UNITED PANAM FINANCIAL CORP, S-1/A, 1998-04-14

UNITED PANAM FINANCIAL CORP
S-1/A, 1998-04-14
MORTGAGE BANKERS & LOAN CORRESPONDENTS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 1998

FILE NO.: 333-39941

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

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AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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UNITED PANAM FINANCIAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<CAPTION>
DELAWARE 6162 95-3211687
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

1300 SOUTH EL CAMINO REAL
SAN MATEO, CALIFORNIA 94402
(650) 345-1800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

----------------

LAWRENCE J. GRILL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
1300 SOUTH EL CAMINO REAL
SAN MATEO, CALIFORNIA 94402
(650) 345-1800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:

PAUL H. IRVING, ESQ. TODD H. BAKER, ESQ.
MANATT, PHELPS & PHILLIPS, LLP GREGORY J. CONKLIN, ESQ.
11355 WEST OLYMPIC BOULEVARD GIBSON, DUNN & CRUTCHER LLP
LOS ANGELES, CALIFORNIA 90064 ONE MONTGOMERY STREET, SUITE 3100
(310) 312-4196 SAN FRANCISCO, CALIFORNIA 94104
(415) 393-8200

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement has become effective.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PRELIMINARY PROSPECTUS SUPPLEMENT

5,500,000 SHARES

LOGO UNITED PANAM FINANCIAL CORP.
COMMON STOCK

This Preliminary Prospectus Supplement updates the information set forth
under the caption "Prospectus Summary--Recent Developments--First Quarter
Developments" commencing on page 6 of the Preliminary Prospectus dated March
31, 1998 of United PanAm Financial Corp. (the "Company").

RECENT RESULTS OF OPERATIONS

Net income increased from $233,000, or $0.02 per share, for the three months
ended March 31, 1997 to $1.5 million, or $0.13 per share, for the three months
ended March 31, 1998. This increase was due primarily to an increase of $7.5
million in gain on sale of loans from the Company's mortgage finance operations
and an increase in net interest income of $2.5 million, offset in part by an
increase in non-interest expense of $8.0 million. The Company's results
reflected the expansion of its mortgage finance, insurance premium finance and
automobile finance businesses during the last twelve months.

Net income for the first quarter of 1998 declined $1.2 million, or $0.11 per
share, from $2.7 million in the fourth quarter of 1997. This decrease was due
to a $1.4 million decline in gain on sale of loans and an increase of
$2.0 million in operating expenses related to the expansion of the Company's
mortgage finance business. The Company's mortgage loan originations increased
to $263.8 million in the first quarter of 1998 from $241.7 million in the
fourth quarter of 1997.

The Company's revenue from gain on sale of loans is dependent, in part, on
the timing and extent of its mortgage loan sales and securitizations. During
the fourth quarter of 1997, the Company sold or securitized $202.0 million in
mortgage loans, or 84% of its total mortgage loan originations during such
period, compared to $193.8 million, or 73% of its total mortgage loan
originations, in the first quarter of 1998. Because the Company elected to
defer some loan sales from the first quarter of 1998 to the second quarter of
1998, the gain on sale for the first quarter of 1998 was less than the gain on
sale for the prior quarter. The weighted average sales price of mortgage loans
sold during the first quarter of 1998 was 105.5% of the principal amount of the
loans sold compared to 105.6% of the principal amount of loans sold or
securitized in the fourth quarter of 1997. There can be no assurance that
future sales prices will be similar to the prices received in the first quarter
of 1998.

The increase of $2.0 million in operating expenses resulted from growth in
the Company's mortgage and automobile finance businesses. As part of its growth
strategy, the Company opened 11 retail mortgage loan branches during the fourth
quarter of 1997 and the first quarter of 1998, and established retail
telemarketing and wholesale correspondent lending groups in the first quarter
of 1998. The expenses associated with this growth strategy, as well as expenses
related to the 9% increase in mortgage loan originations during the first
quarter of 1998, resulted in this increase in operating expenses.

At March 31, 1998, the Company had $185.1 million in mortgage loans held for
sale compared to $120.0 million at December 31, 1997.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

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THE DATE OF THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS APRIL 14, 1998.
<PAGE>

SUBJECT TO COMPLETION, DATED APRIL 14, 1998

5,500,000 SHARES

UNITED PANAM FINANCIAL CORP.
LOGO
COMMON STOCK

All of the 5,500,000 shares of Common Stock offered hereby (the "Offering")
are being sold by United PanAm Financial Corp., a California corporation (the
"Company"). Prior to the Offering, there has been no public market for the
Common Stock. It currently is anticipated that the initial public offering
price will be between $9.50 and $11.50 per share. See "Underwriting" for a
discussion of factors to be considered in determining the initial public
offering price.

The Company has applied for quotation of the Common Stock on the Nasdaq
National Market under the symbol "UPFC."

SEE "RISK FACTORS" COMMENCING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY POTENTIAL PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BYTHE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATIONTO THE CONTRARY
IS A CRIMINAL OFFENSE.

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<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
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<S> <C> <C> <C>
Per Share..................................... $ $ $
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Total(3)...................................... $ $ $
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</TABLE>
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(1) See "Underwriting" for information relating to indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated to be $950,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
825,000 additional shares of Common Stock on the same terms and conditions
as set forth above, solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $ , $ and $ , respectively. See
"Underwriting."

The shares of Common Stock are offered by the Underwriters named herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of the certificates
representing such shares will be made against payment therefor at the offices
of NationsBanc Montgomery Securities LLC on or about , 1998.

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NationsBanc Montgomery Securities LLC
Piper Jaffray Inc.

, 1998
<PAGE>

[MAP OF THE UNITED STATES SHOWING THE LOCATION OF THE COMPANY'S OFFICES.]

The Company intends to furnish its shareholders with annual reports
containing financial statements audited by independent certified public
accountants and quarterly reports containing unaudited financial information
for each of the first three quarters of each fiscal year.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING
THE PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON
STOCK OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Except as
otherwise specified, all information in this Prospectus (i) reflects a 1,875-
for-1 stock split effected in November 1997, (ii) assumes no exercise of the
Underwriters' over-allotment option and (iii) excludes 2,287,500 shares of
Common Stock reserved for issuance under the Company's 1997 Employee Stock
Incentive Plan (the "Stock Incentive Plan"). See "Management--Stock Incentive
Plan" and "Underwriting." Unless the context indicates otherwise, all
references herein to the "Company" refer to United PanAm Financial Corp. and
its subsidiaries on a consolidated basis.

This Prospectus contains forward-looking statements, including statements
regarding the Company's strategies, plans, objectives, expectations and
intentions, which are subject to a variety of risks and uncertainties. The
Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including
those set forth under "Risk Factors" and elsewhere in this Prospectus. The
cautionary statements made in this Prospectus should be read as being
applicable to all related forward-looking statements wherever they appear in
this Prospectus.

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 targets 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 and whole loan sales at its federal savings
bank subsidiary, Pan American Bank, FSB (the "Bank"). The Company completed its
first securitization of mortgage loans in December 1997. In March 1998, the
Company sold its residual interests in this securitization for cash in the
amount of $8.3 million which exceeds the carrying value of approximately $8.2
million at the date of sale. The Company's strategy is to undertake controlled
geographic expansion of its existing businesses, with particular emphasis in
the near term on the national expansion of its mortgage finance operations, and
to evaluate possible entry into other specialty finance businesses which
provide the opportunity for attractive risk-adjusted returns.

The Company believes that the Bank currently is the largest Hispanic-
controlled savings association in California. The Company commenced operations
in 1994, as a Hispanic-controlled financial institution, by purchasing from the
Resolution Trust Corporation (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"), which
the Company believes to be the second largest provider of financing for
consumer automobile insurance premiums in California. In 1996, the Company
commenced its current mortgage and automobile finance businesses.

Mortgage Finance. The Company originates and sells subprime mortgage loans
secured primarily by first mortgages on single family residences through its
subsidiary, United PanAm Mortgage Corporation, and the Bank (such business,
together with the Bank's mortgage finance activities, "UPAM"). UPAM's targeted
mortgage customers are considered "subprime" because of factors such as
impaired credit history or high debt-to-income ratios compared to customers
targeted by traditional mortgage lenders. UPAM's customers use the proceeds of
the mortgage loans primarily to finance home purchases and improvements, debt
consolidation, education and other

3
<PAGE>

consumer needs, and may benefit from consolidating existing consumer debt
through mortgage loans with lower monthly payments. The Company believes that
the subprime residential mortgage market is highly fragmented and that success
in this market depends primarily on the ability to provide superior customer
service and competitive pricing. UPAM seeks to (i) locate experienced loan
officers in geographic proximity to large population centers, (ii) issue
conditional loan approvals promptly, generally within 24 hours after receipt of
an application, (iii) avoid imposing unnecessarily restrictive conditions on
loan approvals, (iv) fund loans on a timely basis, generally within 15 to 20
days following conditional approval, and in accordance with approved terms, and
(v) competitively price loans according to market conditions.

UPAM's operating strategy is to maintain a balance between retail and
wholesale origination of mortgage loans. Approximately 38% of the mortgage
loans originated by UPAM during the twelve months ended December 31, 1997 were
originated through the direct solicitation of borrowers by mail and
telemarketing ("retail" loan originations), with the balance originated through
independent loan brokers ("wholesale" loan originations). At March 31, 1998,
UPAM had 23 retail loan branches and five wholesale loan centers originating
mortgage loans in 29 states, and intends to balance its future growth between
retail offices and wholesale loan centers.

UPAM's mortgage loan originations have grown from $71.5 million for the
twelve months ended December 31, 1996 to $578.6 million for the twelve months
ended December 31, 1997. The average loan-to-value ratio ("LTV") on mortgage
loans originated by UPAM during the twelve months ended December 31, 1997 was
approximately 75%. Until December 1997, UPAM sold all of its loan originations
to mortgage companies and investors through whole loan packages offered for bid
several times each month. During the twelve months ended December 31, 1997,
UPAM sold $360.2 million of mortgage loans at a weighted average sales price
equal to 105.7% of the unpaid principal balance of the loans sold. The Company
completed its first securitization of $114.9 million in mortgage loans in
December 1997 at a net gain on sale of 5.2% of the principal amount of loans
securitized, and expects to sell or securitize mortgage loans on a periodic
basis in the future. In March 1998, the Company sold its residual interests in
this securitization for cash in the amount of $8.3 million which exceeds the
carrying value of approximately $8.2 million at the date of sale. See "Risk
Factors--General--Securitizations."

Insurance Premium Finance. In May 1995, the Company entered into a joint
venture with BPN under the name "ClassicPlan" (such business, "IPF"). BPN was
founded in 1982. Under this joint venture, which commenced operations in
September 1995, (i) the Bank underwrites and finances automobile insurance
premiums in California and (ii) BPN markets this financing primarily to
independent insurance agents that sell personal automobile insurance in
California and, thereafter, services such loans for the Bank. The Bank lends to
individuals for the purchase of single premium automobile insurance policies.
The Bank's collateral is the unearned insurance premium, which is held by the
insurance company and 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. The Company's portfolio of
insurance premium finance contracts has grown from 54,927 contracts in the
aggregate gross amount of $32.1 million at December 31, 1996 to 132,623
contracts in the aggregate gross amount of $40.0 million at December 31, 1997,
primarily as a result of changes in California's automobile insurance laws.
During the twelve months ended December 31, 1997, IPF originated 125,315
insurance premium finance contracts in the aggregate gross amount of $145.2
million, as compared to 83,839 such contracts in the aggregate gross amount of
$99.0 million during the twelve months ended December 31, 1996. The Company
believes that success in the insurance premium finance business depends on
developing relationships with independent insurance agents and efficient and
accurate servicing and collection systems. The Company has an option to
purchase BPN, which becomes exercisable on April 29, 1999 at an agreed price.
See "Business--Insurance Premium Finance--Relationship with BPN." In January
1998, the Company and BPN purchased from Providian National Bank and others the
right to solicit new and renewal insurance premium finance business from
brokers who have previously provided contracts to Commonwealth Premium Finance
("CPF"). Primarily as a result of this acquisition, the Company's insurance
premium finance contracts increased from $40.0 million at December 31, 1997 to
$50.3 million at March 30, 1998.

4
<PAGE>

Automobile Finance. The Company acquires, holds for investment and services
subprime retail automobile installment sales contracts ("auto contracts")
generated by franchised and independent dealers of used automobiles through the
Bank and its subsidiary, United Auto Credit Corporation (such business,
"UACC"). 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. The Company believes that success in the
subprime automobile finance business depends upon controlled growth,
disciplined underwriting, strong internal audit procedures and focused
servicing and collection efforts at each of its local branches adjacent to
dealers, customers and collateral. The Company's portfolio of auto contracts
has grown from 1,134 contracts in the aggregate gross amount (including
unearned financing charges) of $10.8 million at December 31, 1996 to 4,750
contracts in the aggregate gross amount of $40.9 million at December 31, 1997.
During the twelve months ended December 31, 1997, the Company acquired 4,195
auto contracts in the aggregate gross amount of $44.3 million, as compared to
1,175 auto contracts in the aggregate gross amount of $12.2 million during the
twelve months ended December 31, 1996. At March 31, 1998, the Company marketed
its automobile finance program from seven branch offices in California and one
each in Arizona, Colorado, Oregon and Utah.

The Bank. The Bank has been the principal funding source to date for the
Company's residential mortgage, insurance premium and automobile finance
businesses, primarily through the Bank's deposits, FHLB advances and whole loan
sales. 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 $82.0
million (before unearned discounts and premiums) at December 31, 1997. The Bank
maintains four branches in Northern California and one in Southern California,
and has focused its branch marketing efforts on building a middle income
customer base, including efforts targeted at local Hispanic communities. As of
December 31, 1997, deposits totaled $233.2 million with a weighted average
interest rate of 5.25%. In the future, the Company intends to operate its
mortgage finance business principally through United PanAm Mortgage
Corporation. The Company intends to continue funding its insurance premium and
automobile finance businesses entirely through the Bank for the foreseeable
future.

BUSINESS STRATEGY

Growth Strategy. The Company intends to capitalize on its competitive
strengths by expanding its core businesses and entering other specialty finance
businesses which provide the opportunity for attractive risk- adjusted returns.
The Company's growth strategy includes the following key elements.

. Geographic Expansion of Existing Businesses. The Company intends to
expand its residential mortgage and automobile finance businesses into
new geographic areas, principally by opening offices staffed by
experienced local marketing and management personnel. The Company
believes that an emphasis on management with local experience, coupled
with comprehensive underwriting standards and financial controls, will
permit growth in loan originations without compromising loan
performance. The Company also may expand its insurance premium finance
business as opportunities arise outside of California. See "Risk
Factors--General--Management of Growth."

. Entry into New Specialty Finance Businesses. The Company continually
evaluates expansion into other specialty finance businesses which
provide the opportunity for attractive risk-adjusted returns in markets
(i) which it believes are underserved by traditional lenders or are
undergoing change, (ii) which are highly fragmented with no participant
having significant market share, or (iii) in which it can attract the
required management experience to assess, price and manage the credit
risk and, thereby, generate attractive risk-adjusted returns. The
Company may enter such new businesses on a de novo basis or through
acquisitions. See "Risk Factors--General--Management of Growth and "Use
of Proceeds."

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Operating Strategy. The Company's operating strategy includes the following
key elements.

. Centralized Risk Management Controls. For each of its businesses, the
Company has implemented comprehensive risk management policies and
portfolio parameters which are designed to identify the types and amount
of risk that can prudently be taken in each business. The Company
continually monitors the performance of each of its businesses against
these policies and parameters.

. Decentralized Management. The management of each of the Company's
businesses is responsible for its day-to-day operations, subject to
centralized risk management controls and individualized, goal oriented
incentive compensation programs that support the achievement of credit
quality, growth and profitability objectives. The Company believes that
the delegation of responsibility to the management of each business has
enabled the Company to attract, promote and retain experienced managers,
to provide high levels of customer service and to respond promptly to
changes in market conditions.

. Diversified Funding Sources. The Company has funded its lending
businesses to date primarily through the Bank's deposits, as well as
FHLB advances and whole loan sales. The Company believes that bank
deposits are a stable and cost-effective funding source which provide it
with a competitive advantage. To further diversify its funding sources,
in October 1997 the Company obtained a $100 million master repurchase
facility to finance the anticipated growth in its mortgage lending
operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--
Warehouse Line of Credit." 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. In
connection with any mortgage loan securitizations, the Company will seek
to maximize cash gains or arrange for the prompt sale of residual
interests retained in the securitizations at or above their net book
value. The Company will, in the future, consider the sale or
securitization of other financial assets. See "Risk Factors--General--
Securitizations" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General--Mortgage Finance."

RECENT DEVELOPMENTS

Securitization. In December 1997, the Company completed its first
securitization of mortgage loans in the principal amount of $114.9 million. As
part of this securitization, the Company recorded a net gain on sale of $5.9
million or 5.2% of the principal amount of loans securitized and recorded
residual interests in securitizations of $8.2 million. In March 1998, the
Company sold its residual interests in this securitization for cash in the
amount of $8.3 million which exceeds the carrying value of approximately $8.2
million at the date of sale.

Acquisition of Commonwealth Portfolio. In January 1998, the Company and BPN
purchased from Providian National Bank and others for $450,000 the right to
solicit new and renewal personal and commercial insurance premium finance
business from brokers who previously have provided contracts to CPF. 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 arrangement already in effect. See "Business--Insurance
Premium Finance--Relationship with BPN." 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. Primarily as a
result of this acquisition, the Company's insurance premium finance contracts
increased from $40.0 million at December 31, 1997 to $50.3 million at March 30,
1998.

First Quarter Developments. As part of the growth strategy for its mortgage
finance business, the Company opened 11 retail production branches during the
fourth quarter of 1997 and the first quarter of 1998 and established retail
telemarketing and wholesale correspondent lending groups in the first quarter
of 1998.

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<PAGE>

Included in the quarter's results will be expenses associated with this
expansion of the Company's loan origination and marketing network. Management
expects such operating costs to continue to increase as the Company continues
to expand its loan origination capacity.

The Company's quarterly revenues are dependent in part on the timing and
extent of mortgage loan sales and securitizations. During the fourth quarter of
1997, the Company sold or securitized $202.0 million in mortgage loans, or 84%
of its loan originations. The Company expects to sell in the first quarter of
1998 approximately 75% of the loans originated in that quarter. The Company
elected to defer some loan sales in the quarter to gain more flexibility in the
timing and execution of transactions. Accordingly, the Company expects its
revenues in the first quarter from gain on sale to be lower than in the
previous quarter.

As a result of the deferral of loan sales and the increase in its loan
origination capacity, the Company expects its inventory of unsold loans to
increase significantly from December 31, 1997 to March 31, 1998 and its net
income in the first quarter of 1998 to decline substantially from its net
income in the fourth quarter of 1997, although it is expected to exceed net
income for the first quarter of 1997.

The Company was incorporated in Delaware on August 31, 1989. Immediately
prior to the effective date of the Offering, the Company will reincorporate in
California through the merger of the Company into a newly formed subsidiary
incorporated in California under the name "United PanAm Financial Corp." The
Company's principal executive offices are located at 1300 South El Camino Real,
San Mateo, California 94402, and its telephone number is (650) 345-1800.

THE OFFERING

Common Stock offered by the Company... 5,500,000 shares

Common Stock to be outstanding after 16,450,000 shares(1)
the Offering..........................

Use of proceeds....................... For general corporate purposes,
including financing the growth of the
Company's existing businesses, with
particular emphasis on the expansion of
UPAM and the development or acquisition
of other specialty finance businesses,
and to repay certain indebtedness to
existing shareholders. See "Use of
Proceeds."

Proposed Nasdaq National Market UPFC
symbol................................
- --------
(1) Excludes 2,287,500 shares reserved for issuance under the Stock Incentive
Plan, of which (i) 1,580,000 shares were subject to options outstanding as
of March 31, 1998, at a weighted average exercise price of $4.55 per share,
and (ii) 140,000 shares are subject to options to be granted to certain
directors and officers concurrently with the completion of the Offering, at
an exercise price equal to either the initial public offering price or 110%
of the initial public offering price. See "Management--Stock Incentive
Plan."

7
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
APRIL 29, 1994
(INCEPTION) AT OR FOR THE
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1994 1995 1996 1997
-------------- -------- -------- --------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Interest income................... $ 6,882 $ 13,533 $ 16,561 $ 26,511
Interest expense.................. 3,573 7,727 7,853 12,411
-------- -------- -------- --------
Net interest income............. 3,309 5,806 8,708 14,100
Provision for loan losses......... 50 120 194 507
-------- -------- -------- --------
Net interest income after
provision for loan losses...... 3,259 5,686 8,514 13,593
-------- -------- -------- --------
Non-interest income
Gain on sale of loans........... 3 90 2,333 26,526
Other non-interest income....... 95 228 443 702
-------- -------- -------- --------
Total non-interest income..... 98 318 2,776 27,228
-------- -------- -------- --------
Non-interest expense
Compensation and benefits....... 1,564 2,750 5,248 19,043
Savings Association Insurance
Fund special assessment........ -- -- 820 --
Other expense................... 1,579 2,412 3,581 11,039
-------- -------- -------- --------
Total non-interest expense.... 3,143 5,162 9,649 30,082
-------- -------- -------- --------
Income before income taxes........ 214 842 1,641 10,739
Income taxes...................... 98 384 691 4,491
-------- -------- -------- --------
Net income........................ $ 116 $ 458 $ 950 $ 6,248
======== ======== ======== ========
Net income per share--basic(1).... $ 0.01 $ 0.04 $ 0.09 $ 0.58
======== ======== ======== ========
Net income per share--diluted(1)
................................. $ 0.01 $ 0.04 $ 0.09 $ 0.53
======== ======== ======== ========
Weighted average shares
outstanding--basic(1)............ 10,669 10,669 10,669 10,739
======== ======== ======== ========
Weighted average shares
outstanding--diluted(1).......... 10,669 10,669 10,669 11,875
======== ======== ======== ========
BALANCE SHEET DATA
Total assets...................... $180,024 $159,581 $188,743 $310,842
Loans............................. 53,176 131,794 134,821 148,535
Loans held for sale............... -- -- 20,766 120,002
Allowance for loan losses......... (378) (5,250) (5,356) (6,487)
Deposits.......................... 163,114 141,924 159,061 233,194
Notes payable..................... 10,930 10,930 10,930 12,930
FHLB advances..................... -- -- 4,000 28,000
Warehouse line of credit.......... -- -- -- 6,237
Stockholders' equity.............. 5,270 5,811 6,761 13,009
OPERATING DATA
Return on average assets(2)....... 0.11% 0.27% 0.56% 2.48%
Return on average stockholders'
equity(2)........................ 3.44% 8.51% 16.10% 71.84%
Net interest margin............... 3.24% 3.61% 5.44% 6.07%
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
APRIL 29, 1994
(INCEPTION) AT OR FOR THE
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, --------------------------
1994 1995 1996 1997
-------------- ------- ------- --------
<S> <C> <C> <C> <C>
Stockholders' equity to assets..... 2.93% 3.64% 3.58% 4.19%
Tangible capital ratio of Bank..... 8.50% 9.89% 8.85% 7.27%
Core capital ratio of Bank......... 8.50% 9.89% 8.85% 7.27%
Risk-based capital ratio of Bank... 27.53% 17.19% 16.36% 12.34%
ASSET QUALITY DATA
Nonaccrual loans, net(3)........... $1,439 $ 5,240 $ 5,835 $ 6,633
Real estate owned.................. -- 298 988 562
Total non-performing assets........ 1,439 5,538 6,823 7,195
Non-performing assets to total
assets............................ 0.80% 3.47% 3.61% 2.31%
Allowance for credit losses to
loans held for investment......... 0.71% 3.98% 3.97% 4.37%
SUBPRIME MORTGAGE FINANCE DATA
Loan origination activities(4)
Wholesale originations........... -- -- $58,456 $359,236
Retail originations.............. -- -- 13,055 219,386
------ ------- ------- --------
Total loan originations........ -- -- $71,511 $578,622
Percent of loans secured by first
mortgages....................... -- -- 95% 96%
Weighted average initial loan-to-
value ratio..................... -- -- 72% 75%
Originations by product type
Adjustable-rate mortgages...... -- -- 85% 82%
Fixed-rate mortgages........... -- -- 15% 18%
Weighted average interest rate
Adjustable-rate mortgages...... -- -- 9.55% 9.48%
Fixed-rate mortgages........... -- -- 10.76% 10.67%
Average balance per loan......... -- -- $ 100 $ 104
Loans sold through whole loan
transactions(5)................... -- -- $50,142 $360,210
Loan securitizations............... -- -- -- $114,904
Number of retail branches and
wholesale loan centers............ -- -- 5 22
INSURANCE PREMIUM FINANCE DATA
Loans originated................... -- $21,676 $99,012 $145,167
Number of loans originated......... -- 21,137 83,839 125,315
Average net yield on loans
originated........................ -- 15.77% 13.62% 14.01%
Average loan size at origination... -- $ 1.03 $ 1.18 $ 1.16
Net charge-offs to average
loans(2)(6)....................... -- -- 0.38% 0.35%
AUTOMOBILE FINANCE DATA
Gross contracts purchased.......... -- -- $12,216 $ 44,255
Number of contracts purchased...... -- -- 1,175 4,195
Average discount on contracts
purchased......................... -- -- 10.00% 9.86%
Gross amount financed per
contract.......................... -- -- $ 10.42 $ 10.55
Net charge-offs to average
contracts(7)...................... -- -- 1.50% 4.94%
Number of branches................. -- -- 4 10
</TABLE>

(Footnotes on next page)

9
<PAGE>

- --------
(1) Net income per share-diluted is based on the weighted average shares of
Common Stock and Common Stock equivalents outstanding during the period
adjusted for a 1,875-for-1 stock split effected in November 1997. Net
income per share-basic is based on the weighted average shares of Common
Stock outstanding during the period adjusted for the 1,875-for-1 stock
split.
(2) Information for the period from April 29, 1994 (Inception) through December
31, 1994 is annualized for comparability with full year information.
(3) Nonaccrual loans are net of specific loss allowances.
(4) Does not include conforming loans purchased from the RTC in the aggregate
principal amount of $75.9 million and $57.2 million in the year ended
December 31, 1995 and from April 29, 1994 (Inception) through December 31,
1994, respectively, and conforming loan originations of $4.5 million in the
year ended December 31, 1995.
(5) Does not include $3.5 million in conforming loan sales in the year ended
December 31, 1995.
(6) See "Business--Insurance Premium Finance--Servicing and Collection."
(7) See "Business--Automobile Finance--Servicing and Collection."

10
<PAGE>

ORGANIZATIONAL STRUCTURE

The following chart illustrates the relationship between the Company and its
principal operating subsidiaries and divisions prior to the Offering and
certain sources of financing.

<TABLE>
<CAPTION>
<S> <C>
- ------------------- ---------------------------
$2.0 million ---- United PanAm
Capital Loan(1) Financial Corp.
- ------------------- ---------------------------
100% Owned 100% Owned
----------------- ------------------ -------------------
United PanAm PanAmerican ------- $10.9 million
Mortgage Corp. Financial, Inc. RTC Interim
----------------- ------------------ Capital Assistance
Notes Payable(2)
100% Owned -------------------
-------------------
------------------- $100 million
Master Repurchase
Pan American Bank, FSB Agreement(3)
-------------------
------------------- -------------------
Deposits and
100% Owned(4) FHLB Advances
------------------- --------------------
--------------------
United Auto Credit Insurance Premium
Corporation Finance Division
------------------- --------------------
</TABLE>
- --------
(1) See "Use of Proceeds" and Note 10 of Notes to Consolidated Financial
Statements.
(2) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources--RTC Notes Payable"
and "Use of Proceeds."
(3) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources--Warehouse Line of
Credit."
(4) United Auto Credit Corporation has granted to certain key employees the
right to purchase up to a 13.5% ownership interest in that corporation,
subject to certain performance standards, and may, in the future, grant
options to purchase an additional 1.5% interest. See "Management--Executive
Compensation--Employment Agreements" and "--Certain Transactions."

11
<PAGE>

RISK FACTORS

This Prospectus contains forward-looking statements, including statements
regarding the Company's strategies, plans, objectives, expectations and
intentions, which are subject to a variety of risks and uncertainties. The
Company's actual results could differ materially from those anticipated in
these forward- looking statements as a result of certain factors, including
those set forth in these "Risk Factors" and elsewhere in this Prospectus. The
cautionary statements made in this Prospectus should be read as being
applicable to all related forward-looking statements wherever they appear in
this Prospectus.

Prospective investors should consider carefully the following factors,
together with the other information contained in this Prospectus, in
evaluating an investment in the Common Stock offered hereby.

GENERAL

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. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

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. Such loans also have a more
limited secondary market than traditional loans. The actual rate of
delinquencies, defaults and losses on such loans could be more dramatically
affected by an economic slowdown or recession than those experienced in the
financial services industry generally. 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. Although delinquencies,
defaults and losses to date have not had a material adverse effect on the
Company's financial condition, results of operations or business prospects, no
assurance can be given that the Company's underwriting criteria and collection
methods will continue to afford adequate protection against the higher risks
associated with loans to such borrowers. 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 and whole loan sales at the Bank. The Company
completed its first securitization of mortgage loans in December 1997. In
March 1998, the Company sold its residual interests in this securitization for
cash in the amount of $8.3 million which exceeds the carrying value of
approximately $8.2 million at the date of sale. 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. Certificate of
deposit accounts ("CDs") constituted $197.1 million or 84.5% of the Bank's
total deposits at December 31, 1997, of which amount $181.9 million matures in
one year or less. Increases in short-term CDs, which tend to be more sensitive
to interest rate movements than core deposits, may cause the Bank's deposit
base to be less stable than if it had a large amount of core deposits. 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

12
<PAGE>

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. In addition, the
Company's ability to raise additional equity financing may be limited by the
requirement that the Company repay the $10.9 million RTC interim capital
assistance loan (the "RTC Notes Payable") if the Bank ceases to be a
"minority-owned" business, as defined by the OTS, or Pan American Financial,
Inc. ("PAFI") obtains a material portion of its permanent financing. Pursuant
to the Company's loan agreement with the RTC, the Bank would cease to be a
"minority-owned business" if 50% or more of its capital stock were owned or
controlled by one or more non-minorities. Upon completion of the Offering
(whether or not the underwriters' over-allotment option is exercised), 50% or
more of the outstanding Common Stock is expected to be owned by minorities,
assuming that no shares in the Offering are purchased by minorities.
Therefore, the Company believes that, upon completion of the Offering, it will
be a minority-owned business. Because all of the shares offered hereby will be
sold by the Company, and no portion of the net proceeds is anticipated to be
used to finance PAFI or the Bank, the Company believes that the Offering will
not constitute permanent financing of PAFI. In addition, the Company has
pledged the shares of the Bank as collateral for the RTC interim capital
assistance loan. However, there can be no assurances that the RTC will not
view the Offering as changing the "minority-owned" status of the Bank or
constituting permanent financing of PAFI and require repayment of the RTC
Notes Payable. In the event the Offering is deemed to change the "minority-
owned" status of the Bank or constitute the permanent financing of PAFI, the
Company will use $10.9 million of the net proceeds to repay the RTC Notes
Payable. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources--RTC Notes Payable."

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. At December 31, 1997,
82.0% of the dollar amount of the Company's loans was related to collateral or
borrowers located in California. The performance of these loans may be
affected by changes in California's economic and business conditions,
including its residential real estate market. In the recent past, the
California economy has experienced a significant recession with a resulting
decline in employment and the value of residential property. A decline in the
value of residential real estate may adversely affect the value of the
Company's collateral. In addition, California real estate is subject to
certain natural disasters, such as earthquakes and erosion-caused mudslides,
which are typically not covered by the standard hazard insurance policies
maintained by borrowers. Uninsured disasters may render borrowers unable to
repay loans made by the Company. 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, collection 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,
including Guillermo Bron, the Chairman of the Board, Lawrence J. Grill,
President and Chief Executive Officer, John T. French, President and Chief
Executive Officer of United PanAm Mortgage Corporation, and Ray C. Thousand,
President and Chief Executive Officer of United Auto Credit Corporation, as
well as the key employees of BPN. The loss of the services of any such
employee, or the failure of the Company to attract and retain other qualified
personnel, could

13
<PAGE>

have a material adverse effect on the Company's financial condition, results
of operations and business prospects. Although the Company has entered into
employment agreements with certain key employees, including Messrs. Bron,
Grill, French and Thousand, there can be no assurance that these agreements
will be effective in retaining their services. See "Management."

Mr. Bron, the Chairman of the Board of the Company, is an officer, director
and principal stockholder of a general partner of Bastion Capital Fund, L.P.,
a private equity investment fund, and in such capacity, may have the power to
direct the investments of such fund. Mr. Bron may have conflicts of interest
in determining whether a potential acquisition or other business opportunity
should be presented to the Company or to Bastion Capital Fund, L.P. or another
affiliate of Mr. Bron. No assurance can be given that any such conflict will
be resolved in favor of the Company.

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,
mortgage banking companies, commercial banks, credit unions, savings
associations and insurance 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.

The profitability of the Company's lending activities and the low barriers
to entry could attract additional competitors. Certain large, national finance
companies and mortgage originators have announced their intention to adapt
their mortgage loan origination programs and allocate resources to the
origination of subprime loans. The Company and its competitors may also face
increasing competition from government-sponsored entities, such as the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC"). FHLMC currently purchases what it terms "Alternative-A"
mortgage loans and has announced its intention to establish a program to
purchase what it terms "A-" mortgage loans in the near future. In addition,
FHLMC has expressed its intention to purchase so-called "B" and "C" mortgage
loans in the future. FHLMC also has purchased securities backed by subprime
mortgage loans and has re-securitized them for resale. Additional competition
may lower the rates the Company can charge borrowers, reduce the volume of the
Company's loan originations and increase demand for the Company's key
employees and the potential that such employees will leave the Company for its
competitors.

Fluctuations in interest rates and general and localized economic conditions
also may affect the competition the Company faces. Competitors with lower
costs of capital have a competitive advantage over the Company. During periods
of declining interest rates, competitors may solicit the Company's customers
to refinance their loans. In addition, during periods of economic slowdown or
recession, the Company's borrowers may face financial difficulties and be more
receptive to offers of the Company's competitors to refinance their loans.

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

14
<PAGE>

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-
earning assets in a given period, a significant increase in market rates of
interest could have a material adverse effect on the Company's net interest
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 sensitive than its
assets. Accordingly, changes in interest rates could have a material adverse
effect on the profitability of the Company's lending activities.

Adjustable-rate mortgage loans ("ARMs") totaled $474.5 million of the $578.6
million of mortgage loans originated by the Company during the twelve months
ended December 31, 1997. The market values of ARMs are less sensitive to
changes in market interest rates than are the market values of fixed-rate
loans. The Company's ARMs generally are offered at an initial interest rate
below the fully indexed interest rate at origination. There can be no
assurance that the interest rate on these loans will reach the fully indexed
rate if the loans are pre-paid or in the case of foreclosure. Further,
although these loans are underwritten at the fully indexed rate at
origination, borrowers may encounter financial difficulties as a result of
increases in the interest rate over the life of the loan. Certain ARMs also
may be subject to periodic or lifetime payment caps that result in a portion
of the accrued interest being deferred and added to the outstanding principal.
This could result in receipt by the Company of less cash income on its ARMs
than it is required to pay on its related borrowings which do not have such
payment caps. Because the Company does not believe that hedging against
interest rate risks is cost-effective and because the Company sells a
substantial portion of its loans on a regular basis, the Company currently
does not use hedging strategies to mitigate interest rate risk. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Management of Interest Rate Risk."

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. There can be no assurance
that the Company will continue to (i) manage effectively its funding sources,
information and operating systems and human resources, (ii) expand
successfully and operate such businesses profitably, (iii) identify and hire
qualified employees to support its expansion plans, or (iv) accomplish such
expansion in a timely and cost-effective manner or, if achieved, that such
expansion will result in profitable operations. 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.

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 exceeds
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 the Company were
unable to securitize profitably a sufficient number of its loans in a
particular quarter, then the

15
<PAGE>

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 and 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.

In a securitization, the Company sells loans that it has originated or
purchased to a trust for a cash purchase price and an interest in the loans
securitized, called "residual interests," which thereafter can be retained or
sold. The cash portion of the purchase price in many cases will be less than
the carrying value of the related loan. The Company will estimate the present
value of the residual interests on its balance sheet, and will project the
expected cash flows over the life of the residual interests, using prepayment
and default assumptions that the Company believes that market participants
would use for similar financial instruments that are subject to prepayment,
credit and interest rate risks. The Company then will determine the present
value of these cash flows using an interest rate believed by it to be
commensurate with the risks involved. If the Company's actual experience
differs materially from the assumptions used in the determination of the
present value of the residual interests, future cash flows and earnings could
be adversely affected. Furthermore, because the Company does not have
meaningful loan performance data, the Company's assumptions will not be based
on the actual performance of its loans but on available historical loss data
for comparable portfolios of loans and the specific characteristics of the
loans included in the Company's securitizations. No assurance can be given
that the residual interests could be sold at their stated value, if at all.
The assumptions used by the Company for valuing the residual interests in
securitizations arising from its December 1997 securitization included a
prepayment assumption of 5% for the first year increasing to 25% thereafter,
an annual credit loss assumption of 0.75% and a discount rate of 15%. In March
1998, the Company sold its residual interests in this securitization for cash
in the amount of $8.3 million which exceeds the carrying value of
approximately $8.2 million at the date of sale. No assurance can be given that
the assumptions used by the Company for valuing the residual interests in its
first securitization will be appropriate in connection with any subsequent
securitization.

