<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-Q

(Mark one)

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                                  Act of 1934
               For the quarterly period ended September 30, 1998

                                      Or

[_]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
                             Exchange Act of 1934
           For the transition period from __________ to ___________

                       Commission File Number 000-24051

                         UNITED PANAM FINANCIAL CORP.
            (Exact name of registrant as specified in its charter)

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

                           1300 SOUTH EL CAMINO REAL
                         SAN MATEO, CALIFORNIA  94402
              (Address of principal executive offices) (Zip Code)

                                (650) 345-1800
             (Registrant's telephone number, including area code)

                                Not applicable
       (Former name, former address and former fiscal year, if changed 
                              since last report)


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  
                                              ------           -----


The number of shares outstanding of the Registrant's Common Stock as of November
6, 1998 was 17,275,000 shares.
<PAGE>
 
                          UNITED PANAM FINANCIAL CORP.
                                   FORM 10-Q
                               SEPTEMBER 30, 1998

                                     INDEX


<TABLE>
<CAPTION>
                                                                                   Page
                                                                                   ----
<S>             <C>                                                                <C>
PART I.         FINANCIAL INFORMATION
 
Item 1.         Financial Statements
 
                Consolidated Statements of Financial Condition as of
                September 30, 1998 and December 31, 1997                             1

                Consolidated Statements of Operations                               
                for the three and nine months ended September 30, 1998              
                and September 30, 1997                                               2

                Consolidated Statements of Cash Flows                               
                for the three and nine months ended September 30, 1998              
                and September 30, 1997                                               3

                Notes to Unaudited Consolidated Financial Statements                 5

Item 2.         Management's Discussion and Analysis of                             
                Financial Condition and Results of Operations                        8

Item 3.         Quantitative and Qualitative Disclosures About Market Risk          29

                                                                                    
PART II.        OTHER INFORMATION                                                   

Item 1.         Legal Proceedings                                                   30

Item 2.         Changes in Securities and Use of Proceeds                           30

Item 3.         Defaults Upon Senior Securities                                     30

Item 4.         Submission of Matters to a Vote of Security Holders                 31

Item 5.         Other Information                                                   31

Item 6.         Exhibits and Reports on Form 8-K                                    31
</TABLE>
<PAGE>
 
PART I.                      FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS.
           -------------------- 

                 UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                  (UNAUDITED)
                                        
<TABLE>
<CAPTION>
                                                                           September 30,               December 31,
(Dollars in thousands, except per share data)                                  1998                        1997
                                                                        -------------------          ------------------
<S>                                                                     <C>                          <C> 
ASSETS                                                                                               

Cash and due from banks                                                            $ 45,436                    $ 15,026
Short term investments                                                               15,500                       4,000
                                                                        -------------------          ------------------ 
Cash and cash equivalents                                                            60,936                      19,026
Securities available for sale, at fair value                                             --                       1,002
Residual interests in securitizations, at fair value                                     --                       8,230
Loans, net                                                                          187,197                     148,535
Loans held for sale                                                                 167,070                     120,002
Federal Home Loan Bank stock, at cost                                                 2,089                       1,945
Accrued interest receivable                                                           2,046                       1,494
Real estate owned, net                                                                1,192                         562
Premises and equipment, net                                                           4,650                       3,085
Deferred tax assets                                                                   2,975                       3,171
Intangible assets                                                                       363                         457
Other assets                                                                          8,758                       3,333
                                                                        -------------------          ------------------ 
     Total assets                                                                  $437,276                    $310,842
                                                                        ===================          ==================
                                                                                                     
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                 

Deposits                                                                           $317,342                    $233,194
Notes payable                                                                        10,930                      12,930
Federal Home Loan Bank advances                                                          --                      28,000
Warehouse line of credit                                                                 --                       6,237
Accrued expenses and other liabilities                                               22,285                      17,472
                                                                        -------------------          ------------------ 
     Total liabilities                                                              350,557                     297,833
                                                                        -------------------          ------------------
                                                                                                     
Commitments and contingencies                                                                        
Preferred stock (par value $0.01 per share):                                             --                          --
     Authorized, 2,000,000 shares                                                                    
     None issued and outstanding                                                                     
Common stock (par value $0.01 per share):                                                --                          --
    Authorized, 20,000,000 shares                                                                    
    Issued and outstanding, 17,275,000 and 10,950,000 shares at                                      
    September 30, 1998 and December 31, 1997, respectively                              173                         110
Additional paid-in capital                                                           68,438                       5,127
Retained earnings                                                                    18,108                       7,772
                                                                        -------------------          ------------------ 
     Total stockholders' equity                                                      86,719                      13,009
                                                                        -------------------          ------------------
                                                                                                     
     Total liabilities and stockholders' equity                                    $437,276                    $310,842
                                                                        ===================          ==================
</TABLE>


See notes to unaudited consolidated financial statements.                      1
<PAGE>
 
                 UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                                        
<TABLE>
<CAPTION>
                                                                       Three Months                          Nine Months
(Dollars in thousands, except per share data)                      Ended September 30,                   Ended September 30,
                                                           ---------------------------------      --------------------------------
                                                                1998                1997               1998               1997
                                                           -------------       -------------      -------------      -------------
<S>                                                        <C>                 <C>                <C>                <C> 
INTEREST INCOME                                                                                                      
   Loans                                                         $11,617             $ 6,775            $32,786            $17,867
   Short term investments and securities available                                                                   
    for sale                                                         353                 174                819                447
                                                           -------------       -------------      -------------      -------------
        Total interest income                                     11,970               6,949             33,605             18,314
                                                           -------------       -------------      -------------      -------------
                                                                                                                     
INTEREST EXPENSE                                                                                                     
   Deposits                                                        4,063               2,532             11,186              6,710
   Federal Home Loan Bank advances                                   114                 389                659              1,001
   Warehouse line of credit                                          652                  --              2,118                 --
   Notes payable                                                     145                 184                485                482
                                                           -------------       -------------      -------------      -------------
         Total interest expense                                    4,974               3,105             14,448              8,193
                                                           -------------       -------------      -------------      -------------
             Net interest income                                   6,996               3,844             19,157             10,121
   Provision for loan losses                                         661                  66              1,784                445
                                                           -------------       -------------      -------------      -------------
             Net interest income after provision for                                                                               
              loan losses                                          6,335               3,778             17,373              9,676 
                                                           -------------       -------------      -------------      -------------
                                                                                                                     
NON-INTEREST INCOME                                                                                                  
   Gain on sale of loans, net                                     17,071               8,183             44,262             15,260
   Loan related charges and fees                                      33                 166                105                360
   Service charges and fees                                          173                  18                478                123
   Other income                                                       33                  17                 96                 40
                                                           -------------       -------------      -------------      -------------
          Total non-interest income                               17,310               8,384             44,941             15,783
                                                           -------------       -------------      -------------      -------------
                                                                                                                     
NON-INTEREST EXPENSE                                                                                                 
   Compensation and benefits                                       9,961               5,164             28,733             12,195
   Occupancy expense                                               1,458                 720              3,936              1,847
   Other expenses                                                  4,223               2,105             11,737              5,243
                                                           -------------       -------------      -------------      -------------
     Total non-interest expense                                   15,642               7,989             44,406             19,285
                                                           -------------       -------------      -------------      -------------
                                                                                                                     
     Income before income taxes                                    8,003               4,173             17,908              6,174

Income taxes                                                       3,333               1,752              7,572              2,580
                                                           -------------       -------------      -------------      -------------

Net income                                                       $ 4,670             $ 2,421            $10,336            $ 3,594
                                                           =============       =============      =============      =============

Earnings per share-basic                                         $  0.27             $  0.23            $  0.71            $  0.34
                                                           =============       =============      =============      =============

Earnings per share-diluted                                       $  0.26             $  0.21            $  0.67            $  0.32
                                                           =============       =============      =============      =============

Weighted average shares outstanding-basic                         17,275              10,669             14,565             10,669
                                                           =============       =============      =============      =============

Weighted average shares outstanding-diluted                       18,021              11,126             15,359             11,117
                                                           =============       =============      =============      =============
</TABLE>

See notes to unaudited consolidated financial statements.                   2
<PAGE>
 
                 UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                        
<TABLE>
<CAPTION>
(Dollars in thousands)                                                  Three Months                    Nine Months
                                                                    Ended September 30,             Ended September 30,
                                                              ----------------------------    ----------------------------
                                                                  1998            1997            1998            1997
                                                              ------------    ------------    ------------    ------------
<S>                                                           <C>             <C>             <C>             <C> 
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                       $   4,670       $   2,421       $  10,336       $   3,594
 
Adjustments to reconcile net income
 to net cash (used in) provided by operating activities:
   Gain on sale of loans                                           (17,071)         (8,183)        (44,262)        (15,260)
   Origination of mortgage loans held for sale                    (359,090)       (161,726)       (957,247)       (338,214)
   Sales of mortgage loans held for sale                           356,443         158,660         919,009         298,454
   Net proceeds from sale of residual interests in                                                                         
    securitizations                                                     --              --           8,302              -- 
   Provision for loan losses                                           661              66           1,784             445
   Accretion of discount on loans                                      (24)           (185)           (566)           (538)
   Depreciation and amortization                                       485             219           1,241             504
   FHLB stock dividend                                                 (30)            (33)            (86)            (74)
   (Increase) decrease in accrued interest receivable                 (534)             76            (552)            (82)
   Increase in other assets                                           (512)         (2,711)         (5,124)         (3,345)
   Deferred income taxes                                                26          (1,145)            196          (1,125)
   Increase in accrued expenses and other liabilities                3,816           2,157           4,814           6,675
                                                              ------------    ------------    ------------    ------------
     Net cash used in operating activities                         (11,160)        (10,384)        (62,155)        (48,966)
                                                              ------------    ------------    ------------    ------------
 
CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from maturities of investment securities                    --              --           1,002              --
   Repayments of mortgage loans                                     11,055           6,615          30,196          16,859
   Originations, net of repayments, of non-mortgage loans           (4,336)         (2,322)        (36,357)        (30,346)
   Purchase of securities available for sale                            --              --              --          (2,002)
   Purchase of premises and equipment                                 (581)           (636)         (2,684)         (1,869)
   Purchase of FHLB stock, net                                          --             (65)            (58)           (407)
   Proceeds from sale of real estate owned                             545             609             995           1,797
   Other, net                                                           --              --            (330)             --
                                                              ------------    ------------    ------------    ------------
     Net cash provided by (used in) investing activities             6,683           4,201          (7,236)        (15,968)
                                                              ------------    ------------    ------------    ------------
 
CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds, net of repayments, from notes payable to                                                                      
    shareholders                                                        --           1,940          (2,000)          1,940 
   Net increase in deposits                                         17,008          15,632          84,148          51,722
   Proceeds from initial public offering of common stock,                                                                  
    net                                                                 --              --          63,390              -- 
   Proceeds, net of repayments, from warehouse line of                                                                     
    credit                                                              --              --          (6,237)             -- 
   Proceeds, net of repayments, from FHLB advances                      --          15,000         (28,000)         31,000
                                                              ------------    ------------    ------------    ------------
       Net cash provided by financing activities                    17,008          32,572         111,301          84,662
                                                              ------------    ------------    ------------    ------------
 
Net increase in cash and cash equivalents                           12,531          26,389          41,910          19,728
 
Cash and cash equivalents at beginning of period                    48,405          19,402          19,026          26,063
                                                              ------------    ------------    ------------    ------------
 
Cash and cash equivalents at end of period                       $  60,936       $  45,791       $  60,936       $  45,791
                                                              ============    ============    ============    ============
</TABLE>

See notes to unaudited consolidated financial statements.                   3
<PAGE>
 
