390             |  | 4.93  | %                 |  |          |          |                   |   |        |  |      |  
|Securitization notes payable                                     |  |                           | 384,810   |          |                    | 7,234             |  | 3.79  | %                 |  |          |          |                   |   |        |  |      |  
|Repurchase agreements                                            |  |                           | 487,285   |          |                    | 6,867             |  | 2.84  | %                 |  |          | 1,005,584 |                   |   | 5,650  |  | 1.13  | %
|Deposits                                                         |  |                           |          |          |                    |                  |  |      |                   |  |          | 522,863   |                   |   | 6,409  |  | 2.47  | %
|Junior subordinated debentures                                   |  |                           | 10,310    |          |                    | 299               |  | 5.85  | %                 |  |          | 10,300    |                   |   | 229    |  | 4.48  | %
|                                                                 |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total interest bearing liabilities                               |  |                           | 980,164   |          | $                  | 16,790            |  | 3.45  | %                 |  |          | 1,538,747 |                   | $ | 12,288 |  | 1.61  | %
|                                                                 |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Non-interest bearing liabilities                                 |  |                           | 20,452    |          |                    |                   |  |       |                   |  |          | 5,551     |                   |   |        |  |       |  
|                                                                 |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total liabilities                                                |  |                           | 1,000,616 |          |                    |                   |  |       |                   |  |          | 1,544,308 |                   |   |        |  |       |  
|Equity                                                           |  |                           | 133,745   |          |                    |                   |  |       |                   |  |          | 104,393   |                   |   |        |  |       |  
|                                                                 |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Total liabilities and equity                                     |  | $                         | 1,134,361 |          |                    |                   |  |       |                   |  | $        | 1,648,691 |                   |   |        |  |       |  
|                                                                 |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Net interest income before provision for loan losses             |  |                           |           |          | $                  | 64,771            |  |       |                   |  |          |           |                   | $ | 51,308 |  |       |  
|                                                                 |  |                           |           |          |                    |                   |  |       |                   |  |          |           |                   |   |        |  |       |  
|Net interest rate spread(3)                                      |  |                           |           |          |                    |                   |  | 11.93 | %                 |  |          |           |                   |   |        |  | 6.61  | %
|Net interest margin(4)                                           |  |                           |           |          |                    |                   |  | 12.21 | %                 |  |          |           |                   |   |        |  | 6.63  | %
|Ratio of interest earning assets to interest bearing liabilities |  |                           |           |          |                    |                   |  | 109   | %                 |  |          |           |                   |   |        |  | 101   | %

---

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

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

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

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



Comparison of Operating Results for the Three Months Ended June 30, 2005 and June 30, 2004 (as restated)



General



For the three months ended June 30, 2005, our net income increased $0.41
million to $7.04 million from $6.63 million for the three months ended June 30, 2004.



The increase in net income was due primarily to a $6.7 million increase in net interest income, which increased to $33.7 million in the second quarter of 2005 from $27.0 million during the same quarter of 2004,



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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 increased $26.8 million to $121.0 million for the three months ended June 30, 2005 from $94.2 million for the three months ended June 30, 2004, as a result of our planned growth in the
automobile finance business.



Interest Income



Interest income increased to $42.5 million for the three
months ended June 30, 2005 from $33.0 million for the three months ended June 30, 2004 due primarily to a $128.9 million increase in average auto contracts, partially offset by a $638.0 million decrease in average securities.



Interest Expense



Interest expense increased to $8.8 million for the three months ended June
30, 2005 from $6.1 million for the three months ended June 30, 2004 due to a 216 basis point increase in weighted average interest rate on interest bearing liabilities, partially offset by a $582.5 million decrease in average interest bearing
liabilities. The average cost of liabilities increased to 3.77% for the three months ended June 30, 2005 from 1.61% for the comparable period in 2004, generally as a result of an increase in market interest rates and a smaller concentration in
repurchase agreements with lower funding costs.



Provision
and Allowance for Loan Losses



Provision for loan losses
was $6.8 million for the three months ended June 30, 2005 compared to $4.3 million for the three months ending June 30, 2004.