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.

CHANGES 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. Because substantially all of the Company's
loans are made to borrowers who generally cannot obtain financing from
traditional lenders, its actual rates of delinquency, default and loss could
be more dramatically affected by an economic slowdown or recession than those
experienced in the financial services industry generally. 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.

16
<PAGE>

YEAR 2000 COMPLIANCE

Like most financial institutions, the Company's computer systems identify
dates using only the last two digits of the year. These systems may recognize
a date using "00" as the year 1900, rather than 2000.

The Company is using both internal and external resources to identify,
correct and test systems that may be affected by year 2000 dates. System
identification is scheduled for completion by the end of the second quarter of
1998, with testing and implementation scheduled for completion during the last
half of 1998 and in 1999. The Company believes that year 2000 compliance will
not pose significant operational issues for the Company. However, the failure
to implement timely year 2000 compliant systems could have a material adverse
effect on the operations of the Company.

Dependence on third party vendors could adversely affect the Company's
efforts to successfully complete year 2000 compliance for all systems in a
timely manner. The Company is requiring third party vendors to represent that
their products are year 2000 compliant and will implement a program to test
for compliance. Contingency plans are being developed in the event that a
vendor is not able to provide timely year 2000 compliance.

The Company has initiated formal communications with its significant
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. No assurance can be given that the systems of third parties on which
the Company relies will be corrected in a timely manner, or that a failure to
correct the year 2000 issue by another party, or a correction that is
incompatible with the Company's systems, will not have a material adverse
effect on the Company.

The Company is assessing the expense of year 2000 compliance and the
potential effect on the Company's earnings. The Company does not believe that
the costs of year 2000 compliance will be material.

RISKS ASSOCIATED WITH MORTGAGE FINANCE

DEPENDENCE ON WHOLE LOAN SALES FOR FUTURE EARNINGS

The gain on sale generated by whole loan sales has represented and will
continue to represent a significant source of the Company's earnings. During
the twelve months ended December 31, 1997, UPAM sold approximately 62% of its
loan originations in the whole loan secondary market to a limited number of
institutional purchasers. The Company plans to sell a significant number of
loans it originates through whole loan sales in the future. There can be no
assurance that such purchasers will continue to purchase UPAM's loans, and
UPAM's failure to replace successfully such loan purchasers, would 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
complete whole loan sales, as many of UPAM's whole loan purchasers securitize
loans purchased from UPAM, as well as UPAM's ability to complete the
securitization of its mortgage loans. During the twelve months ended December
31, 1997, UPAM sold loans to 16 institutional purchasers, four of which
purchased approximately 78% of the total loans sold by UPAM in that period.

CONTINGENT RISKS

During the period that mortgage loans are held for sale, UPAM is subject to
various risks associated with its lending business, including borrower
default, foreclosure and the risk that a rapid increase in interest rates
would result in a decline in the value of loans held for sale, thus reducing
or eliminating any gain on sale on such loans.

RISK OF DECLINING VALUE OF COLLATERAL

The Company's mortgage finance business may be materially and adversely
affected by declining real estate values. Any material decline in real estate
values reduces the ability of borrowers to use home equity to support
borrowings and increases the LTV of loans previously made by the Company,
thereby weakening collateral coverage and increasing the possibility of a loss
in the event of a default. Further, delinquencies, foreclosures

17
<PAGE>

and losses generally increase during an economic slowdown or recession.
Because UPAM targets borrowers who generally are unable to obtain mortgage
financing from traditional lenders, the actual rates of delinquency,
foreclosure and loss on such loans could be higher under adverse economic
conditions than those experienced in the mortgage finance industry in general.
Any sustained period of increased delinquencies, foreclosures or losses could
materially and adversely affect the Company's financial condition, results of
operations and business prospects.

DEPENDENCE ON INDEPENDENT MORTGAGE BROKERS

UPAM depends primarily on independent mortgage brokers for the origination
and purchase of its wholesale mortgage loans, which constitute the largest
portion of its total loan production. These independent mortgage brokers deal
with multiple lenders for each prospective borrower. UPAM competes with these
lenders for the independent brokers' business on price, service, loan fees,
costs and other factors. UPAM's competitors also seek to establish
relationships with such brokers who are not obligated by contract or otherwise
to do business with it. The Company's financial condition, results of
operations and business prospects could be adversely affected by changes in
the volume and profitability of UPAM's wholesale loans resulting from, among
other things, competition with other lenders and purchasers of such loans.

ELIMINATION OF LENDER PAYMENTS TO BROKERS

Class-action lawsuits have been filed against a number of mortgage lenders
alleging that such lenders have violated the federal Real Estate Settlement
Procedures Act of 1974 ("RESPA") and engaged in unfair practices by making
certain payments to independent mortgage brokers. These lawsuits generally
have been filed on behalf of a purported nationwide class of borrowers and
allege that payments made by a lender to a broker in addition to payments made
by the borrower to a broker are prohibited by RESPA and, therefore, illegal.
If these cases are resolved against the lenders, it may cause an industry-wide
change in the way independent mortgage brokers are compensated. UPAM's broker
compensation arrangements permit such payments. Future regulatory
interpretations or judicial decisions may require UPAM to change its broker
compensation programs or subject it to material monetary judgments or other
penalties. Any such changes or penalties may have a material adverse effect on
the Company's financial condition, results of operations and business
prospects. Although UPAM has not been named in any such class-action lawsuit,
there can be no assurance that UPAM will not subsequently be named in these or
similar lawsuits.

ENVIRONMENTAL LIABILITIES

The Company may acquire real property securing mortgage loans that are in
default, and there is a risk that hazardous substances or waste, contaminants
or pollutants could be discovered on such properties after the Company
acquires them. The Company may be required to remove such substances from the
affected properties at its expense, and the cost of such removal may
substantially exceed the value of the affected properties or the loans secured
by such properties. Furthermore, the Company may not have adequate remedies
against the prior owners or other responsible parties to recover its costs.
Finally, the Company may find it difficult or impossible to sell the affected
properties either prior to or following any such removal.

GOVERNMENT REGULATION

The subprime mortgage industry is highly regulated. UPAM is subject to
extensive and complex rules and regulations of, and examinations by, various
federal, state and local government authorities. These rules and regulations
impose obligations and restrictions on UPAM's loan originations, credit
activities and secured transactions. In addition, these rules may limit the
interest rates, finance charges and other fees UPAM may assess, mandate
extensive disclosure to its customers, prohibit discrimination and impose
multiple qualification and licensing obligations on UPAM. Certain of UPAM's
loan origination activities may be subject to the laws and regulations of the
states in which those activities are conducted. UPAM's lending activities are
also subject to various federal laws, including the Truth in Lending Act
("TILA"), the Homeownership and Equity

18
<PAGE>

Protection Act of 1994 ("High Cost Mortgage Act"), the Equal Credit
Opportunity Act ("ECOA"), the Fair Credit Reporting Act ("FCRA"), RESPA and
the Home Mortgage Disclosure Act ("HMDA"). Failure to comply with any of these
laws may result in, among other things, demands for indemnification or
mortgage loan repurchases, certain rights of rescission for mortgage loans,
class action lawsuits, administrative enforcement actions and civil and
criminal liability.

The laws, rules and regulations applicable to the Company's mortgage finance
business are subject to change. In addition, various laws, rules and
regulations currently are proposed, which, if adopted, could affect UPAM.
There can be no assurance that these proposed laws, rules and regulations, or
other such laws, rules or regulations, will not be adopted in the future. Such
adoption could make compliance more difficult or expensive, restrict UPAM's
ability to originate, broker, purchase or sell loans, further limit or
restrict the amount of commissions, interest and other charges earned on loans
originated, brokered, purchased or sold by UPAM, or otherwise materially and
adversely affect the Company's financial condition, results of operations and
business prospects. See "Business--Supervision and Regulation--Regulation of
Mortgage Finance Operation."

UPAM's loans currently are originated and funded by the Bank. Current
federal regulations generally provide that the Bank is not subject to state
law limits on its lending operations, other than certain California limits on
charges that are deemed to be "interest" under federal regulations. It is
contemplated that the Company's mortgage lending operations in the future will
be conducted by United PanAm Mortgage Corporation. At such time, the Company's
mortgage lending operations will become subject to state law limits in each
state in which it originates mortgage loans.

EFFECT OF ELIMINATION OF MORTGAGE INTEREST DEDUCTION

Government officials, including members of Congress, have from time to time
suggested the elimination of the mortgage interest deduction for federal
income tax purposes or other action, such as a flat tax or a national sales
tax in substitution for the existing income tax system. Because many of UPAM's
loans are made to borrowers for the purpose of consolidating consumer debt or
financing other consumer needs, the competitive advantages of tax deductible
interest, when compared with alternative sources of consumer financing, could
be eliminated or seriously impaired by such government action. Accordingly,
the reduction or elimination of these tax benefits could have a material
adverse effect on the demand for loans of the kind offered by UPAM.

RISKS ASSOCIATED WITH INSURANCE PREMIUM FINANCE

DEPENDENCE ON INDEPENDENT INSURANCE AGENTS

IPF depends primarily on independent insurance agents for the origination of
insurance premium finance contracts. These independent insurance agents deal
with multiple lenders for each prospective borrower. IPF competes with these
lenders for the independent agents' business on price, service, loan fees,
costs and other factors. IPF's competitors also seek to establish
relationships with such agents, who are not obligated by contract or otherwise
to do business with IPF. For the twelve months ended December 31, 1997, two
insurance agents located in Southern California accounted for approximately
12.3% and 19.2%, respectively, of the aggregate number of insurance premium
finance contracts entered into by IPF. The loss of a substantial portion of
the business of either of these agents would have a material adverse effect on
the Company's financial condition, results of operations and business
prospects. In addition, the Company's financial condition, results of
operations and business prospects could be adversely affected by changes in
the volume and profitability of IPF resulting from, among other things,
competition from other lenders for business from independent insurance agents.

RISK OF CONTRACT LOSSES

Each insurance premium finance contract is designed to ensure that at any
point during the term of the underlying insurance policy, the unearned premium
under the policy exceeds the unpaid principal under the contract. However, in
the event of a default, the unearned premium may not provide IPF full
reimbursement of interest, fees and other charges. In addition, the insurance
company may default and fail to remit the unearned

19
<PAGE>

premium, and a delay in processing a claim for the return of the unearned
premium may cause IPF to incur a loss. Moreover, any delay in IPF's
cancellation of a policy would result in declining collateral protection and
an increase in IPF's risk of loss. Although contract losses to date have not
had a material adverse effect on the Company's financial condition, results of
operations or business prospects, no assurance can be given that IPF will not
suffer material losses in the future as a result of defaults under insurance
premium finance contracts. See "Business--Insurance Premium Finance--Operating
Summary."

GOVERNMENT REGULATION

IPF is subject to California regulation. This regulatory structure requires
certain disclosures, notices and collection procedures with respect to loans
made to finance insurance premiums. Such state regulations also require that
certain disclosures be delivered by the insurance agent or broker or other
person arranging for such credit. IPF's activities also are subject to certain
federal statutes, including TILA. Any failure of the Company or BPN to comply
with any of the laws and regulations to which they are subject, or any change
in the regulatory structure or the applicable statutes, regulations or
interpretations of such laws and regulations, could have a material adverse
effect on the Company's and BPN's respective financial condition, results of
operations and business prospects. See "Business--Supervision and Regulation--
Regulation of Insurance Premium Finance Companies."

RELIANCE ON BPN

IPF is dependent upon the continued services of BPN and its key employees.
The loss by IPF of the services of BPN or of the services of any such
employee, or the failure of BPN 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. See "Business--
Insurance Premium Finance--Relationship with BPN."

RISKS ASSOCIATED WITH AUTOMOBILE FINANCE

RISK OF DECLINING VALUE OF COLLATERAL

The value of the collateral securing UACC's auto contracts is subject to
various risks, including uninsured damage, change in location or decline in
value caused by use or age. Any material decline in the value of the
collateral could result in a loss to UACC in the event of a default on the
auto contract.

DEPENDENCE ON DEALER RELATIONSHIPS

The ability of UACC to expand into new geographic markets and to maintain or
increase its volume of auto contracts is dependent upon maintaining and
expanding the network of automobile dealers from which it purchases contracts.
UACC's loss of any of its branch managers could materially and adversely
affect its relationships with dealers doing business with that branch and,
thereby, result in fewer opportunities to purchase contracts. Increased
competition, including competition from captive finance affiliates of
automobile manufacturers, could have a material adverse effect on UACC's
ability to maintain or expand its dealer network. See "Business--Automobile
Finance--Subprime Automobile Finance Industry," "--Sales and Marketing" and
"Business--Competition."

GOVERNMENT REGULATION AND LITIGATION

UACC is subject to numerous federal and state consumer protection laws and
regulations which are subject to change. An adverse change in or
interpretation of existing laws or regulations, the promulgation of any new
laws or regulations, or the failure to comply with any of such laws and
regulations could have a material adverse effect on the Company's financial
condition, results of operations and business prospects. See "Business--
Supervision and Regulation--Regulation of Subprime Automobile Lending."

Given the consumer-oriented nature of the subprime automobile finance
industry, industry participants from time to time are named as defendants in
litigation involving alleged violations of federal and state consumer

20
<PAGE>

protection or other similar laws and regulations. A judgment against the
Company in connection with any such litigation could have a material adverse
effect on the Company's financial condition, results of operations and
business prospects. In addition, the determination that an automobile dealer
failed to comply with applicable laws or that any auto contracts purchased by
UACC involved violations of applicable law could have a material adverse
effect on the Company's financial condition, results of operations and
business prospects. See "Business--Supervision and Regulation--Regulation of
Subprime Automobile Lending."

RISKS ASSOCIATED WITH THE BANK

FINANCIAL INSTITUTION REGULATION

Both the Company, as a savings and loan holding company, and the Bank, as a
federal savings bank, are subject to significant regulation by the federal
government. Statutes and regulations now affecting the Company or the Bank may
be changed at any time, and the interpretation of these statutes and
regulations by federal regulatory authorities also is subject to change.
Changes in federal statutes and regulations affecting federal savings banks
and their holding companies could, among other matters, materially alter the
powers of and opportunities available to the Bank, the Company and its
subsidiaries. There can be no assurance that future changes in such statutes
and regulations or in their interpretation will not adversely affect the
Company's financial condition, results of operations and business prospects.
As a savings and loan holding company, the Company is subject to supervision
and examination from time to time by the Office of Thrift Supervision ("OTS").
As a federal savings bank, the Bank is subject to supervision and examination
from time to time by the OTS, its primary regulator, and by the Federal
Deposit Insurance Corporation ("FDIC"), as administrator of the Savings
Association Insurance Fund ("SAIF"), of which the Bank is a member. Any
failure by the Company or the Bank to comply with any of the laws and
regulations to which it is subject, or any change in the regulatory structure
or the applicable statutes, regulations or interpretations of such laws and
regulations, by the OTS, the FDIC or the Congress, could have a material
adverse effect on the Company or the Bank, and on the Company's financial
condition, results of operations and business prospects. See "Business--
Supervision and Regulation--Holding Company Regulation" and "--Federal Savings
Bank Regulation."

RISKS ASSOCIATED WITH THE COMPANY AND THE OFFERING

CONTROL BY EXISTING SHAREHOLDERS

Upon completion of the Offering, Pan American Financial, L.P. ("PAFLP") will
own an aggregate of approximately 52.8% of the outstanding shares of Common
Stock (approximately 50.3% assuming the exercise of the Underwriters' over-
allotment option in full). Accordingly, PAFLP will have the ability to approve
any matter submitted to a vote of the Company's shareholders (including
mergers, consolidations and sales of assets) and to elect all members of the
Board of Directors. See "Principal Shareholders" and "Management."

ANTI-TAKEOVER PROVISIONS

The Company's Articles of Incorporation (the "Articles") and Bylaws (the
"Bylaws") include provisions that could delay, defer or prevent a takeover
attempt that may be in the best interests of shareholders. These provisions
include the ability of the Board of Directors to issue up to 2,000,000 shares
of Preferred Stock without any further shareholder approval and requirements
that (i) any action required to be taken or that may be taken at any meeting
of the Company's shareholders may only be taken at a meeting of shareholders
or by the written consent of the holders of two-thirds of the outstanding
voting shares, (ii) shareholders give advance notice with respect to
nomination of candidates for election as directors and certain proposals they
may wish to present for a shareholder vote and (iii) special meetings of
shareholders may only be called by the Company's Board of Directors, Chairman
of the Board, Chief Executive Officer, or at the written request of holders of
not less than 10% of the Company's voting shares. In addition, certain
provisions of the Articles and the Bylaws, including provisions governing the
required vote for shareholder action without a meeting, the classification of
the Board of Directors, the elimination of cumulative voting and
indemnification of directors, officers and others, can only be amended by the
affirmative vote of the holders of at least two-thirds of the outstanding
voting shares. The

21
<PAGE>

issuance of Preferred Stock in certain circumstances may have the effect of
delaying, deferring or preventing a change in control of the Company, may
discourage bids for the Common Stock at a premium over the current market
price of the Common Stock and may adversely affect the market price, and the
voting and other rights of the holders, of Common Stock. See "Description of
Capital Stock."

ABSENCE OF PUBLIC MARKET

There currently is no trading market for the Common Stock. Although the
Company has applied for quotation of the Common Stock on the Nasdaq National
Market ("Nasdaq"), there can be no assurance that an active public trading
market for the Common Stock will develop after the Offering or that, if
developed, will be sustained. The initial public offering price of the Common
Stock offered hereby will be determined by negotiations among the Company and
representatives of the Underwriters and may not be indicative of the price at
which the Common Stock will trade after the Offering. See "Underwriting."
Accordingly, there can be no assurance that the market price for the Common
Stock will not fall below the initial public offering price.

POSSIBLE VOLATILITY OF STOCK PRICE

The market price of the Common Stock may experience fluctuations that are
unrelated to the operating performance of the Company. In particular, the
price of the Common Stock may be affected by general market price movements as
well as developments specifically related to the consumer finance industry and
the financial services sector, including interest rate movements, quarterly
variations or changes in financial estimates by securities analysts and a
significant reduction in the price of the stock of another participant in the
consumer finance industry. In addition, the Company's quarterly operating
income depends significantly upon the successful completion of sales by UPAM
of its loans, and the Company's inability to complete these transactions in a
particular quarter may have a material adverse effect on the Company's results
of operations for that quarter and, accordingly, could materially and
adversely affect the price of the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding
16,450,000 shares of Common Stock. The 5,500,000 shares of Common Stock
offered hereby (6,325,000 shares if the Underwriters' over-allotment option is
exercised in full) will be immediately eligible for sale in the public market
without restriction beginning on the date of this Prospectus. Future sales of
substantial amounts of Common Stock after the Offering, or the perception that
such sales could occur, could have a material adverse effect on the market
price of the Common Stock. No prediction can be made as to the effect, if any,
that future sales of shares, or the availability of shares for further sale,
will have on the market price of the Common Stock. Additionally, 2,287,500
shares of Common Stock are reserved for issuance under the Stock Incentive
Plan of which 1,580,000 were subject to options outstanding as of March 31,
1998 and 140,000 shares are subject to options to be granted concurrently with
the completion of the Offering. The Company intends to file a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
to register such shares of Common Stock reserved for issuance under the Stock
Incentive Plan, thus permitting the resales of such shares by non-affiliates
in the public market without restriction under the Securities Act.

The remaining 10,950,000 shares of Common Stock held by existing
shareholders are "restricted securities," as that term is defined in Rule 144
promulgated under the Securities Act, and are eligible for sale subject to the
holding period, volume and other limitations imposed thereby. See "Description
of Capital Stock--Shares Eligible for Future Sale."

The Company, certain existing shareholders of the Company and the executive
officers and directors of the Company have agreed with the Underwriters that,
subject to certain exceptions, for a period of 180 days following the
commencement of the Offering, they will not sell, contract to sell or
otherwise dispose of any shares of Common Stock or rights to acquire such
shares (other than pursuant to employee plans) without the prior written
consent of NationsBanc Montgomery Securities LLC on behalf of the
Underwriters. See "Underwriting."

22
<PAGE>

SUBSTANTIAL AND IMMEDIATE DILUTION

The initial public offering price will be substantially higher than the net
tangible book value per share of the Common Stock. Investors purchasing shares
of Common Stock in the Offering will be subject to immediate dilution of $6.53
per share in net tangible book value assuming an initial public offering price
of $10.50 per share (the mid-point of the filing range set forth on the cover
of this Prospectus). See "Dilution."

ABSENCE OF DIVIDENDS

The Company has never paid a cash dividend on the Common Stock. The Company
currently intends to retain any future earnings to provide funds for the
operation and expansion of its businesses and does not anticipate paying cash
dividends on the Common Stock in the foreseeable future. The payment of
dividends is within the discretion of the Company's Board of Directors and
will depend upon, among other things, the Company's earnings, financial
condition, capital requirements, level of indebtedness, contractual
restrictions on the payment of dividends and general business conditions. See
"Dividend Policy." Federal regulations restrict the Bank's ability to declare
or pay any dividends to the Company. See "Business--Supervision and
Regulation--Federal Savings Bank Regulation--Limitation on Capital
Distributions." In addition, certain interim capital assistance loan
agreements among the Bank, PAFI and the RTC prohibit the Bank from declaring
or paying any dividends, except under limited circumstances, until all of the
obligations of the Bank and PAFI to the RTC have been discharged. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--RTC Notes Payable."

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
5,500,000 shares of Common Stock offered hereby (after deducting the estimated
underwriting discount and Offering expenses) are estimated to be $52.8 million
($60.8 million if the Underwriters' over-allotment option is exercised in
full), assuming an initial public offering price of $10.50 per share (the mid-
point of the filing range set forth on the cover of this Prospectus).

The net proceeds of the Offering will be used primarily for general
corporate purposes, including financing the growth of the Company's existing
businesses, with particular emphasis on the expansion of UPAM and the
development or acquisition of other specialty finance businesses. See
"Business--Business Strategy." In addition, the Company intends to use $2.0
million of the net proceeds of the Offering to repay the Company's
indebtedness to certain of its existing shareholders, which indebtedness was
incurred subsequent to July 1, 1997 to finance the establishment and
operations of United PanAm Mortgage Corporation. Such indebtedness bears
interest at 8% per year (which interest is payable on July 15, 1998 and June
30, 1999) and the entire unpaid principal is payable on June 30, 1999. See
"Management--Certain Transactions." In the event the Offering is deemed by the
RTC to change the "minority-owned" status of the Bank or constitute the
permanent financing of PAFI for purposes of the RTC loan agreements, the
Company will use $10.9 million of the net proceeds to repay the RTC Notes
Payable. All of the shares offered hereby will be sold by the Company, and no
portion of the net proceeds is anticipated to be used to finance PAFI or the
Bank. Therefore, the Company believes that the Offering will not constitute
permanent financing of PAFI. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources--RTC Notes Payable."

23
<PAGE>

DIVIDEND POLICY

The Company has never paid a cash dividend on the Common Stock. The Company
currently intends to retain any future earnings to provide funds for the
operation and expansion of its businesses and does not anticipate paying cash
dividends on the Common Stock in the foreseeable future. The payment of
dividends is within the discretion of the Company's Board of Directors and
will depend upon, among other things, the Company's earnings, financial
condition, capital requirements, level of indebtedness, contractual
restrictions on the payment of dividends and general business conditions.
Federal regulations restrict the Bank's ability to declare or pay any
dividends to the Company. See "Business--Supervision and Regulation--Federal
Savings Bank Regulation--Limitation on Capital Distributions." In addition,
certain interim capital assistance loan agreements among the Bank, PAFI and
the RTC prohibit the Bank from declaring or paying any dividends, except under
limited circumstances, until all of the obligations of the Bank and PAFI to
the RTC have been discharged. See "Risk Factors--Risks Associated With the
Company and the Offering--Absence of Dividends" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources--RTC Notes Payable."

DILUTION

At December 31, 1997, the net tangible book value of the Company was
approximately $12.6 million, or $1.15 per share of Common Stock. Net tangible
book value per share represents the amount of the Company's total tangible
assets less total liabilities divided by the number of shares of Common Stock
outstanding. Net tangible book value dilution represents the difference
between the amount per share paid by purchasers in the Offering and the net
tangible book value per share after the Offering. Without taking into account
any changes in net tangible book value after December 31, 1997, other than to
give effect to the sale by the Company of the 5,500,000 shares of Common Stock
offered hereby, assuming an initial public offering price of $10.50 per share
(the mid-point of the filing range set forth on the cover of this Prospectus)
and after deducting the estimated underwriting discount and Offering expenses,
the net tangible book value of the Company at December 31, 1997 would have
been approximately $65.3 million, or $3.97 per share. This represents an
immediate increase in net tangible book value of $2.82 per share to the
existing shareholders and an immediate net tangible book value dilution of
$6.53 per share to purchasers in the Offering, as illustrated by the following
table.

<TABLE>
<S> <C> <C>
Assumed initial public offering price............................. $10.50
Net tangible book value per share at December 31, 1997........... $1.15
Increase in net tangible book value per share attributable to new
investors....................................................... 2.82
-----
Net tangible book value per share after the Offering.............. 3.97
------
Dilution to new investors......................................... $ 6.53
======
</TABLE>

The following table summarizes as of December 31, 1997 the differences
between the number of shares of Common Stock purchased from the Company, the
total cash consideration paid and the average price per share paid by the
existing shareholders and to be paid by the investors purchasing shares of
Common Stock in the Offering assuming the sale of 5,500,000 shares by the
Company at an assumed initial public offering price of $10.50 per share (the
mid-point of the filing range set forth on the cover of this Prospectus) and
before deducting the estimated underwriting discount and Offering expenses.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders.......... 10,950,000 66.6% $ 5,237,000 8.3% $ 0.48
New investors.................. 5,500,000 33.4% 57,750,000 91.7% $10.50
---------- ----- ----------- -----
Total...................... 16,450,000 100.0% $62,987,000 100.0%
========== ===== =========== =====
</TABLE>

24
<PAGE>

CAPITALIZATION

The following table sets forth the consolidated capitalization and certain
ratios of the Company and the Bank's regulatory capital ratios at December 31,
1997, and as adjusted to give effect to the sale of Common Stock offered
hereby.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-------------------------
AS
ACTUAL ADJUSTED
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term borrowings
Shareholder notes payable due 1999................. $ 2,000 $ --
RTC notes payable due 1999......................... 10,930 10,930
----------- -----------
Total long-term borrowings........................... 12,930 10,930
----------- -----------
Shareholders' equity
Preferred Stock: 2,000,000 shares authorized: no
shares outstanding................................ -- --
Common Stock : 20,000,000 shares authorized;
10,950,000 shares outstanding; 16,450,000 shares
as adjusted....................................... 110 165
Additional paid-in capital......................... 5,127 57,830
Retained earnings.................................. 7,772 7,772
----------- -----------
Total shareholders' equity........................... 13,009 65,767
----------- -----------
Total capitalization................................. $ 25,939 $ 76,697
=========== ===========
Ratio of equity to assets............................ 4.19% 18.19%
Regulatory capital ratios of the Bank(1)
Leverage........................................... 7.27% 7.27%
Tier 1 risk-based.................................. 11.07% 11.07%
Total risk-based................................... 12.34% 12.34%
</TABLE>
- --------
(1) For regulatory capital purposes, the Bank includes the $10.9 million of
RTC Notes Payable as equity capital. As adjusted numbers assume no capital
contribution of net Offering proceeds to the Bank.

25
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents selected consolidated financial and other data
of the Company at the dates and for the periods indicated. The selected
consolidated financial and other data should be read in conjunction with, and
is qualified in its entirety by reference to, the information in the
consolidated financial statements and related notes set forth elsewhere herein.

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
APRIL 29, 1994
(INCEPTION) AT OR FOR THE
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1994 1995 1996 1997
-------------- -------- -------- --------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Interest income................... $ 6,882 $ 13,533 $ 16,561 $ 26,511
Interest expense.................. 3,573 7,727 7,853 12,411
-------- -------- -------- --------
Net interest income............. 3,309 5,806 8,708 14,100
Provision for loan losses......... 50 120 194 507
-------- -------- -------- --------
Net interest income after
provision for loan losses...... 3,259 5,686 8,514 13,593
-------- -------- -------- --------
Non-interest income
Gain on sale of loans........... 3 90 2,333 26,526
Other non-interest income....... 95 228 443 702
-------- -------- -------- --------
Total non-interest income..... 98 318 2,776 27,228
-------- -------- -------- --------
Non-interest expense
Compensation and benefits....... 1,564 2,750 5,248 19,043
SAIF special assessment......... -- -- 820 --
Other expense................... 1,579 2,412 3,581 11,039
-------- -------- -------- --------
Total non-interest expense.... 3,143 5,162 9,649 30,082
-------- -------- -------- --------
Income before income taxes........ 214 842 1,641 10,739
Income taxes...................... 98 384 691 4,491
-------- -------- -------- --------
Net income........................ $ 116 $ 458 $ 950 $ 6,248
======== ======== ======== ========
Net income per share--basic (1)... $ 0.01 $ 0.04 $ 0.09 $ 0.58
======== ======== ======== ========
Net income per share--diluted
(1).............................. $ 0.01 $ 0.04 $ 0.09 $ 0.53
======== ======== ======== ========
Weighted average shares
outstanding--basic (1)........... 10,669 10,669 10,669 10,739
======== ======== ======== ========
Weighted average shares
outstanding--diluted (1)......... 10,669 10,669 10,669 11,875
======== ======== ======== ========
BALANCE SHEET DATA
Total assets...................... $180,024 $159,581 $188,743 $310,842
Loans............................. 53,176 131,794 134,821 148,535
Loans held for sale............... -- -- 20,766 120,002
Allowance for loan losses......... (378) (5,250) (5,356) (6,487)
Deposits.......................... 163,114 141,924 159,061 233,194
Notes payable..................... 10,930 10,930 10,930 12,930
FHLB advances..................... -- -- 4,000 28,000
Warehouse line of credit.......... -- -- -- 6,237
Stockholders' equity.............. 5,270 5,811 6,761 13,009
</TABLE>

26
<PAGE>

<TABLE>
<CAPTION>
APRIL 29, 1994
(INCEPTION) AT OR FOR THE YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, --------------------------
1994 1995 1996 1997
-------------- ------- ------- --------
<S> <C> <C> <C> <C>
OPERATING DATA
Return on average assets(2)........ 0.11% 0.27% 0.56% 2.48%
Return on average stockholders'
equity(2)......................... 3.44% 8.51% 16.10% 71.84%
Net interest margin................ 3.24% 3.61% 5.44% 6.07%
Stockholders' equity to assets..... 2.93% 3.64% 3.58% 4.19%
Tangible capital ratio of Bank..... 8.50% 9.89% 8.85% 7.27%
Core capital ratio of Bank......... 8.50% 9.89% 8.85% 7.27%
Risk-based capital ratio of Bank... 27.53% 17.19% 16.36% 12.34%
ASSET QUALITY DATA
Nonaccrual loans, net(3)........... $1,439 $ 5,240 $ 5,835 $ 6,633
Real estate owned.................. -- 298 988 562
Total non-performing assets........ 1,439 5,538 6,823 7,195
Non-performing assets to total
assets............................ 0.80% 3.47% 3.61% 2.31%
Allowance for credit losses to
loans held for investment......... 0.71% 3.98% 3.97% 4.37%
SUBPRIME MORTGAGE FINANCE DATA
Loan origination activities(4)
Wholesale originations........... -- -- $58,456 $359,236
Retail originations.............. -- -- 13,055 219,386
------ ------- ------- --------
Total loan originations........ -- -- $71,511 $578,622
Percent of loans secured by first
mortgages....................... -- -- 95% 96%
Weighted average initial loan-to-
value ratio..................... -- -- 72% 75%
Originations by product type
Adjustable-rate mortgages...... -- -- 85% 82%
Fixed-rate mortgages........... -- -- 15% 18%
Weighted average interest rate
Adjustable-rate mortgages...... -- -- 9.55% 9.48%
Fixed-rate mortgages........... -- -- 10.76% 10.67%
Average balance per loan......... -- -- $ 100 $ 104
Loans sold through whole loan
transactions(5)................... -- -- $50,142 $360,210
Loan securitizations............... -- -- -- $114,904
Number of retail branches and
wholesale loan centers............ -- -- 5 22
INSURANCE PREMIUM FINANCE DATA
Loans originated................... -- $21,676 $99,012 $145,167
Number of loans originated......... -- 21,137 83,839 125,315
Average net yield on loans
originated........................ -- 15.77% 13.62% 14.01%
Average loan size at origination... -- $ 1.03 $ 1.18 $ 1.16
Net charge-offs to average
loans(2)(6)....................... -- -- 0.38% 0.35%
AUTOMOBILE FINANCE DATA
Gross contracts purchased.......... -- -- $12,216 $ 44,255
Number of contracts purchased...... -- -- 1,175 4,195
Average discount on contracts
purchased......................... -- -- 10.00% 9.86%
Gross amount financed per
contract.......................... -- -- $ 10.42 $ 10.55
Net charge-offs to average
contracts(7) ..................... -- -- 1.50% 4.94%
Number of branches................. -- -- 4 10
</TABLE>

(Footnotes on next page)

27
<PAGE>

- --------

(1) Net income per share - basic is based on the weighted average shares of
Common Stock outstanding during the period adjusted for the 1,875-for-1
stock split effective in November 1997. Net income per share - diluted is
based on the weighted average shares of Common Stock and Common Stock
equivalents outstanding during the period adjusted for a 1,875-for-1 stock
split effective in November 1997.
(2) Information for the period from April 29, 1994 (Inception) to December 31,
1994 is annualized for comparability with full year information.
(3) Nonaccrual loans are net of specific loss allowances.
(4) Does not include conforming loans purchased from the RTC in the aggregate
principal amount of $75.9 million and $57.2 million in the year ended
December 31, 1995 and from April 29, 1994 (Inception) through December 31,
1994, respectively, and conforming loan originations of $4.5 million in
the year ended December 31, 1995.
(5) Does not include $3.5 million in conforming loan sales in the year ended
December 31, 1995.
(6) See "Business--Insurance Premium Finance--Servicing and Collection."
(7) See "Business--Automobile Finance--Servicing and Collection."

The following table presents summary consolidated financial and other data
of the Company for the quarters indicated.
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
----------------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1997 1997 1997 1997
------------ --------- -------- ------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Net interest income.... $ 2,344 $ 2,766 $ 3,511 $ 3,844 $ 3,979
Provision for loan
losses................ 96 94 285 66 62
------- ------- -------- -------- --------
Net interest income
after provision for
loan losses........... 2,248 2,672 3,226 3,778 3,917
------- ------- -------- -------- --------
Non-interest income
Gain on sale of
loans................ 1,479 2,380 4,697 8,183 11,266
Other non-interest
income............... 129 143 179 201 179
------- ------- -------- -------- --------
Total non-interest
income.............. 1,608 2,523 4,876 8,384 11,445
------- ------- -------- -------- --------
Non-interest expense... 3,843 4,800 6,496 7,989 10,797
------- ------- -------- -------- --------
Income before income
taxes................. 13 395 1,606 4,173 4,565
Income taxes........... (7) 162 666 1,752 1,911
------- ------- -------- -------- --------
Net income............. $ 20 $ 233 $ 940 $ 2,421 $ 2,654
======= ======= ======== ======== ========
Net income per share -
basic (1)............. $ -- $ 0.02 $ 0.09 $ 0.23 $ 0.24
======= ======= ======== ======== ========
Net income per share -
diluted (1)........... $ -- $ 0.02 $ 0.08 $ 0.21 $ 0.22
======= ======= ======== ======== ========
Weighted average shares
outstanding -
basic (1)............. 10,669 10,669 10,669 10,669 10,950
======= ======= ======== ======== ========
Weighted average shares
outstanding - diluted
(1)................... 10,669 11,099 11,126 11,126 12,103
======= ======= ======== ======== ========
OTHER DATA
Mortgage loan
originations.......... $34,796 $67,337 $108,481 $161,061 $241,743
Mortgage loans sold or
securitized........... $28,585 $40,254 $ 92,463 $140,363 $202,034
Insurance premium
finance loan
originations.......... $25,563 $43,304 $ 41,951 $ 31,864 $ 28,048
Automobile installment
contracts purchased... $ 5,351 $ 7,686 $ 9,520 $ 12,236 $ 14,813
</TABLE>
- --------

28
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Finance companies 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 paid 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, reflects a combination of spread and non-
interest income.