                 UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
                                  (UNAUDITED)
                                        
<TABLE>
<CAPTION>
(Dollars in thousands)                                             Three Months Ended         Nine Months Ended
                                                                     September 30,              September 30,
                                                                ----------------------     ----------------------
                                                                   1998         1997          1998         1997
                                                                ---------     --------     ---------     --------
<S>                                                             <C>           <C>          <C>           <C>
                                                                                                         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                                        
Cash paid for:                                                                                           
                                                                                                         
       Interest                                                    $5,047       $3,135       $14,625       $8,062
                                                                ---------     --------     ---------     --------
                                                                                                         
       Taxes                                                       $5,775       $1,500       $ 8,285       $2,380
                                                                ---------     --------     ---------     --------
                                                                                                         
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING                                                
       ACTIVITIES                                                                                        
                                                                                                         
       Acquisition of real estate owned through                                                          
            foreclosure of related mortgage loans                  $  797       $  416       $ 2,105       $1,446
                                                                ---------     --------     ---------     --------
</TABLE>

See notes to unaudited  consolidated financial statements.                   4
<PAGE>
 
                 UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
            THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997


1.    ORGANIZATION
 
      United PanAm Financial Corp. (the "Company") was incorporated in
California on April 9, 1998 for the purpose of reincorporating its business in
that state, through the merger of United PanAm Financial Corp., a Delaware
corporation (the "Predecessor"), into the Company.  Unless the context indicates
otherwise, all references herein to the "Company" include the Predecessor.  The
Company was originally organized as a holding company for Pan American
Financial, Inc. ("PAFI") and Pan American Bank, FSB (the "Bank") to purchase
certain assets and assume certain liabilities of Pan American Federal Savings
Bank from the Resolution Trust Corporation (the "RTC") on April 29, 1994
pursuant to a whole purchase and assumption agreement.  The Company, PAFI and
the Bank are considered to be minority owned.  PAFI is a wholly-owned subsidiary
of the Company, and the Bank is a wholly-owned subsidiary of PAFI.  United PanAm
Mortgage Corporation, a California corporation, was organized in 1997 as a
wholly-owned subsidiary of the Company and is presently acting as agent for the
Bank in secondary marketing activities.

      In 1997, the Company changed its fiscal year end from June 30 to December
31 for financial and income tax reporting purposes.

2.    BASIS OF PRESENTATION

      Certain statements in this Quarterly Report on Form 10-Q, including
statements regarding the Company's 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: limited operating history; loans made to credit-impaired
borrowers; need for additional sources of financing; concentration of business
in California; reliance on operational systems and controls and key employees;
competitive pressure in the banking and mortgage lending industry; changes in
the interest rate environment; rapid growth of the Company's businesses; risks
in connection with the securitization of mortgage loans; general economic
conditions; and other risks identified from time to time in the Company's
filings with the Securities and Exchange Commission (the "SEC").  See "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Factors That May Affect Future Results."

      The accompanying unaudited consolidated financial statements include the
accounts of United PanAm Financial Corp., Pan American Financial, Inc., United
PanAm Mortgage Corporation and Pan American Bank, FSB.  Substantially all of the
Company's revenues are derived from the operations of the Bank and United PanAm
Mortgage Corporation and they represent substantially all of the Company's
consolidated assets and liabilities as of September 30, 1998 and December 31,
1997.  Significant inter-company accounts and transactions have been eliminated
in consolidation.

      These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the Company's financial
condition and results of operations for the interim periods presented in this
Form 10-Q have been included. Operating results for the interim periods are not
necessarily indicative of financial results for the full year. These unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
Registration Statement on Form S-1 (File No. 333-39941), as amended, declared
effective by the SEC on April 23, 1998 in connection with its initial public
offering.

                                                                               5
<PAGE>
 
      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes.  Actual results could differ from those estimates.

3.    EARNINGS PER SHARE

      At December 31, 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share" ("SFAS 128").
Under SFAS 128, basic EPS excludes dilution and is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding for the period.  Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted from issuance of common
stock.

      Basic EPS and diluted EPS are calculated as follows for the three and nine
months ended September 30, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                  Three Months                             Nine Months
(Dollars in thousands, except per share amounts)              Ended September 30,                      Ended September 30,
                                                        --------------------------------      -----------------------------------
                                                            1998                1997                1998                 1997
                                                        ------------        ------------         -----------         ------------
<S>                                                     <C>                 <C>                  <C>                 <C>
Earnings per share -- basic                                                                                            
     Net income                                              $ 4,670             $ 2,421             $10,336              $ 3,594
                                                        ============        ============         ===========         ============
     Average common shares outstanding                        17,275              10,669              14,565               10,669
                                                        ============        ============         ===========         ============
     Earnings per share -- basic                             $  0.27             $  0.23             $  0.71              $  0.34
                                                        ============        ============         ===========         ============
Earnings per share -- diluted                                                                                        
     Net income                                              $ 4,670             $ 2,421             $10,336              $ 3,594
                                                        ============        ============         ===========         ============
     Average common shares outstanding                        17,275              10,669              14,565               10,669
     Add: Stock options                                          746                 457                 794                  448
                                                        ------------        ------------         -----------         ------------
     Average common shares outstanding -- diluted             18,021              11,126              15,359               11,117
                                                        ============        ============         ===========         ============
     Earnings per share -- diluted                           $  0.26             $  0.21             $  0.67              $  0.32
                                                        ============        ============         ===========         ============
</TABLE>

4.    ACCOUNTING PRONOUNCEMENTS

      In June 1997, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which establishes
standards for reporting and displaying comprehensive income and its components
in the consolidated financial statements.  SFAS 130 does not, however, require a
specific format for presenting such information, but requires the Company to
display an amount representing total comprehensive income for the periods
presented in that financial statement.  For the three and nine months ended
September 30, 1998 and 1997, the Company had no items of comprehensive income to
report other than net income.

      In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information" ("SFAS 131"), which establishes standards
for the way that public business enterprises are to report information about
operating segments in annual financial statements and requires those enterprises
to report selected information about operating segments in interim financial
reports issued to shareholders. SFAS 131 is effective for financial statements
for periods beginning after December 31, 1997, and the Company is in the process
of determining its preferred format for disclosure purposes.

      In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which establishes accounting
and  reporting standards  for  derivative instruments and for hedging
activities.  SFAS 133 requires that an entity recognize all  derivatives as
either assets  or liabilities  in  the statements of financial condition  and
measure those instruments at fair value. SFAS 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999.

                                                                               6
<PAGE>
 
5.    INITIAL PUBLIC OFFERING

      On April 23, 1998, the Company's Registration Statement on Form S-1 for
the initial public offering of 5,500,000 shares of its common stock at a price
of $11.00 per share was declared effective by the SEC.  The Company received
approximately $56 million from the sale of its common stock after underwriting
discount and expenses associated with the offering.  On May 22, 1998, the
Underwriters' over-allotment option for 825,000 shares of common stock was
exercised resulting in $8 million of additional proceeds being received by the
Company, after underwriting discount.

                                                                               7
<PAGE>
 
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 the Company's 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.  For discussion of the factors that might cause such a difference,
see "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations  Factors That May Affect Future Results" and other risks
identified from time to time in the Company's filings with the SEC.

GENERAL

  THE COMPANY

      The Company is a diversified specialty finance company engaged primarily
in originating and acquiring for investment or sale residential mortgage loans,
personal automobile insurance premium finance contracts and retail automobile
installment sales contracts.  The Company markets to customers who generally
cannot obtain financing from traditional lenders.  These customers usually pay
higher loan origination fees and interest rates than those charged by
traditional lenders to gain access to consumer financing.  The Company believes
that management's experience in originating, assessing, pricing and managing
credit risk enables the Company to earn attractive risk-adjusted returns.  The
Company has funded its operations to date principally through retail deposits,
Federal Home Loan Bank ("FHLB") advances, a mortgage warehouse line of credit,
loan securitizations, and whole loan sales at the Bank.

      The Company commenced operations in 1994 by purchasing from the RTC
certain assets and assuming certain liabilities of the Bank's predecessor, Pan
American Federal Savings Bank.  The Company has used the Bank as a base for
expansion into its current specialty finance businesses.  In 1995, the Company
commenced its insurance premium finance business through a joint venture with
BPN Corporation ("BPN").  In 1996, the Company commenced its current mortgage
and automobile finance businesses.  The Company was incorporated in California
on April 9, 1998 for the purpose of reincorporating its business in that state,
through the merger of the Predecessor into the Company.  Unless the context
indicates otherwise, all references herein to the "Company" include the
Predecessor.

      Finance companies, such as the Company, generate income from a combination
of (i) "spread" or "net interest" income (i.e., the difference between the yield
on loans, net of loan losses, and the cost of funding) and (ii) "non-interest"
income (i.e., the fees received for various services and gain on the sale of
loans). Income is used to cover operating expenses incurred (i.e., compensation
and benefits, occupancy and other expenses) in generating that income. Each of
the Company's businesses, as described below, generates income from a
combination of spread and non-interest income.

  MORTGAGE FINANCE

      The Company originates and sells or securitizes subprime mortgage loans
collateralized primarily by first mortgages on single family residences.  The
Company's mortgage finance customers are considered "subprime" because of
factors such as impaired credit history or high debt-to-income ratios compared
to customers of traditional mortgage lenders.  The Company has funded its
mortgage finance business to date primarily through the Bank's deposits, FHLB
advances, a mortgage warehouse line of credit, the sale of its mortgage loan
originations to mortgage companies and investors through whole loan packages
offered for bid several times per month and, to a lesser extent, from loan
securitizations.  The Company completed its first securitization of mortgage
loans in December 1997 and in March 1998 sold the residual interests in this
securitization for cash at a price in excess of its carrying value.

                                                                               8
<PAGE>
 
      To date, the Company's mortgage lending income is generated from cash
gains on sales of loans, and a spread component resulting from loans held prior
to sale. Income generated from this mortgage finance business covers operating
costs, including compensation, occupancy, loan origination, and administrative
expenses.

  INSURANCE PREMIUM FINANCE

      In May 1995, the Bank entered into a joint venture with BPN under the name
"ClassicPlan" (such business, "IPF").  Under this joint venture, which commenced
operations in September 1995, the Bank underwrites and finances primarily
automobile insurance premiums in California and BPN markets the financing
program and services the loans for the Bank.  The Bank lends to individuals for
the purchase of single premium automobile insurance policies and the Bank's
collateral is the unearned insurance premium held by the insurance company.  The
unearned portion of the insurance premium is refundable to IPF in the event the
underlying insurance policy is canceled.  The Company does not sell or have the
risk of underwriting the underlying insurance policy.

      As a result of BPN performing substantially all marketing and servicing
activities, the Company's role is primarily that of an underwriter and funder of
loans.  Therefore, IPF's income is generated primarily on a spread basis,
supplemented by non-interest income generated from late payment and returned
check fees.  The Bank uses this income to cover the costs of underwriting and
loan administration, including compensation, occupancy and data processing
expenses.

      In January 1998, the Company and BPN purchased from Providian National
Bank and others the right to solicit new and renewal personal and commercial
insurance premium finance business from brokers who previously have provided
contracts to Commonwealth Premium Finance. The purchase price for the agreement
was provided 60% by the Company and 40% by BPN. The relationship between the
Company and BPN continues to be governed by the joint venture agreement already
in effect. The Company also acquired the Commonwealth name and certain equipment
and software. The agreement also provides that Providian National Bank and the
servicers of its insurance premium finance business may not solicit or engage in
the insurance premium finance business in California for a period of three
years.

      As a result of the Commonwealth acquisition, IPF increased its commercial
insurance premium financing to approximately 10.9% of loans outstanding at
September 30, 1998, and it is expected that this business will increase to
approximately 15% of loans outstanding by the end of the year.