The total allowance for loan losses was $26.4 million at June 30, 2005 compared with $24.1 million at June 30, 2004, representing 4.50% of loans at June
30, 2005 and 5.33% at June 30, 2004. Additionally, unearned discounts on loans totaled $30.3 million at June 30, 2005 compared with $20.9 million at June 30, 2004, representing 4.91% of loans at June 30, 2005 and 4.40% at June 30, 2004.



Annualized net charge-offs to average loans were 4.00% for the three
months ended June 30, 2005 compared with 5.13% for the three months ended June 30, 2004.



Non-interest Income



Non-interest income decreased to $638,000 for the three months ended June 30, 2005 from $669,000 for the three months ended June 30, 2004.



Non-interest Expense



Non-interest expense increased $2.8 million to $15.6 million for the three months ended June 30, 2005 from $12.8 million for the three months ended June
30, 2004. The increase in non-interest expense was driven primarily by an increase in salaries, employee benefit costs and occupancy expenses associated with the planned growth of the automobile finance business. During the last 12 months, we
continued with the planned expansion of our automobile finance operations, resulting in an increase to 712 employees in 97 offices, as of June 30, 2005, from 564 employees in 78 offices, as of June 30, 2004.



Income Taxes



Income taxes before taxes on discontinued operations increased $0.6 million
to $4.8 million for the three months ended June 30, 2005 from $4.2 million for the three months ended June 30, 2004. This increase occurred as a result of a $1.4 million increase in income before income taxes between the two periods. The tax rate
was 40.7% and 40.4% for the three months ended June 30, 2005 and June 30, 2004.



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Comparison of Operating Results for the Six Months Ended June 30, 2005 and June 30, 2004 (as restated)



General



For the six months ended June 30, 2005, our net income increased $2.0
million to $13.3 million from $11.3 million for the six months ended June 30, 2004.



The increase in net income was due primarily to a $13.5 million increase in net interest income, which increased to $64.8 million in the six months ended June 30, 2005 from $51.3 million during the same period of
2004, partially offset by a $2.4 million increase in the provision for loan losses and a $6.4 million increase in non-interest expense. Net interest income was favorably impacted by the continued expansion and growth of our automobile finance
business.



Automobile contracts purchased increased $54.7
million to $240.1 million for the six months ended June 30, 2005 from $185.4 million for the six months ended June 30, 2004, as a result of our planned growth in the automobile finance business.



Interest Income



Interest income increased to $81.6 million for the six months ended June 30,
2005 from $63.6 million for the six months ended June 30, 2004 due primarily to a $120.8 million increase in average auto contracts, partially offset by a $611.0 million decrease in average securities.



Interest Expense



Interest expense increased to $16.8 million for the six months ended June
30, 2005 from $12.3 million for the six months ended June 30, 2004 due to a 184 basis point increase in weighted average interest rate on interest bearing liabilities, partially offset by a $558.6 million decrease in average interest bearing
liabilities. The average cost of liabilities increased to 3.45% for the six months ended June 30, 2005 from 1.61% for the comparable period in 2004, generally as a result of an increase in market interest rates and a smaller concentration in
repurchase agreements with lower funding costs.



Provision
and Allowance for Loan Losses



Provision for loan losses
was $12.6 million for the six months ended June 30, 2005 compared to $10.2 million for the six months ended June 30, 2004.



The total allowance for loan losses was $26.4 million at June 30, 2005 compared with $24.1 million at June 30, 2004, representing 4.50% of loans at June
30, 2005 and 5.33% at June 30, 2004. Additionally, unearned discounts on loans totaled $30.3 million at June 30, 2005 compared with $20.9 million at June 30, 2004, representing 4.91% of loans at June 30, 2005 and 4.40% at June 30, 2004.



Annualized net charge-offs to average loans were 4.56% for the six months
ended June 30, 2005 compared with 5.60% for the six months ended June 30, 2004.



Non-interest Income



Non-interest income increased to $2.4 million for the six months ended June 30, 2005 from $1.6 million for the six months ended June 30, 2004. This increase was the result of a $2.0 million gain on sale of investment securities which was
partially offset by a decrease in charges and fees related to deposit accounts.



Non-interest Expense



Non-interest expense increased $6.4 million to $31.6 million for the six months ended June 30, 2005 from $25.2 million for the six months ended June 30, 2004. The increase in non-interest expense was driven primarily



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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 712 employees in 97 offices, as of June 30, 2005, from 564 employees in 78 offices, as of June 30, 2004.