MORTGAGE FINANCE

From its inception in January 1996 to July 1997, the Company's residential
mortgage finance business was conducted solely through the Bank. As a
federally chartered savings bank, the Bank's residential mortgage finance
business is generally exempt from state licensing requirements. In January
1997, the Company organized United PanAm Mortgage Corporation. Pending receipt
of its requisite state licenses, this subsidiary, as agent of the Bank,
markets loans made by the Bank under the Company's mortgage finance program
pursuant to an operating agreement between the subsidiary and the Bank.
However, the Company does not anticipate that the failure to obtain such
licensing would have a material effect on the conduct of its mortgage finance
business because in such event the Bank will continue to conduct the Company's
mortgage lending operations. After obtaining all required licensing, the
mortgage operations will be operated entirely by United PanAm Mortgage
Corporation. The Company has funded its mortgage finance business to date
primarily through the Bank's deposits, FHLB advances, 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
a loan securitization. In October 1997, the Bank obtained a $100 million
master repurchase agreement to supplement the Bank's existing financing
sources and fund the anticipated growth of its mortgage lending business. 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. In March 1998, the Company sold its residual interests in this
securitization for cash in the amount of $8.3 million which exceeds the
carrying value of approximately $8.2 million at the date of sale. The Company
will continue to evaluate both whole loan sales and securitizations as a means
to finance its loan originations.

The Company has sold or securitized a substantial majority of its mortgage
loan originations to date. Therefore, its mortgage lending income has been
generated almost entirely from gain on sale of loans, with only a small 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.

29
<PAGE>

INSURANCE PREMIUM FINANCE

In May 1995, the Bank entered into a joint venture with BPN. Under this
joint venture, which commenced operations in September 1995, the Bank
underwrites and finances automobile insurance premiums in California and BPN
markets the financing program and services the loans for the Bank. The Company
has an option to purchase BPN exercisable commencing on April 29, 1999 at an
agreed price. For a description of the fees paid by the Bank to BPN and the
allocation of interest, fees, losses and recoveries experienced on the loan
portfolio and the purchase option, see "Business--Insurance Premium Finance--
Relationship with BPN."

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.

AUTOMOBILE FINANCE

In 1996, the Bank commenced its automobile finance business through its
subsidiary, United Auto Credit Corporation. Unlike UPAM and IPF, UACC provides
all marketing, origination, underwriting and servicing activities for its
loans. Therefore, 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 and loan sales. As of December 31, 1997, the Bank was
a five-branch federal savings bank with $233.2 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 $82.0 million in principal amount
(before unearned discounts and premiums) at December 31, 1997.

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 securities portfolio and (iii) consumer loans
originated by its 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

30
<PAGE>

The Company is assessing the expense of year 2000 compliance and the
potential effect on the Company's earnings. The Company does not believe that
the costs of year 2000 compliance will be material.

AVERAGE BALANCE SHEETS

The following tables set forth information relating to the Company for the
years ended December 31, 1995, 1996 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>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1995 1996 1997
--------------------------- --------------------------- ---------------------------
AVERAGE AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE(1) INTEREST COST BALANCE(1) INTEREST COSTS BALANCE(1) INTEREST COST
---------- -------- ------- ---------- -------- ------- ---------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets
Investment Securities.. $ 52,363 $3,205 6.12% $ 11,050 $ 706 6.39% $ 9,763 $ 639 6.55%
Mortgage loans,
net(2)................ 105,833 10,028 9.48% 117,877 11,150 9.46% 161,667 15,240 9.43%
IPF loans, net(3)...... 2,591 300 11.58% 28,795 4,026 13.98% 43,923 6,179 14.07%
Automobile installment
contracts, net(4)..... -- -- -- 2,488 679 27.29% 16,980 4,453 26.22%
-------- ------ -------- ------ -------- -------
Total interest earning
assets................ 160,787 13,533 8.42% 160,210 16,561 10.34% 232,333 26,511 11.41%
------ ------ ------- -----
Non-interest earning
assets(4).............. 6,106 8,124 19,778
-------- -------- --------
Total assets........... $166,893 $168,334 $252,111
======== ======== ========
LIABILITIES AND EQUITY
Interest bearing
liabilities
Customer deposits...... 148,582 7,240 4.87% 146,160 7,225 4.94% 198,405 10,095 5.09%
Notes payable.......... 10,930 487 4.46% 10,930 556 5.09% 11,541 669 5.80%
FHLB advances.......... -- -- -- 1,170 72 6.15% 18,526 1,103 5.95%
Warehouse line of
credit................ -- -- -- -- -- -- 8,914 544 6.10%
-------- ------ ----- -------- ------ ----- -------- -------
Total interest bearing
liabilities........... 159,512 7,727 4.85% 158,260 7,853 4.96% 237,386 12,411 5.23%
------ ----- ------ ----- ------- -----
Non-interest bearing
liabilities............ 1,998 4,173 6,028
-------- -------- --------
Total liabilities...... 161,510 162,433 243,414
Equity.................. 5,383 5,901 8,697
-------- -------- --------
Total liabilities and
equity................ $166,893 $168,334 $252,111
======== ======== ========
Net interest income
before provision for
loan losses............ $5,806 $8,708 $14,100
====== ====== =======
Net interest rate
spread(5).............. 3.57% 5.38% 6.18%
Net interest margin(6).. 3.61% 5.44% 6.07%
Ratio of interest
earning assets to
interest bearing
liabilities............ 100.8% 101.2% 97.9%
</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, 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.

31
<PAGE>

RATE AND VOLUME ANALYSIS

The following table presents the extent to which changes in interest rates
and changes in the volume of interest earning assets and interest bearing
liabilities have affected the Company's interest income and interest expense
during the periods indicated. Information is provided in each category with
respect to: (i) changes attributable to changes in volume (changes in volume
multiplied by prior rate); (ii) changes attributable to changes in rate
(changes in rate multiplied by prior volume); and (iii) the net change. The
changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996
COMPARED TO COMPARED TO
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997
---------------------- ----------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO DUE TO
---------------------- ----------------------
VOLUME RATE NET VOLUME RATE NET
------- ---- ------- ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets
Investment securities......... $(2,639) $140 $(2,499) $4,128 $ (38) $4,090
Mortgage loans, net(1)........ 1,138 (16) 1,122 2,128 25 2,153
IPF loans, net................ 3,652 74 3,726 3,799 (26) 3,773
Automobile installment
contracts, net............... 679 -- 679 (85) 19 (66)
------- ---- ------- ------ ------ ------
Total interest earning
assets..................... 2,830 198 3,028 9,970 (20) 9,950
Interest bearing liabilities
Customer deposits............. (133) 118 (15) 2,653 217 2,870
Notes payable................. -- 69 69 32 81 113
FHLB advances................. 72 -- 72 1,033 (2) 1,031
Warehouse line of credit...... -- -- -- 272 272 544
------- ---- ------- ------ ------ ------
Total interest bearing
liabilities................ (61) 187 126 3,990 568 4,558
------- ---- ------- ------ ------ ------
Change in net interest income.. $ 2,891 $ 11 $ 2,902 $5,980 $(588) $5,392
======= ==== ======= ====== ====== ======
</TABLE>
- --------
(1) Includes interest on loans held for sale.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND
DECEMBER 31, 1997

GENERAL

Net income increased from $950,000 for the twelve months ended December 31,
1996 to $6.2 million for the twelve months ended December 31, 1997. 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 in 1997. Also contributing to the favorable operating
results was an increase of $24.2 million in gain on sales of loans from the
Company's mortgage finance operations offset by an increase in non-interest
expense of $20.4 million which also resulted primarily from the expansion of
mortgage finance and other lending operations.

As a result of the expansion of the Company's lending operations, mortgage
loan originations increased from $71.5 million for the twelve months ended
December 31, 1996 to $578.6 million for the twelve months ended December 31,
1997, while insurance premium financing originations increased from $99.0
million to $145.2 million, respectively, and auto contracts purchased
increased from $12.2 million to $44.3 million, respectively. Sales of mortgage
loans were $50.1 million for the twelve months ended December 31, 1996 and
$475.1 million for the comparable period in 1997.

32
<PAGE>

INTEREST INCOME

Interest income increased from $16.6 million for the twelve months ended
December 31, 1996 to $26.5 million for the twelve months ended December 31,
1997 due primarily to a $72.1 million increase in average earning assets and a
1.07% increase in the average yield on earning assets. The largest components
of growth in average earning assets were mortgage loans, insurance premium
finance loans and auto contracts, which increased $43.8 million, $15.1 million
and $14.5 million, respectively. The increase in the average yield on earning
assets was attributable to an increase in the origination or purchase of
higher yielding loans during 1997 principally related to the expansion and
growth of the mortgage, insurance premium and automobile finance businesses.
The increase in mortgage loan receivables was a result of an increase in loans
held for sale, which increased from $20.8 million at December 31, 1996 to
$120.0 million at December 31, 1997. Generally, these loans are originated for
sale in the secondary mortgage market. The growth in IPF loans was primarily a
result of new loan originations associated with changes in California's
automobile insurance laws effective January 1, 1997, while 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.

INTEREST EXPENSE

Interest expense increased from $7.9 million for the twelve months ended
December 31, 1996 to $12.4 million for the twelve months ended December 31,
1997, due to a $79.1 million increase in average interest bearing liabilities
and a 0.27% increase in the weighted average interest rate on interest bearing
liabilities. The largest component of growth in interest bearing liabilities
was deposits with the Bank, which increased from an average balance of $146.2
million for the twelve months ended December 31, 1996 to $198.4 million for
the twelve months ended December 31, 1997. The average cost of deposits
increased from 4.94% for the twelve months ended December 31, 1996 to 5.09%
for the twelve months ended December 31, 1997.

The increase in deposits resulted from the use of retail and wholesale CDs
to finance the Company's lending operations, and the increase in the average
yield on the Bank's deposits reflects the repricing of accounts to higher
rates.

The second largest component of growth in interest bearing liabilities was
FHLB advances to the Bank, which increased from an average balance of $1.2
million for the twelve months ended December 31, 1996 to $18.5 million for the
comparable period in 1997. This increase reflects the use of short-term
borrowings to support the growth of the Company's lending businesses.

PROVISION FOR LOAN LOSSES

Provision for loan losses increased from $194,000 for the twelve months
ended December 31, 1996 to $507,000 for the twelve months ended December 31,
1997. The increase in the provision reflects management's decision to increase
general valuation allowances as a result of the increase in loans made by the
Company. The total allowance for loan losses was $5.4 million at December 31,
1996 compared to $6.5 million at December 31, 1997. The increase is
attributable to the additional provision for losses recorded during the twelve
months ended December 31, 1997 and $2.0 million in acquisition discounts
related to the Company's purchase of auto contracts. The Company allocates the
estimated amount of discounts attributable to credit risk to the allowance for
loan losses. Net loan charge-offs were $444,000 in the twelve months ended
December 31, 1996 compared to $1.3 million in the twelve months ended December
31, 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.

33
<PAGE>

NON-INTEREST INCOME

Non-interest income increased $24.4 million, from $2.8 million for the
twelve months ended December 31, 1996 to $27.2 million for the twelve months
ended December 31, 1997. This increase resulted from gain on sale of mortgage
loans and is due primarily to a substantial increase in the volume of loans
sold by UPAM. During the twelve months ended December 31, 1996, the Company
sold $50.1 million in mortgage loans compared to $475.1 million in mortgage
loans sold or securitized during the comparable period in 1997. Net gains on
sales of loans, as a percentage of loans sold, were 4.65% for the twelve
months ended December 31, 1996 compared to 5.58% for the twelve months ended
December 31, 1997. During the twelve months ended December 31, 1997, the
Company sold $360.2 million as whole loan sales and completed its first
securitization of $114.9 million in mortgage loans in December 1997. In March
1998, the Company sold its residual interests in this securitization for cash
in the amount of $8.3 million which exceeds the carrying value of
approximately $8.2 million at the date of sale. The Company expects to sell or
securitize mortgage loans on a periodic basis in the future.

As part of its securitization, the Company recorded a net gain on sale of
$5.9 million and recorded residual interests in securitizations of $8.2
million consisting of beneficial interests in the form of an interest-only
strip representing the subordinated right to receive cash flows from the pool
of securitized loans after payment of required amounts to the holders of the
securities and certain costs associated with the securitization.

The Company classifies its residual interests in securitizations as trading
securities and records them at fair market value with any unrealized gains or
losses recorded in the results of operations.

Valuations of the residual interests in securitizations at each reporting
period are based on discounted cash flow analyses. Cash flows are estimated as
the amount of the excess of the weighted-average coupon on the loans sold over
the sum of the pass-through on the senior certificates, a servicing fee, an
estimate of annual future credit losses and prepayment assumptions and other
expenses associated with the securitization, discounted at an interest rate
which the Company believes is commensurate with the risks involved. The
Company uses prepayment and default assumptions that market participants would
use for similar instruments subject to prepayment, credit and interest rate
risks. The assumptions used by the Company for valuing the residual interests
in securitizations arising from its December securitization included a
prepayment assumption of 5% for the first year increasing to 25% thereafter,
an annual credit loss assumption of 0.75% and a discount rate of 15%. In March
1998, the Company sold its residual interests in this securitization for cash
in the amount of $8.3 million which exceeds the carrying value of
approximately $8.2 million at the date of sale.

In connection with its securitization transaction, an overcollateralization
amount is required to be maintained which serves as credit enhancement to the
senior certificate holders. The overcollateralization amount initially
consists of the excess of the principal balance of the mortgage loans sold,
less the principal balance of the certificates sold to investors. The
overcollateralization is required to be maintained at a specified target level
of the principal balance of the certificates and can be increased as specified
in the related securitization documents. Cash flows received in excess of the
obligations to the senior certificate holders and certain costs of the
securitization are deposited into a trust account until the
overcollateralization target is reached. Once this target is reached,
distributions of excess cash from the trust account are remitted to the
Company.

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 $259,000, from $443,000 for the twelve months ended December 31,
1996 to $702,000 for the twelve months ended December 31, 1997.

NON-INTEREST EXPENSE

Non-interest expense increased $20.5 million, from $9.6 million for the
twelve months ended December 31, 1996 to $30.1 million for the twelve months
ended December 31, 1997. This increase primarily reflects an increase in
salaries, loan commissions, employee benefits and other personnel costs of
$13.8 million associated with the expansion of the Company's mortgage and
automobile finance operations. In addition, occupancy expense increased
$2.1 million, reflecting an increase in the number of mortgage and automobile
lending offices. Marketing expense was $1.7 million for the twelve months
ended December 31, 1997, compared to $171,000

34
<PAGE>

for the twelve months ended December 31, 1996. 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 $3.8 million during
the twelve months ended December 31, 1997 compared to the same period in 1996.

The Company significantly expanded its mortgage and automobile finance
operations, resulting in an increase from 54 employees in five offices and 25
employees in four offices, respectively, as of December 31, 1996 to 359
employees in 22 offices and 60 employees in ten offices, respectively, as of
December 31, 1997.

INCOME TAXES

Income taxes increased $3.8 million, from $691,000 for the twelve months
ended December 31, 1996 to $4.5 million for the twelve months ended
December 31, 1997. This increase occurred as a result of a $9.1 million
increase in income before income taxes between the two periods offset by a
decrease in the effective tax rate from 42.1% for 1996 to 41.8% for 1997.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1996 AND DECEMBER 31, 1997

Total assets increased $122.1 million, from $188.7 million at December 31,
1996 to $310.8 million at December 31, 1997. This increase occurred primarily
as a result of a $112.9 million increase in loans receivable, from
$155.6 million at December 31, 1996 to $268.5 million as of December 31, 1997.
The increase in loans was comprised of a $99.2 million increase in mortgage
loans held for sale, a $22.7 million increase (net of unearned finance
charges) in auto contracts and a $7.9 million increase in insurance premium
finance loans, offset by a $20.7 million decrease in loans purchased from the
RTC as a result of scheduled principal amortizations and prepayments.

Cash and cash equivalents decreased $7.1 million, from $26.1 million at
December 31, 1996 to $19.0 million at December 31, 1997, primarily as a result
of funding for the Company's origination of loans.

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. There were no residual interests in securitizations at December
31, 1996.

Premises and equipment increased from $822,000 at December 31, 1996 to $3.1
million at December 31, 1997 as a result of purchases of furniture and
equipment for the Company's new branch offices and the overall growth in
lending operations.

Deposit accounts at the Bank increased $74.1 million, from $159.1 million at
December 31, 1996 to $233.2 million at December 31, 1997, due primarily to an
increase in CDs of $65.7 million, from $131.4 million at December 31, 1996 to
$197.1 million at December 31, 1997. Included in deposits at December 31, 1997
are $17.5 million in brokered CDs. There were no brokered CDs outstanding at
December 31, 1996.

Other interest bearing liabilities include the RTC notes payable which
remained unchanged at $10.9 million between period ends, FHLB advances which
increased from $4.0 million as of December 31, 1996 at a weighted average
interest rate of 5.70% to $28.0 million at December 31, 1997 at a weighted
average interest rate of 7.07%, notes payable from shareholders which
increased $2.0 million between period ends and a warehouse line of credit of
$6.2 million at December 31, 1997.

Net deferred tax assets were $3.2 million at December 31, 1997 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.

Shareholders' equity increased from $6.8 million at December 31, 1996 to
$13.0 million at December 31, 1997, solely as a result of the Company's net
income.

35
<PAGE>

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1995 AND
DECEMBER 31, 1996

GENERAL

Net income increased from $458,000 for the year ended December 31, 1995 to
$950,000 for the year ended December 31, 1996. This increase was due primarily
to the expansion of the Company's insurance premium and mortgage finance
businesses which commenced in the later part of 1995 and early 1996,
respectively. Partially offsetting this increase in net income was an increase
in operating costs incurred by UPAM as well as those incurred as a result of
the commencement in early 1996 of UACC's operations.

INTEREST INCOME

Interest income increased from $13.5 million for the year ended December 31,
1995 to $16.6 million for the year ended December 31, 1996 due primarily to a
1.9% increase in the average yield on earning assets. While average earning
assets decreased $577,000, the components of this balance changed
significantly with the average balance of insurance premium finance loans
increasing from $2.6 million for the year ended December 31, 1995 to $28.8
million for the comparable period in 1996, and mortgage loans increasing from
$105.8 million to $117.9 million, respectively. These increases in average
earning assets were offset by a decline in average investments from $52.4
million for the year ended December 31, 1995 to $11.1 million for the year
ended December 31, 1996. The changes in average earning assets resulted from
the Company's strategy of reinvesting in higher yielding loans, such as
subprime mortgage and insurance premium finance loans, rather than investment
securities and traditional mortgage loans which dominated the Company's
balance sheet in the early years of its operations.

INTEREST EXPENSE

Interest expense increased from $7.7 million for the year ended December 31,
1995 to $7.9 million for the year ended December 31, 1996 due primarily to a
$1.3 million decrease in average interest bearing liabilities, offset by a
0.11% increase in the weighted average interest rate on interest bearing
liabilities. The largest component of change in interest bearing liabilities
was deposits, which decreased from an average balance of $148.6 million for
the year ended December 31, 1995 to $146.2 million for the year ended December
31, 1996. The average cost of deposits increased from 4.87% for the year ended
December 31, 1995 to 4.94% for the year ended December 31, 1996.

Other interest bearing liabilities include the RTC Notes Payable, which
remained unchanged at $10.9 million at both December 31, 1995 and 1996, and
FHLB advances which increased to $4.0 million at December 31, 1996 with a
weighted average interest rate of 5.70%. The Bank had no FHLB advances at
December 31, 1995.

PROVISION FOR LOAN LOSSES

Provision for loan losses increased from $120,000 for the year ended
December 31, 1995 to $194,000 for the year ended December 31, 1996. This
increase was due primarily to the growth in 1996 of the Company's insurance
premium finance business. The total allowance for loan losses was $5.3 million
at December 31, 1995 compared to $5.4 million at December 31, 1996. The
increase is attributable to the additional provision for losses recorded
during the year ended December 31, 1996 and $356,000 in acquisition discounts
related to the Company's purchase of auto contracts. The Company allocated the
estimated amount of discounts attributable to credit risk to the allowance for
loan losses. Net loan charge-offs were $108,000 in the year ended December 31,
1995 compared to $444,000 in the year ended December 31, 1996.

36
<PAGE>

NON-INTEREST INCOME

Non-interest income increased $2.5 million, from $318,000 for the year ended
December 31, 1995 to $2.8 million for the year ended December 31, 1996. This
increase resulted from gain on sale of loans and is due primarily to a
substantial increase in the volume of mortgage loans sold by the Company.
During the year ended December 31, 1995, the Company sold $3.5 million in
mortgage loans compared to $50.1 million during the comparable period in 1996.
Net gains on sales of loans, as a percentage of loans sold, were 2.57% for the
year ended December 31, 1995 compared to 4.65% for the year ended December 31,
1996. All loans sold during the year ended December 31, 1995 and 1996 were
sold as whole loans with servicing released to the investor.

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 $215,000 from $228,000 for the year ended December 31, 1995 to
$443,000 for the year ended December 31, 1996.

NON-INTEREST EXPENSE

Non-interest expense increased $4.4 million, from $5.2 million for the year
ended December 31, 1995 to $9.6 million for the year ended December 31, 1996.
This increase primarily reflects an increase in salaries, loan commissions,
employee benefits and other personnel costs of $2.5 million associated with
the Company's mortgage and automobile finance operations which commenced in
early 1996. In addition, occupancy expense increased $402,000 also reflecting
an increase in the number of mortgage and automobile finance offices. As a
result of growth in mortgage and automobile finance operations, other
operating expenses, including stationery and supplies, data processing,
insurance, telephone and postage increased $800,000 during the year ended
December 31, 1996 compared to the same period in 1995.

As stated above, the Company commenced its subprime mortgage finance and
automobile finance businesses in early 1996, and by December 31, 1996 these
operations grew to 64 employees in five offices and 25 employees in four
offices, respectively.

Also included in 1996 non-interest expense is a one-time special assessment
in the amount of $820,000 to recapitalize the SAIF. This assessment of 0.657%
of the Bank's assessment base as of March 31, 1995 was enacted through federal
legislation and paid by SAIF insured institutions. As a result of this
recapitalization, the Bank's future deposit insurance assessments will
decrease significantly.

INCOME TAXES

Income taxes increased $307,000 from $384,000 for the year ended December
31, 1995 to $691,000 for the year ended December 31, 1996. This increase
occurred as a result of a $799,000 increase in income before income taxes
between the two years offset by a decrease in the effective tax rate from
45.6% in 1995 to 42.1% in 1996.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1995 AND DECEMBER 31, 1996

Total assets increased $29.1 million, from $159.6 million as of December 31,
1995 to $188.7 million as of December 31, 1996. This increase occurred
primarily as a result of a $23.8 million increase in loans, from
$131.8 million for the year ended December 31, 1995 to $155.6 million for the
year ended December 31, 1996. The increase in loans was comprised of a $20.8
million increase in mortgage loans held for sale, a $7.6 million increase (net
of unearned finance charges) in auto contracts and a $15.1 million increase in
insurance premium finance loans, offset by a $21.8 million decrease in loans
purchased from the RTC, resulting from scheduled principal amortization and
prepayments.

Cash and cash equivalents increased $2.5 million, from $23.6 million as of
December 31, 1995 to $26.1 million as of December 31, 1996, as a result of
increased liquidity from the Company's sale of mortgage loans.

37
<PAGE>

Deposit accounts increased $17.2 million, from $141.9 million as of December
31, 1995 to $159.1 million as of December 31, 1996 due primarily to an
increase in CDs of $15.6 million, from $115.8 million as of December 31, 1995
to $131.4 million as of December 31, 1996. The Company uses CDs, in part, to
finance the growth of its lending operations.

Other interest-bearing liabilities include the RTC Notes Payable which
remained unchanged at $10.9 million at December 31, 1995 and 1996, and FHLB
advances which increased to $4.0 million at December 31, 1996 with a weighted
average interest rate of 5.70%. There were no FHLB advances at December 31,
1995.

Stockholders' equity increased $950,000, from $5.8 million as of December
31, 1995 to $6.8 million as of December 31, 1996, solely as a result of the
Company's net income for the year.

COMPARISON OF OPERATING RESULTS FOR THE PERIOD FROM APRIL 29, 1994 (INCEPTION)
THROUGH DECEMBER 31, 1994 AND THE YEAR ENDED DECEMBER 31, 1995

GENERAL

Net income increased from $116,000 for the period from April 29, 1994
(Inception) to December 31, 1994 to $458,000 for the year ended December 31,
1995. This increase was due primarily to (i) completion of the Bank's
purchases of loans from the RTC thereby converting assets from lower yielding
investment securities into higher yielding loans, and (ii) the inclusion of
twelve months of operations in 1995 as opposed to eight months in 1994. The
Bank acquired certain assets and assumed certain liabilities from the RTC on
April 29, 1994.

INTEREST INCOME

Interest income increased from $6.9 million for the period from April 29,
1994 (Inception) to December 31, 1994 to $13.5 million for the year ended
December 31, 1995 due primarily to (i) the inclusion of twelve months of
operations in 1995 as opposed to eight months in 1994, and (ii) a $7.6 million
increase in average earning assets and a 1.68% increase in the average yield
on earning assets. The largest component of growth in average earning assets
was mortgage loans, which increased $50.2 million. Loans totaling $133.1
million were purchased from the RTC from April 1994 through December 1995, and
these higher yielding loans resulted in a significant increase in interest
income.

INTEREST EXPENSE

Interest expense increased from $3.6 million for the period from April 29,
1994 (Inception) to December 31, 1994 to $7.7 million for the year ended
December 31, 1995 due primarily to (i) the inclusion of twelve months of
operations in 1995 as opposed to eight months in 1994, (ii) a $10.3 million
increase in average interest bearing liabilities and (iii) a 1.30% increase in
the weighted average interest rate on interest bearing liabilities. The
largest component of growth in interest bearing liabilities was deposits,
which increased from an average balance of $140.3 million for the period from
April 29, 1994 (Inception) to December 31, 1994 to $148.6 million for the year
ended December 31, 1995. This growth resulted from the Bank's purchase of
deposits from the RTC offset by the sale of deposits by the Bank in the same
period and deposit outflows. The average cost of deposits increased from 3.58%
for the period from April 29, 1994 (Inception) to December 31, 1994 to 4.87%
for the year ended December 31, 1995 primarily as a result of deposits
repricing to higher interest rate accounts.

Other interest-bearing liabilities include the RTC Notes Payable, the
average balance of which increased $1.9 million between years as a result of
an additional loan provided to the Bank as part of its purchase of deposits
from the RTC.

38
<PAGE>

PROVISION FOR LOAN LOSSES

Provision for loan losses increased from $50,000 for the period from April
29, 1994 (Inception) to $120,000 for the year ended December 31, 1995. The
total allowance for loan losses was $378,000 at December 31, 1994 compared to
$5.3 million at December 31, 1995. This increase was attributable to the
additional provision for losses recorded during the year ended December 31,
1995 and $4.9 million in acquisition discounts related to the Company's
purchase of loans from the RTC. The Company allocated the estimated amount of
discounts attributable to credit risk to the allowance for loan losses. Loan
charge-offs were $108,000 in the year ended December 31, 1995. There were no
charge-offs in the period from April 29, 1994 (Inception) to December 31,
1994.

NON-INTEREST INCOME

Non-interest income increased $220,000, from $98,000 for the period from
April 29, 1994 (Inception) through December 31, 1994 to $318,000 for the year
ended December 31, 1995. This increase was due primarily to (i) the inclusion
of twelve months of operations in 1995 as opposed to eight months in 1994, and
(ii) an increase in gain on sale of loans from $3,000 for the period from
April 29, 1994 (Inception) through December 31, 1994 to $90,000 for the year
ended December 31, 1995.

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 $133,000 from $95,000 for the period from April 29, 1994 (Inception)
through December 31, 1994 to $228,000 for the year ended December 31, 1995.

NON-INTEREST EXPENSE

Non-interest expense increased $2.1 million, from $3.1 million for the
period from April 29, 1994 (Inception) through December 31, 1994 to $5.2
million for the year ended December 31, 1995. This increase was due primarily
to (i) the inclusion of twelve months of operations in 1995 as opposed to
eight months in 1994, and (ii) increases in compensation and benefits
occurring from increased staffing in the Bank.

INCOME TAXES

Income taxes increased $286,000 from $98,000 for the period from April 29,
1994 (Inception) through December 31, 1994 to $384,000 for the year ended
December 31, 1995. This increase occurred as a result of a $628,000 increase
in income before income taxes between the two years, offset by a decrease in
the average tax rate from 45.8% in 1994 to 45.6% in 1995.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1994 AND DECEMBER 31, 1995

Total assets decreased $20.5 million, from $180.0 million at December 31,
1994 to $159.6 million at December 31, 1995. This decrease occurred primarily
as a result of a $95.8 million decrease in short-term investments offset by a
$79.0 million increase in loans. The increase in loans was comprised primarily
of a $75.9 million increase in mortgage loans purchased from the RTC under the
Minority Preference Resolution Program in 1994 and 1995.

Cash and cash equivalents decreased $96.0 million, from $119.6 million at
December 31, 1994 to $23.6 million at December 31, 1995, resulting from the
purchase of loans from the RTC in 1995.

Deposits at the Bank decreased $21.2 million, from $163.1 million at
December 31, 1994 to $141.9 million at December 31, 1995 due primarily to
outflows in the Bank's deposits resulting from the acquisition by the Bank of
certain assets and liabilities from the RTC and the resultant lowering of
deposit rates to reflect market conditions and reduce excess liquidity held by
the Bank.

Other interest-bearing liabilities include the RTC Notes Payable, which
remained unchanged at $10.9 million between December 31, 1994 and 1995.

39
<PAGE>

Stockholders' equity increased $500,000, from $5.3 million at December 31,
1994 to $5.8 million at December 31, 1995, solely as a result of the Company's
net income for the year.

MANAGEMENT OF INTEREST RATE RISK

The principal objective of the Company's interest rate risk management
activities 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
ARMs 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 prepared quarterly by the OTS (the "OTS
NPV model"), 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 interest rate risk policy of the Company provides that the maximum
permissible change at a 400 basis point increase or decrease in market
interest rates is a 30% change in NPV. 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 purpose of the risk-based capital requirement.

At September 30, 1997, 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 40 basis points and would result in
a $1.4 million increase in the NPV of the Bank and (ii) a 200 basis point
increase in interest rates was 50 basis points and would result in a $1.8
million decrease in the NPV of the Bank. At September 30, 1997, 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.

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.

40
<PAGE>

The following table shows the NPV and projected change in the NPV of the
Bank at September 30, 1997 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.................... $33,034 $(8,495) -20% 11.46% -258 bp
+300 bp.................... $36,982 $(4,547) -11% 12.69% -135 bp
+200 bp.................... $39,766 $(1,763) -4% 13.54% -50 bp
+100 bp.................... $41,198 $ (331) -1% 13.96% -8 bp
0 bp....................... $41,529 -- -- 14.04% --
- -100 bp.................... $41,794 $ 265 +1% 14.11% +7 bp
- -200 bp.................... $42,967 $ 1,438 +3% 14.44% +40 bp
- -300 bp.................... $44,724 $ 3,195 +8% 14.95% +91 bp
- -400 bp.................... $47,183 $ 5,654 +14% 15.66% +162 bp
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

The Company's primary sources of funds are deposits with the Bank, FHLB
advances, principal and interest payments on loans, cash proceeds from the
sale of loans and, to a lesser extent, interest payments on securities 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 a primary source of funds for
the Company. During the twelve months ended December 31, 1996 and 1997, cash
flows from sales and securitizations of loans were $52.2 million and
$493.5 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 requirement and the duration of
the account. Interest rates paid, maturity terms, service fees and withdrawal
penalties are established by the Bank periodically based on liquidity and
financing requirements, rates paid by competitors, growth goals and federal
regulations. At December 31, 1997, such retail deposits were $182.2 million or
78.1% of total deposits.

The Bank uses wholesale and broker-originated deposits to supplement its
retail deposits and, at December 31, 1997, wholesale deposits were $33.5
million or 14.4% of total deposits while broker-originated deposits were
$17.5 million or 7.5% 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. The weighted average maturity of wholesale and broker-
originated deposits at December 31, 1997 was five months.

41
<PAGE>

The Company believes that wholesale and broker-originated deposits provide a
supplemental short-term source of funding which can be more flexible than
retail sources of funds for matching asset maturities, especially the
Company's loans held for sale. While the Company believes its primary source
of deposits will continue to be originated from the Bank's retail branches,
wholesale and broker-originated deposits will be used to provide additional
sources of funds to finance lending growth.

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.

The following table sets forth the average balances and rates paid on each
category of deposits for the years ended December 31, 1995, 1996 and 1997.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1996 1997
---------------- ---------------- ----------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
-------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts............ $ 16,612 2.12% $ 14,665 2.39% $ 21,452 3.44%
Checking accounts............ 12,091 1.48% 10,060 1.33% 9,910 1.32%
Certificates of deposit
Under $100,000.............. 112,342 5.67% 117,063 5.55% 135,059 5.53%
$100,000 and over........... 7,537 6.36% 4,372 5.88% 31,984 5.90%
-------- -------- --------
Total...................... $148,582 4.87% $146,160 4.94% $198,405 5.09%
======== ======== ========
</TABLE>

The following table sets forth the time remaining until maturity for all CDs
at December 31, 1995, 1996 and 1997.

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Maturity within one year................. $ 76,879 $103,369 $181,858
Maturity within two years................ 36,316 26,819 14,984
Maturity within three years.............. 1,681 1,177 298
Maturity within four years............... 957 -- --
-------- -------- --------
Total certificates of deposit............ $115,833 $131,365 $197,140
======== ======== ========
</TABLE>

At December 31, 1997, the Bank exceeded all of its regulatory capital
requirements (and was deemed to be "well capitalized") with (i) tangible
capital of $22.4 million, or 7.27% of total adjusted assets, which is above
the required level of $4.6 million, or 1.50%; (ii) core capital of $22.4
million, or 7.27% of total adjusted assets, which is above the required level
of $9.2 million, or 3.00%; and (iii) risk-based capital of $24.9 million, or
12.34% of risk-weighted assets, which is above the required level of $16.0
million, or 8.00%.

The Company has other sources of liquidity, including FHLB advances,
warehouse lines of credit and securities maturing within one year. 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. The Bank's available borrowing capacity under this credit
facility was $40.9 million at December 31, 1997.

42
<PAGE>

Other borrowings of the Company consist of the RTC Notes Payable which
mature in 1999, notes payable from shareholders which mature in 1999 and a
warehouse line of credit. See "--Liquidity and Capital Resources--Warehouse
Line of Credit" and "--RTC Notes Payable" for a discussion of the Company's
warehouse line of credit and RTC Notes Payable, respectively, and
"Management--Certain Transactions" for discussion of the notes payable from
shareholders.

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>
AT OR FOR YEARS ENDED
DECEMBER 31,
-------------------------
1995 1996 1997
------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
FHLB advances
Maximum month-end balance.......................... $ -- $ 4,000 $ 40,900
Balance at end of period........................... -- 4,000 28,000
Average balance for period......................... -- 1,170 18,526
Weighted average interest rate on
Balance at end of period........................... -- % 5.70% 7.07%
Average balance for period......................... -- % 6.15% 5.95%
Warehouse line of credit
Maximum month-end balance.......................... $ -- $ -- $ 64,359
Balance at end of period........................... -- -- 6,237
Average balance for period......................... -- -- 8,914
Weighted average interest rate on
Balance at end of period........................... -- % -- % 6.70%
Average balance for period......................... -- % -- % 6.10%
</TABLE>

The Company had no material contractual obligations or commitments for
capital expenditures at December 31, 1997. 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 December 31, 1997, the Company had
outstanding commitments to originate loans of $117.4 million, compared to
$19.1 million at December 31, 1996. The Company anticipates that it will have
sufficient funds available to meet its current loan origination commitments.

WAREHOUSE LINE OF CREDIT

In October 1997, the Bank entered into a $100 million master repurchase
agreement under which it may sell and repurchase at a set price mortgage loans
pending the sale or securitization of such loans. The arrangement provides for
an advance rate approximating 100% of the outstanding principal balance of
qualifying mortgage loans and a rate of interest to be determined by the
parties upon each such sale of mortgage loans, but which shall not exceed
LIBOR plus 0.70%. Qualifying mortgage loans consist of first and second
mortgage loans with an LTV that does not exceed 90%, subject to certain
restrictions. This agreement may be terminated at any time at the option of
either party.

RTC NOTES PAYABLE

In connection with its acquisition of certain assets from the RTC, the Bank
obtained loans 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,

43
<PAGE>

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 unpaid 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 as 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 (5.375% at December
31, 1997) plus 300 basis points, beginning on the date such unpaid amount
became due.