  AUTOMOBILE FINANCE

      In 1996, the Bank commenced its automobile finance business through its
subsidiary, United Auto Credit Corporation (such business, "UACC").  UACC
acquires, holds for investment and services subprime retail automobile
installment sales contracts ("auto contracts") generated by franchised and
independent dealers of used automobiles.  UACC's customers are considered
"subprime" because they typically have limited credit histories or credit
histories that preclude them from obtaining loans through traditional sources.
As UACC provides all marketing, origination, underwriting and servicing
activities for its loans, income is generated from a combination of spread and
non-interest income and is used to cover all operating costs, including
compensation, occupancy and systems expense.

  THE BANK

      The Company has funded its operations to date primarily through the Bank's
deposits, FHLB advances, a mortgage warehouse line of credit and loan sales and
securitizations.  As of September 30, 1998, the Bank was a five-branch federal
savings bank with $317.3 million in deposits.  The loans  generated by  the
Company's mortgage, insurance premium and automobile finance businesses
currently are funded and held by the Bank.  In addition, the Bank holds a
portfolio of primarily traditional residential mortgage loans  acquired from the
RTC in 1994 and 1995 at a discount from the unpaid principal balance of such
loans, which loans aggregated $66.9 million in principal amount (before unearned
discounts and premiums) at September 30, 1998.                       

                                                                               9
<PAGE>
 
      The Bank generates spread income not only from loans originated or
purchased by each of the Company's principal businesses, but also from (i) loans
purchased from the RTC, (ii) its short term investments portfolio, and (iii)
consumer loans originated by its retail deposit branches. This income is
supplemented by non-interest income from its branch banking activities (e.g.,
deposit service charges, safe deposit box fees), and is used to cover operating
costs and other expenses.

  YEAR 2000 COMPLIANCE

      State of Readiness.

      The Company is working to resolve the potential impact of the Year 2000 on
the ability of the Company's computerized information systems to accurately
process information that may be date-sensitive. Any of the Company's programs
that recognize a date using "00" as the Year 1900 rather than the Year 2000
could result in errors or system failures. The Company utilizes a number of
computer programs across its entire operations.

      The Company established a Year 2000 project management team in 1997 to
ensure that its operating systems will be fully capable of processing its
transactions. The Company also adopted a Year 2000 operating plan in accordance
with the guidelines prescribed by the Office of Thrift Supervision and the
Federal Financial Institutions Examination Council. The assessment and awareness
phases of the plan have been completed and the Company is now in the testing
phase. It is expected that all internal computer applications will be tested and
validated by the end of 1998.

      The Company relies upon third-party software vendors and service providers
for a substantial amount of its electronic data processing. Thus, one of the
Company's Year 2000 focuses is to monitor the progress of its primary software
vendors and service providers towards compliance with Year 2000 issues and
prepare to test actual data of the Company on simulated processing of future
sensitive dates. It is expected that all critical systems provided by third
party service providers will be tested and validated by June 1999.

      The Company has initiated formal communications with its customers and
vendors to determine the extent to which the Company may be affected by the
failure of these parties to correct their own year 2000 issues. The company's
borrowers and customers are generally consumers which mitigates much of the Year
2000 risk. As of this time, the Company has not identified any significant
issues with its major customers or vendors.

      Costs to Address the Year 2000 Issue.

      The Company has budgeted expenditures of approximately $600,000 in 1998
and 1999 to ensure that its systems are ready for processing information in the
Year 2000. The majority of these expenditures relate to the cost of fully
dedicated Year 2000 project management team resources, some of whom are third
party contractors. The Company estimates that it has incurred approximately
$200,000 of its Year 2000 budget expenditures through September 30, 1998 and
will incur an additional $75,000 by the end of 1998. In addition, the Company
has incurred, and will continue to incur, certain costs relating to the
temporary reallocation of its internal resources to address Year 2000 issues.

  Risks Presented by the Year 2000 Issue.

      Should the Company and/or its third-party software vendors and service
providers upon whom the Company relies fail to timely identify, address and
correct material Year 2000 issues, such failure could have a material adverse
impact on the Company's ability to operate.  The range of adverse impacts may
include the requirement to pay significant overtime to manually process certain
transactions and added costs to process certain financing activity through a
centralized administrative function.  In addition, if corrections made by such
third-party software vendors and service providers to address Year 2000 issues
are incompatible with the Company's systems, the Year 2000 issue could have a
material adverse impact on the Company's operations.

                                                                              10
<PAGE>
 
      Despite the Company's activities in regards to the Year 2000 issue, there
can be no assurance that partial or total systems interruptions or the costs
necessary to update hardware and software will not have a material adverse
effect on the Company's business, financial condition, results of operations and
business prospects.

      Contingency Plans.

      The Year 2000 project management team currently is developing contingency
plans in the event of an unanticipated business interruption as a result of a
Year 2000 systems failure.  These plans will address how the Company operates
its critical activities in a business interruption resulting from any Year 2000
issues.  An initial draft of the plan is scheduled to be completed by the end of
1998 with final plans adopted by June 1999.  There can be no assurance, however,
that such contingency plans will be successful.

  AVERAGE BALANCE SHEETS

      The following tables set forth information relating to the Company for the
three and nine months ended September 30, 1998 and 1997.  The yields and costs
are derived by dividing income or expense by the average balance of assets or
liabilities, respectively, for the periods shown.  The yields and costs include
fees which are considered adjustments to yields.

<TABLE>
<CAPTION>
                                                                 Three Months Ended September 30,
                                         --------------------------------------------------------------------------------
                                                            1998                                     1997
                                         ---------------------------------------   --------------------------------------
                                                                        Average                                  Average
(Dollars in thousands)                     Average                      Yield/       Average                     Yield/
                                          Balance(1)      Interest       Cost       Balance(1)     Interest       Cost
                                         ------------   -----------   ----------   ------------  ------------   ---------
                                                                            (Unaudited)
<S>                                      <C>            <C>           <C>          <C>           <C>            <C>
ASSETS
Interest earning assets
   Investment securities                    $ 32,474      $   353       4.35%          $ 12,510       $  174       5.56%
   Mortgage loans, net(2)                    299,338        6,839       9.14%           155,668        3,855       9.91%
   IPF loans, net(3)                          53,725        1,756      13.07%            48,696        1,688      13.87%
   Automobile installment                                                                      
    Contracts, net(4)                         50,118        3,022      24.12%            19,112        1,232      25.78%
                                         -----------    ---------                   -----------    ---------
      Total interest earning assets          435,655       11,970      10.99%           235,986        6,949      11.78%
                                                        ---------                                  --------- 
Non-interest earnings assets                  37,630                                     21,311
                                         -----------                                -----------             
       Total assets                         $473,285                                   $257,297
                                         ===========                                ===========

LIABILITIES AND EQUITY                                                                         
Interest bearing liabilities                                                                   
   Customer deposits                        $306,254      $ 4,063       5.26%          $203,968       $2,532       4.93%
   Notes payable                              10,930          145       5.26%            11,415          184       6.40%
   FHLB advances                               7,871          114       5.75%            23,607          389       6.54%
   Warehouse line of credit                   38,039          652       6.71%                --           --         --
                                         -----------    ---------                   -----------    ---------
       Total interest bearing                                                                                            
        liabilities                          363,094        4,974       5.43%           238,990        3,105       5.15% 
Non-interest bearing liabilities              26,665                                     10,776
                                         -----------                                -----------              
       Total liabilities                     389,759                                    249,766              
Equity                                        83,526                                      7,531              
                                         -----------                                -----------              
       Total liabilities and equity         $473,285                                   $257,297
                                         ===========                                ===========
Net interest income before  provision                                                          
       for loan losses                                    $ 6,996                                     $3,844
                                                        ---------                                  ---------
Net interest rate spread(5)                                             5.56%                                      6.62%
Net interest margin(6)                                                  6.42%                                      6.52%
Ratio of interest earning assets to                                                                                  99%
       interest bearing liabilities                                      120%      
</TABLE>
__________________________________
(1)  Average balances are measured on a month-end basis.
(2)  Net of deferred loan origination fees, unamortized discounts, premiums and
     allowance for estimated loan losses; includes loans held for sale and non-
     performing loans.
(3)  Net of allowance for estimated losses; includes non-performing loans.
(4)  Net of unearned finance charges and allowance for estimated losses;
     includes non-performing loans.
(5)  Net interest rate spread represents the difference between the yield on
     interest earning assets and the cost of interest bearing liabilities.
(6)  Net interest margin represents net interest income divided by average
     interest earning assets.

                                                                              11
<PAGE>
 
<TABLE>
<CAPTION>
                                                                  Nine Months Ended September 30,
                                         --------------------------------------------------------------------------------
                                                            1998                                     1997
                                         ---------------------------------------   --------------------------------------
                                                                        Average                                  Average
(Dollars in thousands)                     Average                      Yield/       Average                     Yield/
                                          Balance(1)      Interest       Cost       Balance(1)     Interest       Cost
                                         ------------   -----------   ----------   ------------  ------------   ---------
                                                                            (Unaudited)
<S>                                      <C>            <C>           <C>          <C>           <C>            <C>
ASSETS
Interest earning assets
   Investment securities                    $ 20,893      $   819       5.23%          $  9,772      $   447       6.12%
   Mortgage loans, net(2)                    275,573       20,197       9.77%           143,715       10,378       9.63%
   IPF loans, net(3)                          49,725        4,992      13.39%            44,591        4,735      14.16%
   Automobile installment                                                                                       
          contracts, net(4)                   40,450        7,597      25.04%            14,113        2,754      26.09%
                                         -----------    ---------                   -----------    ---------
      Total interest earning assets          386,641       33,605      11.59%           212,191       18,314      11.51%
                                                        ---------                                  --------- 
Non-interest earnings assets                  36,390                                     17,485                 
                                         -----------                                -----------             
       Total assets                         $423,031                                   $229,676            
                                         ===========                                =========== 
                                                                                                                
LIABILITIES AND EQUITY                                                                                          
Interest bearing liabilities                                                                                    
   Customer deposits                        $283,814      $11,186       5.27%          $183,134      $ 6,710       4.89%
   Notes payable                              11,730          485       5.53%            11,124          482       5.79%
   FHLB advances                              15,441          659       5.71%            20,334        1,001       6.38%
   Warehouse line of credit                   43,498        2,118       6.51%                --           --         --
                                         -----------    ---------                   -----------    ---------
       Total interest bearing            
        liabilities                          354,483       14,448       5.45%           214,592        8,193       5.10% 
                                                        ---------                                  --------- 
Non-interest bearing liabilities              20,671                                      7,459
                                         -----------                                -----------             
       Total liabilities                     375,154                                    222,051
Equity                                        47,877                                      7,625
                                         -----------                                -----------             
       Total liabilities and equity         $423,031                                   $229,676
                                         ===========                                =========== 
Net interest income before provision
       for loan losses                                    $19,157                                    $10,121
                                                        =========                                  ========= 
Net interest rate spread(5)                                             6.14%                                      6.41%
Net interest margin(6)                                                  6.61%                                      6.36%
Ratio of interest earning assets to
       interest bearing liabilities                                      109%                                        99%
</TABLE>
__________________________________
(1)  Average balances are measured on a month-end basis.
(2)  Net of deferred loan origination fees, unamortized discounts, premiums and
     allowance for estimated loan losses; includes loans held for sale and non-
     performing loans.
(3)  Net of allowance for estimated losses; includes non-performing loans.
(4)  Net of unearned finance charges and allowance for estimated losses;
     includes non-performing loans.
(5)  Net interest rate spread represents the difference between the yield on
     interest earning assets and the cost of interest bearing liabilities.
(6)  Net interest margin represents net interest income divided by average
     interest earning assets.
 