Income Taxes



Income taxes before taxes on discontinued operations increased $2.3 million
to $9.4 million for the six months ended June 30, 2005 from $7.1 million for the six months ended June 30, 2004. This increase occurred as a result of a $5.6 million increase in income before income taxes between the two periods. The tax rate was
40.8% and 40.4% for the six months ended June 30, 2005 and June 30, 2004.



Comparison of Financial Condition at June 30, 2005 and December 31, 2004



Total assets decreased $332 million, to $1.08 billion at June 30, 2005, from $1.41 billion at December 31, 2004. The decrease resulted primarily from a $369.7 million decrease in securities available for sale to
$418.4 million at June 30, 2005 from $788.1 million at December 31, 2004 and a $72.0 million decrease in assets of discontinued operations, partially offset by a $15.3 million increase in cash and cash equivalents and a $86.6 million increase in
loans to $585.9 million at June 30, 2005 from $499.3 million at December 31, 2004. The increase in loans principally resulted from the purchasing of additional dealer contracts in existing and new markets consistent with planned growth in our
automobile finance business unit.



Warehouse line of credit
borrowing decreased to $90.7 million as of June 30, 2005 from $101.8 million as of December 31, 2004 due to the completion of a $195.0 million securitization in April of 2005 partially offset by borrowings to fund new loans.



Securitization notes payable increased to $425.9 million at June 30, 2005
from $352.6 million at December 31, 2004 due to the completion of a new $195.0 million securitization in April of 2005, partially offset by payments on the loans backing the securitized borrowings.



Repurchase agreements decreased $337.4 million to $407.9 million at June 30,
2005 from $745.3 million at December 31, 2004. This decrease is the result of excess funds from pay downs and maturities in the securities portfolio, as well as the sale of some of the securities, which were used to repay repurchase agreements.



Shareholders equity increased to $142.0 million at June
30, 2005 from $124.3 million at December 31, 2004, primarily as a result of net income of $13.3 million during the six months ended June 30, 2005.



Management of Interest Rate Risk



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



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



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



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##### Table of Contents

Liquidity and Capital Resources



General



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



Our primary uses of cash include:



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



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



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



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



The capital resources available to us include:



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



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



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



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



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



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



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



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



Securitizations



We completed one
securitization transaction in the third quarter of 2004 and a second securitization transaction in the second quarter of 2005. These transactions are structured as an on-balance-sheet transactions, recorded as secured financings. Regular contract
securitizations are an integral part of our business plan for the future so we will increase our liquidity and reduce risks associated with interest rate fluctuations. We have developed a securitization program that involves selling interests in
pools of our auto contracts to investors through the public issuance of AAA/Aaa rated asset-backed securities. Automobile securitizations are used by many financial institutions and are part of a multi-billion dollar annual market for asset-backed
securities. As part of this process, management considers the relative risks and returns prior to initiating a securitization. These risks include, but are not limited to, interest rate fluctuations during the warehouse period, increased prepayments
speeds and losses, loss of servicing rights and adverse economic conditions. These factors are explained in further detail in the section Risks Related to our Business. The table below provides information about the outstanding trust
assets and liabilities as of June 30, 2005 and December 31, 2004.



|                  |  |                |         |                  |   |        
|----------------- |  | -------------- | ------- | ---------------- | - | -------
|                  |  | June 30,2005   |         | December 31,2004
|                  |  | (In thousands)
|Total assets      |  | $              | 536,342 |                  | $ | 392,632
|Total liabilities |  | $              | 425,873 |                  | $ | 352,564



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



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



Warehouse Facility



As of June 30, 2005 we
were party to one $250 million warehouse facility, which we used to fund our automobile finance operations to purchase automobile contracts pending securitization. Under the terms of the facility, our indirect subsidiary, UPFC Funding Corp., may
obtain advances on a revolving basis by issuing notes to the participating lenders and pledging for each advance a portfolio of automobile receivables. UPFC Funding Corp. purchases the automobile receivables from UACC and UACC services the
automobile receivables, which are held by a custodian. We have agreed to provide an absolute and unconditional and irrevocable guaranty of the full and punctual payment and performance of all liabilities, agreements and other obligations of UACC
under the warehouse facility. This facility is used to fund the purchase of automobile contracts and will be used as ongoing credit until we can structure another securitization.