Until all of the obligations of PAFI and the Bank have been discharged, the
Bank has agreed, pursuant to the RTC Agreements, among other things, not to:
(i) declare or pay any dividends, except under certain limited circumstances,
and not to issue any capital stock or any options or other rights in respect
thereto, or repurchase, redeem, retire or otherwise acquire for value any of
its capital stock; (ii) make any loan or advance to PAFI or any other
affiliate, except to United PanAm Mortgage Corporation and United Auto Credit
Corporation, as long as such transactions do not require the Bank to
repurchase any loans which would result in a loss to the Bank; (iii) increase
the compensation of, or pay any bonuses to, any of its officers, directors or
key employees unless such increases are approved by the RTC; or (iv) sell or
otherwise dispose of all or substantially all of its assets, enter into any
merger or consolidation or enter into any agreement providing for a change of
control of the Bank, unless such transaction is conditioned upon the prior or
simultaneous repayment in full of all amounts due under the RTC Agreements.

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 non-recourse,
servicing released basis. As a result, upon sale, all risks and rewards of
ownership, including those associated with loan payments, 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. Accordingly, to date, prepayments have not
had a significant effect on the Company's operations.

Summary of Loan Portfolio. At December 31, 1997, the Company's loan
portfolio constituted $268.5 million or 86.4% of the Company's total assets,
of which $148.5 million or 55.3% were held for investment and $120.0 million
or 44.7% 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.

44
<PAGE>

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

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996 1997
------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
MORTGAGE LOANS
Mortgage loans (purchased
primarily from RTC)...... $57,274 $124,483 $102,733 $ 81,995
------- -------- -------- --------
Subprime mortgage loans
Held for sale........... -- -- 20,766 120,002
Held for investment..... -- -- 1,294 5,375
------- -------- -------- --------
Total subprime mortgage
loans.................. -- -- 22,060 125,377
------- -------- -------- --------
Total mortgage loans.... 57,274 124,483 124,793 207,372
------- -------- -------- --------
CONSUMER LOANS
Automobile installment
contracts................ -- -- 10,830 40,877
Insurance premium
financing................ -- 16,975 32,058 39,990
Other consumer loans...... 235 31 230 267
------- -------- -------- --------
Total consumer loans.... 235 17,006 43,118 81,134
------- -------- -------- --------
Total loans............. 57,509 141,489 167,911 288,506
Unearned discounts and
premiums................. (4,333) (4,445) (3,697) (2,901)
Unearned finance charges.. -- -- (3,271) (10,581)
Allowance for loan
losses................... (378) (5,250) (5,356) (6,487)
------- -------- -------- --------
Total loans, net........ $52,798 $131,794 $155,587 $268,537
======= ======== ======== ========
</TABLE>

Loan Maturities. The following table sets forth the dollar amount of loans
maturing in the Company's loan portfolio at December 31, 1997 based on
scheduled contractual amortization. Loan balances are reflected before
unearned discounts and premiums, unearned finance charges and allowance for
losses.

<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
--------------------------------------------------------------------------
MORE THAN MORE THAN MORE THAN MORE THAN
ONE YEAR 1 YEAR TO 3 YEARS TO 5 YEARS TO 10 YEARS TO MORE THAN
OR LESS 3 YEARS 5 YEARS 10 YEARS 20 YEARS 20 YEARS TOTAL LOANS
-------- --------- ---------- ---------- ----------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans held for
investment............. $ 78 $ 484 $ 2,090 $7,185 $27,083 $ 50,450 $ 87,370
Mortgage loans held for
sale................... -- -- -- -- 4,983 115,019 120,002
Consumer loans.......... 40,527 19,933 20,674 -- -- -- 81,134
------- ------- ------- ------ ------- -------- --------
Total................. $40,605 $20,417 $22,764 $7,185 $32,066 $165,469 $288,506
======= ======= ======= ====== ======= ======== ========
</TABLE>

The following table sets forth, at December 31, 1997, the dollar amount of
loans receivable that were contractually due after one year and indicates
whether such loans have fixed or adjustable interest rates.

<TABLE>
<CAPTION>
DUE AFTER DECEMBER 31, 1998
---------------------------
FIXED ADJUSTABLE TOTAL
------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Mortgage loans held for investment.............. $16,106 $ 71,186 $ 87,292
Mortgage loans held for sale.................... 24,898 95,104 120,002
Consumer loans.................................. 40,340 267 40,607
------- -------- --------
Total......................................... $81,344 $166,557 $247,901
======= ======== ========
</TABLE>

45
<PAGE>

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."

At December 31, 1997, the Company had $2.7 million in assets classified as
special mention, $6.9 million of assets classified as substandard, $70,000 in
assets classified as doubtful and no assets classified as loss.

The following table sets forth the remaining balances of all loans in the
Bank's held for investment portfolio (before specific reserves for losses)
that were more than 30 days delinquent at December 31, 1995, 1996 and 1997.

<TABLE>
<CAPTION>
LOAN DECEMBER 31, % OF TOTAL DECEMBER 31, % OF TOTAL DECEMBER 31, % OF TOTAL
DELINQUENCIES 1995 LOANS 1996 LOANS 1997 LOANS
- ------------- ------------ ---------- ------------ ---------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
30 to 59 days........... $1,753 1.3% $1,866 1.3% $ 416 0.3%
60 to 89 days........... 842 0.6% 109 0.1% 641 0.4%
90+ days................ 6,507 4.7% 6,422 4.6% 7,130 4.6%
------ --- ------ --- ------ ---
Total................... $9,102 6.6% $8,397 6.0% $8,187 5.3%
====== === ====== === ====== ===
</TABLE>

46
<PAGE>

Nonaccrual and Past Due Loans. The Company's general policy is to
discontinue accrual of interest on a mortgage loan when it is delinquent 90
days or more, and on a non-mortgage loan 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 December 31, 1997 had no troubled debt restructured loans. The following
table sets forth the aggregate amount of nonaccrual loans (net of unearned
discounts and premiums, unearned finance charges and specific allowances) at
December 31, 1994, 1995, 1996 and 1997.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1994 1995 1996 1997
------ ------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Nonaccrual loans
Single-family residential................ $1,439 $5,086 $5,044 $5,219
Multi-family residential................. -- 154 81 81
Consumer and other loans................. -- -- 710 1,333
------ ------ ------ ------
Total.................................. $1,439 $5,240 $5,835 $6,633
====== ====== ====== ======
Nonaccrual loans as a percentage of
Total loans held for investment.......... 2.73% 3.85% 4.19% 4.31%
Total assets............................. 0.80% 3.28% 3.09% 2.13%
General allowance for loan losses as a
percentage of
Total loans held for investment.......... 0.71% 3.19% 3.14% 3.54%
Nonaccrual loans......................... 26.27% 82.80% 74.90% 82.33%
</TABLE>

For the years ended December 31, 1995, 1996 and 1997, the amount of interest
income that would have been recognized on nonaccrual loans if such loans had
continued to perform in accordance with their contractual terms was $296,000,
$370,0000 and $367,000, respectively. The total amount of interest income
recognized on nonaccrual loans was $327,000, $364,000 and $212,000 for the
years ended December 31, 1995, 1996 and 1997, respectively. Accruing loans
over 90 days past due were $66,000 at December 31, 1997. There were no
accruing loans over 90 days past due at December 31, 1995 and 1996.

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 December 31, 1995, 1996 and 1997, real estate owned was $298,000,
$988,000 and $562,000, respectively, and consisted entirely of one to four
family residential properties. For the twelve months ended December 31, 1997,
real estate owned expenses were $158,000 and gains of $239,000 were reported
on the sale of real estate owned.

47
<PAGE>

Allowance for Loan Losses. The following is a summary of the changes in the
consolidated allowance for loan losses of the Company for each of the years
ended December 31, 1995, 1996 and 1997 and for the period from April 29, 1994
(Inception) to December 31, 1994.

<TABLE>
<CAPTION>
AT OR FOR THE YEAR
ENDED
APRIL 29, 1994 DECEMBER 31,
(INCEPTION) TO -----------------------
DECEMBER 31, 1994 1995 1996 1997
----------------- ------ ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period...... $ -- $ 378 $5,250 $ 5,356
Provision for loan losses......... 50 120 194 507
Charge-offs
Mortgage loans held for
investment..................... -- (108) (285) (373)
Mortgage loans held for sale.... -- -- -- --
Consumer loans.................. -- -- (433) (2,101)
----- ------ ------ -------
-- (108) (718) (2,474)
Recoveries
Mortgage loans held for
investment..................... -- -- -- 77
Mortgage loans held for sale.... -- -- -- --
Consumer loans.................. -- -- 274 1,068
----- ------ ------ -------
-- -- 274 1,145
----- ------ ------ -------
Net charge-offs................... -- (108) (444) (1,329)
Acquisition discounts allocated to
loss allowance................... 328 4,860 356 1,953
----- ------ ------ -------
Balance at end of period............ $ 378 $5,250 $5,356 $ 6,487
===== ====== ====== =======
Allowance as a percent of net
principal balance
Mortgage loans held for
investment....................... 0.71% 4.23% 4.28% 4.32%
Consumer loans.................... -- 1.00% 2.66% 3.18%
Net charge-offs to average loans.. -- 0.10% 0.30% 0.60%
Ending allowance to period end
loans, net....................... 0.71% 3.98% 3.97% 4.37%
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------------------------------------------------
1994 1995 1996 1997
----------------------- ----------------------- ----------------------- -----------------------
PERCENT OF LOANS PERCENT OF LOANS PERCENT OF LOANS PERCENT OF LOANS
IN EACH CATEGORY IN EACH CATEGORY IN EACH CATEGORY IN EACH CATEGORY
AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS
------ ---------------- ------ ---------------- ------ ---------------- ------ ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution of end of
period allowance by
loan type
Mortgage loans held
for investment....... $378 99.6% $5,080 87.9% $4,295 70.7% $3,653 51.9%
Consumer loans........ -- 0.4% 170 12.1% 1,061 29.3% 2,241 48.1%
Unallocated........... -- -- -- -- -- -- 593 --
---- ----- ------ ----- ------ ----- ------ -----
$378 100.0% $5,250 100.0% $5,356 100.0% $6,487 100.0%
==== ===== ====== ===== ====== ===== ====== =====
</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.

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.

48
<PAGE>

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.

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.

The following is a summary of the Company's cash equivalents and securities
portfolios as of December 31, 1995, 1996 and 1997.

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------
1995 1996 1997
------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at end of period
Fed funds........................................ $ 8,500 $ -- $ --
Overnight deposits............................... 1,507 21,000 4,000
U.S. agency securities........................... -- -- 1,002
Commercial paper................................. 2,986 -- --
FHLB certificates of deposit..................... 9,000 -- --
------- ------- ---------
Total............................................ $21,993 $21,000 $ 5,002
======= ======= =========
Weighted average yield at end of period
Fed funds........................................ 5.29% -- --
Overnight deposits............................... 5.67% 5.02% 3.50%
U.S. agency securities........................... -- -- 6.54%
Commercial paper................................. 5.62% -- --
FHLB certificates of deposit..................... 5.61% -- --
Weighted average maturity at end of period
Fed funds........................................ 1 day -- --
Overnight deposits............................... 1 day 1 day 1 day
U.S. agency securities........................... -- -- 24 months
Commercial paper................................. 26 days -- --
FHLB certificates of deposit..................... 3 days -- --
</TABLE>

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.

49
<PAGE>

ACCOUNTING CONSIDERATIONS

FASB No. 129, "Disclosure on Information about Capital Structure" ("FASB
129") is effective for financial statements for periods ending after December
15, 1997. It is not expected that FASB 129 will require significant revision
of prior disclosures since FASB 129 lists required disclosures that had been
included in a number of previously existing separate statements and opinions.

In June 1997, 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 period in that financial
statement. The Company is in the process of determining its preferred format.
SFAS 130 is effective for fiscal years beginning after December 15, 1997.

In June 1997, the FASB issued SFAS No. 131, "Disclosures 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.

50
<PAGE>

BUSINESS

GENERAL

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 targets 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,
FHLB advances and whole loan sales at the Bank, and its first securitization
of mortgage loans completed in December 1997. The Company's strategy is to
undertake controlled geographic expansion of its existing businesses, with
particular emphasis in the near term on the national expansion of its mortgage
finance operations, and to evaluate possible entry into additional specialty
finance businesses which provide the opportunity for attractive risk-adjusted
returns.

The Company believes that the Bank currently is the largest Hispanic-
controlled savings association in California. The Company commenced operations
in 1994, as a Hispanic-controlled financial institution, 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, which the Company believes to be the second largest
provider of financing for consumer automobile insurance premiums in
California. In 1996, the Company commenced its current mortgage and automobile
finance businesses.

BUSINESS STRATEGY

GROWTH STRATEGY

The Company intends to capitalize on its competitive strengths by expanding
its core businesses and entering other specialty finance businesses which
provide the opportunity for attractive risk-adjusted returns. The Company's
growth strategy includes the following key elements.

51
<PAGE>

OPERATING STRATEGY

The Company's operating strategy includes the following key elements.

MORTGAGE FINANCE

BUSINESS OVERVIEW

UPAM's loan production generally consists of subprime residential mortgage
loans which are made to borrowers whose borrowing needs may not be met by
traditional financial institutions due to credit history or other factors.
UPAM's customers use the proceeds of the mortgage loans primarily to finance
home purchases and improvements, debt consolidation, education and other
consumer needs, and may benefit from consolidating existing consumer debt
through mortgage loans with lower monthly payments.

UPAM generally targets borrowers who have substantial equity in the property
securing the loan, but may have (i) impaired or limited credit profiles, (ii)
higher debt-to-income ratios than traditional mortgage lenders allow or (iii)
difficulty verifying their income due to self-employment or other
circumstances. These borrowers are generally willing to pay higher loan
origination fees and interest rates than those charged by traditional lenders.
The Company believes that the amount of equity present in the real estate
securing UPAM's loans, together with the fact that approximately 88% of UPAM's
loans are secured by borrowers' primary residences and approximately 96% are
secured by first mortgages, mitigates certain risks inherent in subprime
lending. The average LTV ratio on loans originated by UPAM during the twelve
months ended December 31, 1997 was approximately 75%.

UPAM's strategy emphasizes a more balanced retail and wholesale origination
approach than many of its competitors. The retail division originates loans
through the direct solicitation of borrowers by mail and telemarketing and
accounted for $219.4 million, or 38%, of UPAM's total loan production during
the twelve months ended December 31, 1997. The wholesale division originates
loans through independent loan brokers and accounted for $359.2 million, or
62%, of UPAM's total loan production during the same period.

52
<PAGE>

Until December 1997, UPAM sold substantially all of its loan originations
with servicing released to other mortgage companies and investors through
whole loan packages offered for bid several times per month. During the twelve
months ended December 31, 1997, UPAM sold $360.2 million of loans through
whole loan sales at a weighted average sales price equal to 105.7% of the
original principal balance of the loans sold. UPAM completed its first
securitization of $114.9 million in mortgage loans in December 1997 at a net
gain on sale of 5.2% of the principal amount of loans securitized and expects
to sell or securitize its loans on a periodic basis in the future. No
assurances can be given that UPAM will be able to continue to securitize its
mortgage loans in the future or that any such securitizations will prove to be
profitable if commenced. See "Risk Factors--General--Securitizations."

SUBPRIME MORTGAGE INDUSTRY

The residential mortgage market can be separated into two major segments:
"prime" and "subprime." Prime borrowers comprise greater than 80% of the
market and have credit quality and documentation that satisfy the requirements
of the Government National Mortgage Association ("GNMA"), FNMA or FHLMC.

Historically, the subprime mortgage loan market has been a highly fragmented
niche market dominated by local brokers with direct ties to investors who
owned and serviced this relatively higher margin, riskier product. Although
there recently have been numerous new entrants into the subprime mortgage loan
business, the Company believes that the subprime mortgage market is still
highly fragmented.

BUSINESS STRATEGY

UPAM's strategic objective is to develop a national subprime residential
mortgage business. In order to achieve this objective, UPAM intends to (i)
continue to originate subprime mortgage loans through a balanced retail and
wholesale network, (ii) develop the capability to sell or securitize these
loans and (iii) over time develop an in-house collection capability to
complement third-party sub-servicing. Until December 1997, UPAM sold
substantially all of its loan originations with servicing released to mortgage
companies and investors through whole loan packages offered for bid several
times per month. UPAM completed its first securitization of mortgage loans in
December 1997 and may sell or securitize mortgage loans on a periodic basis in
the future.

The Company believes that the subprime residential mortgage market is highly
fragmented and that success in this market depends primarily on the ability to
provide superior customer service and competitive pricing. UPAM seeks to (i)
locate experienced loan officers in geographic proximity to large population
centers, (ii) issue conditional loan approvals promptly, generally within 24
hours after receipt of an application, (iii) avoid imposing unnecessarily
restrictive conditions on loan approvals, (iv) fund loans on a timely basis,
generally within 15 to 20 days following conditional approval, and in
accordance with approved terms, and (v) competitively price loans according to
market conditions.

53
<PAGE>

OPERATING SUMMARY

The following table presents a summary of UPAM's key operating and
statistical results on a quarterly basis for the years ended December 31, 1996
and 1997.

<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
---------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996 1997 1997 1997 1997
--------- -------- ------------- ------------ --------- -------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LOAN ORIGINATION
STATISTICS
Loans originated........ $4,901 $15,168 $16,646 $34,796 $67,337 $108,481 $161,061 $241,743
Number of loans
originated............. 51 144 171 345 606 933 1,466 2,540
Average principal
balance per loan....... $ 96 $ 105 $ 97 $ 101 $ 111 $ 116 $ 110 $ 95
Weighted average
interest rate
Fixed-rate loans....... 10.21% 10.46% 11.61% 11.11% 10.60% 10.83% 10.78% 10.61%
Adjustable-rate loans.. 9.46% 10.00% 9.6% 9.38% 9.27% 9.38% 9.51% 9.58%
Weighted average loan-
to-value ratio......... 70% 72% 72% 72% 73% 74% 76% 75%
First mortgage loans.... 91% 94% 96% 96% 97% 97% 97% 95%
Fixed-rate loans........ 42% 29% 10% 8% 11% 10% 16% 26%
Owner occupied.......... 92% 93% 92% 86% 86% 88% 85% 88%
Retail origination...... 7% 1% 8% 32% 35% 41% 44% 34%
California.............. 21% 16% 36% 46% 53% 58% 50% 39%
BORROWER QUALITY
STATISTICS(1)
AA or A-................ 55% 67% 69% 67% 73% 71% 71% 69%
B or C.................. 40% 28% 28% 31% 23% 25% 25% 27%
C- or D................. 5% 5% 3% 2% 4% 4% 4% 4%
LOAN SALES STATISTICS
Loans sold or
securitized............ $1,097 $ 4,226 $16,234 $28,585 $40,254 $ 92,463 $140,363 $202,034
Average sales price
(% of principal
balance)............... -- 105.69% 105.32% 106.13% 106.15% 105.60% 105.73% 105.59%
OPERATING STATISTICS
States loans originated
in..................... 4 7 7 7 10 14 19 29
Retail loan branches.... -- -- 2 3 6 9 12 17
Retail loan officers.... -- -- 7 17 41 59 79 119
Wholesale loan centers.. 1 1 1 2 2 4 5 5
Wholesale account
executives............. 3 3 5 10 33 34 38 41
</TABLE>
- -------
(1)See "--Loan Production by Borrower Risk Classification."

LOAN ORIGINATION

Retail Division. UPAM's retail origination growth strategy emphasizes
geographic expansion and focused consumer marketing efforts through both
direct mail and telemarketing. Although retail loan originations entail
significantly higher operating costs than wholesale originations, the benefits
of retail origination result from (i) greater fee retention to compensate for
these costs and (ii) direct relationships with borrowers which create a more
sustainable loan origination franchise and increased control over the lending
process. During the twelve months ended December 31, 1997, the retail division
originated $219.4 million in loans, or 38%, of UPAM's total loan production.
As of December 31, 1997, the retail division employed 119 loan officers,
located in 17 retail branches. Ten of these branches are located in
California, two are in Arizona, and one each in Colorado, Washington, Nevada,
New Mexico and Oregon.

The retail division has implemented an expansion plan designed to control
the significant operating expenses associated with establishing new branch
offices. Under this plan, UPAM has housed several branches responsible for
specific geographic areas in one centrally located retail office, thereby
reducing overhead, increasing efficiency and allowing greater supervision,
while retaining locally-focused marketing efforts. As an example, only one
greater Los Angeles retail office exists (in Orange), but it houses six full-
service branches responsible for the Pasadena, Orange, Long Beach, Ontario,
West Los Angeles and Riverside areas.

54
<PAGE>

UPAM targets markets for expansion based on demographics and its ability to
recruit experienced sales office managers and other qualified personnel in
particular markets. Retail marketing activities include direct mail, followed
by outbound telemarketing calls from the local retail branch. Telemarketing
activities are aimed at identifying potential borrowers with subprime credit
characteristics. In December 1997, UPAM created a marketing department with
the objective of expanding and refining the target markets for direct mail and
telemarketing activities and increasing the overall effectiveness of existing
marketing efforts.

In February 1998, UPAM established a retail telemarketing group to maximize
the retail division's lead generation and follow-up on direct mail activities.
The telemarketing group will use a predictive dialer system which it expects
to have operational in the second quarter of 1998.

The following table sets forth selected information relating to UPAM's
retail loan originations during the periods shown.

<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
-------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1997 1997 1997 1997
------------- ------------ --------- -------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans originated........ $1,391 $11,158 $23,616 $44,151 $70,258 $81,361
Number of loans
originated............. 19 102 222 372 604 778
Average principal
balance per loan....... $ 73 $ 109 $ 106 $ 118 $ 116 $ 104
Weighted average loan-
to-value ratio......... 63% 72% 74% 75% 77% 74%
First mortgage loans.... 97% 98% 98% 98% 98% 94%
Property securing loan
Owner occupied........ 74% 72% 77% 83% 86% 85%
Non-owner occupied.... 26% 28% 23% 17% 14% 15%
Weighted average
interest rate
Fixed-rate loans...... 10.11% 10.50% 10.28% 10.47% 10.48% 10.25%
Adjustable-rate
loans................ 8.65% 8.73% 8.95% 8.99% 9.03% 8.99%
</TABLE>

Wholesale Division. UPAM's wholesale origination growth strategy emphasizes
(i) geographic expansion, (ii) expanding relationships with existing brokers
through quality service, (iii) concentrating marketing efforts on a smaller
number of high-volume brokers and (iv) developing correspondent relationships.
The benefits of wholesale origination result from brokers conducting their own
marketing and employing their own personnel to complete loan applications,
allowing UPAM to increase quickly its loan origination volume through
increased leverage of fixed costs. The wholesale division funded $359.2
million in loans, or 62% of UPAM's total loan production, during the twelve
months ended December 31, 1997. At December 31, 1997, the wholesale division
had five loan centers located in Washington, Utah, California, Florida and
Ohio, and employed 41 account executives. These loan centers maintain
relationships with brokers that provide loans to UPAM. During the twelve
months ended December 31, 1997, UPAM originated loans through approximately
760 independent mortgage brokers, with the top 20 brokers generating 29% of
those loans and the largest broker accounting for 5.0%.

The wholesale division has established a correspondent group targeting mid-
size brokers, which group commenced originating loans in April 1998. Loans are
initially funded through the broker's warehouse lines (not affiliated with
UPAM or the Bank) and delivered to UPAM on a whole loan basis for underwriting
and program review. All loans purchased on this basis will have appraisal
reviews performed and must conform with UPAM's credit and underwriting
guidelines. Whereas the margins on correspondent business are generally less
than traditional wholesale channels, efficiencies are gained as correspondents
perform more of the traditional back-office work, allowing UPAM to purchase
loans with a minimum of fixed overhead.

55
<PAGE>

The following table sets forth selected information relating to wholesale
loan originations during the periods shown.

<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
-------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1997 1997 1997 1997
------------- ------------ --------- -------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans originated........ $15,255 $23,637 $43,721 $64,330 $90,803 $160,382
Number of loans
originated............. 152 243 384 561 862 1,762
Average principal
balance per loan....... $ 100 $ 97 $ 113 $ 114 $ 105 $ 91
Weighted average loan-
to-value ratio......... 73% 72% 73% 74% 75% 75%
First mortgage loans.... 96% 95% 96% 97% 96% 96%
Property securing loan
Owner occupied....... 93% 93% 91% 92% 85% 90%
Non-owner occupied... 7% 7% 9% 8% 15% 10%
Weighted average
interest rate
Fixed-rate loans..... 11.93% 11.49% 10.83% 11.22% 10.99% 10.89%
Adjustable-rate
loans................ 9.67% 9.69% 9.44% 9.63% 9.89% 9.83%
</TABLE>

PRODUCTS AND PRICING

UPAM offers both fixed-rate loans and ARMs, as well as loans with an
interest rate that is initially fixed for a period of time and subsequently
converts to an adjustable-rate. Most of the ARMs originated by UPAM are
offered at a lower initial interest rate and are subject to lifetime interest
rate caps. At each interest rate adjustment date, UPAM adjusts the rate,
subject to certain limitations on the amount of any single adjustment, until
the rate charged equals the lower of the fully indexed rate or the lifetime
interest rate cap. There can be no assurance, however, that the interest rate
on these loans will reach the fully indexed rate if interest rates rise
rapidly, to the level of the cap, the loans are pre-paid or in cases of
foreclosure. UPAM's borrowers are classified under one of six subprime risk
classifications, and loan products are available at different interest rates
and with different origination points and fees depending on the particular
borrower's risk classification. UPAM's maximum loan amount is generally
$400,000 with an LTV of 90%, $500,000 with an LTV of 85% and $750,000 with an
LTV of 75%. Loans over $750,000 are made on a case-by-case basis. Loans
originated by UPAM during the twelve months ending December 31, 1997 had an
average loan amount of approximately $104,000 and an average LTV of
approximately 75%. Unless prohibited by law or otherwise waived by UPAM upon
the payment by the borrower of higher origination fees and a higher interest
rate, UPAM generally imposes a prepayment penalty on the borrower. As of
December 31, 1997, approximately 86% of UPAM's loans included a prepayment
penalty.

UNDERWRITING STANDARDS

UPAM originates loans in accordance with underwriting criteria that
generally do not satisfy traditional underwriting standards, such as those
utilized by GNMA, FNMA or FHLMC, and therefore may result in rates of
delinquencies and foreclosures that are higher, and may be substantially
higher, than those rates experienced by loans underwritten in a more
traditional manner. UPAM's underwriting guidelines are intended to evaluate
the applicant's credit history and capacity to repay the loan, the value of
the proposed collateral and the adequacy of such collateral for the loan. UPAM
determines the loan terms, including interest rate and maximum LTV based upon
the underwriting guidelines.

Underwriters are required to have had either substantial subprime
underwriting experience or substantial experience with UPAM in other aspects
of the Company's subprime mortgage finance business before becoming part of
UPAM's underwriting department. Underwriters are not given approval authority
until their work has been reviewed by a corporate-based underwriter or a
specifically identified branch underwriter. In addition,

56
<PAGE>

a sampling of a new underwriter's work is reviewed by a corporate level
underwriter. No branch-based underwriter has an approval limit greater than
$400,000. All loans over $400,000 require approval of the Chief Credit Officer
or a designated corporate-based underwriter. Exceptions from these established
guidelines are also subject to approvals, often at the corporate level. This
approval process is reviewed periodically by the Board of Directors. The Chief
Credit Officer periodically re-evaluates the authority levels of all
underwriting personnel.

UPAM's underwriting guidelines require a credit report on each applicant
from a credit reporting company. UPAM's underwriters review the applicant's
credit history based on the information contained in the application and
reports available from credit reporting bureaus in order to determine if the
applicant's credit history meets UPAM's underwriting guidelines. A number of
factors determine a loan applicant's creditworthiness, including debt ratios,
payment history and the combined LTV for all existing mortgages on a property.
Based on this review, the underwriter assigns a preliminary rating to the
application.

Assessment of the applicant's ability to pay is one of the principal
elements differentiating UPAM's underwriting process from methods employed by
traditional lenders that may rely heavily on automated credit scoring tools.
UPAM's underwriters review the applicant's credit profile to evaluate whether
an impaired credit history is a result of previous adverse circumstances or a
continuing inability or unwillingness to meet credit obligations in a timely
manner.

All mortgaged properties are appraised by qualified independent appraisers
prior to funding of the loan. All appraisals are required to conform to the
Uniform Standards of Professional Appraisal Practice. Review appraisals are
required on substantially all wholesale loans (consistent with industry
standards since the appraiser involved on a wholesale origination would
generally not be on a list of approved appraisers maintained by UPAM) and
retail loans where the appraisal was prepared by an appraiser who has not been
approved by UPAM.

UPAM has implemented a loan quality control process designed to ensure
compliance with its policies and procedures. Prior to funding a loan, UPAM
performs a pre-funding quality control audit which consists of verifying a
loan applicant's credit and employment. UPAM also ensures that the
documentation is complete once the loan is originated in order to facilitate
its subsequent sale.

The underwriting guidelines set forth in the following table, and the letter
grades applied to each sub-prime borrower category, reflect solely the
Company's internal standards, and may not be comparable to those used by other
subprime mortgage lenders. UPAM continually evaluates its underwriting
guidelines and periodically modifies the underwriting guidelines as required.

57
<PAGE>

<TABLE>
<CAPTION>
CREDIT CRITERIA MATRIX (LTV'S UP TO 85%)
--------------------------------------------------------------
AA A- B
-------------------- -------------------- --------------------
<S> <C> <C> <C>
MORTGAGE Maximum one 30-day Maximum two 30-day Maximum four 30-day
RATING late payment and no late payments and no late payments and
LAST 12 MONTHS 60-day late payments 60-day late payments one 60-day late
within last 12 within last 12 payment within last
months. Rolling 30- months. Rolling 30- 12 months if LTV is
day lates NOT day lates okay. Not 80% or less; no 60-
allowed. Not more more than 29 days day late payments if
than 29 days delinquent at LTV over 80%.
delinquent at closing. Rolling 30-day lates
closing. okay. Not more than
59 days delinquent
at closing.
<CAPTION>
EXCELLENT GOOD SATISFACTORY
CONSUMER CREDIT -------------------- -------------------- --------------------
24-MONTH HISTORY 12-MONTH HISTORY 12-MONTH HISTORY
-------------------- -------------------- --------------------
<S> <C> <C> <C>
All open and/or active - Excellent credit - Good credit prior - Reasonably good
accounts in the review prior 24 months. 12 months. credit last 2
period, are considered Isolated Isolated months. Isolated
when calculating the incidences of incidences of incidences of
ratio of derogatory ac- minor minor credit
counts to total ac- delinquencies delinquencies delinquencies
counts. greater than 30 greater than 60 greater than 90
days will be days will be days will be
considered. considered. considered.
-Sufficient number -Sufficient number -Demonstrate
of accounts paid of accounts paid ability/
as agreed to as agreed to willingness to pay
offset isolated offset isolated majority of
incidences of incidences of accounts as
delinquencies delinquencies agreed.
greater than 30 greater than 60 -Evidence of
days. days. significant
-Evidence of -Evidence of delinquencies
significant significant greater than 90
delinquencies delinquencies days or 90 days
greater than 30 greater than 60 overdue are not
days not allowed. days not allowed. allowed.
-< 25% of credit -< 35% of credit -< 50% of credit
report items report items report items
derogatory in last derogatory in last derogatory in last
24 months. 12 months. 12 months.
-Minimum of 3 -Minimum of 3 -Minimum 3
accounts open for accounts open for accounts open for
6 months. 6 months. 6 months. If no
minimum consumer
credit,
satisfactory "B"
mortgage rating or
VOR last 12 months
required.
BANKRUPTCY 3 years since If LTV is over 85%, 1 year since
FORECLOSURE discharge/dismissal. 2 years since discharge--Chapter
Re-established discharge--Chapter 7 7.
excellent ("A") and Chapter 13. 1 year since filing
credit since If LTV is 85% or Chapter 13.
discharge/dismissal. less, 2 years since Must be discharged
Minimum of 3 filing Chapter 13. prior to loan
accounts open at Must be discharged application.
least 6 months. No prior to loan Re-established good
delinquency credit application. ("B") credit since
report items since Re-established good discharge/dismissal;
discharge/dismissal. ("A") credit since or 18 months, if no
discharge/dismissal. re-established
Minimum of 3 credit since
accounts open at discharge/dismissal.
least 6 months. No
delinquent credit
items since
discharge/dismissal.
No foreclosures last No foreclosures last No foreclosures last
3 years. 2 years. 2 years.
COLLECTION No collections, No collections or No collections or
CHARGE-OFF charge-offs allowed charge-offs in the charge-offs in the
in last 24 months. last 12 months. last 12 months.
TAX LIENS No liens, judgments No liens, judgments No liens, judgments
JUDGMENTS last 24 months last 12 months last 12 months
</TABLE>

58
<PAGE>

<TABLE>
<CAPTION>
CREDIT CRITERIA MATRIX (LTV'S UP TO 85%)
-------------------------------------------------------------
C C- D
------------------- ------------------- -------------------
<S> <C> <C> <C>
MORTGAGE Maximum six 30-day, Unlimited number of Greater than one
RATING two 60-day and one 30-day, 60-day and 120-day late
LAST 12 MONTHS 90-day late 90-day late payment within last
payments within payments or one 12 months. Current
last 12 months. 120-day late NOD allowed.
Rolling 30-day payment within last
lates okay. Not 12 months. Current
more than 89 days NOD allowed. Not
delinquent at more than 119 days
closing. delinquent at
closing.
<CAPTION>
FAIR POOR POOR
CONSUMER CREDIT ------------------- ------------------- -------------------
12-MONTH HISTORY 24-MONTH HISTORY 12-MONTH HISTORY
------------------- ------------------- -------------------
<S> <C> <C> <C>
All open and/or active - Moderate to - Majority of - Majority of
accounts in the review significant credit report credit report
period, are considered credit items derogatory items derogatory
when calculating the derogatories in in last 12 months in last 12
ratio of derogatory ac- the past. -Percentage of months.
counts to total ac- -Currently derogatory credit -Percentage of
counts. delinquent items are not a derogatory credit
accounts. factor. items are not a
-< 100% of credit factor.
report items
derogatory in
last 12 months.

This category
applies to
Borrowers who do
not have at least
3 accounts open
for a minimum of
6 months.
BANKRUPTCY 1 year since Bankruptcy filed Current bankruptcy
FORECLOSURE bankruptcy filing within last 12 or recent Chapter 7
date with some re- months. Must be dismissal or
established credit. discharged prior to discharge.
Must be discharged loan application. Current bankruptcy
prior to loan must be paid
application. through loan.
No foreclosures in Foreclosures cured N/A
last 12 months. in last 12 months.
COLLECTION Collections, Collections, Collections,
CHARGE-OFF charge-offs last 12 charge-offs last 12 charge-offs last 12
months allowed. months allowed. months allowed.

Unpaid collections Unpaid collections Unpaid collections
in last 12 months in last 12 months in last 12 months
must be paid must be paid must be paid
through closing, or through closing, or through closing, or
a monthly payment a monthly payment a monthly payment
calculated and calculated and calculated and
included in the included in the included in the
borrower's DTI. borrower's DTI. borrower's DTI.
Unpaid charge-offs Unpaid charge-offs Unpaid charge-offs
may remain, no may remain, no may remain, no
monthly payment monthly payment monthly payment
calculation calculation calculation
required. required. required.
TAX LIENS Liens, judgments Liens, judgments Liens, judgments
JUDGMENTS last 12 months last 12 months last 12 months
</TABLE>

59
<PAGE>

LOAN PRODUCTION BY BORROWER RISK CLASSIFICATION

The following table sets forth information concerning UPAM's loan production
by subprime borrower risk classification for the periods shown. The letter
grades applied to each subprime borrower category reflect solely the Company's
internal standards, and may not be comparable to those used by other subprime
mortgage lenders.

<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1997 1997 1997 1997
------------- ------------ --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
AA Risk Grade
Percent of total
originations......... 15% 14% 20% 27% 32% 33%
Weighted average loan-
to-value ratio....... 74% 74% 75% 75% 75% 74%
Weighted average
interest rate........ 8.91% 9.65% 8.88% 9.06% 9.22% 9.62%
A- Risk Grade
Percent of total
originations......... 54% 53% 53% 44% 39% 37%
Weighted average loan-
to-value ratio....... 71% 71% 74% 76% 76% 76%
Weighted average
interest rate........ 9.48% 9.19% 9.28% 9.15% 9.55% 9.66%
B Risk Grade
Percent of total
originations......... 24% 26% 21% 21% 21% 22%
Weighted average loan-
to-value ratio....... 75% 73% 72% 75% 78% 76%
Weighted average
interest rate........ 10.43% 9.69% 9.56% 9.77% 10.17% 10.31%
C Risk Grade
Percent of total
originations......... 4% 5% 2% 4% 4% 4%
Weighted average loan-
to-value ratio....... 66% 69% 70% 69% 70% 69%
Weighted average
interest rate........ 11.53% 10.94% 10.81% 10.33% 10.61% 10.48%
C- Risk Grade
Percent of total
originations......... 1% 2% 1% 2% 2% 2%
Weighted average loan-
to-value ratio....... 55% 66% 68% 64% 69% 70%
Weighted average
interest rate........ 12.23% 11.54% 11.58% 11.17% 10.89% 11.48%
D Risk Grade
Percent of total
originations......... 2% -- 3% 2% 2% 2%
Weighted average loan-
to-value ratio....... 54% 53% 64% 59% 64% 63%
Weighted average
interest rate........ 13.25% 13.25% 12.61% 11.95% 12.88% 12.94%
</TABLE>

60
<PAGE>

LOAN PRODUCTION BY GEOGRAPHIC DISTRIBUTION

The following table sets forth the percentage of UPAM's loans (based upon
dollar amounts) originated by state for the periods shown.