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
AND SEPTEMBER 30, 1997

  GENERAL

     Net income increased from $2.4 million for the three months ended September
30, 1997 to $4.7 million for the three months ended September 30, 1998.  This
increase was due primarily to the expansion of the Company's mortgage, insurance
premium and auto finance businesses, all of which showed improved operating
results during 1997 and 1998.  Also contributing to the favorable operating
results for the three months ended September 30, 1998 compared with the same
period in 1997 was an increase of $8.9 million in gain on sale of loans from the
Company's mortgage finance operations and $3.2 million in net interest income
offset by an increase in non-interest expense of $7.7 million and an increase in
provision for loan losses of $595,000.  Net interest income also was favorably
impacted during the third quarter of 1998 by using the $63.4 million of net
proceeds from the Company's initial public offering of common stock to finance a
portion of its mortgage operations.

                                                                              12
<PAGE>
 
     As a result of the expansion of the Company's lending operations, mortgage
loan originations increased from $161.1 million for the three months ended
September 30, 1997 to $358.6 million for the three months ended September 30,
1998, while insurance premium finance originations increased from $31.9 million
to $35.4 million, respectively, and auto contracts purchased increased from
$12.4 million to $23.0 million, respectively.  Sales of mortgage loans were
$347.9 million for the three months ended September 30, 1998 and $140.4 million
for the comparable period in 1997.
 
  INTEREST INCOME

     Interest income increased from $6.9 million for the three months ended
September 30, 1997 to $12.0 million for the three months ended September 30,
1998 due primarily to a $199.7 million increase in average interest earning
assets offset by a decline of 0.79% in the average yield on interest earning
assets. The largest components of growth in average interest earning assets were
mortgage loans, automobile installment contracts and investment securities,
which increased $143.7 million, $31.0 million and $20.0 million, respectively.
The increase in mortgage loan receivables was a result of an increase in loans
held for sale, which increased from $70.2 million at September 30, 1997 to
$167.1 million at September 30, 1998. Generally, these loans are originated for
sale or securitization in the secondary mortgage market. The increase in such
loans was primarily a result of growth in the Company's mortgage finance
business and the opening of 10 retail lending branches and one wholesale loan
center since September of 1997. The increase in auto contracts principally
resulted from the opening of five new branch offices since September of 1997 and
the purchasing of additional dealer contracts in existing and new markets. The
increase in investment securities was a result of an increase in the Company's
liquidity and short-term investment portfolio reflecting the overall growth in
the Company's total assets.

     The decline in the average yield on interest earning assets was principally
due to an increase in non-accrual mortgage loans from $3.6 million at September
30, 1997 to $19.5 million at September 30, 1998.  The Company ceases to accrue
interest on its mortgage loans when a borrower is delinquent two payments or
more.  As a result of an increase in mortgage loans 60-89 days or more
delinquent and the repurchase of certain mortgage loans relating to first 
payment defaults on loans originated prior to June 1998, the Company placed
$10.7 million of loans on non-accrual status during the quarter ended September
30, 1998.

  INTEREST EXPENSE

     Interest expense increased from $3.1 million for the three months ended
September 30, 1997 to $5.0 million for the three months ended September 30, 1998
due to a $124.1 million increase in average interest bearing liabilities and a
0.28% increase in the weighted average interest rate on interest bearing
liabilities.  The largest component of growth in average interest bearing
liabilities was deposits of the Bank, which increased from an average balance of
$204.0 million during the quarter ended September 30, 1997 to $306.3 million
during the quarter ended September 30, 1998.  The average cost of deposits
increased from 4.93% for the three months ended September 30, 1997 to 5.26% for
the comparable period in 1998 generally as a result of an increase in the Bank's
wholesale deposits.  

     The increase in deposits resulted from the use of retail and wholesale
certificates of deposit ("CDs") to finance the Company's lending growth, and the
increase in the average yield on the Bank's deposits reflects the repricing of
accounts to higher rates and overall growth in the deposit portfolio at interest
rates higher than those in previous quarters.

     The second largest component of growth in average interest bearing
liabilities was from borrowings under the Bank's warehouse line of credit,
increasing to $38.0 million for the three months ended September 30, 1998. In
October 1997, the Bank entered into a master repurchase agreement under which it
may sell and repurchase, at a set price, mortgage loans pending the sale or
securitization of these loans. The weighted average interest rate on such
borrowings was 6.71% for the three months ended September 30, 1998. There were
no warehouse line of credit advances outstanding during the quarter ended
September 30, 1997.

                                                                              13
<PAGE>
 
  PROVISION FOR LOAN LOSSES

     Provision for loan losses increased from $66,000 for the three months ended
September 30, 1997 to $661,000 for the three months ended September 30, 1998.
The increase in provision for losses reflects the Company's loan growth over the
past 12 months as well as an increase in specific loss allowances related to
non-performing mortgage loans. The total allowance for loan losses was $6.2
million at September 30, 1997 compared with $8.9 million at September 30, 1998,
representing 4.73% and 4.07% of loans held for investment at September 30, 1998
and 1997, respectively. In addition to its provision for losses, the Company's
allowance for loan losses is also increased by its allocation of acquisition
discounts related to the purchase of automobile installment contracts. The
Company allocates the estimated amount of its acquisition discounts attributable
to credit risk to the allowance for loan losses. Annualized net charge-offs to
average loans were 1.92% for the three months ended September 30, 1998 compared
with 1.04% for the comparable period in 1997.
 
     A provision for loan losses is charged to operations based on the Company's
regular evaluation of its loans held for investment and the adequacy of its
allowance for loan losses.  The Company reports its loans held for sale at the
lower of cost or market value, accordingly, loan loss provisions are not
established for this portfolio.  While management believes it has adequately
provided for losses and does not expect any material loss on its loans in excess
of allowances already recorded, no assurance can be given that economic or real
estate market conditions or other circumstances will not result in increased
losses in the loan portfolio.

  NON-INTEREST INCOME

     Non-interest income increased $8.9 million, from $8.4 million for the three
months ended September 30, 1997 to $17.3 million for the three months ended
September 30, 1998.  This increase resulted from cash gains on sales of mortgage
loans and is due primarily to a substantial increase in the volume of mortgage
loans sold by the Company.  During the three months ended September 30, 1998,
the Company sold $347.9 million in mortgage loans on a whole loan primarily non-
recourse basis compared with $140.4 million in mortgage loans sold during the
comparable period in 1997. Net gains on sales of loans, as a percentage of loans
sold, were 4.91% for the three months ended September 30, 1998 compared with
5.83% for the three months ended September 30, 1997. The decline reflects
continued competitive pressure in the securitization and whole loan sale markets
resulting, in part, from higher industry-wide loan prepayment rates in the later
part of 1997 and 1998 as compared to the third quarter of 1997.

     Other components of non-interest income include fees and charges for Bank
services and miscellaneous other income.  The total of all of these items
increased $38,000, from $201,000 for the three months ended September 30, 1997
to $239,000 for the three months ended September 30, 1998.

  NON-INTEREST EXPENSE

     Non-interest expense increased $7.6 million, from $8.0 million for the
three months ended September 30, 1997 to $15.6 million for the three months
ended September 30, 1998. This increase primarily reflects an increase in
salaries, loan commissions, employee benefits and other personnel costs of $4.8
million associated with the expansion of the Company's mortgage and automobile
finance operations. In addition, occupancy expense increased $758,000,
reflecting an increase in the number of mortgage and automobile lending offices.
Marketing expense was $1.1 million for the three months ended September 30,
1998, compared with $434,000 for the three months ended September 30, 1997. This
increase is attributable to the Company's retail mortgage lending operations
which use extensive direct mail and telemarketing campaigns to target
prospective borrowers. Also, as a result of growth in the Company's mortgage
finance and automobile lending operations, other operating expense, including
stationery and supplies, data processing, insurance, telephone and postage,
increased $1.4 million during the three months ended September 30, 1998 compared
with the same period in 1997. 

                                                                              14
<PAGE>
 
     During the last 12 months, the Company expanded significantly its mortgage
and automobile finance operations, resulting in an increase from 260 employees
in six offices and 54 employees in 11 offices, respectively, as of September 30,
1997, to 534 employees in 28 offices and 93 employees in 14 offices,
respectively, as of September 30, 1998.

  INCOME TAXES

     Income taxes increased $1.5 million, from $1.8 million for the three months
ended September 30, 1997 to $3.3 million for the three months ended September
30, 1998.  This increase occurred as a result of a $3.8 million increase in
income before income taxes between the two periods offset by a decrease in the
effective tax rate from 42.0% for the three months ended September 30, 1997 to
41.6% for the three months ended September 30, 1998.


COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
SEPTEMBER 30, 1997

  GENERAL

     Net income increased from $3.6 million for the nine months ended September
30, 1997 to $10.3 million for the nine months ended September 30, 1998. This
increase was due primarily to the expansion of the Company's mortgage, insurance
premium and auto finance businesses in the second half of 1997 and during 1998.
Also contributing to the favorable operating results for the nine months ended
September 30, 1998 compared with the same period in 1997 was an increase of
$29.0 million in gain on sale of loans from the Company's mortgage finance
operations and $9.0 million in net interest income offset by an increase in non-
interest expense of $25.1 million and an increase in provision for loan losses
of $1.3 million.

     As a result of the expansion of the Company's lending operations, mortgage
loan originations increased from $336.9 million for the nine months ended
September 30, 1997 to $957.4 million for the nine months ended September 30,
1998, while insurance premium finance originations increased from $117.1 million
to $123.2 million, respectively, and auto contracts purchased increased from
$29.8 million to $60.7 million, respectively.  Sales of mortgage loans were
$886.4 million for the nine months ended September 30, 1998 and $273.1 million
for the comparable period in 1997.

  INTEREST INCOME

     Interest income increased from $18.3 million for the nine months ended
September 30, 1997 to $33.6 million for the nine months ended September 30, 1998
due primarily to a $174.5 million increase in average interest earning assets
and a 0.08% increase in the yield on average earning assets. The largest
components of growth in average earning assets were mortgage loans, auto
contracts and investment securities, which increased $131.9 million, $26.3
million and $11.1 million, respectively.  The increase in mortgage loan
receivables was a result of an increase in loans held for sale.  These loans are
generally held for sale in the secondary mortgage market and the increase in
such loans was primarily a result of growth in the Company's mortgage finance
business and the opening of additional retail lending branches and wholesale
loan centers.  The increase in auto contracts principally resulted from the
opening of new branch offices and the purchasing of additional dealer contracts
in these new markets.  The increase in investment securities resulted from an
increase in the Company's liquidity and short-term investment portfolio
reflecting the overall growth in the Company's total assets.  The increase in
the average yield on interest earning assets was attributable to an increase in
the origination or purchase of higher yielding loans principally related to the
expansion and growth of the mortgage, insurance premium and automobile finance
businesses.

                                                                              15
<PAGE>
 
  INTEREST EXPENSE

     Interest expense increased from $8.2 million for the nine months ended
September 30, 1997 to $14.4 million for the nine months ended September 30, 1998
due to a $139.9 million increase in average interest bearing liabilities and a
0.35% increase in the weighted average interest rate on interest bearing
liabilities.  The largest component of growth in interest bearing liabilities
was deposits of the Bank, which increased from an average balance of $183.1
million for the nine months ended September 30, 1997 to $283.8 million for the
nine months ended September 30, 1998.  The average cost of deposits increased
from 4.89% for the nine months ended September 30, 1997 to 5.27% for the
comparable period in 1998.