Other Sources of Funds



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



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



Subordinated Debentures



In 2003, we issued junior subordinated debt of $10.3 million to a subsidiary trust, UPFC Trust I, to enhance our liquidity. UPFC Trust I in turn issued
$10 million of company obligated mandatorily redeemable preferred securities.



Aggregate Contractual Obligations



The following table provides the amounts due under specified obligations for the periods indicated as of June 30, 2005.



|                               |  |                        |         |                  |   |                   |  |                  |        |       |   |        |  |   |        
|------------------------------ |  | ---------------------- | ------- | ---------------- | - | ----------------- |  | ---------------- | ------ | ----- | - | ------ |  | - | -------
|                               |  | Less than1 Years       |         | 1 Yearto 3 Years |   | 4 Yearsto 5 Years |  | More Than5 Years |        | Total
|                               |  | (Dollars in thousands)
|Warehouse line of credit       |  |                        | 90,664  |                  |   |                  |  |                  |       |       |   |       |  |   | 90,664 
|Securitization borrowings      |  |                        | 180,978 |                  |   | 218,903           |  |                  | 25,991 |       |   |       |  |   | 425,872
|Repurchase agreements          |  |                        | 407,904 |                  |   |                  |  |                  |       |       |   |       |  |   | 407,904
|Operating lease obligations    |  |                        | 3,807   |                  |   | 5,329             |  |                  | 2,578  |       |   |       |  |   | 11,714 
|Junior subordinated debentures |  |                        |        |                  |   |                  |  |                  |       |       |   | 10,310 |  |   | 10,310 
|                               |  |                        |         |                  |   |                   |  |                  |        |       |   |        |  |   |        
|Total                          |  | $                      | 683,353 |                  | $ | 224,232           |  | $                | 28,569 |       | $ | 10,310 |  | $ | 946,464
|                               |  |                        |         |                  |   |                   |  |                  |        |       |   |        |  |   |        



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The obligations are categorized by their contractual due dates, except securitization borrowings that are
categorized by the expected repayment dates. We may, at our option, prepay the junior subordinated debentures prior to their maturity date. Furthermore, the actual payment of certain current liabilities may be deferred into future periods.



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 $26.4 million at June 30,
2005 compared with $25.6 million at December 31, 2004 representing 4.50% of loans at June 30, 2005 and 5.13% at December 31, 2004. Additionally, unearned discounts on loans totaled $30.3 million at June 30, 2005 compared with $24.8 million at
December 31, 2004, representing 4.91% of loans at June 30, 2005 and 4.74% at December 31, 2004.



Nonaccrual and Past Due Loans



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



|                   |  |                        |       |                 |     |   |                  |   |                 |  |     |                  |  |                 |       |  |     |  
|------------------ |  | ---------------------- | ----- | --------------- | --- | - | ---------------- | - | --------------- |  | --- | ---------------- |  | --------------- | ----- |  | --- | -
|Loan Delinquencies |  | June 30,2005           |       | % of TotalLoans |     |   | December 31,2004 |   | % of TotalLoans |  |     | December 31,2003 |  | % of TotalLoans |      
|                   |  | (Dollars in thousands) |      
|30 to 59 days      |  | $                      | 2,288 |                 | 0.3 | % |                  | $ | 2,522           |  | 0.5 | %                |  | $               | 2,015 |  | 0.5 | %
|60 to 89 days      |  |                        | 577   |                 | 0.1 | % |                  |   | 856             |  | 0.1 | %                |  |                 | 674   |  | 0.2 | %
|90+ days           |  |                        | 358   |                 | 0.1 | % |                  |   | 416             |  | 0.1 | %                |  |                 | 390   |  | 0.1 | %
|                   |  |                        |       |                 |     |   |                  |   |                 |  |     |                  |  |                 |       |  |     |  
|Total              |  | $                      | 3,223 |                 | 0.5 | % |                  | $ | 3,794           |  | 0.7 | %                |  | $               | 3,079 |  | 0.8 | %
|                   |  |                        |       |                 |     |   |                  |   |                 |  |     |                  |  |                 |       |  |     |  



A loan is placed on
nonaccrual status when it is delinquent for over 30 days or more. When a loan is reclassified from accrual to nonaccrual status, all previously accrued interest is reversed. Interest income on nonaccrual loans is subsequently recognized only to the
extent that cash payments are received or the borrowers ability to make periodic interest and principal payments is in accordance with the loan terms, at which time the loan is returned to accrual status. Accounts, which are deemed fully or
partially uncollectible by management, are generally fully reserved or charged off for the amount that exceeds the estimated fair value (net of selling costs) of the underlying collateral.