LOAN SALES AND SECURITIZATIONS

Whole Loan Sales. During the twelve months ended December 31, 1997, UPAM
sold, for cash paid in full at closing, $360.2 million of mortgage loans
through whole loan sales at a weighted average sales price equal to 105.7% of
the original principal balance of the loans sold.

Whole loan sales are made on a non-recourse basis pursuant to a purchase
agreement containing customary representations and warranties by UPAM
regarding the underwriting criteria applied by UPAM in the origination
process. In the event of a breach of such representations and warranties, UPAM
may be required to repurchase or substitute loans. In addition, UPAM sometimes
commits to repurchase or substitute a loan if a payment default occurs within
the first month following the date the loan is funded, unless other
arrangements are made between UPAM and the purchaser. UPAM also is required in
some cases to repurchase or substitute a loan if the loan documentation is
alleged to contain fraudulent misrepresentations made by the borrower. Since
the inception of the Company's mortgage finance business in 1996, UPAM has
repurchased seven loans in the aggregate principal amount of $1.2 million.

UPAM seeks to maximize its premium on whole loan sales revenue by closely
monitoring institutional purchasers' requirements and focusing on originating
the types of loans that meet those requirements and for which institutional
purchasers tend to pay higher premiums. During the twelve months ended
December 31, 1997, UPAM sold loans to 16 institutional purchasers, four of
which purchased approximately 78% of the loans sold by UPAM in this period.

Securitizations. UPAM completed its first securitization of mortgage loans
in December 1997, in the principal amount of $114.9 million, and expects to
sell or securitize loans on a periodic basis in the future. Whether, when and
how significantly UPAM enters the securitization market will depend upon
economic and secondary market conditions and available financial resources. In
connection with any mortgage loan securitizations, the Company will seek to
maximize cash gains or arrange for the prompt sale of residual interests
retained in the securitizations at or above their net book value. See "Risk
Factors--General--Securitizations."

LOAN SERVICING AND DELINQUENCIES

UPAM currently sells most of its loans on a servicing released basis. All
loans held for sale, loans securitized, and those loans that cannot be sold,
are serviced and held by the Bank. The Bank subcontracts with a third-party
sub-servicer to conduct its servicing operations, and monitors the sub-
servicer's activities to ensure

61
<PAGE>

that they comply with its guidelines. As UPAM securitizes additional mortgage
loans, it expects to continue to use a third party sub-servicer to perform
payment processing, account maintenance, tax and insurance escrow accounting
and other primary servicing activities, but may develop expanded in-house
capabilities for delinquency, foreclosure and REO activities management.

UPAM began receiving applications for mortgage loans under its regular
lending programs in January 1996 and to date has sold substantially all of its
loans on a whole loan, servicing released basis. Accordingly, UPAM does not
have representative historical delinquency, bankruptcy, foreclosure or default
experience that may be referred to for purposes of estimating future
delinquency, loss and prepayment data with respect to its loans.

INSURANCE PREMIUM FINANCE

BUSINESS OVERVIEW

In May 1995, the Company entered a joint venture with BPN under the name
"ClassicPlan." Under this joint venture, which commenced operations in
September 1995, (i) the Bank underwrites and finances automobile insurance
premiums in California and (ii) BPN markets this financing primarily to
independent insurance agents that sell automobile insurance in California and,
thereafter, services such loans for the Bank. IPF targets drivers who are
classified by insurance companies as non-standard or high risk for a variety
of reasons, including age, driving record, a lapse in insurance coverage or
ownership of high value or high performance automobiles. Insurance companies
that underwrite insurance for such drivers, including those participating in
the assigned risk programs established by California law, generally either do
not offer financing of insurance premiums or do not offer terms as flexible as
those offered by IPF.

Customers are directed to BPN through a non-exclusive network of insurance
brokers and agents who sell automobile insurance and offer financing through
programs like those offered by IPF. On a typical twelve-month insurance
policy, the borrower makes a cash down payment of 15% or 20% of the premium
(plus certain fees) and the balance is financed under a contract that contains
a payment period of shorter duration than the policy term. In the event that
the insured defaults on the loan, the Bank has the right to obtain directly
from the insurance company the unearned insurance premium held by the
insurance company, which can then be applied to the outstanding loan balance
(premiums are earned by the insurance company over the life of the insurance
policy). Each contract is designed to ensure that, at any point during the
term of the underlying policy, the unearned premium under the insurance policy
exceeds the unpaid principal amount due under the contract. Under the terms of
the contract, the insured grants IPF a power of attorney to cancel the policy
in the event the insured defaults under the contract. Upon cancellation, the
insurance company is required by California law to remit the unearned premium
to IPF which, in turn, offsets this amount against any amounts due from the
insured. IPF does not sell or have the risk of underwriting the underlying
insurance policy. IPF seeks to minimize its credit risk by (i) perfecting a
security interest in the unearned premium, (ii) avoiding concentrations of
policies with insurance companies that are below certain industry ratings and
(iii) doing business to date only in California which maintains an insurance
guaranty fund which protect consumers and insurance premium finance companies
against losses from failed insurance companies.

In addition to insurance premiums, IPF will also finance broker fees (i.e.,
fees paid by the insured to the agent). If a policy cancels, the agent repays
any unearned broker fee financed by IPF. Broker fee financing represents
approximately 3% of total loans outstanding. At December 31, 1997,
approximately 81% of all broker fee financing was to a single insurance
agency. When IPF agrees to finance an agent's broker fees, a credit limit is
established for the agent. Agents are required to maintain deposits with the
Bank to mitigate IPF's losses on broker fees financed. To date, the Bank has
not charged-off a broker fee balance.

The Company's portfolio of insurance premium finance contracts has grown
from 54,927 contracts in the aggregate gross amount of $32.1 million at
December 31, 1996 to 132,623 contracts in the aggregate gross amount of $40.0
million at December 31, 1997, primarily as a result of the adoption in
California of mandatory automobile insurance. These contracts were originated
solely in California by over 500 agents and were secured by policies
underwritten by over 200 insurance companies.

62
<PAGE>

In January 1998, the Company and BPN purchased from Providian National Bank
and others for $450,000 the right to solicit new and renewal personal and
commercial insurance premium finance business from brokers who previously have
provided contracts to Providian National Bank and the servicers of its
insurance premium finance business. 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 arrangement
already in effect. See "--Relationship with BPN" below. 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 from the
date of the agreement.

RELATIONSHIP WITH BPN

BPN is headquartered in Chino, California, and markets the Company's
insurance premium finance program under the trade name "ClassicPlan." The
Company believes that IPF is the largest provider of financing for consumer
automobile insurance premiums in California. On a very limited basis, IPF also
finances insurance premiums for businesses purchasing property, casualty and
liability insurance. At December 31, 1997, BPN had two stockholders and 45
employees.

BPN solicits insurance agents and brokers to submit their clients' financing
requests to the Bank. BPN is responsible for monitoring the agents'
performance and assisting with IPF's compliance with applicable consumer
protection, disclosure and insurance laws, and providing customer service,
data processing and collection services to IPF. The Bank pays fees to BPN for
these services. The amount of these fees is based on fixed charges, which
include a loan service fee per contract and cancellation fees charged by the
Bank, and the earnings of the loan portfolio, which include (i) 50% of the
interest earned on portfolio loans after the Bank subtracts a specified
floating portfolio interest rate and (ii) 50% of late fees and returned check
fees charged by the Bank. Additionally, BPN and the Bank share equally (i)
certain collection and legal expenses which may occur from time-to-time, (ii)
all net loan losses experienced on the insurance premium loan portfolio and
(iii) all net losses up to $375,000 experienced on the broker fees loan
portfolio. BPN bears losses over $375,000 experienced on the broker fees loan
portfolio.

The stockholders of BPN have entered into certain guaranty agreements in
favor of the Bank whereby they agree to pay any sums owed to the Bank and not
paid by BPN. The total potential liability of the guarantors to the Bank is
limited to $1,250,000 plus any amounts by which BPN is obligated to indemnify
the Bank. Under these guaranties, all debts of BPN to the guarantors are
subordinated to the full payment of all obligations of BPN to the Bank.

The Company has entered into an option agreement with BPN and its
stockholders whereby the Company may purchase all of the issued and
outstanding shares of BPN (the "Share Option") and all additional shares of
any BPN affiliate which may be organized outside of California (the "Affiliate
Share Option"). The option period expires March 31, 2005. The Company has
agreed not to exercise the Share Option prior to April 29, 1999 unless BPN or
its stockholders have breached their outstanding agreements with the Company.
Until the date occurring 90 days after delivery to the Company of a notice
stating that BPN has had $30,000,000 or more in loans outstanding for the six
months preceding delivery of such notice, which notice cannot be delivered
prior to October 29, 1999, the Company may exercise the Share Option for
$3,250,000 and must pay a $750,000 noncompete payment to certain stockholders
and key employees of BPN (the "Noncompete Payment"). If the Share Option is
exercised any time thereafter, the Noncompete Payment will be made and the
option exercise price shall be the greater of (a) $3,250,000 or (b) four times
BPN's pre-tax earnings for the twelve complete consecutive calendar months
immediately preceding the date of exercise less the Noncompete Payment. The
Affiliate Share Option may not be exercised independently of the Share Option.
The exercise price of the Affiliate Share Option will equal the sum of four
times BPN Affiliate's pre-tax earnings for the twelve month period prior to
exercise.

AUTOMOBILE INSURANCE PREMIUM FINANCE INDUSTRY

Insurance Finance. The private passenger automobile insurance industry in
the United States is estimated by A.M. Best Company ("A.M. Best"), a provider
of independent ratings on the financial strength and claims

63
<PAGE>

payment ability of insurance companies, to have been a $109 billion market in
annual premium volume during 1996, with nonstandard automobile insurance
comprising $23 billion of this market. Although reliable data concerning the
size and composition of the personal lines premium finance market is not
available, the Company believes that the industry is highly fragmented with no
independent insurance premium finance company accounting for a significant
share of the market.

The Company believes that the insurance premium finance industry is
attractive for the following reasons: (i) the nonstandard automobile insurance
premium market has grown rapidly in recent years, growing 56.7% over the past
five years; (ii) the insurance premium finance industry is consolidating
nationwide as both producers and insurance companies reduce the number of
their relationships with insurance premium finance companies; and (iii)
additional states may follow California in legislating mandatory insurance
coverage for all motorists. The Company believes that the insurance premium
finance industry in California is somewhat more concentrated than elsewhere in
the nation, with several long-established competitors.

California Insurance Laws. Under current law, automobiles in the state of
California cannot be registered without providing proof of automobile
insurance or posting required bonds with the Department of Motor Vehicles.

In California, as in most states, insurance companies fall into one of two
categories, admitted or non- admitted. All insurance companies licensed to do
business in California are required to be members of the California Insurance
Guarantee Association ("CIGA"), and are classified as "admitted" companies.
CIGA was established to protect insurance policyholders in the event the
company that issued a policy fails financially, and to establish confidence in
the insurance industry. Should an insurance company fail, CIGA is empowered to
raise money by levying member companies. CIGA pays off claims against
insurance companies, which protects both the customer and the premium
financiers should an admitted insurance company fail. In such event, CIGA will
refund any unearned premiums. This provides protection to companies, such as
IPF, that provide insurance premium financing. As a result, IPF's policy is to
limit financing of insurance policies issued by non-admitted carriers to less
than 5% of its total portfolio. At December 31, 1997, policies issued by non-
admitted carriers comprised 1.44% of IPF's total portfolio.

Because insurance companies will not voluntarily insure drivers whom they
consider to be excessively high risk, California has a program called the
California Automobile Assigned Risk Program ("CAARP"), to which all admitted
companies writing private passenger automobile insurance policies must belong.
This 43-year-old program is an insurance plan for high-risk, accident-prone
drivers who are unable to purchase insurance coverage from regular insurance
carriers. CAARP policies are distributed to the admitted companies in
proportion to their share of California's private passenger automobile
insurance market. The companies participating in CAARP do not have any
discretion in choosing the customers they insure under the program. The
customers are arbitrarily assigned to them by CAARP. Although CAARP offers
financing of its policy premiums, its terms are not as competitive as the
insurance premium finance companies and, therefore, many CAARP policies are
financed by others. At December 31, 1997, approximately 24.8% of the insurance
policies financed by IPF were issued under CAARP.

64
<PAGE>

BUSINESS STRATEGY

IPF's business strategy is to increase profitably the volume of contracts
originated and maintained in its portfolio by expanding its relationships with
insurance brokers and agents and insurance companies in California and,
potentially, in other states. IPF intends to implement this strategy by:

. Strengthening its relationships with insurance brokers and agents by
offering a variety of high-quality support services (e.g., computer
hardware and software and customer reports) designed to enable them to
better serve their customers;

. Investing additional resources to ensure IPF's ability to continue to
provide technologically advanced and efficient contract origination and
servicing systems and support services;

. Expanding its premium financing to other insurance lines of business
(e.g., commercial, property, casualty and liability insurance); and

. Expanding the Company's operations into new states either through joint
ventures or the acquisition of existing insurance premium finance
businesses in those states.

OPERATING SUMMARY

The following table presents a summary of IPF's key operating and
statistical results for the years ended December 31, 1996 and 1997.

<TABLE>
<CAPTION>
AT OR FOR THE
YEAR ENDED
DECEMBER 31,
---------------------------
1996 1997
------------- -------------
(DOLLARS IN THOUSANDS,
EXCEPT PORTFOLIO AVERAGES)
<S> <C> <C>
OPERATING DATA
Loan originations................................ $ 99,012 $ 145,167
Loans outstanding at period end.................. 32,058 39,990
Average gross yield(1)........................... 19.18% 19.79%
Average net yield(2)............................. 13.62% 14.01%
Allowance for loan losses........................ $ 504 $ 450
LOAN QUALITY DATA
Allowance for loan losses (% of loans
outstanding).................................... 1.57% 1.13%
Net charge-offs (% of average loans
outstanding)(3)................................. 0.38% 0.35%
Delinquencies (% of loans outstanding)(4)........ 1.18% 1.64%
PORTFOLIO DATA
Average monthly loan originations (number of
loans).......................................... 6,986 10,443
Average loan size at origination................. $ 1,180 $ 1,158
Commercial insurance policies (% of loans
outstanding).................................... 1.6% 2.1%
CAARP policies (% of loans outstanding).......... 19.8% 24.8%
Cancellation rate (% of premiums financed)....... 45.0% 49.0%
</TABLE>
- --------
(1) Gross yield represents total rates and fees paid by the borrower.
(2) Net yield represents the yield to the Bank after interest and fee sharing
with BPN.
(3) Includes only the Bank's 50% share of charge-offs.
(4) This statistic measures delinquencies on canceled policy balances. Since
IPF seeks recovery of unearned premiums from the insurance companies,
which can take up to 90 days, loans are not considered delinquent until
more than 90 days past due.

PRODUCTS AND PRICING

IPF generally charges from 16% to 23% annualized interest (depending on the
amount financed) and a $40 processing fee for each consumer contract, which
the Company believes is competitive in IPF's industry. In

65
<PAGE>

addition, contracts provide for the payment by the insured of a delinquency
charge and, if the default results in cancellation of any insurance policy
listed in the contract, for the payment of a cancellation charge. Certain of
these finance charges and fees are shared with BPN. See "--Relationship with
BPN." The insured makes a minimum 15% down payment on an annual policy and
pays the remainder in a maximum of ten monthly payments.

IPF designs its programs so that the unearned premium is equal to or greater
than the remaining principal amount due on the contract by requiring a down
payment and having a contract term shorter than the underlying policy term.

SALES AND MARKETING

IPF currently markets its insurance premium finance program through a
network of over 500 agents, primarily located in Los Angeles, Orange and San
Bernardino counties. Relationships with agents are established by BPN's
marketing representatives. The Company believes that IPF has been able to
attract and maintain its relationship with agents by offering a higher level
of service than its competitors. IPF focuses on providing each agent with up-
to-date information on its customers' accounts, which allows the agent to
service customers' needs and minimize the number of policies that are
canceled. Many of IPF's largest agents have computer terminals provided by BPN
in their offices which allow on-line access to customer information. Agents
for IPF receive their producer fees ($20, equal to 50% of the aforementioned
$40 processing fee per contract) in 30 days, as opposed to some of IPF's
competitors, who hold back 50% of the fee as collateral against early
cancellations. IPF does not require return of this $20 producer fee for early
policy cancellation unless the policy pays off in the first 30 days.

To minimize its exposure to reliance on a limited number of agents, the
Company has instituted portfolio guidelines generally limiting the dollar
amount of contracts originated by any agent to 15% of IPF's total portfolio.
The Company performs a quarterly analysis of all agents based on information
provided by BPN. At December 31, 1997, IPF had one agent that exceeded the 15%
portfolio parameter, accounting for 23.9% of IPF's total portfolio.

UNDERWRITING STANDARDS

IPF is a secured lender, and upon default, relies on its security interest
in the unearned premium held by the insurance company. IPF can, however,
suffer a loss on an insurance premium finance contract for four reasons: (i)
loss of all or a portion of the unearned premium due to its failure to cancel
the contract on a timely basis; (ii) an insolvency of the insurance company
holding the unearned premium not otherwise covered by CIGA; (iii) inadequacy
of the unearned premium to cover charges in excess of unpaid principal amount;
and (iv) cost of collection and administration, including the time value of
money, exceeding the unpaid principal and other charges due under the
contract. For the twelve months ended December 31, 1997, IPF canceled for
nonpayment contracts representing approximately 49% of all premiums financed.
Careful administration of contracts is critical to protecting IPF against
loss.

Credit applications are taken at the insurance agent's office. Given the
secondary source of repayment on unearned premiums due from the insurance
company on a canceled policy, and in most cases, access to CIGA, IPF does not
carry out a credit investigation of a borrower on loans under $25,000. At
December 31, 1997, IPF had one insurance premium finance loan with an original
principal amount over $25,000.

SERVICING AND COLLECTION

The Company believes that an efficient and accurate servicing and collection
system is the most important management tool that an insurance premium
financing company can use to protect itself from losses as a result of an
insured's default on a contract. The insurance premium finance industry is
acutely time sensitive because insurance premiums are earned each day that an
insurance policy remains in effect, thus reducing, on a daily basis, the
collateral support provided by the unearned premium.

66
<PAGE>

BPN's current computer system is an Advisor 216x, manufactured by Computer
Design Systems, Inc. of Minneapolis. The system uses a UNIX operating system
and is based on RISC architecture. Although this system satisfies IPF's
current requirements for (i) application processing, (ii) payment processing
and collections and (iii) monitoring and reporting, and has significant
capacity remaining, BPN is developing a new generation of Oracle-based
management information system software which will provide complete online,
real-time information processing services. In addition, the system will
provide direct electronic processing of many processing functions that
currently are paper intensive.

Billing Process. A customer's monthly payments are recorded in BPN's
computer system on the date of receipt. BPN's computer system is designed to
provide protection against principal loss by automatically canceling a policy
no later than 18 days after the customer's latest payment due date. If a
payment is not received on its due date, BPN's computer system automatically
prints a notice of intent to cancel and assesses a late fee which is mailed to
the insured and his or her insurance agent stating that payment must be
received within 18 days after the due date or IPF will cancel the insurance
policy. If payment is received within the 18 day period, BPN's computer system
returns the account to normal status.

Collections Process. If IPF does not receive payment within the statutory
period set forth in the notice of intent to cancel, BPN's computer system will
automatically generate a cancellation notice on the next business day,
instructing the insurance company to cancel the insured's insurance policy and
refund any unearned premium directly to IPF for processing.

Although California law requires the insurance company to refund unearned
premiums within 30 days of the cancellation date, most insurance companies pay
on more extended terms. After cancellation, IPF charges certain allowable fees
and continues to earn interest. Although the gross return premium may not
fully cover the fees and accrued interest owed to IPF by the insured,
principal generally is fully covered. Policies which are canceled in the first
two months generally have a greater risk of loss of fees.

IPF charges against income a general provision for possible losses on
finance receivables in such amounts as management deems appropriate. Case-by-
case direct write-offs, net of recoveries on finance receivables, are charged
to IPF's allowance for possible losses. This allowance amount is reviewed
periodically in light of economic conditions, the status of the outstanding
contracts and other factors.

Insurance Company Failure. One of the principal risks involved in financing
insurance premiums is the possible insolvency of an insurance company. Another
risk is that an insurance company's financial circumstances cause it to delay
its refunds of unearned premiums. Either event can adversely affect the yield
to an insurance premium finance company on a contract. Despite the protection
afforded by CIGA, IPF also reviews the ratings assigned to the insurance
companies by A.M. Best or their financial statements. To minimize its exposure
to risks resulting from the insolvency of an insurance company, IPF limits the
number of policies financed that are issued by insurance companies rated "B"
or lower by A.M. Best.

AUTOMOBILE FINANCE

BUSINESS OVERVIEW

The Company entered the subprime automobile finance business in February
1996 through the establishment of United Auto Credit Corporation as a
subsidiary of the Bank. UACC purchases auto contracts primarily from dealers
in used automobiles, approximately 77% of which are independent dealers and
23% of which are franchisees of automobile manufacturers. The borrowers on
contracts purchased by UACC are classified as subprime because they typically
have limited credit histories or credit histories that preclude them from
obtaining loans through traditional sources. UACC maintains seven branch
offices located in California and one each in Arizona, Oregon and Utah. At
December 31, 1997, UACC's portfolio contained 4,750 auto contracts in the
aggregate gross amount of $40.9 million, including unearned finance charges of
$10.6 million.

67
<PAGE>

SUBPRIME AUTOMOBILE FINANCE INDUSTRY

Automobile financing is one of the largest consumer finance markets in the
United States. In general, the automobile finance industry can be divided into
two principal segments: a prime credit market and a subprime credit market.
Traditional automobile finance companies, such as commercial banks, savings
institutions, thrift and loan companies, credit unions and captive finance
companies of automobile manufacturers, generally lend to the most
creditworthy, or so-called prime, borrowers. The subprime automobile credit
market, in which UACC operates, provides financing to borrowers who generally
cannot obtain financing from traditional lenders.

Historically, traditional lenders have not serviced the subprime market or
have done so only through programs that were not consistently available.
Recently, however, independent companies specializing in subprime automobile
financing and subsidiaries of larger financial services companies have entered
this segment of the automobile finance market, but it remains highly
fragmented, with no company having a significant share of the market.

BUSINESS STRATEGY

UACC's business strategy includes controlled growth at the branch level,
with limited volume goals and the gradual addition of new branches. Each
branch is targeted to generate between $650,000 and $750,000 in gross
contracts per month within four months of opening. The Company believes that
UACC's strategy of (i) controlled growth, (ii) disciplined underwriting, (iii)
strong internal audit procedures and (iv) focused servicing and collection
efforts at the branch level, will result in sustainable profitability and
lower levels of delinquency and loss than those experienced by many of its
competitors, whose rapid growth has resulted in portfolio quality problems.

The Company believes that the subprime automobile finance market is
inconsistently or poorly serviced by the consumer finance industry. As a
result, UACC's strategy is to differentiate itself by providing dealers with
consistent, same day decisions and rapid funding of approved contracts. The
Company believes that UACC is also more flexible than some of its competitors
in financing older, higher mileage vehicles and maintenance warranties.

68
<PAGE>

OPERATING SUMMARY

The following table presents a summary of UACC's key operating and
statistical results for the years ended December 31, 1996 and 1997.

<TABLE>
<CAPTION>
AT OR FOR THE YEAR
ENDED DECEMBER 31,
----------------------------------
1996 1997
---------------- ----------------
(DOLLARS IN THOUSANDS,
EXCEPT PORTFOLIO AND OTHER DATA)
<S> <C> <C>
OPERATING DATA
Gross contracts purchased.............. $ 12,216 $ 44,255
Gross contracts outstanding............ 10,830 40,877
Unearned finance charges............... 3,271 10,581
Net contracts outstanding.............. 7,559 30,296
Average purchase discount.............. 10.0% 9.9%
APR to customers....................... 21.0% 21.0%
Allowance for loan losses.............. $ 557 $ 1,791
LOAN QUALITY DATA
Allowance for loan losses (% of net
contracts)............................ 7.37% 5.91%
Delinquencies (% of net contracts)
31-60 days............................ 0.38% 0.84%
61-90 days............................ 0.34% 0.20%
90+ days.............................. -- 0.22%
Net charge-offs (% of average net
contracts)............................ 1.50% 4.94%
Repossessions (net) (% of net
contracts)............................ 1.44% 0.64%
PORTFOLIO DATA
Used vehicles.......................... 98.7% 99.0%
Vehicle age at time of contract
(years)............................... 6.4 6.1
Original contract term (months)........ 37.0 38.4
Gross amount financed to WSBB(1)....... 119% 116%
Net amount financed to WSBB(2) ........ 109% 105%
Net amount financed per contract ...... $ 7,399 $ 7,517
Down payment........................... 22% 20%
Monthly payment........................ $ 269 $ 270
OTHER DATA
Number of branches..................... 4 10
</TABLE>
- --------
(1) WSBB represents Kelly Wholesale Blue Book for used vehicles.
(2) Net amount financed equals the gross amount financed less unearned
finance charges or discounts.

PRODUCTS AND PRICING

UACC targets transactions which involve (i) a used automobile with an
average age of five to eight years and (ii) an average original contract term
of 38 to 42 months.

The financial profile of the target transaction includes (i) an amount
financed (before taxes, license, warranty and discount) equal to 95% to 100%
of invoice for new vehicles or current WSBB for used vehicles (after tax,
license, warranty and discount, the amount financed is targeted at 105% to
110%), (ii) a contract rate and discount which yields 28.5%, (iii) an amount
financed of $7,000 to $10,000, with a down payment of 15% to 20%, and (iv) a
monthly payment from $225 to $325.

69
<PAGE>

The target profile of a UACC borrower includes (i) time on the job of three
to five years, (ii) time at current residence of three to five years, (iii) a
ratio of total debt to total income of 33% to 37% and (iv) a ratio of total
monthly automobile payments to total monthly income of 12% to 15%.

The application for an auto contract is taken by the dealer. UACC purchases
the auto contract from the dealer at a discount which increases the effective
yield on such contract. For the quarter ended December 31, 1997, the Company
allocated 70% of the discount to the allowance for loan losses, representing
7% of the gross contract amount. Management periodically reviews the portion
of the discount allocated to the allowance for loan losses in light of the
Company's operations and, in January 1998, increased the allocation to 80% of
the discount, representing 8% of the gross contract amount.

SALES AND MARKETING

UACC markets its financing program to both independent used and franchised
automobile dealers. UACC's marketing approach emphasizes scheduled calling
programs, marketing materials and consistent follow-up. The Company uses
facsimile software programs to send marketing materials to established dealers
and potential dealers on a twice weekly basis in each branch market. UACC's
experienced local staff seeks to establish strong relationships with dealers
in their vicinity.

UACC solicits business from dealers through its branch managers who meet
with dealers and provide information about UACC's programs, train dealer
personnel in UACC's program requirements and assist dealers in identifying
consumers who qualify for UACC's programs. In order to both promote asset
growth and achieve required levels of credit quality, UACC compensates its
branch managers on a salary with a bonus (up to 20% of base salary per year)
that requires the achievement of delinquency, charge-off, volume and return on
average assets targets established for the branch, as well as satisfactory
audit results.

As of December 31, 1997, UACC directly marketed its programs to dealers
through its ten branch offices in California, Utah, Oregon and Arizona.

<TABLE>
<CAPTION>
GROSS NUMBER OF CONTRACTS
CONTRACTS PURCHASED OVER
OUTSTANDING AT THE YEAR
DECEMBER 31, ENDED DECEMBER 31,
BRANCH LOCATION DATE ESTABLISHED 1997 1997
- --------------- ---------------- -------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Irvine, CA.................. March 1996 $ 9,713 811
San Diego, CA............... June 1996 7,526 723
Riverside, CA............... September 1996 7,533 858
San Jose, CA................ November 1996 4,559 489
Los Angeles, CA............. March 1997 4,635 499
San Fernando, CA............ May 1997 3,589 411
Upland, CA.................. July 1997 1,679 196
Salt Lake City, UT.......... August 1997 894 108
Phoenix, AZ................. September 1997 723 97
Portland, OR................ December 1997 26 3
------- -----
$40,877 4,195
======= =====
</TABLE>

When a UACC branch decides to begin doing business with a dealer, a dealer
profile and investigation worksheet are completed. UACC and the dealer enter
into an agreement that provides UACC with recourse to the dealer in cases of
dealer fraud or a breach of the dealer's representations and warranties. When
UACC holds auto contracts aggregating $50,000 or more from a dealer, UACC
obtains a Dun and Bradstreet Analysis Report for such dealer. Branch
management periodically monitors each dealer's overall performance and
inventory to ensure a satisfactory quality level, and regional managers
regularly conduct audits of the dealer's performance.

70
<PAGE>

The following table sets forth certain data for auto contracts purchased by
UACC for the periods indicated.

<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
---------------------------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1997 1997 1997 1997
-------- ------------- ------------ --------- -------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Gross amount of
contracts.............. $2,628 $4,022 $5,351 $7,686 $9,520 $12,236 $14,813
Average original term of
contracts (months)..... 36.9 36.9 37.0 36.1 38.0 38.2 38.4
</TABLE>

At December 31, 1997, 95% of UACC's auto contracts were written by its
California branches. In the quarter ended December 31, 1997, UACC expanded
into Salt Lake City, Phoenix and Portland, and UACC opened an office in Denver
at the end of January 1998. In addition to diversifying its geographic
concentrations, UACC intends to maintain a broad dealer base to avoid
dependence on a limited number of dealers. At December 31, 1997, no dealer
accounted for more than 2.7% of UACC's portfolio and the ten dealers from
which UACC purchased the most contracts accounted for approximately 19.0% of
its aggregate portfolio.

UNDERWRITING STANDARDS AND PURCHASE OF CONTRACTS

Underwriting Standards and Purchase Criteria. Dealers submit credit
applications directly to UACC's branches. UACC uses credit bureau reports in
conjunction with information on the credit application to make a final credit
decision or a decision to request additional information. Only credit bureau
reports that have been obtained by UACC are acceptable.

UACC's credit policy places specific accountability for credit decisions
directly within the branches. The branch manager or assistant branch manager
reviews all credit applications. In general, no branch manager will have
credit approval authority for contracts greater than $15,000. Any transaction
that exceeds a branch manager's approval limit must be approved by UACC's
Regional Manager, Operations Manager or President.

Verification. Upon approving or conditioning any application, all required
stipulations are presented to the dealer and must be satisfied before funding.

All dealers are required to provide UACC with written evidence of insurance
in force on a vehicle being financed when submitting the contract for
purchase. Prior to funding a contract, the branch must verify by telephone
with the insurance agent the customer's insurance coverage with UACC as loss
payee. If UACC receives notice of insurance cancellation or non-renewal, the
branch will notify the customer of his or her contractual obligation to
maintain insurance coverage at all times on the vehicle. However, UACC will
not "force place" insurance on an account if insurance lapses and,
accordingly, UACC bears the risk of an uninsured loss in these circumstances.

Post-Funding Quality Reviews. UACC's Regional Manager and Operations Manager
complete quality control reviews of the newly originated auto contracts. These
reviews focus on compliance with underwriting standards, the quality of the
credit decision and the completeness of auto contract documentation.
Additionally, UACC's Regional Manager and Operations Manager complete regular
branch audits that focus on compliance with UACC's policies and procedures and
the overall quality of branch operations and credit decisions.

SERVICING AND COLLECTION

UACC services at the branch level all of the auto contracts it purchases.

Billing Process. UACC sends each borrower a coupon book. All payments are
directed to the customer's respective UACC branch. UACC also accepts payments
delivered to the branch by a customer in person.

71
<PAGE>

Collection Process. UACC's collection policy calls for the following
sequence of actions to be taken with regard to all problem loans: (i) call the
borrower at one day past due; (ii) immediate follow-up on all broken promises
to pay; (iii) branch management review of all accounts at ten days past due;
and (iv) Regional Manager or Operations Manager review of all accounts at 45
days past due.

UACC will consider extensions or modifications in working a collection
problem. All extensions and modifications require the prior approval of the
branch manager, and are monitored by the Operations Manager.

Repossessions. It is UACC's policy to repossess the financed vehicle only
when (i) payments are substantially in default, (ii) the customer demonstrates
an intention not to pay or (iii) the customer fails to comply with material
provisions of the contract. All repossessions require the prior approval of
the branch manager. In certain cases, the customer is able to pay the balance
due or bring the account current, thereby redeeming the vehicle.

When a vehicle is repossessed and sold at an automobile auction or through a
private sale, the sale proceeds are subtracted from the net outstanding
balance of the loan with any remaining amount recorded as a loss. UACC
generally pursues all customer deficiencies.

Allowance for Loan Losses. UACC's policy is to place on nonaccrual status
accounts delinquent in excess of 120 days on a contractual basis, and to
reverse all previously accrued but unpaid interest on such accounts. Accounts
that have had their collateral repossessed are placed on nonaccrual by the end
of the month in which they are repossessed regardless of delinquency status.
Accounts are not returned to accrual status until they are brought current.

UACC's policy is to charge-off accounts delinquent in excess of 120 days.
The remaining balance of accounts where the collateral has been repossessed
and sold is charged-off by the end of the month in which the collateral is
sold and the proceeds collected.

Loss reserves based on expected losses over the life of the contract are
established when each contract is purchased from the dealer. The reserve is
deducted from the discount that is taken on each transaction. Loss reserve
analyses are performed regularly to determine the adequacy of current reserve
levels. For the quarter ended December 31, 1997, the Company allocated 70% of
the acquisition discount on each loan to the allowance for loan losses. The
loss allowances recorded at the time of purchase represent an estimate of
expected losses for these loans. If actual experience exceeds estimates, an
additional provision for losses is established as a charge against earnings.
Management periodically reviews the portion of the discount allocated to the
allowance for loan losses in light of the Company's operations and, in January
1998, increased the allocation to 80% of the discount, representing 8% of the
gross contract amount.

72
<PAGE>

The following table reflects UACC's losses (i.e., net charge-offs as a
percent of original net contract balances) for each contract pool (defined as
the total dollar amount of net contracts purchased in a given quarter)
purchased since UACC's inception.

<TABLE>
<CAPTION>
QUARTER OF PURCHASE
-------------------------------------------------------
1996 1997
----------------------- -------------------------------
NUMBER OF SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
MONTHS QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
OUTSTANDING ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
2...................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
3...................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
4...................... 0.0% 0.0% 0.1% 0.1% 0.2% 0.1%
5...................... 0.0% 0.2% 0.1% 0.3% 0.2% 0.4%
6...................... 0.1% 0.5% 0.3% 0.6% 0.5% 0.8%
7...................... 0.6% 1.6% 0.8% 0.9% 0.9%
8...................... 1.0% 2.1% 1.0% 1.3% 1.2%
9...................... 1.7% 3.1% 1.4% 1.9% 1.4%
10..................... 1.9% 3.7% 2.2% 2.4%
11..................... 3.8% 3.9% 3.2% 2.9%
12..................... 4.5% 4.9% 3.4% 3.5%
13..................... 5.3% 5.6% 4.2%
14..................... 6.8% 6.2% 4.4%
15..................... 7.4% 7.0% 5.1%
16..................... 7.4% 7.5%
17..................... 7.7% 8.0%
18..................... 7.8% 8.4%
19..................... 7.9%
20..................... 8.3%
21..................... 8.6%
Original Pool ($000)... $2,030 $2,855 $3,792 $5,505 $6,794 $8,781 $10,128
====== ====== ====== ====== ====== ====== =======
Remaining Pool ($000).. $ 847 $1,396 $2,171 $3,801 $5,401 $7,663 $ 9,596
====== ====== ====== ====== ====== ====== =======
(%)................... 42% 49% 57% 69% 79% 87% 95%
====== ====== ====== ====== ====== ====== =======
</TABLE>

UACC purchased its first auto contracts in March 1996 and, accordingly, a
maximum of 21 months loss history was available at December 31, 1997.