     The second largest component of growth in average interest bearing
liabilities was from borrowings under the Bank's warehouse line of credit.
During the nine months ended September 30, 1998, the average balance outstanding
under this warehouse line of credit was $43.5 million with an average interest
rate of 6.51%.  There were no warehouse line of credit advances outstanding
during the nine months ended September 30, 1997.  The increase in both deposits
and the warehouse line of credit were attributable to additional financing
requirements as a result of the growth in the Company's lending operations.

  PROVISION FOR LOAN LOSSES

     Provision for loan losses increased from $445,000 for the nine months ended
September 30, 1997 to $1.8 million for the nine months ended September 30, 1998.
The increase in provision for loan losses reflects management's decision to
increase general valuation allowances as a result of the increase in loans made
by the Company and an increase in specific loss allowances related to non-
performing loans.   Annualized net charge-offs to average loans were 2.03% for
the nine months ended September 30, 1998 compared with 0.81% for the comparable
period in 1997.

     A provision for loan losses is charged to operations based on the Company's
regular evaluation of its loan portfolio and the adequacy of its allowance for
loan losses.  While management believes it has adequately provided for losses
and does not expect any material loss on its loans in excess of allowances
already recorded, no assurance can be given that economic or real estate market
conditions or other circumstances will not result in increased losses in the
loan portfolio.

  NON-INTEREST INCOME

     Non-interest income increased $29.2 million, from $15.7 million for the
nine months ended September 30, 1997 to $44.9 million for the nine months ended
September 30, 1998. This increase resulted from cash gains on sales of mortgage
loans and is due to a substantial increase in the volume of mortgage loans sold
by the Company. During the nine months ended September 30, 1998, the Company
sold $886.4 million in mortgage loans on a whole loan primarily non-recourse
basis compared with $273.1 million in mortgage loans sold during the comparable
period in 1997. Net gains on sales of loans, as a percentage of loans sold, were
4.99% for the nine months ended September 30, 1998 compared with 5.59% for the
nine months ended September 30, 1997. The decline reflects continued competitive
pressure in the securitization and whole loan sale markets resulting, in part,
from higher industry-wide loan prepayment rates in the later part of 1997 and
1998.

     Other components of non-interest income include fees and charges for Bank
services and miscellaneous other income. The total of all of these items
increased $156,000, from $523,000 for the nine months ended September 30, 1997
to $679,000 for the nine months ended September 30, 1998.

  NON-INTEREST EXPENSE

     Non-interest expense increased $25.1 million, from $19.3 million for the
nine months ended September 30, 1997 to $44.4 million for the nine months ended
September 30, 1998. This increase reflects

                                                                              16
<PAGE>
 
an increase in salaries, loan commissions, employee benefits and other personnel
costs of $16.5 million associated with the growth and expansion of the Company's
mortgage and automobile finance operations. Also, as a result of this growth,
occupancy expense increased from $1.8 million for the nine months ended
September 30, 1997 to $3.9 million for the nine months ended September 30, 1998.
Marketing expense was $2.8 million for the nine months ended September 30, 1998,
compared with $932,000 for the comparable period in 1997. This increase is
attributable to the Company's retail mortgage lending operations, which use
extensive direct mail and telemarketing campaigns to target prospective
borrowers. Other operating expense, including stationery and supplies, data
processing, insurance, telephone and postage, increased $4.6 million during the
nine months ended September 30, 1998 compared with the same period in 1997.

  INCOME TAXES

     Income taxes increased $5.0 million from $2.6 million for the nine months
ended September 30, 1997 to $7.6 million for the nine months ended September 30,
1998.  This increase occurred as a result of a $11.7 million increase in income
before taxes between the two periods and an increase in the effective tax rate
from 41.8% for the nine months ended September 30, 1997 to 42.3% for the nine
months ended September 30, 1998.
 
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1998 AND DECEMBER 31, 1997

     Total assets increased $126.5 million, from $310.8 million at December 31,
1997 to $437.3 million at September 30, 1998.  This increase occurred primarily
as a result of an $85.8 million increase in loans, from $268.5 million at
December 31, 1997 to $354.3 million as of September 30, 1998.  The increase in
loans was comprised of a $64.6 million increase in subprime mortgage loans, a
$26.3 million increase (net of unearned finance charges) in auto contracts and a
$11.5 million increase in insurance premium finance loans, offset by a $15.1
million decrease in loans purchased from the RTC as a result of scheduled
principal amortization and prepayments.

     Cash and cash equivalents increased $41.9 million, from $19.0 million at
December 31, 1997 to $60.9 million at September 30, 1998, primarily as a result
of an increase in the Company's liquidity and short-term investments portfolio.

     Residual interests in securitizations were $8.2 million at December 31,
1997 which were entirely attributable to the Company's first securitization in
December 1997. In March 1998, the Company sold its residual interests from the
December securitization for $8.3 million in cash and recorded a gain on sale of
approximately $100,000. Accordingly, as of September 30, 1998, the Company had
no remaining residual interests in securitizations reflected on its balance
sheet.

     Premises and equipment increased from $3.1 million at December 31, 1997 to
$4.7 million at September 30, 1998 as a result of purchases of furniture and
equipment for the Company's new branch offices and the continued growth in
lending operations.

     Deposits increased $84.1 million, from $233.2 million at December 31, 1997
to $317.3 million at September 30, 1998, due primarily to an increase in CDs of
$77.0 million, from $197.1 million at December 31, 1997 to $274.1 million at
September 30, 1998. Included in deposits at September 30, 1998 and December 31,
1997 are $25.0 million in brokered CDs. The growth in deposits reflects the
continued financing of the Company's mortgage, insurance premium finance and
auto lending activities with retail and wholesale deposits through the Bank's
five-branch network.

     Other interest bearing liabilities include the RTC notes payable which
remained unchanged at $10.9 million between the period ends, FHLB advances which
were $28.0 million as of December 31, 1997 at a weighted average interest rate
of 7.07%, notes payable to shareholders which were $2.0 million at December 31,
1997 and a warehouse line of credit  which was  $6.2 million at December  31,
1997.  At  

                                                                              17
<PAGE>
 
September 30, 1998, there were no FHLB advances or warehouse line of credit
advances outstanding.  In addition, the notes payable to shareholders were paid
off.

     Net deferred tax assets were $2.9 million at September 30, 1998 due
principally to temporary differences in the recognition of gain on sale of loans
for federal and state income tax reporting and financial statement reporting
purposes.  For income tax purposes, loans held for sale are marked-to-market as
compared to financial statement reporting where loans are recorded at the lower
of cost or market.

     Shareholders' equity increased from $13.0 million at December 31, 1997 to
$86.7 million at September 30, 1998, solely as a result of the Company's net
income of $10.3 million during the nine months ended September 30, 1998 and the
net proceeds received of $63.4 million from the Company's initial public
offering completed in the second quarter of 1998.

MANAGEMENT OF INTEREST RATE RISK

     The principal objective of the Company's interest rate risk management
program is to evaluate the interest rate risk inherent in the Company's business
activities, determine the level of appropriate risk given the Company's
operating environment, capital and liquidity requirements and performance
objectives and manage the risk consistent with guidelines approved by the Board
of Directors. Through such management, the Company seeks to reduce the exposure
of its operations to changes in interest rates. The Board of Directors reviews
on a quarterly basis the asset/liability position of the Company, including
simulation of the effect on capital of various interest rate scenarios.
 
     The Company's profits depend, in part, on the difference, or "spread,"
between the effective rate of interest received on the loans it originates and
the interest rates paid on deposits and other financing facilities which can be
adversely affected by movements in interest rates. In addition, between the time
the Company originates loans and investors' sales commitments are received, the
Company may be exposed to interest rate risk to the extent that interest rates
move upward or downward during the time the loans are held for sale. The Company
mitigates these risks somewhat by purchasing or originating adjustable rate
mortgages that reprice frequently in an increasing or declining interest rate
environment. Also, the Company sells substantially all of its loans held for
sale on a regular basis, thereby reducing significantly the amount of time these
loans are held by the Company.

     The Bank's interest rate sensitivity is monitored by the Board of Directors
and management through the use of a model which estimates the change in the
Bank's net portfolio value ("NPV") over a range of interest rate scenarios. NPV
is the present value of expected cash flows from assets, liabilities and off-
balance sheet instruments, and "NPV Ratio" is defined as the NPV in that
scenario divided by the market value of assets in the same scenario. The Company
reviews a market value model (the "OTS NPV model") prepared quarterly by the
Office of Thrift Supervision (the "OTS"), based on the Bank's quarterly Thrift
Financial Reports filed with the OTS. The OTS NPV model measures the Bank's
interest rate risk by approximating the Bank's NPV under various scenarios which
range from a 400 basis point increase to a 400 basis point decrease in market
interest rates. The OTS has incorporated an interest rate risk component into
its regulatory capital rule for thrifts. Under the rule, an institution whose
sensitivity measure, as defined by the OTS, in the event of a 200 basis point
increase or decrease in interest rates exceeds 20% would be required to deduct
an interest rate risk component in calculating its total capital for purposes of
the risk-based capital requirement.

     At June 30, 1998, the most recent date for which the relevant OTS NPV model
is available, the Bank's sensitivity measure resulting from (i) a 200 basis
point decrease in interest rates was 79 basis points and would result in a $4.3
million increase in the NPV of the Bank and (ii) a 200 basis point increase in
interest rates was 75 basis points and would result in a $3.9 million decrease
in the NPV of the Bank. At June 30, 1998, the Bank's sensitivity measure was
below the threshold at which the Bank could be required to hold additional risk-
based capital under OTS regulations.

                                                                              18
<PAGE>
 
     Although the NPV measurement provides an indication of the Bank's interest
rate risk exposure at a particular point in time, such measurement is not
intended to and does not provide a precise forecast of the effect of changes in
market interest rates on the Bank's net interest income and will differ from
actual results.  Management monitors the results of this modeling, which are
presented to the Board of Directors on a quarterly basis.

     The following table shows the NPV and projected change in the NPV of the
Bank at June 30, 1998 assuming an instantaneous and sustained change in market
interest rates of 100, 200, 300 and 400 basis points ("bp"). This table is based
on data prepared by the OTS. The Company makes no representation as to the
accuracy of this data.

               INTEREST RATE SENSITIVITY OF NET PORTFOLIO VALUE

<TABLE>
<CAPTION>
                                                                                               NPV as % of Portfolio
                                             Net Portfolio Value                                 Value of Assets
                               -------------------------------------------------      ------------------------------------
  Change in Rates                $ Amount          $ Change           % Change           NPV Ratio            % Change
  ---------------              ------------      ------------       ------------      --------------       ---------------
                                                                 (Dollars in thousands)                                         
<S>                            <C>               <C>                <C>               <C>                  <C> 
+400 bp                          $38,742          $(13,164)               -25%               9.37%              -269 bp
+300 bp                           43,961            (7,945)               -15%              10.48%              -158 bp
+200 bp                           48,016            (3,890)                -7%              11.31%               -75 bp
+100 bp                           50,581            (1,325)                -3%              11.82%               -24 bp
0 bp                              51,906                --                 --               12.06%                   --
-100 bp                           53,732             1,826                 +4%              12.39%               +33 bp
-200 bp                           56,202             4,296                 +8%              12.85%               +79 bp
-300 bp                           59,453             7,547                +15%              13.46%              +140 bp
-400 bp                           63,451            11,545                +22%              14.20%              +214 bp
</TABLE>


LIQUIDITY AND CAPITAL RESOURCES

  GENERAL

     The Company's primary sources of funds have been deposits at the Bank, FHLB
advances, financing under a secured warehouse line of credit, principal and
interest payments on loans, cash proceeds from the sale or securitization of
loans and, to a lesser extent, interest payments on short-term investments and
proceeds from the maturation of securities.  While maturities and scheduled
amortization of loans are a predictable source of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates, economic
conditions and competition.  However, the Company has continued to maintain the
required minimum levels of liquid assets as defined by OTS regulations.  This
requirement, which may be varied at the direction of the OTS depending upon
economic conditions and deposit flows, is based upon a percentage of deposits
and short-term borrowings.  The required  ratio is currently 4%,  and the
Company  has always met or exceeded this requirement.  Management, through its
Asset and Liability Committee, which meets monthly or more frequently if
necessary, monitors rates and terms of competing sources of funds to use the
most cost-effective source of funds wherever possible.