The following table sets forth the aggregate amount of nonaccrual loans net
of unearned discounts, premiums and unearned finance charges at June 30, 2005, December 31, 2004 and 2003.



|                                                 |  |                        |       |   |              |      |       |   |  |   |       |  
|------------------------------------------------ |  | ---------------------- | ----- | - | ------------ | ---- | ----- | - |  | - | ----- | -
|                                                 |  | June 30,2005           |       |   | December 31, |     
|                                                 |  |                        | 2004  |   |              | 2003 |      
|                                                 |  | (Dollars in thousands) |      
|Nonaccrual loans                                 |  | $                      | 6,445 |   |              | $    | 7,169 |   |  | $ | 5,713 |  
|                                                 |  |                        |       |   |              |      |       |   |  |   |       |  
|Total                                            |  | $                      | 6,445 |   |              | $    | 7,169 |   |  | $ | 5,713 |  
|                                                 |  |                        |       |   |              |      |       |   |  |   |       |  
|Non accrual loans as a percentage of total loans |  |                        | 1.04  | % |              |      | 1.36  | % |  |   | 1.40  | %



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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 theSix MonthsEnded June 30,2005 |                   |   | At or For the Year EndedDecember 31, |                  
|                                                         |  |                                           | 2004(As Restated) |   |                                      | 2003(As Restated) |        
|                                                         |  | (Dollars in thousands)                    |                  
|Allowance for Loan Losses                                |  |                                           |                   |   |                                      |                   |         |   |  |   |         |  
|Balance at beginning of period                           |  | $                                         | 25,593            |   |                                      | $                 | 24,982  |   |  | $ | 27,586  |  
|Provision for loan losses                                |  |                                           | 12,558            |   |                                      |                   | 25,516  |   |  |   | 17,771  |  
|Charge-offs                                              |  |                                           | (12,765           | ) |                                      |                   | (26,386 | ) |  |   | (22,000 | )
|Recoveries                                               |  |                                           | 988               |   |                                      |                   | 1,481   |   |  |   | 1,625   |  
|                                                         |  |                                           |                   |   |                                      |                   |         |   |  |   |         |  
|Net charge-offs                                          |  |                                           | (11,777           | ) |                                      |                   | (24,905 | ) |  |   | (20,375 | )
|                                                         |  |                                           |                   |   |                                      |                   |         |   |  |   |         |  
|Balance at end of period                                 |  | $                                         | 26,374            |   |                                      | $                 | 25,593  |   |  | $ | 24,982  |  
|                                                         |  |                                           |                   |   |                                      |                   |         |   |  |   |         |  
|Annualized net charge-offs to average loans              |  |                                           | 4.56              | % |                                      |                   | 5.42    | % |  |   | 5.65    | %
|Allowance for loan losses as a percentage of total loans |  |                                           | 4.50              | % |                                      |                   | 5.98    | % |  |   | 6.53    | %



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk.
|------- | -----------------------------------------------------------



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



|Item 4. | Controls and Procedures.
|------- | ------------------------



Disclosure Controls and Procedures



As of the quarter ended June 30, 2005, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures. This
evaluation was done under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.



Disclosure controls and procedures are defined in SEC rules as controls and other procedures designed to ensure that information required to be disclosed
in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. While we believe that our disclosure controls and procedures have improved due to the scrutiny of the
matters discussed below under Internal Control Over Financial Reporting, which scrutiny occurred during the quarters ended December 31, 2004, March 31, 2005 and June 30, 2005, our management, including our Chief Executive Officer and
Chief Financial Officer, have concluded that the design and operation of our disclosure controls and procedures were not effective at June 30, 2005. We note that a control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met.