THE BANK

BUSINESS OVERVIEW

The Bank is a federally chartered stock savings bank formed in 1994 to
purchase from the RTC certain assets and to assume certain liabilities of the
Bank's predecessor, Pan American Federal Savings Bank. The Bank has been the
principal funding source to date for the Company's residential mortgage,
insurance premium and automobile finance businesses primarily through its
deposits, FHLB advances and whole loan sales. 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 $82.0 million (before unearned discounts
and premiums) at December 31, 1997. The Bank has focused its branch marketing
efforts on building a middle income customer base, including efforts targeted
at local Hispanic communities. The Bank has bilingual employees in each of its
branches, and key members of the Company's and the Bank's Board of Directors
and management are of Hispanic heritage and are active in communities served
by the Bank. In addition to operating its retail banking business at four
branches located in Northern California and one in Southern California, the
Bank provides, subject to appropriate cost sharing arrangements, compliance,
risk

73
<PAGE>

management, executive, financial, facilities and human resources management to
other business units of the Company. The business of the Bank is subject to
substantial governmental supervision and regulatory requirements. See "--
Supervision and Regulation--Federal Savings Bank Regulation."

COMPETITION

The profitability of the Company's lending activities and the low barriers
to entry could attract additional competitors. Certain large, national finance
companies and mortgage originators have announced their intention to adapt
their mortgage loan origination programs and allocate resources to the
origination of subprime loans. The Company and its competitors may also face
increasing competition from government-sponsored entities, such as FNMA and
FHLMC. FHLMC currently purchases what it terms "Alternative-A" mortgage loans
and has announced its intention to establish a program to purchase what it
terms "A-" mortgage loans in the near future. In addition, FHLMC has expressed
its intention to purchase so-called "B" and "C" mortgage loans in the future.
FHLMC also has purchased securities backed by subprime mortgage loans and has
re-securitized them for resale. Additional competition may lower the rates the
Company can charge borrowers, reduce the volume of the Company's loan
originations and increase demand for the Company's key employees with the
potential that such employees will leave the Company for its competitors.

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

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<PAGE>

SUPERVISION AND REGULATION

Set forth below is a brief description of various laws and regulations
affecting the operations of the Company and its subsidiaries. The description
of laws and regulations contained herein does not purport to be complete and
is qualified in its entirety by reference to applicable laws and regulations.
Any change in applicable laws, regulations or regulatory policies may have a
material effect on the business, operations, and prospects of the Company.

HOLDING COMPANY REGULATION

The Company is a savings and loan holding company within the meaning of the
Home Owners' Loan Act, as amended ("HOLA"). For purposes of this discussion,
the description of holding company regulation also applies to Pan American
Financial, Inc., a direct subsidiary of the Company and the parent of the
Bank. The Company has registered with the OTS and is subject to OTS
regulation, examination, supervision, and reporting requirements. In addition,
the OTS has enforcement authority over the Company and its other subsidiaries.
Among other things, this authority permits the OTS to restrict or prohibit
activities that are determined to be a serious risk to the Bank. In addition,
the Bank must notify the OTS at least 30 days before making any distribution
to the Company and the OTS has the authority to preclude a savings association
from paying a dividend under certain circumstances. See "--Federal Savings
Bank Regulations--Limitations on Capital Distributions."

HOLA prohibits a savings and loan holding company, directly or indirectly
through one or more subsidiaries, from (i) acquiring another savings
institution or holding company thereof, without prior written approval of the
OTS, (ii) acquiring or retaining, with certain exceptions, more than 5% of the
voting shares of a nonsubsidiary savings institution, a nonsubsidiary holding
company, or a nonsubsidiary company engaged in activities other than those
permitted by HOLA, or (iii) acquiring or retaining control of a savings
institution that is not federally insured. In evaluating applications by
holding companies to acquire savings institutions, the OTS must consider the
financial and managerial resources and future prospects of the Company and
institution involved, the effect of the acquisition on the risk to the
insurance funds, the convenience and needs of the community, and competitive
factors.

As a holding company that controls only one savings association, the Company
generally is not restricted under existing laws as to the types of business
activities in which it may engage, provided that the Bank continues to be a
"qualified thrift lender" under HOLA ("QTL"). Upon any nonsupervisory
acquisition by the Company of another savings association or savings bank that
meets the QTL test and is deemed to be a savings institution by OTS, the
Company would become a multiple savings and loan holding company (if the
acquired institution is held as a separate subsidiary) and would be subject to
extensive limitations on the types of business activities in which it could
engage. HOLA generally limits the activities of a multiple savings and loan
holding company and its uninsured institution subsidiaries primarily to
activities permissible for bank holding companies under Section 4(c)(8) of the
Bank Holding Company Act of 1956, as amended (the "BHC Act"), subject to the
prior approval of the OTS, and activities authorized by OTS regulation.

Legislation has been proposed that would impose limits on the non-banking
activities of companies that acquire savings associations. It is anticipated
that the Company's holding company status would be "grandfathered" under such
legislation, but there can be no assurance that the Company would be exempt
from such limits. Furthermore, any available grandfathering might not continue
to be available to the Company as a result of a possible merger of the federal
banking agencies. Several proposals have been introduced in Congress over the
past several years. If the OTS and Office of the Comptroller of the Currency
(the "OCC") were merged, as one proposal would require, the federal thrift
charter would be eliminated. If adopted, such a proposal would require that
the Bank become a national bank and would subject it to regulation as such.
One effect of such a requirement would be that the Bank could not engage in
activities not permitted for national banks unless such activities were
grandfathered. In addition, the ability to branch interstate would become
subject to the restrictions of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 ("Riegle Act"). Accordingly, any out-of-state
branches of the Bank in existence upon the effectiveness of such a proposal
that are not permissible

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<PAGE>

under the Riegle Act and, if not grandfathered, could be required to be
divested. There are also some benefits to such a charter conversion. For
example, the Bank would not, under regulations currently applicable to
national banks, be subject to the QTL test described below.

Federal law generally provides that no company may acquire control of a
federally insured savings institution without obtaining the approval of the
OTS. Such acquisitions of control may be disapproved if it is determined,
among other things, that the acquisition would substantially lessen
competition or the financial and managerial resources and further prospects of
the acquiror and savings institution involved or that the acquisition would be
detrimental to the institution or present enhanced insurance risk to the SAIF
or Bank Insurance Fund ("BIF").

REGULATION OF MORTGAGE FINANCE OPERATION

The consumer financing industry is a highly regulated industry. UPAM's
business is subject to extensive and complex rules and regulations of, and
examinations by, various federal, state and local government authorities.
These rules and regulations impose obligations and restrictions on UPAM's loan
origination, credit activities and secured transactions. In addition, these
rules limit the interest rates, finance charges and other fees UPAM may
assess, mandate extensive disclosure to UPAM's customers, prohibit
discrimination and impose multiple qualification and licensing obligations on
UPAM. Failure to comply with these requirements may result in, among other
things, demands for indemnification or mortgage loan repurchases, certain
rights of rescission for mortgage loans, class action lawsuits, administrative
enforcement actions and civil and criminal liability. Management of UPAM
believes that UPAM is in compliance with these rules and regulations in all
material respects.

UPAM's loan origination activities are subject to the laws and regulations
in each of the states in which those activities are conducted. For example,
state usury laws limit the interest rates UPAM can charge on its loans. UPAM
presently is in the process of applying for licenses in California and other
states in which such licenses are required to conduct UPAM's activities. Until
such licenses are obtained, all such activities are being conducted by the
Bank or, to the extent permitted by such licensing laws, by UPAM on behalf of
the Bank. UPAM's lending activities are also subject to various federal laws,
including those described below.

UPAM is subject to certain disclosure requirements under TILA and the
Federal Reserve Board's Regulation Z promulgated thereunder. TILA is designed
to provide consumers with uniform, understandable information with respect to
the terms and conditions of loan and credit transactions. TILA also guarantees
consumers a three-day right to cancel certain credit transactions, including
loans of the type originated by UPAM. Such three-day right to rescind may
remain unexpired for up to three years if the lender fails to provide the
requisite disclosures to the consumer.

UPAM originates loans which are subject to the High Cost Mortgage Act, which
makes certain amendments to TILA. The High Cost Mortgage Act generally applies
to consumer credit transactions secured by the consumer's principal residence,
other than residential mortgage transactions, reverse mortgage transactions or
transactions under an open-end credit plan, in which the loan has either (i)
total points and fees upon origination in excess of the greater of eight
percent of the loan amount or $400 or (ii) an annual percentage rate of more
than ten percentage points higher than United States Treasury securities of
comparable maturity ("Covered Loans"). The High Cost Mortgage Act imposes
additional disclosure requirements on lenders originating Covered Loans. In
addition, it prohibits lenders from, among other things, originating Covered
Loans that are underwritten solely on the basis of the borrower's home equity
without regard to the borrower's ability to repay the loan and including
prepayment fee clauses in Covered Loans to borrowers with a debt-to-income
ratio in excess of 50% or Covered Loans used to refinance existing loans
originated by the same lender. The High Cost Mortgage Act also restricts,
among other things, certain balloon payments and negative amortization
features. UPAM commenced originating Covered Loans during 1996.

76
<PAGE>

UPAM is also required to comply with ECOA and the Federal Reserve Board's
Regulation B promulgated thereunder, FCRA, RESPA and HMDA. Regulation B
restricts creditors from requesting certain types of information from loan
applicants. FCRA requires lenders, among other things, to supply an applicant
with certain information if the lender denies the applicant credit. RESPA
requires lenders, among other things, to supply an applicant with certain
disclosures concerning settlement fees and charges and mortgage servicing
transfer practices. It also prohibits the payment or receipt of kickbacks or
referral fees in connection with the performance of settlement services. In
addition, beginning with loans originated in 1994, UPAM must file an annual
report with the Department of Housing and Urban Development pursuant to HMDA,
which requires the collection and reporting of statistical data concerning
loan transactions.

In the course of its business, UPAM may acquire properties securing loans
that are in default. There is a risk that hazardous or toxic waste could be
found on such properties. In such event, UPAM could be held responsible for
the cost of cleaning up or removing such waste, and such cost could exceed the
value of the underlying properties.

Because UPAM's business is highly regulated, the laws, rules and regulations
applicable to UPAM are subject to regular modification. There are currently
proposed various laws, rules and regulations which, if adopted, could
materially affect UPAM's business. There can be no assurance that these
proposed laws, rules and regulations, or other such laws, rules or
regulations, will not be adopted in the future which could make compliance
much more difficult or expensive, restrict UPAM's ability to originate, broker
or sell loans, further limit or restrict the amount of commissions, interest
and other charges earned on loans originated, brokered or sold by UPAM, or
otherwise adversely affect the business or prospects of UPAM.

REGULATION OF INSURANCE PREMIUM FINANCE COMPANIES

The auto insurance premium finance industry is subject to state regulation.
The regulatory structure of each state places certain restrictions on the
terms of loans made to finance insurance premiums. These restrictions, among
other things, generally provide that the lender must provide certain
cancellation notices to the insured and the insurer in order to exercise an
assigned right to cancel an automobile insurance policy in the event of a
default under an insurance premium finance agreement and to obtain in
connection therewith a return from the insurer of any unearned premiums that
have been assigned by the insured to the lender. Such state laws also require
that certain disclosures be delivered by the insurance agent or broker
arranging for such credit to the insured regarding the amount of compensation
to be received by such agent or broker from the lender.

REGULATION OF SUBPRIME AUTOMOBILE LENDING

UACC's automobile lending activities are subject to various federal and
state consumer protection laws, including TILA, ECOA, FCRA, the Federal Fair
Debt Collection Practices Act, the Federal Trade Commission Act, the Federal
Reserve Board's Regulations B and Z, and state motor vehicle retail
installment sales acts, retail installment sales acts and other similar laws
regulate the origination and collection of consumer receivables and impact
UACC's business. These laws, among other things, (i) require UACC to obtain
and maintain certain licenses and qualifications, (ii) limit the finance
charges, fees and other charges on the contracts purchased, (iii) require UACC
to provide specified disclosures to consumers, (iv) limit the terms of the
contracts, (v) regulate the credit application and evaluation process, (vi)
regulate certain servicing and collection practices and (vii) regulate the
repossession and sale of collateral. These laws impose specific statutory
liabilities upon creditors who fail to comply with their provisions and may
give rise to defense to payment of the consumer's obligation. In addition,
certain of the laws make the assignee of a consumer installment contract
liable for the violations of the assignor. See "--Regulation of Mortgage
Finance Operation."

Each dealer agreement contains representations and warranties by the dealer
that, as of the date of assignment, the dealer has compiled with all
applicable laws and regulations with respect to each contract. The dealer is
obligated to indemnify UACC for any breach of any of the representations and
warranties and to repurchase any non-conforming contracts. UACC generally
verifies dealer compliance with usury laws, but does

77
<PAGE>

not audit a dealer's full compliance with applicable laws. There can be no
assurance that UACC will detect all dealer violations or that individual
dealers will have the financial ability and resources either to repurchase
contracts or indemnify UACC against losses. Accordingly, failure by dealers to
comply with applicable laws, or with their representations and warranties
unless the dealer agreement, could have a material adverse effect on UACC.

UACC believes it is currently in compliance in all material respects with
applicable laws, but there can be no assurance that UACC will be able to
maintain such compliance. The failure to comply with such laws, or a
determination by a court that UACC's interpretation of any such law was
erroneous, could have a material adverse effect upon UACC. Furthermore, the
adoption of additional laws, changes in the interpretation and enforcement of
current laws or the expansion of UACC's business into jurisdictions that have
adopted more stringent regulatory requirements than those in which UACC
currently conducts business, could have a material adverse effect upon UACC.

If a borrower defaults on a contract, UACC, as the servicer of the contract,
is entitled to exercise the remedies of a secured party under the Uniform
Commercial Code as adopted in a particular state (the "UCC"), which typically
includes the right to repossession by self-help unless such means would
constitute a breach of peace. The UCC and other state laws regulate
repossession and sales of collateral by requiring reasonable notice to the
borrower of the date, time and place of any public sale of collateral, the
date after which any private sale of the collateral may be held and the
borrower's right to redeem the financed vehicle prior to any such sale, and by
providing that any such sale must be conducted in a commercially reasonable
manner. Financed vehicles repossessed generally are resold by UACC through
unaffiliated wholesale automobile networks or auctions which are attended
principally by used automobile dealers.

FEDERAL SAVINGS BANK REGULATION

Business Activities. The activities of savings associations are governed by
HOLA and, in certain respects, the Federal Deposit Insurance Act, as amended
("FDI Act"). HOLA and the FDI Act were amended by the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, as amended ("FIRREA"), and the
Federal Deposit Insurance Corporation Act of 1991 ("FDICIA"). FIRREA was
enacted to resolve issues relating to problem institutions, including thrifts,
establish a new thrift insurance fund, reorganize the regulatory structure
applicable to savings associations and impose bank-like standards on savings
associations. FDICIA, among other things, requires that federal banking
agencies intervene promptly when a depository institution experiences
financial difficulties, mandates the establishment of a risk-based deposit
insurance assessment system, and requires imposition of numerous additional
safety and soundness operational standards and restrictions. Both FIRREA and
FDICIA contain provisions affecting numerous aspects of the operations and
regulations of federally insured savings associations and empower the OTS and
the FDIC, among other agencies, to promulgate regulations implementing their
provisions.

Provisions of the federal banking statutes, as amended by FIRREA and FDICIA,
among other matters (i) restrict the use of brokered deposits by savings
associations that are not well capitalized, (ii) prohibit the acquisition of
any corporate debt security that is not rated in one of the four highest
rating categories, (iii) subject to OTS waiver, restrict the aggregate amount
of loans secured by non-residential real estate property to 400% of total
capital, (iv) permit savings and loan holding companies to acquire up to 5% of
the voting shares of non- subsidiary savings associations or savings and loan
holding companies without prior approval, (v) permit bank holding companies to
acquire healthy savings associations, (vi) require the federal banking
agencies to establish by regulation standards for extensions of credit secured
by real estate and (vii) restrict transactions between a savings association
and its affiliates.

Loans to One Borrower. Under HOLA, savings associations are generally
subject to the national bank limits on loans to one borrower. Generally, a
savings institution may not make a loan or extend credit to a single or
related group of borrowers in excess of 15% of the institution's unimpaired
capital and surplus. An additional amount may be lent, equal to 10% of
unimpaired capital and surplus, if such loan is fully secured by readily

78
<PAGE>

marketable collateral, which is defined to include certain securities and
bullion, but generally does not include real estate.

QTL Test. Savings associations that do not meet a QTL test are subject to
certain restrictions. Any savings institution is a QTL if (i) it qualifies as
a domestic building and loan association under Section 7701(a)(19) of the
Internal Revenue Code (which generally requires that at least 60% of the
institution's assets constitute loans secured by residential real estate or
deposits, educational loans, cash or certain governmental obligations) or (ii)
at least 65% of its "portfolio assets" (total assets less (a) specified liquid
assets up to 20% of total assets, (b) intangibles, including goodwill, and (c)
the value of property used to conduct business) consist of certain "qualified
thrift investments" (primarily residential mortgages and related investments,
including certain mortgage-backed and related securities) on a monthly basis
in nine out of every 12 months.

A savings association that fails the QTL test for four or more months out of
the prior 12-month period must either convert to a bank charter or operate
under certain restrictions. If the savings association does not convert to a
national bank charter, generally it will be prohibited from: (i) making any
new investment or engaging in any new activity not permissible for a national
bank; (ii) paying dividends not permissible under national bank statutes and
regulations; (iii) obtaining any new advances from any FHLB; and (iv)
establishing any new branch office in a location not permissible for a
national bank with its head office located in the association's home state.
Any bank chartered as a result of failure of the QTL test must pay exit and
entrance fees as a consequence of leaving the SAIF and entering the BIF as
further described below. In addition, beginning three years after the
association fails the QTL test and unless it has requalified as a QTL, the
association will be prohibited from engaging in any activity or retaining any
investment not permissible for a national bank and will have to repay any
outstanding advances from the FHLB as promptly as possible consistent with
safety and soundness. One year from the date the association fails the QTL
test and unless it has requalified as a QTL, any holding company that controls
the association must register as and be deemed to be a bank holding company,
subject to the restrictions and limitations of the BHC Act, and to the
regulations of the Federal Reserve. The Company believes that the Bank met the
QTL test at December 31, 1997.

Limitation on Capital Distributions. OTS regulations impose limitations upon
all capital distributions by savings associations, such as cash dividends,
payments to repurchase or otherwise acquire its shares, payments to
shareholders of another institution in a cash-out merger and other
distributions charged against capital. The rule establishes three tiers of
associations that are based primarily on an institution's capital level. An
institution that has capital which is equal to or exceeds all capital
requirements before and after a proposed capital distribution ("Tier I
Institution") and has not been advised by the OTS that it is in need of more
than normal supervision, could, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal to the
greater of (i) 100% of its net income to date during the calendar year plus
the amount that would reduce by one-half its "surplus capital ratio" (the
excess capital over its risk based capital requirements) at the beginning of
the calendar year or (ii) 75% of its net income for the previous four
quarters. Any additional capital distributions would require prior regulatory
approval. If the Bank's capital falls below its capital requirements or the
OTS notifies it that it is in need of more than normal supervision, the Bank's
ability to make capital distributions could be restricted. In addition, the
OTS could prohibit a proposed capital distribution by any institution, that
would otherwise be permitted by the regulation, if the OTS determines that
such distribution would constitute an unsafe or unsound practice. At December
31, 1997, the Bank was a Tier I Institution. See "Risk Factors--Risks
Associated With the Company and the Offering--Absence of Dividends" and
"Dividend Policy."

Liquidity. The Bank must maintain an average daily balance of liquid assets
and short-term liquid assets equal to a monthly average of not less than
specified percentages of its net withdrawable deposit accounts plus short-term
borrowings. This liquidity requirement may be changed from time to time by the
OTS. Monetary penalties may be imposed for failure to meet these liquidity
requirements. Since its acquisition in 1994, the Bank has never failed to meet
its liquidity requirements.

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<PAGE>

Classification of Assets. Savings institutions are required to classify
their assets on a regular basis, establish appropriate allowances for losses
and report the results of such classification quarterly to the OTS. A savings
institution is also required to set aside adequate valuation allowances and
establish liabilities for off-balance sheet items, such as letters of credit,
when a loss becomes probable and estimable. The OTS has the authority to
review the institution's classification of its assets and to determine whether
additional assets must be classified or the institution's valuation allowances
must be increased.

Community Reinvestment. Under the Community Reinvestment Act (the "CRA"), as
implemented by OTS regulations, a savings institution has a continuing and
affirmative obligation consistent with its safe and sound operation to help
meet the credit needs of its entire community, including low- and moderate-
income neighborhoods. The CRA does not establish specific lending requirements
or programs for financial associations nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best- suited to its particular community. The CRA requires the OTS, in
connection with its examination of a savings institution, to assess the
institution's record of meeting the credit needs of its community and to take
such record into account in evaluating certain applications by such
institution. The CRA also requires all associations to publicly disclose their
CRA rating. The Bank received a CRA rating of "satisfactory" in its most
recent examination.

Insurance of Accounts and Regulation by the FDIC. The Bank is a member of
the SAIF, which is administered by the FDIC. Savings deposits are insured up
to $100,000 by the FDIC per insured member (as defined by law and regulation).
Such insurance is backed by the full faith and credit of the United States. As
insurer, the FDIC imposes deposit insurance assessments and is authorized to
conduct examinations of, and to require reporting by, FDIC-insured
institutions. It also may prohibit any FDIC-insured institution from engaging
in any activity the FDIC determines by regulation or order to pose a serious
risk to the FDIC. The FDIC also may initiate enforcement actions against
savings associations and may terminate the deposit insurance if it determines
that the institution has engaged or is engaging in unsafe or unsound
practices, or is in an unsafe or unsound condition.

FDICIA required the FDIC to implement a risk-based deposit insurance
assessment system. Pursuant to this requirement, the FDIC has adopted a risk-
based assessment system under which all SAIF-insured depository associations
are placed into one of nine categories and assessed insurance assessments
based upon their level of capital and supervisory evaluation. Under this
system, associations classified as well capitalized and considered healthy pay
the lowest assessment while associations that are less than adequately
capitalized and considered of substantial supervisory concern pay the highest
assessment. In addition, under FDICIA, the FDIC may impose special assessments
on SAIF members to repay amounts borrowed from the United States Treasury or
for any other reason deemed necessary by the FDIC. The FDIC may increase
assessment rates, on a semiannual basis, if it determines that the reserve
ratio of the SAIF will be less than the designated reserve ratio of 1.25% of
SAIF insured deposits. In setting these increased assessments, the FDIC must
seek to restore the reserve ratio to that designated reserve level, or such
higher reserve ratio as established by the FDIC. Presently, well capitalized
institutions, such as the Bank, are not required to pay these special
assessments.

By contrast, financial institutions that are members of the BIF, which had
higher reserves and previously did not have an obligation to pay interest on
debt to the Financial Corporation ("FICO"), had certain competitive
advantages. The disparity in deposit insurance assessments between SAIF and
BIF members was exacerbated by the statutory requirement that both the SAIF
and the BIF funds be recapitalized to a 1.25% reserved deposits ratio and that
a portion of most thrifts' deposit insurance assessments be used to service
bonds issued by FICO.

To address this rate disparity, on September 30, 1996, the President signed
legislation intended to enable the SAIF to reach the designated reserve ratio.
The legislation provided for a one-time special assessment of 0.657% to be
imposed upon all SAIF deposits as of March 31, 1995. Based on the Bank's SAIF
deposits as of March 31, 1995, the cost of the one-time special assessment was
approximately $820,000 (pre-tax). This amount was accrued in December 1996 and
paid in June 1997.

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<PAGE>

The legislation also provides for BIF members to service a growing portion
of the FICO bond payments. Until January 1, 2000, annual assessments of 0.013%
of BIF deposits and 0.0648% of SAIF deposits will service the annual payments
due on the FICO bonds. Accordingly, the Bank's assessment rate on the FICO
bonds is 0.0648% of the deposits. This legislation provides for subsequent
full pro rata sharing of FICO bond payments by BIF and SAIF institutions.
Accordingly, the effect of this legislation has been to lessen the competitive
advantage of BIF members over SAIF members because of the disparity in deposit
insurance assessments and FICO payments. The legislation called for a merger
of the SAIF and BIF as of January 1, 1999, but only if the thrift charter has
been eliminated.

The financing corporations created by FIRREA and the Competitive Equality
Banking Act of 1987 are also empowered to assess premiums on savings
associations to help fund the liquidation or sale of troubled associations.
Such premiums cannot, however, exceed the amount of SAIF assessments and are
paid in lieu thereof.

Transactions With Related Parties. The Bank's authority to engage in
transactions with related parties or "affiliates" (i.e., any company that
controls or is under common control with an institution with certain
exceptions) is limited by Sections 23A and 23B of the Federal Reserve Act
("FRA") and Section 11 of HOLA. Section 23A limits the aggregate amount of
covered transactions with any individual affiliate to 10% of the capital and
surplus of the savings institution and also limits the aggregate amount of
transactions with all affiliates to 20% of the savings institution's capital
and surplus. Certain transactions with affiliates are required to be secured
by collateral in an amount and of a type described in Section 23A and the
purchase of low-quality assets from affiliates is generally prohibited.
Section 23B generally requires that certain transactions with affiliates,
including loans and asset purchases, must be on terms and under circumstances,
including credit standards, that are substantially the same or at least as
favorable to the institution as those prevailing at the time for comparable
transactions with non-affiliated companies. In addition to restrictions
imposed under Sections 23A and 23B, Section 11 of HOLA prohibits savings
institutions from lending to any affiliate that is engaged in activities that
are not permissible for bank holding companies under Section 4(c) of the BHC
Act. Further, no savings institution may purchase the securities of any
affiliate other than a subsidiary.

Enforcement. Under the FDI Act, the OTS has primary enforcement
responsibility over savings associations such as the Bank and has the
authority to bring enforcement action against all "institution-related
parties," including shareholders, attorneys, appraisers and accountants who
knowingly or recklessly participate in wrongful action that caused or is
likely to cause more than a minimal financial loss to, or a significant
adverse effect on, an insured depository institution. Civil penalties cover a
wide range of violations and actions and range up to $25,000 per day unless a
finding of reckless disregard is made, in which case fines of up to $1 million
per day are permitted. Criminal penalties for most financial institution
crimes include fines of up to $1 million and imprisonment for up to 30 years.
In addition, regulators have substantial discretion to take enforcement action
against an institution that fails to comply with its regulatory requirements,
particularly with respect to the capital requirements. Possible enforcement
action ranges from the imposition of a capital plan and capital directive to
receivership, conservatorship or the termination of deposit insurance. Under
the FDI Act, the FDIC has the authority to recommend to the Director of the
OTS that enforcement action be taken with respect to a particular savings
institution. If action is not taken by the Director, the FDIC has authority to
take such action under certain circumstances. The Bank is not presently
subject to any of the foregoing enforcement actions.

Standards for Safety and Soundness. FDICIA requires each federal banking
agency to prescribe for all insured depository institutions and, to some
extent, their holding companies standards relating to internal controls,
information systems and audit systems, loan documentation, credit
underwriting, interest rate risk exposure, asset growth, and compensation,
fees and benefits, and such other operational and managerial standards as the
agency deems appropriate. In addition, federal banking regulatory agencies are
required to prescribe by regulation: (i) maximum classified assets to capital
ratios; (ii) minimum earnings sufficient to absorb losses without impairing
capital; (iii) to the extent feasible, a minimum ratio of market value to book
value for publicly traded shares of depository institutions or the depository
institution holding companies; (iv) standards for extensions of credit secured
by real estate or made for the purpose of financing the construction of
improvements on real estate; and (v) such other standards relating to asset
quality, earnings, and valuation as the agency deems

81
<PAGE>

appropriate. Finally, each federal banking agency is required to prescribe
standards for employment contracts and other compensation arrangements of
executive officers, employees, directors, and principal shareholders of
insured depository associations that would prohibit compensation, benefits and
arrangements that are excessive or that could lead to a material financial
loss for the institution. If an insured depository institution or its holding
company fails to meet any of the standards described above, it must submit to
the appropriate federal banking agency a plan specifying the steps that will
be taken to cure the deficiency. If an institution fails to submit an
acceptable plan or fails to implement the plan, the appropriate federal
banking agency will require the institution or holding company to correct the
deficiency and, until corrected, may impose restrictions on the institution or
the holding company, including any of the restrictions applicable under the
prompt corrective action provisions of FDICIA. See "--Prompt Corrective
Action."

Capital Requirements. FDICIA added a provision establishing "capital
categories" in order to facilitate prompt corrective action by federal banking
regulators. The purpose of this amendment is to impose more scrutiny and
restrictions on institutions, and to prohibit savings institutions from making
capital distributions or paying certain management fees that would leave the
institution undercapitalized. FDICIA established five capital categories for
this purpose:

. An institution will be deemed to be well-capitalized if it (i) has a
total risk-based capital ratio of 10% or more, (ii) has a Tier 1 risk-
based capital ratio of 6% or more, (iii) has a leverage ratio of 5% or
more and (iv) is not subject to any regulatory order or directive
regarding capital.

. An institution will be deemed to be adequately capitalized if it (i) has
a total risk-based capital ratio of at least 8%, (ii) has a Tier I risk-
based capital ratio of at least 4% and (iii) subject to certain
exceptions, has a leverage ratio of at least 4%.

. An institution will be deemed to be undercapitalized if it (i) has a
total risk-based capital ratio of less than 8%, (ii) has a Tier I risk-
based capital ratio that is less than 4%, or (iii) subject to certain
exceptions, has a leverage ratio of less than 4%.

. An institution will be deemed to be significantly undercapitalized if it
(i) has a total risk-based capital ratio of less than 6%, (ii) has a
Tier I risk-based capital ratio of less than 3%, or (iii) has a leverage
ratio of less than 3%.

. An institution will be deemed to be critically undercapitalized if it
has a ratio of tangible equity to total assets of less than 2%.

Recent Legislation. Congress has been considering legislation in various
forms that would require federal thrifts, such as the Bank, to convert their
charters to national or state bank charters. The Treasury Department has been
studying the development of a common charter for federal savings associations
and commercial banks. In the event that the thrift charter is eliminated by
January 1, 1999, the Economic Growth and Paperwork Reduction Act of 1996 would
require the merger of the BIF and the SAIF into a single Deposit Insurance
Fund on that date. In the absence of appropriate "grandfather" provisions,
legislation eliminating the thrift charter could have a material adverse
effect on the Bank and the Company because, among other things, the
regulatory, capital and accounting treatment for national and state banks and
savings associations differs in certain significant respects. The Bank cannot
determine whether, or in what form, such legislation eventually may be
enacted, and there can be no assurance that any legislation that is enacted
would contain adequate grandfather rights for the Bank and the Company.

Year 2000 Compliance. In May 1997, the Federal Financial Institutions
Examination Council issued an interagency statement to the chief executive
officers of all federally supervised financial institutions regarding year
2000 project management awareness. It is expected that, unless financial
institutions address the technology issues relating to the coming of the year
2000, there will be major disruptions in the operations of financial
institutions. The statement provides guidance to financial institutions,
providers of data services, and all examining personnel of the federal banking
agencies regarding the year 2000 problem. The federal banking agencies intend
to conduct year 2000 compliance examinations, and the failure to implement a
year 2000 program may be seen by the federal banking agencies as an unsafe and
unsound banking practice. In addition, federal banking agencies will be taking
into account year 2000 compliance programs when analyzing applications and may
deny an application based on year 2000 related issues.

82
<PAGE>

Prompt Corrective Action. FDICIA establishes a system of prompt corrective
action to resolve the problem of undercapitalized associations. Under that
system, banking regulators must take certain supervisory actions against
undercapitalized associations, the severity of which depends upon the
institution's level of capitalization. Generally, subject to a narrow
exception, FDICIA requires the appropriate federal banking regulator to
appoint a receiver or conservator for an institution that is critically
undercapitalized. FDICIA authorizes banking regulators to specify the ratio of
tangible capital to assets at which an institution becomes critically
undercapitalized and requires that ratio to be no less than 2% of assets.

A savings association may be reclassified to an even lower category than is
indicated by its current capital position if the OTS determines the
institution to be otherwise in an unsafe or unsound condition or to be engaged
in an unsafe or unsound practice. This could include a failure by the
institution to correct deficiencies following receipt of a less-than-
satisfactory rating on its most recent examination report. Among other things,
undercapitalized institutions are subject to growth limitations and are
required to submit capital restoration plans. If an institution fails to
submit an acceptable plan or fails in any material respect to implement an
approved plan, it is treated as significantly undercapitalized.

Pan American Bank's Capital Ratios. The following table indicates the Bank's
regulatory capital ratios at December 31, 1997.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-------------------------------------
RISK-
CORE CAPITAL BASED
TANGIBLE CAPITAL (LEVERAGE) CAPITAL
---------------- ------------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Shareholder's equity/GAAP capital... $22,918 $22,918 $22,918
Reductions to capital
Goodwill and other intangibles.... (457) (457) (457)
Disallowed portion of deferred
taxes............................ (82) (82) (82)
Additions to capital
General valuation allowances...... -- -- 2,559
------- ------- -------
Regulatory capital as reported to
the OTS............................ 22,379 22,379 24,938
Minimum capital requirements as
reported to the OTS................ 4,619 9,239 16,171
------- ------- -------
Regulatory capital-excess........... $17,760 $13,140 $ 8,767
======= ======= =======
Capital ratios...................... 7.27% 7.27% 12.34%
Well-capitalized requirement........ 3.00% 5.00% 10.00%
</TABLE>

Federal Home Loan Bank System. The Bank is a member of the FHLB system.
Among other benefits, each FHLB serves as a reserve or central bank for its
members within its assigned region. Each FHLB is financed primarily from the
sale of consolidated obligations of the FHLB system. Each FHLB makes available
to members loans (i.e., advances) in accordance with the policies and
procedures established by the Board of Directors of the individual FHLB.

As a member, the Bank is required to own capital stock in an FHLB in an
amount equal to the greater of: (i) 1% of the aggregate outstanding principal
amount of its residential mortgage loans, home purchase contracts and similar
obligations at the beginning of each calendar year, (ii) 0.3% of total assets,
or (iii) 5% of its FHLB advances (borrowings). At December 31, 1997, the Bank
had $1.9 million in FHLB stock, which was in compliance with this requirement.

The FHLBs must provide funds to service the FICO bonds and contribute funds
for affordable housing programs. These requirements have affected adversely
the level of FHLB dividends paid and could continue to do so. Such
requirements could also result in the FHLB imposing a higher rate of interest
on advances to their members and could have an adverse effect on the value of
FHLB stock in the future, with a corresponding reduction in the Bank's
capital. For the years ended December 31, 1995, 1996 and 1997, dividends from
the FHLB to the Bank amounted to $37,000, $74,000, and $95,000, respectively.
If dividends were reduced, the Bank's income would likely also be reduced.

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<PAGE>

Federal Reserve System. Federal Reserve regulations require savings
associations to maintain non-interest earning reserves against their
transaction accounts (primarily regular checking and NOW accounts). The Bank
is in compliance with these regulations. The balances maintained to meet the
reserve requirements imposed by the Federal Reserve may be used to satisfy
liquidity requirements imposed by the OTS. Because required reserves must be
maintained in the form of vault cash, a non-interest-bearing account at a
Federal Reserve Bank or a pass-through account as defined by the Federal
Reserve, the effect of this reserve requirement is to reduce the Bank's
interest-earning assets. FHLB system members are also authorized to borrow
from the Federal Reserve, but applicable regulations require associations to
exhaust all FHLB sources before borrowing from a Federal Reserve Bank.

LEGAL PROCEEDINGS

The Company is from time to time involved in litigation incidental to the
conduct of its businesses. The Company currently is not a party to any
material pending litigation.

PROPERTIES

The Company's principal executive offices occupy approximately 8,881 square
feet of office space located at 1300 South El Camino Real, San Mateo,
California 94402. As of December 31, 1997, the Company maintained five
branches for its banking business, 22 branches for its mortgage finance
business, ten branches for its automobile finance business and one branch for
its insurance premium finance business. The size of the branches typically
range from 250 square feet to 19,081 square feet. All of the Company's leased
properties are leased for terms expiring on dates ranging from the date hereof
to March 2006, many with options to extend the lease term. The Company
believes that no single lease is material to its operations, its facilities
are adequate for the foreseeable future and alternative sites presently are
available at market rates.

EMPLOYEES

At December 31, 1997, the Company had 490 full-time equivalent employees.
The Company believes its relations with its employees are satisfactory.

84
<PAGE>

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth information regarding the directors,
executive officers and key employees of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Directors and Executive Officers
Guillermo Bron.................. 46 Chairman of the Board and a director of the Company
and the Bank
Lawrence J. Grill............... 61 President, Chief Executive Officer, Secretary and a
director of the Company and the Bank
John T. French.................. 66 Director of the Company and Chairman of the Board,
President and Chief Executive Officer of United
PanAm Mortgage Corporation
Ray C. Thousand................. 40 President and Chief Executive Officer of United Auto
Credit Corporation
Carol M. Bucci.................. 40 Senior Vice President, Treasurer and Chief Financial Officer
of the Company and the Bank
Edmund M. Kaufman(1)(2)......... 68 Director of the Company and the Bank
Luis Maizel(1)(2)............... 47 Director of the Company
Daniel L. Villanueva(1)(2)...... 39 Director of the Company and the Bank
Key Employees
Stephen W. Haley................ 44 Senior Vice President--Compliance and Risk
Management of the Company and the Bank
Sharon Macchiarella............. 48 Vice President of the Bank
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.