     Sales and securitizations of loans have been one of the primary sources of
funds for the Company.  During the nine months ended September 30, 1998 and
1997, cash flows from sales of loans were $919.0 million, and $298.5 million,
respectively.

     Another source of funds consists of deposits obtained through the Bank's
five retail branches in California. The Bank offers checking accounts, various
money market accounts, regular passbook accounts, fixed interest rate
certificates with varying maturities and retirement accounts. Deposit account
terms vary by interest rate, minimum balance requirements and the duration of
the account. Interest rates paid, maturity terms, service fees and withdrawal
penalties are established by the Bank periodically based on 

                                                                              19
<PAGE>
 
liquidity and financing requirements, rates paid by competitors, growth goals
and federal regulations.  At September 30, 1998, such retail deposits were
$234.2 million or 73.8% of total deposits.

     The Bank uses wholesale and broker-originated deposits to supplement its
retail deposits and, at September 30, 1998, wholesale deposits were $58.1
million or 18.3% of total deposits while broker-originated deposits were $25.0
million or 7.9% of total deposits.  The Bank solicits wholesale deposits by
posting its interest rates on a national on-line service which advertises the
Bank's wholesale products to investors.  Generally, most of the wholesale
deposit account holders are institutional investors, commercial businesses or
public sector entities.  Broker deposits are originated through major dealers
specializing in such products.

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

<TABLE>
<CAPTION>
                                                                                    December 31,
                                    September 30,            --------------------------------------------------------------
                                        1998                            1997                              1996
                             ---------------------------     --------------------------       -----------------------------
                                              Weighted                        Weighted                          Weighted
                                               Average                         Average                           Average
                               Balance          Rate           Balance          Rate            Balance           Rate
                             -----------   -------------     -----------    -----------       -----------     -------------
<S>                          <C>            <C>              <C>            <C>               <C>             <C> 
                                                                   (Dollars in thousands)
Passbook accounts               $ 32,745          3.96%         $ 26,095          3.76%          $ 17,054           2.84%
Checking accounts                 10,481          1.41%            9,959          1.33%            10,642           1.32%
Certificates of deposit                                                                                             
   Under $100,000                214,625          5.52%          144,926          5.56%           123,914           5.47%
   $100,000 and over              59,491          5.75%           52,214          5.89%             7,451           5.89%
                             -----------                     -----------                      -----------     
     Total                      $317,342          5.27%         $233,194          5.25%          $159,061           4.68%
                             ===========                     ===========                      ===========     
</TABLE>


     The following table sets forth the time remaining until maturity for all
CDs at September 30, 1998, December 31, 1997 and 1996.


<TABLE>
<CAPTION>
                                                     September 30,          December 31,             December 31,
                                                         1998                   1997                     1996
                                                  ------------------     -----------------       ------------------
                                                                         (Dollars in thousands)  
<S>                                               <C>                    <C>                     <C>
Maturity within one year                                    $246,005              $181,858                 $103,369
Maturity within two years                                     27,998                14,984                   26,819
Maturity within three years                                      113                   298                    1,177
                                                  ------------------     -----------------       ------------------
Total certificates of deposit                               $274,116              $197,140                 $131,365
                                                  ==================     =================       ==================
</TABLE>


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

     At September 30, 1998, the Bank exceeded all of its regulatory capital
requirements with (i) tangible capital of $33.6 million, or 7.73% of total
adjusted assets, which is above the required level of $6.5 million, or 1.50%;
(ii) core capital of $33.6 million, or 7.73% of total adjusted assets, which is
above the required level of $13.0 million, or 3.00%; and (iii) risk-based
capital of $37.3 million, or 12.50% of risk-weighted assets, which is above the
required level of $23.9 million, or 8.00%.

     Under the Federal Deposit Insurance Corporation Act of 1991 ("FDICIA"), the
Bank is deemed to be "well capitalized" at September 30, 1998.

                                                                              20
<PAGE>
 
     The Company has other sources of liquidity, including FHLB advances, a
warehouse line of credit and its liquidity and short-term investments portfolio.
Through the Bank, the Company obtains advances from the FHLB, collateralized by
its portfolio of mortgage loans purchased from the RTC and the Bank's FHLB
stock.  The FHLB functions as a central reserve bank providing credit for
thrifts and certain other member financial institutions.  Advances are made
pursuant to several programs, each of which has its own interest rate and range
of maturities.  Limitations on the amount of advances are based generally on a
fixed percentage of net worth or on the FHLB's assessment of an institution's
credit-worthiness.  As of September 30, 1998, the Bank's available borrowing
capacity under this credit facility was $30.1 million.

     The Bank has $300 million in master repurchase agreements under which it
may sell and repurchase at a set price mortgage loans pending the sale or
securitization of such loans. These agreements may be terminated at any time at
the option of either party. At September 30, 1998, there were no balances
outstanding under these warehouse lines of credit.

     Other borrowings of the Company at September 30, 1998 consist of the RTC
Notes Payable (as defined below) which mature in 1999.

     The following table sets forth certain information regarding the Company's
short-term borrowed funds (consisting of FHLB advances and its warehouse line of
credit) at or for the periods ended on the dates indicated.

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                        September 30,       ------------------------------------------
                                                            1998                   1997                    1996
                                                      ----------------      ------------------      ------------------
                                                                            (Dollars in thousands)
<S>                                                   <C>                   <C>                     <C>
FHLB advances
     Maximum month-end balance                             $34,500                 $40,900                  $4,000
     Balance at end of period                                   --                  28,000                   4,000
     Average balance for period                             15,441                  18,526                   1,170
  Weighted average interest rate on                 
     Balance at end of period                                   --%                   7.07%                   5.70%
     Average balance for period                               5.71%                   5.95%                   6.15%
Warehouse line of credit                             
     Maximum month-end balance                             $95,000                 $64,359                  $   --
     Balance at end of period                                   --                   6,237                      --
     Average balance for period                             43,498                   8,914                      --
  Weighted average interest rate on                  
     Balance at end of period                                   --%                   6.70%                     --%
     Average balance for period                               6.51%                   6.10%                     --%
</TABLE>

     The Company had no material contractual obligations or commitments for
capital expenditures at September 30, 1998. However, the Company is in the
process of expanding its mortgage and auto finance operations, which will entail
lease commitments and expenditures for leasehold improvements and furniture,
fixtures and equipment. At September 30, 1998, the Company had outstanding
commitments to originate loans of $41.1 million, compared to $9.6 million at
December 31, 1997. The Company anticipates that it will have sufficient funds
available to meet its current origination commitments.

                                                                              21
<PAGE>
 
  RTC NOTES PAYABLE

     In connection with its acquisition of certain assets from the RTC, the Bank
obtained loans (the "RTC Notes Payable") from the RTC in the aggregate amount of
$10.9 million under the RTC's Minority Interim Capital Assistance Program
provided for in Section 21A(u) of the Federal Home Loan Bank Act, as amended
(the "FHLBA"). The FHLBA gives the RTC authority to provide interim capital
assistance to minority-owned institutions, defined in the FHLBA as more than
fifty percent (50%) owned or controlled by one or more minorities. The Bank,
PAFI and the RTC entered into an Interim Capital Assistance Agreement on April
29, 1994 with respect to a loan of $6,930,000 and a second Interim Capital
Assistance Agreement on September 9, 1994 with respect to a loan of $4,000,000
(together, the "RTC Agreements"). The RTC Agreements provide for repayment of
the entire principal amount, plus any accrued, previously unpaid interest
thereon, in a single lump sum installment on April 28, 1999 and September 8,
1999, respectively. The RTC Notes Payable may be prepaid at the option of the
Bank and must be prepaid in the event that PAFI obtains all or any material
portion of its permanent financing prior to maturity of the RTC Notes Payable.
The RTC is entitled to declare the entire principal amount of the RTC Notes
Payable, plus all interest accrued and unpaid thereon, immediately due and
payable upon the occurrence of certain events of default.

     The rate at which interest accrues on the RTC Notes Payable is based on the
RTC's "Cost of Funds," defined in the RTC Agreements at the end of the calendar
quarter Monday auction yield price for 13 week United States Treasury Bills plus
12.5 basis points, and adjusts annually, in the case of the $6.9 million loan
due April 1999, and quarterly, in the case of the $4 million loan due September
1999.  Interest accrues on any amount of principal or interest not paid when due
at the rate of the RTC's Cost of Funds plus 300 basis points, beginning on the
date such unpaid amount became due.

     In connection with the RTC Agreements, PAFI and the RTC have entered into
Stock Pledge Agreements pursuant to which PAFI has pledged to the RTC all of the
issued and outstanding shares of the capital stock of the Bank as security for
the repayment of the RTC Notes Payable.

LENDING ACTIVITIES

     To date, the Company has sold most of its loan originations to mortgage
companies and other investors through whole loan packages on a primarily non-
recourse, servicing released basis. As a result, upon sale, risks and rewards of
ownership transfer to the buyer. In December 1997, the Company completed its
first securitization of mortgage loans and in March 1998 sold its residual
interests in this securitization to a third-party.

     Summary of Loan Portfolio.  At September 30, 1998, the Company's loan
portfolio constituted $354.3 million, or 81.0% of the Company's total assets, of
which $187.2 million, or 52.8%, were held for investment and $167.1 million, or
47.2%, were held for sale.  Loans held for investment are reported at cost, net
of unamortized discounts or premiums and allowance for losses.  Loans held for
sale are reported at the lower of cost or market value.

                                                                              22
<PAGE>
 
     The following table sets forth the composition of the Company's loan
portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                      September 30,           December 31,          December 31,
                                                           1998                   1997                  1996
                                                    -----------------      -----------------      ----------------
                                                                         (Dollars in thousands)   
<S>                                                 <C>                    <C>                    <C>
MORTGAGE LOANS                                                                                    
Mortgage loans (purchased primarily from RTC)                $ 66,893               $ 81,995              $102,733
                                                    -----------------      -----------------      ----------------
Subprime mortgage loans                                                                           
     Held for sale                                            167,070                120,002                20,766
     Held for investment                                       22,949                  5,375                 1,294
                                                    -----------------      -----------------      ----------------
     Total subprime mortgage loans                            190,019                125,377                22,060
                                                    -----------------      -----------------      ----------------
     Total mortgage loans                                     256,912                207,372               124,793
                                                    -----------------      -----------------      ----------------
CONSUMER LOANS
Automobile installment contracts                               72,483                 40,877                10,830
Insurance premium financing                                    51,487                 39,990                32,058
Other consumer loans                                              361                    267                   230
                                                    -----------------      -----------------      ----------------
     Total consumer loans                                     124,331                 81,134                43,118
                                                    -----------------      -----------------      ----------------
     Total loans                                              381,243                288,506               167,911
Unearned discounts and premiums                                (2,237)                (2,901)               (3,697)
Unearned finance charges                                      (15,881)               (10,581)               (3,271)
Allowance for loan losses                                      (8,858)                (6,487)               (5,356)
                                                    -----------------      -----------------      ----------------
     Total loans, net                                        $354,267               $268,537              $155,587
                                                    =================      =================      ================
</TABLE>
                                                                               
     Loan Maturities.  The following table sets forth the dollar amount of loans
maturing in the Company's loan portfolio at September 30, 1998 based on
scheduled contractual amortization.  Loan balances are reflected before unearned
discounts and premiums, unearned finance charges and allowance for losses.