Internal Control Over Financial Reporting



Our
management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. As we reported in our Annual Report on Form 10-K for
the year ended December 31, 2004, in connection with managements assessment of the effectiveness of our system of internal control over financial reporting as of December 31, 2004, our management concluded that we had material weaknesses in
internal controls over financial reporting attributable to insufficient resources in financial reporting and accounting departments and a lack of formalized procedures and controls over accounting and financial reporting. Accordingly, and as
reported in our Annual



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##### Table of Contents

Report on Form 10-K for the year ended December 31, 2004, management intends to implement remediation measures during the course of 2005 pursuant to a formal
remediation plan approved by our Audit Committee and Board of Directors. We expect the completion of remediation measures to occur by September 30, 2005.



We have made the following changes to strengthen our internal control over financial reporting during the three months ended June 30, 2005:



| |  |  | We have employed additional support personnel, including a Treasury Manager and two staff accountants, to allow existing resources in the our financial reporting and accounting
functions to perform the enhanced internal control activities described above and are currently in the process of further adding accounting staff.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | We have established a management task force working in conjunction with our Audit Committee and devised and begun implementation of a comprehensive program for the remediation of
other deficiencies identified as part of our ongoing analysis and review for Sarbanes-Oxley compliance, including a timetable for execution and completion, all of which have been approved by our Audit Committee.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, we have hired a Director of Financial Reporting to strengthen
our internal control over financial reporting subsequent to June 30, 2005.



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



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------



Not applicable



|Item 2. | Unregistered Sales of Equity 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.
|------- | ----------------------------------------------------



The Companys 2005 Annual Meeting of Shareholders was held on June 23, 2005. At this meeting, the following matters
were submitted to a vote of the Companys shareholders:



|            |  |                                                                                                                                               
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|Proposal 1: |  | Election of three (3) directors to serve terms of two years;                                                                                  
|Proposal 2: |  | Amendment to the Companys 1997 Stock Incentive Plan; and                                                                                     
|Proposal 3: |  | Ratification of the selection of Grobstein, Horwath & Company LLP as the Companys independent auditors for the year ending December 31, 2005.



Proposal 1. At this
meeting, each of the following directors were elected to serve on the Companys Board of Directors until the annual meeting of shareholders to be held in 2007, or until election of their successors, or until they resign:



|               |  |            |  |               
|-------------- |  | ---------- |  | --------------
|               |  | Votes For  |  | Votes Withheld
|Guillermo Bron |  | 14,659,271 |  | 329,861       
|Luis Maizel    |  | 14,732,353 |  | 256,779       
|Ray Thousand   |  | 14,659,271 |  | 329,861       



Other directors
continuing to serve on the Companys Board of Directors until the annual meeting of shareholders to be held in 2006, or until election of their successors, or until they resign, are Mitchell Lynn and Ron Duncanson.



Proposal 2. At this meeting, an amendment to the Companys 1997 Stock
Incentive Plan was approved by the Companys shareholders (with 11,884,496 votes cast for, 776,800 votes cast against, and 2,327,836 votes abstaining) to increase the number of shares of common stock reserved for issuance under such plan from
7,000,000 to 7,750,000.



Proposal 3. At this meeting, the
ratification of Grobstein, Horwath & Company LLP as the Companys independent auditors for the year ending December 31, 2005 was approved by the Companys shareholders (with 14,986,207 votes cast for, 235 votes cast against, and 2,690
votes abstaining).



|Item 5. | Other Information.
|------- | ------------------



Not applicable



|Item 6. | Exhibits.
|------- | ---------



|     |  |                                                                                           
|---- |  | ------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act 2002.
|     | 
|31.2 |  | Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act 2002.
|     | 
|32.1 |  | Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act 2002.
|     | 
|32.2 |  | Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act 2002.



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



|      |  |                |  |                              |  |                                                                                                                  
|----- |  | -------------- |  | ---------------------------- |  | -----------------------------------------------------------------------------------------------------------------
|      |  |                |  | United PanAm Financial Corp.
|      |  |                | 
|Date: |  | August 1, 2005 |  | By:                          |  | /s/    RAY THOUSAND                                                                                              
|      |  |                |  |                              |  | Ray Thousand Chief Executive Officer and President (Principal Executive Officer)                                 
|      |  |                | 
|      |  | August 1, 2005 |  | By:                          |  | /s/    GARLAND W.
KOCH                                                                                           
|      |  |                |  |                              |  | Garland W. Koch Executive Vice President and Chief Financial Officer (Principal Financial and Accounting
Officer)



37