DIRECTORS AND EXECUTIVE OFFICERS

Guillermo Bron has served as Chairman of the Board and a director of the
Company and the Bank since April 1994. Mr. Bron is President of BVG West
Corp., the sole general partner of Pan American Financial, L.P. Mr. Bron
founded the Company and organized an Hispanic investor group that acquired
certain assets and assumed certain liabilities of the Bank's predecessor from
the RTC in April 1994. Since July 1994, Mr. Bron has been an officer, director
and principal stockholder of a general partner of Bastion Capital Fund, L.P.,
a private equity investment fund. Previously, Mr. Bron was a Managing Director
of Corporate Finance and Mergers and Acquisitions at Drexel Burnham Lambert.
Mr. Bron is a director of Telemundo Group, Inc.

Lawrence J. Grill has served as the President, Chief Executive Officer,
Secretary and a director of the Company and the Bank since April 1994. From
1984 through 1994, Mr. Grill was President of Lawrence J. Grill & Associates,
a consulting firm specializing in business strategy and operations improvement
for financial institutions, and in connection therewith served as a director,
officer and consultant to various thrifts and banks. Previously, Mr. Grill
held senior executive positions with Kaufman and Broad, Wickes Companies and
AM International and practiced corporate law in California and Illinois. Mr.
Grill is a CPA in Illinois and is licensed to practice law in California and
Illinois.

John T. French has served as a director of the Bank since October 1996 and
as a director of the Company and Chairman of the Board, President and Chief
Executive Officer of United PanAm Mortgage Corporation since October 1997.
From 1986 through March 1995, he served as Chief Executive Officer of Plaza
Home Mortgage, and also founded and was Chairman of Option One Mortgage
Corporation. From 1977 through 1985, Mr. French

85
<PAGE>

served as President of the General Loan Brokerage division of Western Real
Estate Financial, a general loan brokerage company. Mr. French has over 38
years of experience in the mortgage industry.

Ray C. Thousand has served as President, Chief Executive Officer and a
director of United Auto Credit Corporation since February 1996. Previously,
Mr. Thousand held positions in consumer and commercial lending with Norwest
Financial (from 1979 to 1985), and executive positions with Bank of
America/Security Pacific Credit (from 1985 to 1993), TransAmerica Business
Credit (1994) and Fidelity Funding Financial Group (from 1994 to 1995) with
emphasis on lending to consumer finance companies engaged in indirect
automobile lending.

Carol M. Bucci has served as Senior Vice President and Controller of the
Bank since January 1997 and as Senior Vice President and the Chief Financial
Officer of the Company since October 1997. She served as Vice President and
Controller of the Bank from December 1995 to December 1996. From February 1995
to December 1995, she served as Vice President and Controller of Home Federal
Savings and Loan in San Francisco, California. She served as Vice President
and Chief Financial Officer of American Liberty Mortgage Corp. from April 1992
through December 1994, as First Vice President and Assistant Controller of
First Nationwide Bank from January 1990 to April 1992 and as Executive Vice
President and Chief Financial Officer of Cal America Savings and Loan from May
1987 to April 1989. Ms. Bucci is a CPA in California.

Edmund M. Kaufman has served as a director of the Bank since August 1996 and
of the Company since October 1997. Mr. Kaufman is a partner in the Los Angeles
law firm of Irell & Manella, where he has specialized for 37 years in mergers
and acquisitions and corporate finance. Mr. Kaufman also serves as a director
of the Los Angeles Music Center Opera Company and of Structural Research and
Analysis, a software corporation.

Luis Maizel has served as a director of the Company since October 1997. Mr.
Maizel has been President of LM Capital Management since 1988 and LM Advisors
Inc. since 1984. Both such companies are pension funds management and
financial consulting firms of which he is the principal stockholder. From 1980
to 1984, he was President of Industrias Kuick, S.A. and Blount Agroindustras,
S.A., manufacturers of agribusiness equipment.

Daniel L. Villanueva has served as a director of the Bank since August 1994
and of the Company since October 1997. Mr. Villanueva is President of the Los
Angeles Galaxy Soccer Team and was a co-founder of Moya, Villanueva &
Associates, a marketing and public relations firm which is now part of
Manning, Selvage & Lee, where he worked from 1986 until 1996.

Officers serve at the discretion of the Board of Directors. None of the
directors or executive officers were selected pursuant to any arrangement or
understanding, other than with the directors and executive officers of the
Company acting within their capacity as such.

KEY EMPLOYEES

Stephen W. Haley has served as Senior Vice President--Compliance and Risk
Management of the Bank and the Company since August 1997. From November 1996
to August 1997, he was a management consultant with Coopers & Lybrand LLP.
From April 1991 to November 1996, Mr. Haley was a self-employed management
consultant and from July 1981 to April 1991, he was a management consultant
with KPMG Peat Marwick LLP's financial services group, where he was a partner
for the last four years.

Sharon Macchiarella has served as Vice President of the Bank since February
1997, Vice President - Administrator Corporate Risk Management of the Bank
since April 1997 and IPF Administrator of the Company since November 1995. Ms.
Macchiarella also served as an insurance premium finance consultant with the
Bank from March 1995 to November 1995 and Rancho Vista National Bank from
January 1995 to December 1995. Previously, Ms. Macchiarella held executive
positions in insurance premium finance with World Trade Bank, N.A. (from March
1988 to July 1992), First National Bank of Marin (from September 1992 to
September 1994) and First Deposit National Corporation (from July 1992 to
September 1992).

86
<PAGE>

COMMITTEES OF THE BOARD

The Board of Directors has an Audit Committee and a Compensation Committee,
each of which consists of two or more independent directors who serve at the
pleasure of the Board of Directors.

The Audit Committee is chaired by Mr. Maizel, and its other members are
Messrs. Kaufman and Villanueva. The primary purposes of the Audit Committee
are (i) to review the scope of the audit and all non- audit services performed
by the Company's independent certified public accountants and the fees
incurred by the Company in connection therewith, (ii) to review the results of
such audit, including the independent accountants' opinion and letter of
comment to management and management's response thereto, (iii) to review with
the Company's independent accountants, the Company's internal accounting
principles, policies and practices and financial reporting, (iv) to make
recommendations regarding the selection of the Company's independent
accountants and (v) to review the Company's quarterly financial statements
prior to public issuance.

The Compensation Committee is chaired by Mr. Kaufman, and its other members
are Messrs. Maizel and Villanueva. The primary purposes of the Compensation
Committee are (i) to review and recommend to the Board of Directors the
salaries, bonuses and perquisites of the Company's executive officers, (ii) to
determine the individuals to whom, and the terms upon which, awards under the
Company's Stock Incentive Plan, management incentive plans and 401(k) plan are
granted, (iii) to make periodic reports to the Board of Directors as to the
status of such plans and (iv) to review and recommend to the Board of
Directors additional compensation plans.

DIRECTOR COMPENSATION

The Company pays each director who is not employed by the Company $500 for
each meeting of the Board of Directors attended and $300 for each meeting of a
committee of the Board of Directors attended (other than a telephonic
meeting). In addition, each Committee Chairman receives a $500 quarterly fee.
The Company reimburses directors for all reasonable and documented expenses
incurred as a director. Directors who are also employees of the Company,
including Messrs. Bron, Grill and French, are not compensated for their
services as directors. The Board of Directors may change such compensation in
the future.

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<PAGE>

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth the compensation
paid or accrued by the Company for services rendered in all capacities during
the fiscal year ended December 31, 1997 to the President and Chief Executive
Officer and the Company's four other most highly compensated executive
officers during 1997 (the "Named Executives").

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- ----------------------- -------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
BONUS COMPENSATION RESTRICTED OPTIONS/ LTIP COMPENSATION
NAME AND PRINCIPAL POSITION SALARY ($) ($) ($)(1) STOCK AWARDS SARS(2) PAYOUTS ($)
- --------------------------- ---------- ------- ------------ ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence J. Grill....... 176,667 75,000 4,725 -- -- -- --
President and Chief
Executive Officer
Guillermo Bron.......... 137,500 -- -- -- -- -- --
Chairman of the Board
John T. French.......... 95,000 100,000 -- -- 60,000 -- --
Chairman of the Board,
President and Chief
Executive Officer of
United PanAm Mortgage
Corporation(3)
Ray C. Thousand......... 137,283 33,750 2,200 -- -- -- --
President and Chief
Executive Officer of
United Auto Credit
Corporation
Carol M. Bucci.......... 104,600 18,000 -- -- 40,000 -- --
Senior Vice President,
Treasurer and Chief
Financial Officer
</TABLE>
- --------
(1) Consists primarily of an automobile allowance.
(2) Consists of shares issuable pursuant to options granted under the Stock
Incentive Plan.
(3) Mr. French was a consultant to United PanAm Mortgage Corporation and the
Bank, and in that capacity was acting President and Chief Executive
Officer of United PanAm Mortgage Corporation from March 11, 1997 until
October 1, 1997 when he became the Chairman of the Board, President and
Chief Executive Officer of United PanAm Mortgage Corporation.

88
<PAGE>

Stock Option Grants. The following table sets forth certain information
concerning the grant of stock options during fiscal 1997 to the Named
Executives pursuant to the Stock Incentive Plan.

OPTION GRANTS IN FISCAL YEAR 1997

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
SHARES OF POTENTIAL REALIZABLE VALUE
COMMON PERCENT OF AT ASSUMED ANNUAL RATES
STOCK TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ----------------------------
NAME GRANTED FISCAL YEAR PRICE(4) DATE 5% 10%
---- ---------- ------------- -------- ---------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
John T. French(2)....... 60,000 10% $10.50 October 15, 2007 $ 31,500 $ 63,000
Carol M. Bucci(3)....... 40,000 7% $10.50 October 15, 2007 $ 21,000 $ 42,000
</TABLE>
- --------
(1) The Potential Realizable Value is the product of (a) the difference
between (i) the product of the market price per share at the date of grant
and the sum of (A) 1 plus (B) the assumed rate of appreciation of the
Common Stock compounded annually over the term of the option and (ii) the
per share exercise price of the option and (b) the number of shares of
Common Stock underlying the option at December 31, 1997. These amounts
represent certain assumed rates of appreciation only. Actual gains, if
any, on stock option exercises are dependent on a variety of factors,
including market conditions and the price performance of the Common Stock.
There can be no assurance that the rate of appreciation presented in this
table can be achieved.
(2) The options vest in four equal annual installments commencing on October
15, 1997.
(3) The options vest in four equal annual installments commencing on October
15, 1998.
(4) The Company believes that the exercise price is equal to or greater than
the fair market value of the Common Stock on the date of grant, based upon
the book value of the Common Stock and the early stage of the Company's
development.

Option Exercises and Holdings. The following table sets forth certain
information with respect to the Named Executives concerning the exercise of
options during fiscal 1997 and unexercised options held by the Named
Executives as of December 31, 1997.

AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END AT YEAR-END(1)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence J. Grill....... 281,250 -- -- 93,750 -- $909,375
John T. French.......... -- -- 80,625 110,625 $636,563 $636,563
Carol M. Bucci.......... -- -- 28,125 68,125 $272,813 $272,813
</TABLE>
- --------
(1) The value of unexercised "in-the-money" options is the difference between
the market price of the Common Stock on December 31, 1997 and the exercise
price of the option, multiplied by the number of shares subject to the
option.

Management Incentive Plans. Key management employees of the Bank and its
subsidiaries and divisions are eligible to participate in a management
incentive plan. Under this plan, a bonus pool is established for the payment
of bonuses. These bonuses are established based on the achievement of
corporate, divisional and personal goals. A minimum level of pre-tax profits
must be achieved for the payment of any bonus under this plan. Bonuses earned
during the calendar year are paid out subsequent to the certified audit of the
fiscal year during which the bonus was earned. The Company intends to
establish similar plans for each of its businesses.

89
<PAGE>

Employment Agreements. The Company has entered into employment agreements
with Messrs. Bron, Grill, French and Thousand. All other executive officers
are employed on an "at will" basis.

The Company has entered into an employment agreement with Guillermo Bron
under which Mr. Bron has been employed as the Chairman of the Board of the
Company and the Bank for the term commencing on October 1, 1997 and ending on
December 31, 2000, unless extended by the Company to December 31, 2001. Under
this agreement, Mr. Bron is entitled to (i) an annual base salary of $150,000,
(ii) an annual cash bonus of up to 100% of his base salary, in an amount
determined by the Board of Directors, (iii) $500,000 of term life insurance
above the amount normally provided to employees under the Company's group term
life insurance, (iv) a monthly car allowance of $500 and (v) the premium cost
under the Company's plan for family medical, dental, vision, long-term
disability and accidental death and dismemberment insurance. In addition,
concurrently with the sale of the shares of Common Stock offered hereby, Mr.
Bron will be granted a ten-year option to purchase 60,000 shares of Common
Stock at an exercise price of equal to 110% of the initial Offering price,
which options vest 25% per year, commencing on October 15 1998. In the event
the Company terminates his employment without cause, or Mr. Bron terminates
his employment as the result of a reduction in authority, Mr. Bron shall be
entitled to receive (i) a lump sum payment equal to his base salary from the
date of termination to the next to occur of December 31, 1999, 2000 or 2001,
but in no event less than six months salary, (ii) a lump sum payment equal to
the bonus received by him in the prior year prorated for that portion of the
current year for which Mr. Bron was employed by the Company and (iii) any
additional benefits accrued through the date of termination. In the event the
Company terminates Mr. Bron's employment with cause, the Company is obligated
to pay the compensation required by the agreement only through the date of
termination.

The Bank has entered into a salary continuation agreement with Mr. Bron
pursuant to which Mr. Bron is entitled to receive an annual benefit of up to
$100,000 payable over a period of 15 years upon either (i) the termination of
his employment by the Bank for any reason other than termination for cause
after attaining 65 years of age or (ii) his death if he is actively employed
by the Bank at such time. Upon the termination of his employment for any of
the following reasons, Mr. Bron is entitled to receive reduced annual benefits
before 2003 which increase to $100,000 if such termination occurs in or after
2003: (i) the termination of his employment by the Bank without cause or after
the occurrence of a change of control of the Bank or the Company, (ii) the
termination of his employment due to disability, (iii) the termination of his
employment as the result of a reduction in authority or (iv) the voluntary
termination of his employment prior to attaining 65 years of age. The Bank may
purchase insurance on the life of Mr. Bron to fund payments to Mr. Bron under
this agreement. Any such insurance policy will be an asset of the Bank in
which Mr. Bron will have no rights. The Bank is not required to make any
payments under this agreement if Mr. Bron is terminated for cause.

The Company has entered into an employment agreement with Lawrence J. Grill
under which Mr. Grill has been employed as the President, Chief Executive
Officer and Secretary of the Company and the Bank for the term commencing on
October 1, 1997 and ending on December 31, 2000, unless extended by the
Company to December 31, 2001. Under this agreement, Mr. Grill is entitled to
(i) an annual base salary of $190,000, (ii) an annual cash bonus of up to 50%
of his base salary based upon the satisfaction of performance goals relating
to pre-tax net income, return on stockholders' equity and such other factors
as may be established by the Board of Directors, (iii) $500,000 of term life
insurance above the amount normally provided to employees under the Company's
group term life insurance, (iv) a monthly car allowance of $500 and (v) the
premium cost under the Company's plan for family medical, dental, vision,
long-term disability and accidental death and dismemberment insurance. In
addition, concurrently with the sale of the shares of Common Stock offered
hereby, Mr. Grill will be granted a ten-year option to purchase 60,000 shares
of Common Stock at an exercise price equal to the initial Offering price,
which options vest 25% per year, commencing on October 15, 1998. In the event
the Company terminates his employment without cause, or Mr. Grill terminates
his employment as the result of a reduction in authority, Mr. Grill shall be
entitled to receive (i) a lump sum payment equal to his base salary from the
date of termination to the next to occur of December 31, 1999, 2000 or 2001,
but in no event less than six months salary, (ii) a lump sum payment equal to
the bonus received by him in the prior year prorated for that portion of the

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current year for which Mr. Grill was employed by the Company, (iii) any
additional benefits accrued through the date of termination and (iv)
continuation of group medical, disability and life insurance coverage for up
to the balance of the stated term. In the event the Company terminates Mr.
Grill's employment with cause, the Company is obligated to pay the
compensation required by the agreement only through the date of termination.

The Bank has entered into a salary continuation agreement with Mr. Grill
pursuant to which Mr. Grill is entitled to receive an annual benefit of up to
$100,000 payable over a period of 15 years upon either (i) the termination of
his employment by the Bank for any reason other than termination for cause
after attaining 67 years of age or (ii) his death if he is actively employed
by the Company at such time. Upon the termination of his employment for any of
the following reasons, Mr. Grill is entitled to receive reduced annual
benefits before 2003 which increase to $100,000 if such termination occurs in
or after 2003: (i) the termination of his employment by the Bank without cause
or after the occurrence of a change of control of the Bank or the Company,
(ii) the termination of his employment due to disability, (iii) the
termination of his employment as the result of a reduction in authority or
(iv) the voluntary termination of his employment prior to attaining 67 years
of age. The Bank may purchase insurance on the life of Mr. Grill to fund
payments to Mr. Grill under this agreement. Any such insurance policy will be
an asset of the Bank in which Mr. Grill will have no rights. The Bank is not
required to make any payments under this agreement if Mr. Grill is terminated
for cause.

United PanAm Mortgage Corporation has entered into an employment agreement
with John T. French under which Mr. French has been employed as Chairman of
the Board, President and Chief Executive Officer for the term commencing on
October 1, 1997 and ending on September 30, 1999. Under this agreement, Mr.
French is entitled to (i) a monthly base salary of $16,667, (ii) an annual
cash bonus in an amount determined by the Board of Directors, but in no event
less than $100,000 if Mr. French reasonably performs his obligations under the
agreement, (iii) participate in all benefits made generally available by the
company to its executives and (iv) the assumption by the company of an office
lease in an amount not to exceed $1,500 per month for a term expiring on
October 31, 1998. In addition, Mr. French has been granted a ten-year option
to purchase 60,000 shares of Common Stock at an exercise price of $10.50 per
share, which options vest in four equal annual installments commencing on
October 15, 1997. Notwithstanding the option period described above, the
options will fully vest on September 30, 1999 if Mr. French is an employee of
the company on that date and the company and Mr. French neither renew this
agreement nor enter into a new employment agreement. In the event the company
terminates his employment without cause, or Mr. French terminates his
employment for specified causes, Mr. French shall make himself available to
perform such consulting services as the company deems reasonable and, in
consideration thereof, shall be entitled to receive a monthly consulting fee
of $10,000, all for the period from the date of termination to the later of
the first anniversary of such termination or September 30, 1999, unless such
consulting term is extended by the company for one additional year. In the
event the company terminates Mr. French's employment with cause, the company
is obligated to pay only the base salary through the date of termination.

The Company has entered into an employment agreement with Ray C. Thousand
under which Mr. Thousand has been employed as the President and Chief
Executive Officer of United Auto Credit Corporation for the three years
commencing on December 7, 1995. Under this agreement, Mr. Thousand is entitled
to (i) an annual base salary of $135,000, (ii) an annual cash bonus of up to
100% of his base salary based upon the satisfaction of specified performance
goals relating to loan volume, pre-tax profit, delinquencies and charge-offs
and (iii) a monthly automobile allowance of $200. In addition, Mr. Thousand
has been granted an option to purchase up to a 7.5% ownership interest in
United Auto Credit Corporation at an exercise price equal to the book value of
such interest (subject to certain adjustments), which option vests 20% per
year and are exercisable based upon the satisfaction of specified performance
goals. In the event the Company terminates his employment before the end of
the stated term without cause, Mr. Thousand shall be entitled to receive the
base salary until the earlier to occur of the end of the stated term or the
first anniversary of the date of termination, all compensation required by the
agreement accrued to the date of termination and a prorated bonus. In the
event the Company terminates Mr. Thousand's employment before the end of the
stated term as a result of the failure of United Auto Credit Corporation to
achieve specified performance goals, he shall be entitled to receive 15% of
the remaining base salary that would have been paid under the agreement. In
the event the Company terminates Mr. Thousand's

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<PAGE>

employment before the end of the stated term with cause, the Company is
obligated to pay the compensation required by the agreement only through the
date of termination, and any accrued but unpaid bonus is forfeited.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

All decisions involving executive officer compensation are made by the
Company's Compensation Committee, consisting of Messrs. Kaufman, Maizel and
Villanueva.

STOCK INCENTIVE PLAN

General. In 1994, the Company adopted a stock option plan and, on November
5, 1997, amended and restated such plan as the United PanAm Financial Corp.
1997 Employee Stock Incentive Plan. Pursuant to the Stock Incentive Plan,
officers, directors, employees and consultants of the Company are eligible to
receive shares of Common Stock or other securities or benefits with a value
derived from the value of the Common Stock.

The purpose of the Stock Incentive Plan is to enable the Company to attract,
retain and motivate officers, directors, employees and consultants by
providing for or increasing their proprietary interests in the Company and, in
the case of non-employee directors, to attract such directors and further
align their interests with those of the Company's shareholders by providing
for or increasing their proprietary interests in the Company.

The maximum number of shares of Common Stock that may be issued pursuant to
awards granted under the Stock Incentive Plan currently is 2,287,500 (subject
to adjustment to prevent dilution).

Administration. The Stock Incentive Plan is administered by a committee of
two or more directors appointed by the Board of Directors of the Company (the
"Committee"). The Committee has full and final authority to select the
recipients of awards and to grant such awards. Subject to the provisions of
the Stock Incentive Plan, the Committee has a wide degree of flexibility in
determining the terms and conditions of awards and the number of shares to be
issued pursuant thereto, including conditioning the receipt or vesting of
awards upon the achievement by the Company of specified performance criteria.
The expenses of administering the Stock Incentive Plan are borne by the
Company.

Terms of Awards. The Stock Incentive Plan authorizes the Committee to enter
into any type of arrangement with an eligible recipient that, by its terms,
involves or might involve the issuance of Common Stock or any other security
or benefit with a value derived from the value of Common Stock. Awards are not
restricted to any specified form or structure and may include, without
limitation, sales or bonuses of stock, restricted stock, stock options, reload
stock options, stock purchase warrants, other rights to acquire stock,
securities convertible into or redeemable for stock, stock appreciation
rights, phantom stock, dividend equivalents, performance units or performance
shares. An award may consist of one such security or benefit or two or more of
them in tandem or in the alternative.

An award granted under the Stock Incentive Plan may include a provision
accelerating the receipt of benefits upon the occurrence of specified events,
such as a change of control of the Company or a dissolution, liquidation,
merger, reclassification, sale of substantially all of the property and assets
of the Company or other significant corporate transactions. The Committee may
grant options that either are intended to be "incentive stock options" as
defined under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or are not intended to be incentive stock options ("non-
qualified stock options"). Awards to consultants and non-employee directors
may only be non-qualified stock options.

An award may permit the recipient to pay all or part of the purchase price
of the shares or other property issuable pursuant thereto by (i) delivering
previously owned shares of capital stock of the Company or other property or
(ii) reducing the amount of shares or other property otherwise issuable
pursuant to the award. If an option permits the recipient to pay for the
shares issuable pursuant thereto with previously owned shares, the recipient
would be able to exercise the option in successive transactions, starting with
a relatively small number of shares and, by a series of exercises using shares
acquired from each such transaction to pay the purchase price

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<PAGE>

of the shares acquired in the following transaction, to exercise an option for
a large number of shares with no more investment than the original share or
shares delivered. The exercise price is payable in cash by consultants and
non-employee directors, although the Committee at its discretion may permit
such payment by delivery of shares of Common Stock, or by delivery of broker
instructions authorizing a loan secured by the shares acquired upon exercise
or payment of proceeds from the sale of such shares.

Subject to limitations imposed by law, the Board of Directors may amend or
terminate the Stock Incentive Plan at any time and in any manner. However, no
such amendment or termination may deprive the recipient of an award previously
granted under the Stock Incentive Plan of any rights thereunder without his
consent.

Pursuant to Section 16(b) of the Exchange Act, directors, certain officers
and ten percent shareholders of the Company are generally liable to the
Company for repayment of any "short-swing" profits realized from any non-
exempt purchase and sale of Common Stock occurring within a six-month period.
Rule 16b-3, promulgated under the Exchange Act, provides an exemption from
Section 16(b) liability for certain transactions by an officer or director
pursuant to an employee benefit plan that complies with such Rule.
Specifically, the grant of an option under an employee benefit plan that
complies with Rule 16b-3 will not be deemed a purchase of a security for
purposes of Section 16(b). The Stock Incentive Plan is designed to comply with
Rule 16b-3.

Awards may not be granted under the Stock Incentive Plan after the tenth
anniversary of the adoption of the Stock Incentive Plan. Although any award
that was duly granted on or prior to such date may thereafter be exercised or
settled in accordance with its terms, no shares of Common Stock may be issued
pursuant to any award after the twentieth anniversary of the adoption of the
Stock Incentive Plan.

The business criteria on which performance goals are based under the Stock
Incentive Plan will be determined on a case-by-case basis, except that with
respect to stock options and stock appreciation rights compensation is based
on increases in value of the Common Stock after the date of grant or award.
Similarly, the maximum amount of compensation that could be paid to any
participant or the formula used to calculate the amount of compensation to be
paid to the participant if a performance goal is obtained will be determined
on a case-by-case basis, except that in the case of stock options maximum
possible compensation will be calculated as the difference between the
exercise price of the option and the fair market value of the Common Stock on
the date of option exercise, times the maximum number of shares for which
grants may be made to any participant (200,000 shares per year under the Stock
Incentive Plan).

Recent Awards. Since 1994, options have been granted to (i) Lawrence J.
Grill, the President and Chief Executive Officer of the Company, to purchase
up to 375,000 shares of Common Stock at an exercise price of $0.80 per share,
(ii) Carol M. Bucci, Senior Vice President, Treasurer and Chief Financial
Officer of the Company, to purchase up to 56,250 shares of Common Stock at an
exercise price of $0.80 per share and up to an additional 40,000 shares at
$10.50 per share, (iii) Stephen W. Haley, the Senior Vice President-Compliance
and Risk Management of the Company, to purchase up to 60,000 shares of Common
Stock at an exercise price of $10.50 per share, (iv) Daniel L. Villanueva, a
director of the Company, to purchase up to 18,750 shares of Common Stock at an
exercise price of $0.80 per share, (v) Edmund M. Kaufman, a director of the
Company, to purchase up to 18,750 shares of Common Stock at an exercise price
of $0.80 per share, (vi) John T. French, a director of the Company and the
Chairman of the Board, President and Chief Executive Officer of United PanAm
Mortgage Corporation, to purchase up to 131,250 shares of Common Stock at an
exercise price of $0.80 per share and up to an additional 60,000 shares at an
exercise price of $10.50 per share, and (vii) 21 current or former employees
or consultants of the Company to purchase up to an aggregate of 1,101,250
shares at an average exercise price of $4.77 per share. Such options vest in
installments before October 15, 2001 and expire on or before October 15, 2007.

Concurrently with the sale of the shares of Common Stock offered hereby,
options will be granted to (i) Guillermo Bron, the Chairman of the Board of
the Company, to purchase up to 60,000 shares of Common Stock at an exercise
price equal to 110% of the initial public offering price, (ii) Mr. Grill to
purchase up to 60,000 shares of Common Stock at an exercise price equal to the
initial public offering price and (iii) Mr. Maizel to

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<PAGE>

purchase up to 20,000 shares of Common Stock at an exercise price equal to the
initial public offering price. These options will become exercisable in four
equal annual installments commencing on the first anniversary of the date of
grant and will expire on the tenth anniversary of the date of grant.

The Company intends to register under the Securities Act the shares of
Common Stock issuable pursuant to the Stock Option Plans. See "Description of
Capital Stock--Shares Eligible For Future Sale."

PROFIT SHARING PLAN

The Bank maintains the Pan American Bank 401(k) Profit Sharing Plan (the
"401(k) Plan"), initially effective as of April 1, 1995, for the benefit of
all eligible employees of the Company. The purpose of the 401(k) Plan is to
provide participating employees a vehicle for deferring a part of their pre-
tax salary to provide security for their retirement.

All employees of the Company who have completed six months of service are
eligible to participate in the 401(k) Plan on the first day of the month
following completion of the service requirement. The 401(k) Plan provides for
two types of contributions: employee elective deferrals and employer profit
sharing contributions. Participating employees can contribute, by way of
payroll deductions, up to the lesser of 15% of their pre-tax salary or the
annual dollar limit of $9,500 for 1997 as an elective deferral, subject to
certain legal limits. In addition, the 401(k) Plan permits participating
employees to make rollover contributions. The 401(k) Plan does not permit
participants to make voluntary after-tax contributions.

The 401(k) Plan provides for discretionary profit sharing contributions.
Each plan year (which is the calendar year), the Board of Directors of the
Bank will determine whether or not to make a contribution to the 401(k) Plan
and, if so, in what amount. If the Bank determines to make a contribution to
the 401(k) Plan, the amounts contributed by each affiliated employer will be
allocated to the accounts of participating employees who are employed on the
last day of the plan year on a pro rata basis. The Bank has not elected to
make a discretionary profit sharing contribution for any of the plan years
that the 401(k) Plan has been in existence. Effective January 1, 1998, the
Company may commence matching contributions to the 401(k) Plan.

Participating employees have the right to invest all contributions allocated
to their accounts under one or more of the six investment options offered. A
participating employee is always 100% vested in elective deferrals.
Participating employees become vested in their employer contributions 20%
after the completion of one year of service and 20% for each year thereafter,
with 100% vesting after the completion of five or more years of service.

Upon a participating employee's retirement, death, total and permanent
disability, attainment of age 59 1/2 or other termination of employment with
the Company, he is entitled to receive a distribution of vested benefits. The
participating employee will receive these benefits in the form of a lump sum.
While a participating employee is still in the employ of the Company, he may
withdraw benefits only from his elective deferral account and only upon a
showing of financial hardship. A participating employee may also borrow
against his vested benefits, but those benefits must be repaid.

Tax law limits deductible contributions in 1998 to the lesser of 15% of the
total amount of pre-tax salary paid during the plan year or $10,000 to
participating employees. The 401(k) Plan is designed to qualify under Section
401(k) of the Code and, therefore, contributions by the Company and the
participating employees are deductible by the Company and not includible in
the income of participating employees for federal income tax purposes.

The Internal Revenue Service has determined that the 401(k) Plan is a
qualified plan within the meaning of Section 401(a) and 401(k) of the Code as
of September 20, 1996.

The Bank, through its Board of Directors, appoints one or more
administrators to administer the 401(k) Plan. Pursuant to the terms of the
401(k) Plan, the plan administrator will operate the 401(k) Plan so as not to
discriminate in favor of participating employees who are officers,
shareholders or highly compensated employees of the Company. All trust assets
are held in trust by the trustee for the exclusive benefit of the
participating employees and their beneficiaries under the 401(k) Plan.

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<PAGE>

The account balances of the Named Executives under the 401(k) Plan,
consisting solely of such officers' electing deferrals as of December 31,
1997, are as follows.

<TABLE>
<CAPTION>
NAME ACCOUNT BALANCE
---- ---------------
<S> <C>
Lawrence J. Grill............................................ $35,745.01
Guillermo Bron............................................... $10,273.38
John T. French............................................... $ 9,302.22
Ray C. Thousand.............................................. -0-
Carol M. Bucci............................................... $17,976.03
</TABLE>

CERTAIN TRANSACTIONS

Subsequent to July 1, 1997, the shareholders of the Company loaned the
Company an aggregate of $2.0 million, each substantially in proportion to the
number of shares of Common Stock held by the shareholder. The amount borrowed
was used to finance the establishment and initial operations of United PanAm
Mortgage Corporation. These loans are unsecured, bear interest at an annual
rate of 8% payable on July 15, 1998 and June 30, 1999 and are due and payable
on June 30, 1999. The Company intends to use a portion of the net proceeds of
the Offering to repay this indebtedness. See "Use of Proceeds."

On October 15, 1997, the Company loaned $225,000 to Lawrence J. Grill to
finance his exercise of an option to purchase 281,250 shares of Common Stock.
This loan is secured by the shares purchased, bears interest at an annual rate
of 5.81% payable annually and is due and payable on the earlier of October 15,
2000 or the termination of Mr. Grill's employment by the Company.

United Auto Credit Corporation has granted to certain of its key employees
the right to purchase up to a 13.5% ownership interest in that company, and
may, in the future, grant options to purchase an additional 1.5%. These
options generally vest over a five-year period beginning with the date of
employment and are exercisable at prices which increase for each subsequent
installment. In addition, the options held by senior management, representing
11.5% of the 13.5% contingent ownership interest, generally may only be
exercised if the company has achieved a 30% cumulative annual return on equity
from inception through the date of vesting.

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<PAGE>

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the shares of
Common Stock beneficially owned as of March 31, 1998, and as adjusted to
reflect the sale of the shares offered hereby, by (i) each person known to the
Company to be the beneficial owner of more than five percent of the
outstanding Common Stock, (ii) each director and Named Executive and (iii) all
directors and executive officers as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING(2) AFTER OFFERING(2)(3)
----------------------------- -----------------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF
NAME AND ADDRESS(1) SHARES CLASS(4) SHARES CLASS(4)
------------------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Pan American Financial,
L.P.(5)
1999 Avenue of the Stars,
Suite 2960
Los Angeles, California
90067.................... 8,681,250 79.3% 8,681,250 52.8%
BVG West Corp.(6)......... 1,368,750 12.5% 1,368,750 8.3%
1999 Avenue of the Stars,
Suite 2960
Los Angeles, California
90067
Lawrence J. Grill(7)...... 615,000 5.6% 615,000 3.7%
Guillermo Bron(8)......... -- -- -- --
John T. French(9)......... 80,625 * 80,625 *
Ray C. Thousand........... -- -- -- --
Carol M. Bucci(10)........ 42,188 * 42,188 *
Edmund M. Kaufman(11)..... 9,375 * 9,375 *
Daniel L. Villanueva(12).. 18,750 * 18,750 *
Luis Maizel(13)........... -- -- -- --
All directors and
executive officers as a
group (eight
persons)(14)............. 765,938 6.8% 765,938 4.6%
</TABLE>
- --------
* Less than one percent.
(1) The business address of each director and executive officer of the Company
is 1300 South El Camino Real, San Mateo, California 94402.
(2) Each person has sole voting and investment power over the shares of Common
Stock shown as beneficially owned, subject to community property laws
where applicable.
(3) Assumes no exercise of the Underwriters' over-allotment option.
(4) Shares of Common Stock which the person (or group) has the right to
acquire within 60 days after March 31, 1998 are deemed to be outstanding
in calculating the percentage ownership of the person (or group), but are
not deemed to be outstanding as to any other person or group.
(5) PAFLP is a Delaware limited partnership, the sole general partner of which
is BVG West Corp. BVG West Corp. is wholly owned by Mr. Bron. Mr. Bron and
members of his family hold 58.9% of the Class A Limited Partnership Units
and 52.2% of the Class B Limited Partnership Units of PAFLP, which entitle
the holders to receive 5,002,419 shares of the Common Stock held by PAFLP.
Mr. Bron and BVG West Corp. each disclaims beneficial ownership of the
shares of Common Stock held by PAFLP.
(6) BVG West Corp. is the sole general partner of PAFLP and is wholly owned by
Mr. Bron. Mr. Bron disclaims beneficial ownership of the shares of Common
Stock held by BVG West Corp.
(7) Includes 93,750 shares issuable upon the exercise of stock options granted
pursuant to the Stock Incentive Plan, which options are exercisable within
60 days after March 31, 1998. Excludes (i) 37,500 shares held by Mr.
Grill's adult children and 1,875 shares held by Mr. Grill's father-in-law,
as to which shares he disclaims beneficial ownership, and (ii) 60,000
shares issuable upon the exercise of stock options to be granted pursuant
to the Stock Incentive Plan concurrently with the completion of the
Offering. See "Management--Stock Incentive Plan." Mr. Grill holds 10.2% of
the Class B Limited Partnership Units of PAFLP which entitle Mr. Grill to
receive 168,465 shares of the Common Stock held by PAFLP. Mr. Grill
disclaims beneficial ownership of the shares of Common Stock held by
PAFLP.