<TABLE>
<CAPTION>
                                                                   September 30, 1998
                       ----------------------------------------------------------------------------------------------------------
                                       More Than 1     More Than 3     More Than 5    More Than 10                    
                        One Year or      Year to        Years to        Years to       Years to 20    More Than 20      Total 
                           Less          3 Years         5 Years        10 Years          Years           Years         Loans
                       ------------  --------------  --------------  --------------  --------------  --------------  ------------
                                                                  (Dollars in thousands)   
<S>                    <C>           <C>             <C>             <C>             <C>             <C>             <C>
Mortgage loans held                                                                                                   
   for investment           $    52         $ 1,046         $ 3,339         $11,294         $36,488        $ 37,623      $ 89,842
Mortgage loans held                                                                                                  
   for sale                      --              --              --              --           9,682         157,388       167,070
Consumer loans               53,146          34,934          35,162           1,089              --              --       124,331
                       ------------  --------------  --------------  --------------  --------------  --------------  ------------
     Total                  $53,198         $35,980         $38,501         $12,383         $46,170        $195,011      $381,243
                       ============  ==============  ==============  ==============  ==============  ==============  ============
</TABLE>


  CLASSIFIED ASSETS AND ALLOWANCE FOR LOAN LOSSES

     The Company maintains an asset review and classification process for
purposes of assessing loan portfolio quality and the adequacy of its loan loss
allowances. The Company's Asset Review Committee reviews for classification all
problem and potential problem assets and reports the results of its review to
the Board of Directors quarterly. The Company has incorporated the OTS internal
asset classifications as a part of its credit monitoring systems and in order of
increasing weakness, these designations are "substandard," "doubtful" and
"loss." Substandard assets have one or more defined weaknesses and are
characterized by the distinct possibility that some loss will be sustained if
the deficiencies are not corrected. Doubtful assets have the weaknesses of
substandard assets with the additional characteristic that the weaknesses make
collection or liquidation in full, on the basis of currently existing facts,
condition and values, questionable and there is a high possibility of loss. Loss
assets are considered uncollectible and of such little value that continuance as
an asset is not warranted. Assets which do have weaknesses but do not currently
have sufficient risk to warrant classification in one of the categories
described above are designated as "special mention." 

                                                                              23
<PAGE>
 
     At September 30, 1998, the Company had $1.5 million in assets classified as
special mention, $21.6 million of assets classified as substandard, $57,000 in
assets classified as doubtful and no assets classified as loss.
 
     The following table sets forth the remaining balances of all loans (before
specific reserves for losses) that were more than 30 days delinquent at
September 30, 1998, December 31, 1997 and 1996.

<TABLE>
<CAPTION>
Loan                  
----                  September 30,    % of Total   December 31,    % of Total    December 31,   % of Total
Delinquencies             1998           Loans         1997           Loans           1996          Loans
-------------         -------------   -----------   ------------   ------------   ------------   -----------
                                                      (Dollars in thousands)                         
<S>                   <C>             <C>           <C>            <C>            <C>            <C> 
30 to 59 days               $ 8,410         2.32%         $  356           0.1%         $1,941          1.2%
60 to 89 days                 3,959         1.09%            994           0.4%            109          0.1%
90+ days                     15,726         4.33%          7,101           2.6%          6,430          3.9%
                      -------------   -----------   ------------   ------------   ------------   -----------
Total                       $28,095         7.74%         $8,451           3.1%         $8,480          5.2%
                      =============   ===========   ============   ============   ============   ===========
</TABLE>

     Nonaccrual and Past Due Loans. The Company's general policy is to
discontinue accrual of interest on a mortgage loan when it is two payments or
more delinquent, accordingly, loans are placed on non-accrual status generally
when they are 60-89 days delinquent. A non-mortgage loan is placed on nonaccrual
status when it is delinquent for 120 days or more. When a loan is reclassified
from accrual to nonaccrual status, all previously accrued interest is reversed.
Interest income on nonaccrual loans is subsequently recognized only to the
extent that cash payments are received or the borrower's ability to make
periodic interest and principal payments is in accordance with the loan terms,
at which time the loan is returned to accrual status. Accounts which are deemed
fully or partially uncollectible by management are generally fully reserved or
charged off for the amount that exceeds the estimated fair value (net of selling
costs) of the underlying collateral. The Company does not generally modify,
extend or rewrite loans and at September 30, 1998 had no troubled debt
restructured loans. The following table sets forth the aggregate amount of
nonaccrual loans (net of unearned discounts and premiums and unearned finance
charges) at September 30, 1998, December 31, 1997 and 1996.

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                        September 30,      -------------------------------------
                                                            1998                 1997                 1996
                                                       ---------------     -----------------     ---------------
                                                                           (Dollars in thousands)
<S>                                                    <C>                 <C>                   <C>
Nonaccrual loans                                                                                 
     Single-family residential                                 $18,901                $5,766              $5,504
     Multi-family residential and commercial                       604                   605                 605
     Consumer and other loans                                    1,446                 1,426                 928
                                                       ---------------     -----------------     ---------------
          Total                                                $20,951                $7,797              $7,037
                                                       ===============     =================     ===============
                                                                                                 
Nonaccrual loans as a percentage of                                                              
     Total loans held for investment                             11.19%                 5.25%               5.22%
     Total assets                                                 4.80%                 2.51%               3.73%
Allowance for loan losses as a percentage of                                                     
     Total loans held for investment                              4.73%                 4.37%               3.97%
     Nonaccrual loans                                            42.28%                83.20%              76.11%
</TABLE>
                                                                               
     Real Estate Owned.  Real estate acquired through foreclosure or by deed in
lieu of foreclosure ("REO") is recorded at the lower of cost or fair value at
the time of foreclosure.  Subsequently, an allowance for estimated losses is
established when the recorded value exceeds fair value less estimated selling
costs.  Holding and maintenance costs related to real estate owned are recorded
as expenses in the period incurred.  At September 30, 1998, December 31, 1997
and 1996, real estate owned was $1.2 million, $562,000 and $988,000,
respectively, and consisted entirely of one to four family residential
properties.
 

                                                                              24
<PAGE>
 
     Allowance for Loan Losses.  The following is a summary of the changes in
the consolidated allowance for loan losses of the Company for the periods
indicated.

<TABLE>
<CAPTION>
                                                                                                     At or For the
                                                           At or For the Nine                          Year Ended
                                                              Months Ended                            December 31,
                                                             September 30,             -----------------------------------------
                                                                  1998                       1997                     1996
                                                         ---------------------         ----------------        -----------------
                                                                                    (Dollars in thousands)
<S>                                                      <C>                           <C>                     <C>
ALLOWANCE FOR LOAN LOSSES                                                                                      
Balance at beginning of period                                         $ 6,487                  $ 5,356                   $5,250
     Provision for loan losses                                           1,784                      507                      194
     Charge-offs                                                                                               
          Mortgage loans held for investment                               (36)                    (373)                    (285)
          Mortgage loans held for sale                                    (959)                      --                       --
          Consumer loans                                                (2,769)                  (2,101)                    (433)
                                                         ---------------------         ----------------        -----------------
                                                                        (3,764)                  (2,474)                    (718)
     Recoveries                                                                                                
          Mortgage loans held for investment                                 9                       77                       --
          Mortgage loans held for sale                                      40                       --                       --
          Consumer loans                                                 1,060                    1,068                      274
                                                         ---------------------         ----------------        -----------------
                                                                         1,109                    1,145                      274
                                                         ---------------------         ----------------        -----------------
     Net charge-offs                                                    (2,655)                  (1,329)                    (444)
     Acquisition discounts allocated to loss allowance                   3,242                    1,953                      356
                                                         ---------------------         ----------------        -----------------
Balance at end of period                                               $ 8,858                  $ 6,487                   $5,356
                                                         =====================         ================        =================
     Annualized net charge-offs to average loans                          2.03%                    0.60%                    0.30%
     Ending allowance to period end loans, net                            4.73%                    4.37%                    3.97%
</TABLE>

     The Company's policy is to maintain an allowance for loan losses to absorb
future losses which may be realized on its loan portfolio.  These allowances
include specific reserves for identifiable impairments of individual loans and
general valuation allowances for estimates of probable losses not specifically
identified.  In addition, the Company's allowance for loan losses is also 
increased by its allocation of acquisition discounts related to the purchase of 
automobile installment contracts.

     The determination of the adequacy of the allowance for loan losses is 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 non-performing
loans, the concentration of credit, current and prospective economic conditions
and other factors.

     The Company's management uses its best judgment in providing for possible
loan losses and establishing allowances for loan losses. However, the allowance
is an estimate which is inherently uncertain and depends on the outcome of
future events. In addition, regulatory agencies, as an integral part of their
examinations process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to increase the allowance based upon their
judgment of the information available to them at the time of their examination. 
The Bank's current year examination by its regulatory agencies was recently 
completed and no adjustments to the Bank's allowance for loan losses were 
required.

CASH EQUIVALENTS AND SECURITIES PORTFOLIO

     The Company's cash equivalents and securities portfolios are used primarily
for liquidity purposes and secondarily for investment income.  Cash equivalents
and securities, which generally have maturities of less than 90 days, satisfy
regulatory requirements for liquidity.

                                                                              25
<PAGE>
 
     The following is a summary of the Company's cash equivalents and securities
portfolios as of the dates indicated.

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                       September 30,          -------------------------------------------
                                                            1998                     1997                     1996
                                                     ------------------       ------------------       ------------------
                                                                            (Dollars in thousands)
<S>                                                  <C>                      <C>                      <C>
Balance at end of period                                                                               
     Overnight deposits                                         $15,500                   $4,000                  $21,000
     Commercial paper                                                --                       --                       --
     U.S. agency securities                                          --                    1,002                       --
                                                     ------------------       ------------------       ------------------
     Total                                                      $15,500                   $5,002                  $21,000
                                                     ==================       ==================       ==================
                                                                                                       
Weighted average yield at end of period                                                                
     Overnight deposits                                            5.38%                    3.50%                    5.02%
     Commercial paper                                                                         --                       --
     U.S. agency securities                                          --                     6.54%                      --
Weighted average maturity at end of period                           --                                
     Overnight deposits                                           1 day                    1 day                    1 day
     Commercial paper                                                --                       --                       --
     U.S. agency securities                                          --                24 months                       --
</TABLE>

FACTORS THAT MAY AFFECT FUTURE RESULTS

  LIMITED OPERATING HISTORY

     The Company purchased certain assets and assumed certain liabilities of Pan
American Federal Savings Bank from the RTC in 1994.  In 1995, the Company
commenced its insurance premium finance business through a joint venture with
BPN, and in 1996 the Company commenced its subprime mortgage and automobile
finance businesses.  Accordingly, the Company has only a limited operating
history upon which an evaluation of the Company and its prospects can be based.

  CREDIT-IMPAIRED BORROWERS

     Loans made to borrowers who cannot obtain financing from traditional
lenders generally entail a higher risk of delinquency and default and higher
losses than loans made to borrowers with better credit. Substantially all of the
Company's mortgage and auto loans are made to individuals with impaired or
limited credit histories, limited documentation of income or higher debt-to-
income ratios than are permitted by traditional lenders. If the Company
experiences higher losses than anticipated, the Company's financial condition,
results of operations and business prospects would be materially and adversely
affected.

  NEED FOR ADDITIONAL FINANCING

     The Company's ability to maintain or expand its current level of lending
activity will depend on the availability and terms of its sources of financing.
The Company has funded its operations to date principally through deposits, FHLB
advances, a mortgage warehouse line of credit, loan securitizations, and whole
loan sales at the Bank.  The Bank competes for deposits primarily on the basis
of interest rates and, accordingly, the Bank could experience difficulty in
attracting deposits if it does not continue to offer rates that are competitive
with other financial institutions.  Federal regulations restrict the Bank's
ability to lend to affiliated companies and limit the amount of non-mortgage
consumer loans that may be held by the Bank.  Accordingly, the growth of the
Company's mortgage, insurance premium and automobile finance businesses will
depend to a significant extent on the availability of additional sources of
financing.  There can be no assurance that the Company will be able to develop
additional financing sources on acceptable terms or at all.  To the extent the
Bank is unable to maintain its deposits and the Company is unable to develop
additional sources of financing, the Company will have to restrict its lending
activities which would materially and adversely affect the Company's financial
condition, results of operations and business prospects.  See "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources."

                                                                              26
<PAGE>
 
  CONCENTRATION OF BUSINESS IN CALIFORNIA

     The Company's lending activities are concentrated primarily in California
and are likely to remain so for the foreseeable future. The occurrence of
adverse economic conditions or natural disasters in California could have a
material adverse effect on the Company's financial condition, results of
operations and business prospects.

  RELIANCE ON SYSTEMS AND CONTROLS

     The Company depends heavily upon its systems and controls, some of which
have been designed specifically for a particular business, to support the
evaluation, acquisition, monitoring, collections and administration of that
business. There can be no assurance that these systems and controls, including
those specially designed and built for the Company, are adequate or will
continue to be adequate to support the Company's growth. A failure of the
Company's automated systems, including a failure of data integrity or accuracy,
could have a material adverse effect upon the Company's financial condition,
results of operations and business prospects.

  RELIANCE ON KEY EMPLOYEES AND OTHERS
 
     The Company is dependent upon the continued services of its key employees
as well as the key employees of BPN. The loss of the services of any key
employee, or the failure of the Company to attract and retain other qualified
personnel, could have a material adverse effect on the Company's financial
condition, results of operations and business prospects.

  COMPETITION

     Each of the Company's businesses is highly competitive. Competition in the
Company's markets can take many forms, including convenience in obtaining a
loan, customer service, marketing and distribution channels, amount and terms of
the loan, loan origination fees and interest rates. Many of the Company's
competitors are substantially larger and have considerably greater financial,
technical and marketing resources than the Company. The Company's competitors in
subprime mortgage finance include other consumer finance companies. The Company
competes in the insurance premium finance business with other specialty finance
companies, independent insurance agents who offer premium finance services,
captive premium finance affiliates of insurance companies and direct bill plans
established by insurance companies. The Company competes in the subprime
automobile finance industry with commercial banks, the captive finance
affiliates of automobile manufacturers, savings associations and companies
specializing in subprime automobile finance, many of which have established
relationships with automobile dealerships and may offer dealerships or their
customers other forms of financing, including dealer floor plan financing and
lending, which are not offered by the Company. In attracting deposits, the Bank
competes primarily with other savings institutions, commercial banks, brokerage
firms, mutual funds, credit unions and other types of investment companies.

  CHANGES IN INTEREST RATES

     The Company's results of operations depend to a large extent upon its net
interest income, which is the difference between interest income on interest-
earning assets, such as loans and investments, and interest expense on interest-
bearing liabilities, such as deposits and other borrowings. When interest-
bearing liabilities mature or reprice more quickly than interest-bearing assets
in a given period, a significant increase in market rates of interest could have
a material adverse effect on the Company's net income. Further, a significant
increase in market rates of interest could adversely affect demand for the
Company's financial products and services. Interest rates are highly sensitive
to many factors, including governmental monetary policies and domestic and
international economic and political conditions, which are beyond the Company's
control. The Company's liabilities generally have shorter terms and are more
interest rate

                                                                              27
<PAGE>
 
sensitive than its assets. Accordingly, changes in interest rates could have a
material adverse effect on the profitability of the Company's lending
activities.

  MANAGEMENT OF GROWTH

     The Company has experienced rapid growth in each of its businesses and
intends to pursue growth for the foreseeable future, particularly in its
mortgage and automobile finance businesses. In addition, the Company intends to
broaden its product offerings to include additional types of consumer or, in the
case of IPF, commercial loans. Further, the Company may enter other specialty
finance businesses. This growth strategy will require additional capital,
systems development and human resources. The failure of the Company to implement
its planned growth strategy would have a material adverse effect on the
Company's financial condition, results of operations and business prospects.

  DEPENDENCE ON LOAN SALE AND SECURITIZATION MARKETS

     The Company generates substantial revenues from whole loan sales or
securitizations.  There can be no assurance that whole loan purchasers will
continue to purchase the Company's loans or that they will continue to purchase 
loans at present prices, and failure to do so could have a material adverse
effect on the Company's financial condition, results of operations and business
prospects. Further, adverse conditions in the asset-backed securitization market
could adversely affect the Company's ability to sell or securitize loans at
present prices.

  SECURITIZATIONS

     The Company completed its first securitization of mortgage loans in
December 1997 and expects to sell or securitize mortgage loans on a periodic
basis in the future. The Company will, in the future, consider the
securitization of other financial assets. In March 1998, the Company sold its
residual interests in this securitization for cash in the amount of $8.3 million
which exceeded the carrying value of approximately $8.2 million at the date of
sale. The Company believes that the gain on sale from such securitizations could
represent a significant portion of the Company's future revenues and net income.
The Company's ability to complete securitizations will depend on a number of
factors, including conditions in the securities markets generally, conditions in
the asset-backed securities market specifically, the performance of the
Company's portfolio of securitized loans and the Company's ability to obtain
credit enhancement for its securitized loans. If securitizations represented a
significant portion of the Company's revenues and net income and the Company
were unable to securitize profitably a sufficient number of loans in a
particular quarter, then the Company's revenues for the quarter could decline,
which could result in lower earnings or a loss reported for the quarter. In
addition, delays in closing a securitization could require the Company to seek
additional alternative funding under current and future credit facilities in
order to finance additional loan originations and purchases and could increase
the Company's interest rate risk by increasing the period during which newly
originated loans are held prior to sale and could increase the Company's
interest expense.

     The Company may rely on credit enhancements to guarantee or otherwise
support senior certificates issued in securitizations. If the Company is unable
to obtain credit enhancement in connection with the senior certificates, the
Company might be unable to securitize its loans, which could have a material
adverse effect on the Company's results of operations, financial condition and
business prospects. Although alternative structures to securitizations may be
available, there can be no assurance that the Company will be able to use these
structures or that these structures will be economically viable for the Company.
The Company's ability to obtain credit enhancement for its securitizations also
may be adversely affected by poor performance of the Company's securitizations
or the securitizations of others. The inability of the Company to complete
securitizations for any reason could have a material adverse effect on the
Company's results of operations, financial condition and business prospects.

                                                                              28
<PAGE>
 
  CHANGE IN GENERAL ECONOMIC CONDITIONS

     Each of the Company's 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, the
Company may experience a decrease in demand for its financial products and
services, an increase in its 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. Although the Company believes that its underwriting criteria and
collection methods enable it to manage the higher risks inherent in loans made
to such borrowers, no assurance can be given that such criteria or methods will
afford adequate protection against such risks. Any sustained period of increased
delinquencies, defaults or losses would materially and adversely affect the
Company's financial condition, results of operations and business prospects.

  IMPACT OF INFLATION AND CHANGING PRICES

     The financial statements and notes thereto presented herein have been
prepared in accordance with Generally Accepted Accounting Principles ("GAAP"),
which require the measurement of financial position and operating results in
terms of historical dollar amounts without considering the changes in the
relative purchasing power of money over time due to inflation. The impact of
inflation is reflected in the increased cost of the Company's operations. Unlike
industrial companies, nearly all of the assets and liabilities of the Company
are monetary in nature. As a result, interest rates have a greater impact on the
Company's performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the price of goods and services.


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; and Factors That May
Affect Future Results Dependence on Loan Sale and Securitization Markets"

                                                                              29
<PAGE>
 
PART II.                     OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS.
           ----------------- 

     Not applicable


ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS.
           ----------------------------------------- 

     Use of proceeds -- As discussed in Note 5 to Unaudited Notes to
     Consolidated Financial Statements under "Item 1. Financial Information" of
     this Quarterly Report, the Company completed an initial public offering of
     common stock. in connection therewith:

           1.  The effective date of the Company's Registration Statement on
               Form S-1, as amended (File No. 333-39941) ("Registration
               Statement"), was April 23, 1998.

           2.  The offering commenced on April 23, 1998 and was terminated on
               May 28, 1998 with the sale of all of the registered securities at
               a price to the public of $11.00 per share.

           3.  NationsBanc Montgomery Securities LLC and Piper Jaffray Inc.
               acted as managing underwriters for the Company.

           4.  The class of securities registered pursuant to the Registration
               Statement was common stock, no par value per share. The aggregate
               amount of such securities registered and sold was 6,325,000
               shares for an aggregate dollar amount of $69.6 million. There
               were no selling shareholders.

           5.  Expenses incurred by the Company in connection with the sale of
               the shares of common stock, none of which were paid directly or
               indirectly to directors or officers of the Company or their
               associates, included the following (dollars in thousands):

<TABLE> 
                       <S>                                          <C> 
                       Underwriting discounts and commissions       $4,870
                       Finders' fees                                    --
                       Expenses paid to or for underwriters             --
                       Other expenses                                1,394
                                                                    ------
                                                                    $6,264
                                                                    ======
</TABLE> 

           6.  The net offering proceeds to the Company after deduction of the
               above expenses were approximately $63.3 million and were used for
               general corporate purposes, including financing the growth of the
               Company's mortgage and automobile finance operations, and to
               repay $2.0 million in indebtedness to certain shareholders. Such
               use of proceeds did not represent a material change in the use of
               proceeds described in the Company's Registration Statement.


ITEM 3.    DEFAULTS UPON SENIOR SECURITIES.
           ------------------------------- 

     Not applicable

                                                                              30
<PAGE>
 
ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
           --------------------------------------------------- 

     Not applicable


ITEM 5.    OTHER INFORMATION.
           ----------------- 

     Not applicable


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K.
           -------------------------------- 

     (a)   Exhibits
     (b)   10.87    Assignment, Assumption and Recognition Agreement dated
                    August 14, 1998, between Countrywide Home Loans, Inc.,
                    Associates Home Equity Services, Inc. and Pan American Bank,
                    FSB.

           10.88    Assignment, Assumption and Recognition Agreement dated
                    August 14, 1998, between Countrywide Home Loans, Inc.,
                    Fidelity Federal Bank, FSB and Pan American Bank, FSB.

           10.89    Assignment, Assumption and Recognition Agreement dated
                    September 15, 1998 between Countrywide Home Loans, Inc.,
                    Southern Mortgage Acquisitions, Inc. and Pan American Bank,
                    FSB.

           10.90    Assignment, Assumption and Recognition Agreement dated
                    September 30, 1998, between Countrywide Home Loans, Inc.,
                    Fidelity Federal Bank, FSB and Pan American Bank, FSB.

           10.91    Employment Agreement dated July 6, 1998, between United
                    PanAm Mortgage Corporation and Edward Pollard.

           27.1     Financial Data Schedule


     (c)   Reports on Form 8-K

           None

                                                                              31
<PAGE>
 
                                  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:    November 6, 1998              By: /s/ Lawrence J. Grill
                                           -------------------------------------
                                           Lawrence J. Grill
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)



         November 6, 1998              By: /s/ Carol M. Bucci
                                           -------------------------------------
                                           Carol M. Bucci
                                           Senior Vice President
                                           and Chief Financial Officer
                                           (Principal Financial and Accounting
                                            Officer)