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<PAGE>

(8) Excludes (i) 1,368,750 shares held by BVG West Corp., a corporation owned
by Mr. Bron, (ii) 8,681,250 shares held by PAFLP the sole general partner
of which is BVG West Corp., and (iii) 60,000 shares issuable upon the
exercise of stock options to be granted pursuant to the Stock Incentive
Plan concurrently with the completion of the Offering. See "Management--
Stock Incentive Plan."
(9) Consists of shares issuable upon the exercise of stock options granted
pursuant to the Stock Incentive Plan. Excludes 110,625 shares issuable
upon the exercise of stock options granted pursuant to the Stock Incentive
Plan, which options are not exercisable within 60 days of March 31, 1998.
See "Management--Stock Incentive Plan." Mr. French holds 12.4% of the
Class B Limited Partnership Units of PAFLP which entitle Mr. French to
receive 204,890 shares of the Common Stock held by PAFLP. Mr. French
disclaims beneficial ownership of the shares of Common Stock held by
PAFLP.
(10) Consists of shares issuable upon the exercise of stock options granted
pursuant to the Stock Incentive Plan. Excludes 54,062 shares issuable
upon the exercise of stock options granted pursuant to the Stock
Incentive Plan, which options are not exercisable within 60 days after
March 31, 1998. See "Management--Stock Incentive Plan."
(11) Consists of shares issuable upon the exercise of stock options granted
pursuant to the Stock Incentive Plan. Excludes 9,375 shares issuable upon
the exercise of stock options granted pursuant to the Stock Incentive
Plan, which options are not exercisable within 60 days after March 31
1998. See "Management--Stock Incentive Plan." Mr. Kaufman holds 1.8% of
the Class B Limited Partnership Units of PAFLP which entitle Mr. Kaufman
to receive 30,354 shares of the Common Stock held by PAFLP. Mr. Kaufman
disclaims beneficial ownership of the shares of Common Stock held by
PAFLP.
(12) Consists of shares issuable upon the exercise of stock options granted
pursuant to the Stock Incentive Plan. Excludes 150,000 shares and
warrants to purchase an additional 75,000 shares held by Villanueva
Management Inc., an investment company owned by Daniel D. Villanueva. See
"Management--Stock Incentive Plan." Daniel L. Villanueva holds 2.7% of
the Class B Limited Partnership Units by PAFLP which entitle Mr.
Villanueva to receive 45,531 shares of the Common Stock held by PAFLP.
Mr. Villanueva disclaims beneficial ownership of the shares of Common
Stock held by Villanueva Management Inc. or PAFLP.

(13) Excludes 20,000 shares issuable upon the exercise of stock options to be
granted pursuant to the Stock Incentive Plan concurrently with the
completion of the Offering. Mr. Maizel holds 1.1% of the Class A Limited
Partnership Units and 1.8% of the Class B Limited Partnership Units of
PAFLP which entitle Mr. Maizel to receive 106,239 shares of the Common
Stock held by PALFP. See "Management--Stock Option Plan."
(14) Includes 255,001 shares issuable upon the exercise of stock options
granted pursuant to the Stock Incentive Plan. Excludes (i) 223,749 shares
issuable upon the exercise of stock options granted pursuant to the Stock
Incentive Plan, which options are not exercisable within 60 days after
March 31, 1998 and (ii) 140,000 shares issuable upon the exercise of
stock options to be granted pursuant to the Stock Incentive Plan
concurrently with the completion of the Offering. See "Management--Stock
Incentive Plan."

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock and 2,000,000 shares of Preferred Stock. At March 31, 1998, there
were 10,950,000 shares of Common Stock outstanding, held of record by nine
persons. The following description of capital stock reflects the consummation
of the reincorporation of the Company in California.

COMMON STOCK

Each holder of Common Stock is entitled to one vote for each share held of
record on each matter submitted to a vote of shareholders. While the Company's
shareholders currently may cumulate their votes for the election of directors,
cumulative voting will no longer be required or permitted under the Company's
Articles of Incorporation (the "Articles") at such time as the Company's
shares of Common Stock are listed on the Nasdaq National Market and the
Company has at least 800 holders of its equity securities as of the record
date of the Company's most recent annual meeting of shareholders. At such
time, the Company will divide its Board into two classes of directors. Subject
to preferences which may be granted to the holders of Preferred Stock, each
holder of Common Stock is entitled to share ratably in distributions to
shareholders and to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor and, in the event
of the liquidation, dissolution or winding up of the Company, is entitled to
share ratably in all assets of the Company remaining after payment of
liabilities. Holders of Common Stock have no conversion, preemptive or other
rights to subscribe for additional shares, and there are no redemption rights
or sinking fund provisions with respect to the Common Stock. The outstanding
shares of Common Stock are, and the shares to be sold by the Company in this
Offering will be, when issued and delivered against receipt of the
consideration set forth in this Prospectus, validly issued, fully paid and
nonassessable. Additional shares of Common Stock may be issued by the Company
from time to time.

PREFERRED STOCK

The Board of Directors, without further action by the holders of Common
Stock, may issue shares of Preferred Stock in one or more series and may fix
or alter the relative, participating, optional or other rights, preferences,
privileges and restrictions, including the voting rights, redemption
provisions (including sinking fund provisions), dividend rights, dividend
rates, liquidation preferences and conversion rights, and the description of
and number of shares constituting any wholly unissued series of Preferred
Stock. The Board of Directors, without further shareholder approval, can issue
Preferred Stock with voting and conversion rights which could adversely affect
the voting power of the holders of Common Stock. No shares of Preferred Stock
presently are outstanding, and the Company currently has no plans to issue
shares of Preferred Stock. The issuance of Preferred Stock in certain
circumstances may delay, defer or prevent a change in control of the Company
without further action by the shareholders, may discourage bids for the
Company's Common Stock at a premium over the market price of the Common Stock
and may adversely affect the market price, and the voting and other rights of
the holders, of Common Stock.

CERTAIN PROVISIONS IN THE COMPANY'S ARTICLES AND BYLAWS

SHAREHOLDER MEETING

The Articles provide that any action required to be taken or that may be
taken at any meeting of the Company's shareholders may only be taken at a
meeting of shareholders or by the written consent of the holders of two-thirds
of the outstanding voting shares. Special meetings of shareholders may only be
called by the Company's Board of Directors, Chairman of the Board or Chief
Executive Officer, or at the written request of holders of not less than 10%
of the Company's voting shares. In addition, if a shareholder wishes to
propose an item for consideration at a special meeting of shareholders, or at
the annual meeting of shareholders to be held in May 1999, he must give
written notice to the Company not less than 30 nor more than 60 days prior to
the meeting or, if later, the tenth day following the first public
announcement of such meeting, or such other date as is necessary to comply
with applicable federal proxy solicitation rules or other regulations. The
Bylaws of the Company (the "Bylaws") provide that, if a shareholder wishes to
propose an item for consideration at any annual meeting of shareholders, he
must give written notice to the Company not less than 120 days prior to the
day and month on which, in the immediately preceding year, the proxy statement
for such year had been released to shareholders.

98
<PAGE>

BOARD OF DIRECTORS

The Bylaws provide that the number of directors shall be not less than five
nor more than nine until changed by an amendment duly adopted by the Company's
shareholders. The Bylaws further provide that the exact number of directors
shall be fixed from time to time, within such range, by the Board of
Directors. The number of directors currently is fixed at six. The Articles
provide that, upon the satisfaction of certain conditions, the Board of
Directors will be divided into two classes of directors, each serving for
staggered two-year terms. It is anticipated that this will occur at the next
annual meeting of shareholders of the Company, which is scheduled to be held
in May 1999.

AMENDMENT OF ARTICLES AND BYLAWS

The Bylaws may not be amended without the approval of the holders of at
least two-thirds of the outstanding voting shares or the approval of at least
a majority of the authorized directors; provided, however, that the provisions
of the Bylaws relating to shareholder proposals and the number and nomination
of directors require the approval of the holders of at least two-thirds of the
outstanding voting shares. In addition, the provisions contained in the
Articles and Bylaws with respect to the required vote for shareholder action
without a meeting, the classification of the Board of Directors, the
elimination of cumulative voting and indemnification of directors, officers
and others may not be amended without the affirmative vote of at least two-
thirds of the outstanding voting shares.

The foregoing provisions of the Articles and the Bylaws may delay, defer or
prevent a change in control of the Company without further action by the
shareholders, may discourage bids for the Company's Common Stock at a premium
over the market price of the Common Stock and may adversely affect the market
price of the Common Stock.

TRANSFER AGENT AND REGISTRAR

The Company has appointed U.S. Stock Transfer Corporation, Glendale,
California as the transfer agent and registrar for the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no market for the Common Stock. Future
sales of substantial amounts of the Common Stock in the public market could
adversely affect prevailing market prices.

Upon completion of the Offering, there will be 16,450,000 shares of Common
Stock outstanding. Of these shares, the 5,500,000 shares sold in the Offering
will be freely tradable without restriction or further registration under the
Securities Act, except for any such shares held by an "affiliate" of the
Company. The remaining 10,950,000 shares (the "Restricted Shares"), and any
shares purchased in the Offering by an "affiliate" of the Company, may not be
sold without registration under the Securities Act or pursuant to an
applicable exemption therefrom.

In general, under Rule 144 promulgated under the Securities Act, as
currently in effect, a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least one year (including the
holding period of any prior owner other than an "affiliate" of the Company),
or who is an "affiliate" of the Company, is entitled to sell within any three-
month period a number of such Restricted Shares or, in the case of an
"affiliate," a number of such Restricted Shares and shares purchased in the
public market, that does not exceed the greater of (i) 1% of the then
outstanding shares of the Common Stock (approximately 164,500 shares
immediately after the Offering) or (ii) the average weekly trading volume of
the Common Stock in the public market during the four calendar weeks
immediately preceding such sale. Sales under Rule 144 are also subject to
certain requirements as to the manner of sale, notice and availability of
current public information regarding the Company. A person who has not been an
"affiliate" of the Company at any time during the 90 days preceding a sale,
and who has beneficially owned Restricted Shares for at least two years, is
entitled to sell such

99
<PAGE>

shares under Rule 144 without regard to the volume limitations, manner of sale
provisions or notice requirements. As of March 31, 1998, 10,668,750 of the
Restricted Shares may be deemed to have been held for more than one year.

Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 under the Securities Act ("Rule
701") may be relied upon with respect to the resale of securities originally
purchased from the Company by its employees, directors, officers, consultants
or advisers prior to the closing of the Offering, pursuant to written
compensatory benefit plans or written contracts relating to the compensation
of such persons. In addition, the Commission has indicated that Rule 701 will
apply to stock options granted by the Company under its employee benefit plans
before the Offering, along with the shares of Common Stock acquired upon
exercise of such options. Securities issued in reliance on Rule 701 are deemed
to be restricted securities and, beginning 90 days after the date of this
Prospectus (unless subject to the lock-up agreements described below), may be
sold by persons other than affiliates of the Company subject only to the
manner-of-sale provisions of Rule 144 and by affiliates of the Company under
Rule 144 without compliance with its minimum holding period requirement.

All of the Company's officers and directors and certain of its other
shareholders have agreed that they will not, without the prior written consent
of NationsBanc Montgomery Securities LLC (which consent may be withheld in its
sole discretion) and subject to certain limited exceptions, directly or
indirectly, sell, offer, contract or grant any option to sell, make any short
sale, pledge, transfer, establish an open "put equivalent position" within the
meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or otherwise dispose of any shares of Common Stock,
options or warrants to acquire Common Stock, or securities exchangeable or
exercisable for or convertible into Common Stock currently owned either of
record or beneficially by them or announce the intention to do any of the
foregoing, for a period commencing on the date of this Prospectus and
continuing to a date 180 days after such date. NationsBanc Montgomery
Securities LLC may, in its sole discretion and at any time without notice,
release all or any portion of the securities subject to these lock-up
agreements. In addition, the Company has agreed that, for a period of 180 days
after the date of this Prospectus, it will not, without the consent of
NationsBanc Montgomery Securities LLC, issue, offer, sell or grant options to
purchase or otherwise dispose of any equity securities or securities
convertible into or exchangeable for equity securities except for (i) the
issuance of shares of Common Stock offered hereby and (ii) the grant of
options to purchase shares of Common Stock pursuant to the Stock Incentive
Plan and shares of Common Stock issued pursuant to the exercise of such
options, provided that such options shall not vest, or the Company shall
obtain the written consent of the grantee not to transfer such shares, until
the end of such 180-day period. See "Underwriting."

The Company has granted options to purchase up to 1,580,000 shares of Common
Stock pursuant to the Stock Incentive Plan. Concurrently with the sale of the
shares offered hereby, the Company will grant options to purchase an
additional 140,000 shares of Common Stock pursuant to the Stock Incentive
Plan. An additional 567,500 shares currently are reserved for issuance under
the Stock Incentive Plan. The Company intends to register the sale of such
shares under the Securities Act. See "Management--Stock Incentive Plan."
Accordingly, as awards under the Stock Incentive Plan vest, shares issued
pursuant thereto will be freely tradable, except such shares as may be
acquired by an "affiliate" of the Company.

100
<PAGE>

UNDERWRITING

The Underwriters named below represented by NationsBanc Montgomery
Securities LLC and Piper Jaffray Inc. (the "Representatives") have severally
agreed, subject to the terms and conditions set forth in the Underwriting
Agreement, to purchase from the Company the number of shares of Common Stock
indicated below opposite their respective names at the initial public offering
price less the underwriting discount set forth on the cover page of this
Prospectus:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
NationsBanc Montgomery Securities LLC..........................
Piper Jaffray Inc..............................................
---------
Total........................................................ 5,500,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters are
committed to purchase all of such shares if any are purchased.

The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock to the public on the terms set
forth on the cover page of this Prospectus. The Underwriters may allow to
selected dealers a concession of not more that $ per share, and the
Underwriters may allow, and such dealers may reallow, a concession of not more
than $ per share to certain other dealers. After the Offering, the offering
price and other selling terms may be changed by the Representatives. The
shares of Common Stock are offered subject to receipt and acceptance by the
Underwriters and to certain other conditions, including the right to reject
orders in whole or in part.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of 825,000 additional shares of Common Stock to cover over-allotments,
if any, at the offering price less the underwriting discount set forth on the
cover page of this Prospectus. To the extent the Underwriters exercise this
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with the Offering.

The Underwriting Agreement provides that the Company and certain of its
shareholders will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or will contribute to payments
that the Underwriters may be required to make in respect thereof.

101
<PAGE>

NationsBanc Montgomery Securities LLC, issue, offer, sell or grant options to
purchase or otherwise dispose of any equity securities or securities
convertible into or exchangeable for equity securities except for (i) the
issuance of shares of Common Stock offered hereby and (ii) the grant of
options to purchase shares of Common Stock pursuant to the Stock Incentive
Plan and shares of Common Stock issued pursuant to the exercise of such
options, provided that such options shall not vest, or the Company shall
obtain the written consent of the grantee not to transfer such shares, until
the end of such 180-day period. See "Management--Stock Incentive Plan" and
"Description of Capital Stock--Shares Eligible for Future Sale."

Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price will be determined by
negotiations among the Company and the Representatives. Among the factors to
be considered in such negotiations are the history of, and prospects for, the
Company and the industry in which it competes, an assessment of the Company's
management, its past and present operations and financial performance, the
prospects for further earnings of the Company, the present state of the
Company's development, the general condition of the securities markets at the
time of the Offering, the market prices of and demand for the publicly traded
common stock of comparable companies in recent periods and other factors
deemed relevant.

Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Common Stock. As an exception to these
rules, the Representatives are permitted to engage in certain transactions
that stabilize the price of the Common Stock. Such transactions consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price
of the Common Stock. If the Underwriters create a short position in the Common
Stock in connection with the Offering (i.e., if they sell more shares of
Common Stock than are set forth on the cover page of this Prospectus), the
Representatives may reduce that short position by purchasing Common Stock in
the open market. The Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above. The Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the Representatives
purchase shares of Common Stock in the open market to reduce the Underwriters'
short position or to stabilize the price of the Common Stock, they may reclaim
the amount of the selling concession from the Underwriters and selling group
members who sold those shares as part of the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security. Neither the Company nor any of the
Underwriters makes any representation or predictions as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, neither the Company nor any of the
Underwriters makes any representation that the Representatives will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.

The Representatives have informed the Company that the Underwriters do not
expect to make sales to accounts over which they exercise discretionary
authority in excess of 5% of the number of shares of Common Stock offered
hereby.

LEGAL MATTERS

Certain matters relating to the offering are being passed upon for the
Company by Manatt, Phelps & Phillips, LLP, Los Angeles, California. Certain
legal matters will be passed upon for the Underwriters by Gibson, Dunn &
Crutcher LLP, San Francisco, California.

102
<PAGE>

EXPERTS

The consolidated financial statements of the Company as of December 31, 1996
and 1997, for each of the years in the three year period ended December 31,
1997 have been included herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP refers
to a change in the Company's method of accounting for transfers and servicing
of financial assets in 1997.

ADDITIONAL INFORMATION

The Company has filed a Registration Statement under the Securities Act with
the Commission with respect to the Common Stock offered hereby. This
Prospectus, which constitutes part of the Registration Statement, omits
certain of the information contained in the Registration Statement and the
exhibits thereto on file with the Commission pursuant to the Securities Act
and the rules and regulations of the Commission. Statements contained in this
Prospectus, such as the contents of any contract or other document referred
to, are not necessarily complete and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. Upon completion of the Offering, the Company will be subject
to the information reporting requirements of the Exchange Act and, in
accordance therewith, will file reports and other information with the
Commission. A copy of the Registration Statement, including the exhibits
thereto, may be inspected without charge at the Commission's principal office
at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
Commission's regional offices at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, New
York, New York 10048. Copies of such materials may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 upon the payment of certain fees prescribed by the Commission. The
Commission also maintains a World Wide Web site that contains reports, proxy
and information statements and other information regarding registrants, such
as the Company, that file electronically with the Commission. The address of
the site is http://www.sec.gov.

103
<PAGE>

UNITED PANAM FINANCIAL CORP.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Report................................................ F-2
Consolidated Statements of Financial Condition
as of December 31, 1997 and 1996........................................... F-3
Consolidated Statements of Operations for the
years ended December 31, 1997, 1996 and 1995............................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1997, 1996 and 1995............................... F-5
Consolidated Statements of Cash Flows for the
years ended December 31, 1997, 1996 and 1995............................... F-6
Consolidated Statements of Cash Flows, Continued for the
years ended December 31, 1997, 1996 and 1995............................... F-7
Notes to Consolidated Financial Statements.................................. F-8
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
United PanAm Financial Corp.:

We have audited the accompanying consolidated statements of financial
condition of United PanAm Financial Corp. and subsidiaries (the "Company") as
of December 31, 1997 and 1996, and the consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three year
period ended December 31, 1997. The consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of United
PanAm Financial Corp. and subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows, for each of the years in
the three year period ended December 31, 1997 in conformity with generally
accepted accounting principles.

As discussed in Note 2 of the consolidated financial statements, effective
January 1, 1997, the Company adopted Statement of Financial Accounting
Standards No. 125 "Accounting for Transactions and Servicing of Financial
Assets and Extinguishment of Liabilities".

/s/ KPMG Peat Marwick LLP

San Francisco, California
March 6, 1998

F-2
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) -------- --------
<S> <C> <C>
ASSETS
Cash and due from banks...................................... $ 5,063 $ 15,026
Short term investments....................................... 21,000 4,000
-------- --------
Cash and cash equivalents.................................... 26,063 19,026
Securities available for sale, at fair value................. -- 1,002
Residual interests in securitizations, at fair value......... -- 8,230
Loans, net................................................... 134,821 148,535
Loans held for sale.......................................... 20,766 120,002
Federal Home Loan Bank stock, at cost........................ 1,288 1,945
Accrued interest receivable.................................. 845 1,494
Real estate owned, net....................................... 988 562
Premises and equipment, net.................................. 822 3,085
Deferred tax assets.......................................... 1,392 3,171
Intangible assets............................................ 584 457
Other assets................................................. 1,174 3,333
-------- --------
Total assets............................................... $188,743 $310,842
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits..................................................... $159,061 $233,194
Federal Home Loan Bank advances.............................. 4,000 28,000
Notes payable................................................ 10,930 12,930
Warehouse line of credit..................................... -- 6,237
Accrued expenses and other liabilities....................... 7,991 17,472
-------- --------
Total liabilities.......................................... 181,982 297,833
-------- --------
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, 10,668,750 and 10,950,000 shares at
December 31, 1996 and 1997, respectively................... 107 110
Additional paid-in capital................................... 5,130 5,127
Retained earnings............................................ 1,524 7,772
-------- --------
Total stockholders' equity................................. 6,761 13,009
-------- --------
Total liabilities and stockholders' equity................. $188,743 $310,842
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1995 1996 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) ---------------- --------
<S> <C> <C> <C>
INTEREST INCOME:
Loans.................................................... $ 9,207 $ 15,159 $ 25,150
Accretion of discount on loans purchased................. 873 696 722
RTC interest............................................. 248 -- --
Short term investments and securities available
for sale................................................ 3,205 706 639
------- -------- --------
Total interest income.................................. 13,533 16,561 26,511
------- -------- --------
INTEREST EXPENSE:
Deposits................................................. 7,240 7,225 10,095
Federal Home Loan Bank advances.......................... -- 72 1,103
Warehouse line of credit................................. -- -- 544
Notes payable............................................ 487 556 669
------- -------- --------
Total interest expense................................. 7,727 7,853 12,411
------- -------- --------
Net interest income.................................. 5,806 8,708 14,100
Provision for loan losses................................ 120 194 507
------- -------- --------
Net interest income after provision for loan losses.. 5,686 8,514 13,593
------- -------- --------
NON-INTEREST INCOME:
Gain on sale of loans, net............................... 90 2,333 26,526
Loan related charges and fees............................ 48 116 422
Service charges and fees................................. 121 272 230
Other income............................................. 59 55 50
------- -------- --------
Total non-interest income.............................. 318 2,776 27,228
------- -------- --------
NON-INTEREST EXPENSE:
Compensation and benefits................................ 2,750 5,248 19,043
Occupancy expense........................................ 407 809 2,891
SAIF special assessment.................................. -- 820 --
Other expenses........................................... 2,005 2,772 8,148
------- -------- --------
Total non-interest expense............................. 5,162 9,649 30,082
------- -------- --------
Income before income taxes............................. 842 1,641 10,739
Income taxes............................................. 384 691 4,491
------- -------- --------
Net income............................................... $ 458 $ 950 $ 6,248
======= ======== ========
Earnings per share-basic................................. $ 0.04 $ 0.09 $ 0.58
======= ======== ========
Earnings per share-diluted .............................. $ 0.04 $ 0.09 $ 0.53
======= ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
NUMBER OF COMMON PAID-IN RETAINED STOCKHOLDERS'
SHARES STOCK CAPITAL EARNINGS EQUITY
(DOLLARS IN THOUSANDS) ---------- ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1994..................... 10,668,750 $107 $5,130 $ 116 $ 5,353
Net income................ -- -- -- 458 458
---------- ---- ------ ------ -------
Balance, December 31,
1995..................... 10,668,750 107 5,130 574 5,811
Net income................ -- -- -- 950 950
---------- ---- ------ ------ -------
Balance, December 31,
1996..................... 10,668,750 107 5,130 1,524 6,761
Net income................ -- -- -- 6,248 6,248
Options exercised......... 281,250 3 222 -- 225
Note receivable from
shareholder.............. -- -- (225) -- (225)
---------- ---- ------ ------ -------
Balance, December 31,
1997..................... 10,950,000 $110 $5,127 $7,772 $13,009
========== ==== ====== ====== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
(DOLLARS IN THOUSANDS) -------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 458 $ 950 $ 6,248
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Gain on sale of loans......................... (90) (2,333) (26,526)
Origination of mortgage loans held for sale... -- (71,848) (582,433)
Sales of mortgage loans held for sale......... -- 52,224 493,526
Provision for loan losses..................... 120 194 507
Accretion of discount on loans................ (873) (696) (722)
Depreciation and amortization................. 142 270 842
FHLB stock dividend........................... (37) (74) (95)
Decrease (increase) in accrued interest
receivable................................... 669 324 (649)
Decrease (increase) in other assets........... 3,181 (117) (2,159)
Deferred income taxes......................... 93 (420) (1,779)
Increase in accrued expenses and other
liabilities.................................. 114 6,127 9,481
-------- -------- ---------
Net cash (used in) provided by operating
activities.................................. 3,777 (15,399) (103,759)
-------- -------- ---------
Cash flows from investing activities:
Proceeds from maturities of investment
securities................................... -- -- 1,000
Originations, net of repayments, of mortgage
loans........................................ 10,728 19,538 22,431
Purchase of mortgage loans.................... (75,878) -- --
Sales of mortgage loans....................... 3,470 -- --
Originations, net of repayments, of non-
mortgage loans............................... (16,771) (22,485) (29,782)
Purchase of securities available for sale..... -- -- (2,002)
Purchase of premises and equipment............ (212) (776) (2,975)
Purchase of FHLB stock, net................... -- (448) (563)
Proceeds from sale of real estate owned....... -- 923 2,243
-------- -------- ---------
Net cash used in investing activities........ (78,663) (3,248) (9,648)
-------- -------- ---------
Cash flows from financing activities:
Net increase (decrease) in deposits........... (21,190) 17,137 74,133
Proceeds, net of repayments, from warehouse
line of credit............................... -- -- 6,237
Proceeds from notes payable................... -- -- 2,000
Proceeds, net of repayments, from FHLB
advances..................................... -- 4,000 24,000
-------- -------- ---------
Net cash provided by (used in) financing
activities.................................... (21,190) 21,137 106,370
-------- -------- ---------
Net increase (decrease) in cash and cash
equivalents................................... (96,076) 2,490 (7,037)
Cash and cash equivalents at beginning of
period........................................ 119,649 23,573 26,063
-------- -------- ---------
Cash and cash equivalents at end of period..... $ 23,573 $ 26,063 $ 19,026
======== ======== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS) ------------------------
1995 1996 1997
------------------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid for:
Interest.......................................... $ 7,720 $ 7,856 $ 12,087
======= ======= ========
Taxes............................................. $ 763 $ 1,512 $ 5,360
======= ======= ========
Supplemental schedule of non-cash investing and
financing activities:
Acquisition of real estate owned through foreclosure
of related mortgage loans........................... $ 298 $ 1,613 $ 1,817
======= ======= ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS

ORGANIZATION

United PanAm Financial Corp. (the "Company"), was 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 (the
"Purchase Agreement") of Pan American Federal Savings Bank from the Resolution
Trust Corporation (the "RTC") on April 29, 1994. The Company, PAFI and the
Bank are considered to be minority owned. The Company is owned substantially
by Pan American Financial, LP and individual investors. PAFI is a wholly-owned
subsidiary of the Company and the Bank is a wholly-owned subsidiary of PAFI.
United PanAm Mortgage 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.

These financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing these financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the financial
statements and the reported amount of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

In 1997, the Company changed its fiscal year end from June 30 to December 31
for financial reporting purposes. For income tax purposes, the Company has
filed an application with the appropriate taxing authorities to change its
fiscal year end from June 30 to December 31.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The 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 December 31, 1997 and 1996. Significant inter-
company accounts and transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

For financial statement purposes, cash and cash equivalents include cash on
hand, non-interest-bearing deposits, certificates of deposit, Federal funds
sold, Commercial Paper and highly liquid interest-bearing deposits with
maturities of three months or less.

In accordance with regulations, the Bank must maintain an amount equal to 4%
of the sum of total deposits and short-term borrowings in cash and U.S.
Government and other approved securities that are readily convertible to cash.
The Bank exceeded these requirements at December 31, 1997 and 1996.

SECURITIES

Securities are classified in one of three categories; held to maturity,
trading, or available for sale. Investments classified as held to maturity are
carried at amortized cost because management has both the intent and ability
to hold these investments to maturity. Investments classified as trading are
carried at fair value with any gains and losses reflected in earnings. All
other investments are classified as available for sale and are carried at fair
value with any unrealized gains and losses included as a separate component of
stockholders' equity, net of applicable taxes.

LOANS

The Company originates and purchases loans for investment as well as for
sale in the secondary market. At the date of acquisition, loans are designated
as either held for sale or held for investment, and accounted for

F-8
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

accordingly. Loans held for sale are reported at the lower of cost or market
value applied on an aggregate basis. Market values of loans held for sale are
based upon prices available in the secondary market for similar loans. Loans
which are held for investment are reported at cost, net of unamortized
discounts or premiums, unearned loan origination fees and allowances for
losses. Transfers of loans from the held for sale portfolio to the held for
investment portfolio are recorded at the lower of cost or market value on the
transfer date.

INTEREST INCOME

Interest income is accrued as it is earned. Loan origination fees and
certain direct loan origination costs are deferred and recognized in interest
income over the contractual lives of the related loans using the interest
method. When a loan is paid-off or sold, the unamortized balance of these
deferred fees and costs is recognized in income. The Company ceases to accrue
interest on mortgage loans that are delinquent 90 days or more and on non-
mortgage loans delinquent 120 days or more, or earlier, if the ultimate
collectibility of the interest is in doubt. Interest income deemed
uncollectible is reversed. The Company ceases to amortize deferred fees on
non-performing loans. Income is subsequently recognized only to the extent
cash payments are received, until in management's judgment, the borrower's
ability to make periodic interest and principal payments is in accordance with
the loan terms, at which time the loan is returned to accrual status.

RESIDUAL INTERESTS IN SECURITIZATIONS

In December 1997, the Company completed a securitization and sale of
approximately $115.0 million in mortgage loans held for sale and recorded a
net gain on sale of $5.9 million. As a result of this securitization, the
Company recorded residual interests in securitizations consisting of
beneficial interests in the form of an interest-only strip representing the
subordinated right to receive cash flows from the pool of securitized loans
after payment of required amounts to the holders of the securities and certain
costs associated with the securitization.

The Company classifies its residual interests in securitizations as trading
securities and records them at fair market value with any unrealized gains or
losses recorded in the results of operations.

In connection with its securitization transaction, the Company is required
to maintain an overcollateralization amount which serves as credit enhancement
to the senior certificate holders. The overcollateralization amount initially
consists of the excess of the principal balance of the mortgage loans sold,
less the principal balance of the certificates sold to investors. The
overcollateralization is required to be maintained at a specified target level
of the principal balance of the certificates and can be increased as specified
in the related securitization documents. Cash flows received in excess of the
obligations to the senior certificate holders and certain costs of the
securitization are deposited into a trust account until the
overcollateralization target is reached. Once this target is reached,
distributions of excess cash from the trust account are remitted to the
Company.

F-9
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

GAIN ON SALE OF LOANS

Gains or losses resulting from sales of mortgage loans are recognized at
settlement and are based on the difference between the sales proceeds and the
carrying value of the related loans sold. Non-refundable fees and direct costs
associated with the origination of mortgage loans are deferred and recognized
when the loans are sold. For securitizations, the gain on sale is calculated
based on the excess of cash received and residual interests retained over the
net book value of loans sold. The retained interest in the securitization is
measured by allocating the previous carrying value between the loans sold and
the interest retained, based on their relative fair values at the date of
securitization.

ALLOWANCE FOR LOAN LOSSES

The Company charges current earnings with a provision for estimated losses
on loans. The provision consists of losses identified specifically with
certain problem loans and a general provision for losses not specifically
identified in the loan portfolio. In addition, the allowance for loan losses
includes a portion of acquisition discounts from the Company's purchase of
automobile installment contracts. Management's analysis takes into
consideration numerous 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. Additionally, regulatory authorities,
as an integral part of their examination process, review the Company's
allowance for estimated losses based on their judgment of information
available to them at the time of their examination and may require the
recognition of additions to the allowance.

PREMISES AND EQUIPMENT

Premises and equipment are carried at cost, less accumulated depreciation
and amortization. Depreciation and amortization are computed on the straight-
line method over the shorter of the estimated useful lives of the related
assets or terms of the leases. Furniture, equipment, computer hardware,
software and data processing equipment are currently depreciated over 3-5
years.

PURCHASE ACCOUNTING

The Company applied business combinations purchase accounting principles to
its acquisition of assets and liabilities from the RTC. The purchase price was
allocated primarily to the assets acquired by the Company. The fair value was
determined based on management's best estimates in conformity with Accounting
Principles Board Opinion ("APB") No. 16 "Business Combinations".

Loan discount resulting from the valuation of the Company's loan portfolio
under purchase accounting requirements at the acquisition date is netted
against loans. The discount is being amortized over the contractual terms of
the related loans using the interest method.

INTANGIBLE ASSETS

Intangible assets consist of the difference between the estimated fair
values of the liabilities assumed over the amount paid to the RTC to acquire
the Company's Panorama City branch.

At December 31, 1996 and 1997 intangible assets totaling $584,000 and
$457,000, respectively, are being amortized over seven years, the estimated
life of the acquired assets, using the straight-line method.

REAL ESTATE OWNED

Real estate owned consists of properties acquired through foreclosure and is
recorded at the lower of cost or fair value at the time of foreclosure.
Subsequently, allowance for estimated losses are established when the

F-10
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

recorded value exceeds fair value less estimated costs to sell. As of December
31, 1996 and 1997, there were no such allowances. Real estate owned at
December 31, 1996 and 1997 consisted of one to four unit residential real
estate.

INCOME TAXES

The Company uses the asset/liability method of accounting for income taxes.
Under the asset/liability method, deferred tax assets and liabilities are
recognized for the future consequences of differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases (temporary differences). Deferred tax assets and
liabilities are measured using tax rates expected to apply to taxable income
in the years in which those temporary differences are recovered or settled.
The effect of deferred tax assets and liabilities from a change in tax rate is
recognized in income in the period of enactment. For income tax return
purposes, the Company files as part of a consolidated group. Income taxes are
allocated to the group members in accordance with an income tax allocation
agreement adopted by each party in the group.

EARNINGS PER SHARE

At December 31, 1997, the Company adopted SFAS No. 128, Earnings Per Share.
Under SFAS No. 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.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1996, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" ("SFAS 125"). SFAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets, and
distinguishes transfers of financial assets that are sales from transfers that
are secured borrowings. In December 1996, SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125" ("SFAS 127")
was issued as an amendment to SFAS No. 125. On January 1, 1997, the Company
adopted SFAS 125.

3. SECURITIES AVAILABLE FOR SALE

Securities available for sale are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
--------------- ----------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
(DOLLARS IN THOUSANDS) --------- ----- --------- ------
<S> <C> <C> <C> <C>
U. S. Agency securities....................... $-- $-- $1,002 $1,002
</TABLE>

The weighted average yield on U. S. agency securities was 6.54% at December
31, 1997. At December 31, 1997 there were no gross unrealized gains or losses.

The following is a summary of the contractual terms to maturity of
securities at their fair value as of December 31, 1997:

<TABLE>
<CAPTION>
CONTRACTUAL MATURITY
---------------------------------------
AFTER ONE AFTER THREE
WITHIN THROUGH THROUGH
ONE YEAR THREE YEARS FOUR YEARS TOTAL
(DOLLARS IN THOUSANDS) -------- ----------- ----------- ------
<S> <C> <C> <C> <C>
U. S. Agency securities................ $1,002 $-- $-- $1,002
</TABLE>

F-11
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. LOANS

Loans are summarized as follows:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1996 1997
(DOLLARS IN THOUSANDS) -------- --------
<S> <C> <C>
Mortgage loans:
Fixed rate................................................. $ 19,505 $ 16,480
Adjustable rate............................................ 84,522 70,890
-------- --------
104,027 87,370
-------- --------
Consumer loans:
Insurance premium financing................................ 32,058 39,990
Automobile installment contracts........................... 10,830 40,877
Other...................................................... 230 267
-------- --------
43,118 81,134
-------- --------
Total loans............................................... 147,145 168,504
Less:
Unearned discounts and premiums............................ (3,697) (2,901)
Unearned finance charges................................... (3,271) (10,581)
Allowance for loan losses.................................. (5,356) (6,487)
-------- --------
Total loans, net.......................................... $134,821 $148,535
======== ========
Contractual weighted average interest rate.................. 10.20% 13.01%
-------- --------
</TABLE>

At December 31, 1996 and 1997, approximately 99% of the Company's mortgage
loans were collateralized by first deeds of trust on one-to-four family
residences. At December 31, 1996 and 1997, approximately 81% and 82%,
respectively, of the Company's loan portfolio is related to collateral or
borrowers located in California.

The activity in the allowance for loan losses consists of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1995 1996 1997
(DOLLARS IN THOUSANDS) ------ ------ ------
<S> <C> <C> <C>
Balance at beginning of period........................ $ 378 $5,250 $5,356
Provision for loan losses............................. 120 194 507
Purchase discounts allocated to the allowance for loan
losses, net.......................................... 4,860 356 1,953
Charge-offs........................................... (108) (718) (2,474)
Recoveries............................................ -- 274 1,145
------ ------ ------
Net charge-offs...................................... (108) (444) (1,329)
------ ------ ------
Balance at end of period.............................. $5,250 $5,356 $6,487
====== ====== ======
</TABLE>

The discounts allocated to the allowance for loan losses in 1996 and 1997
are comprised primarily of acquisition discounts on the Company's purchase of
automobile installment contracts. The discounts allocated to the allowance for
loan losses in 1995 primarily relate to the purchase of loan portfolios from
the RTC. The Company allocated the estimated amount of discounts attributable
to credit risk to the allowance for loan losses.

F-12
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following table sets forth information with respect to the Company's
non-performing assets:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
(DOLLARS IN THOUSANDS) ------ ------
<S> <C> <C>
Nonaccrual loans................................................ $5,835 $6,633
Real estate owned, net.......................................... 988 562
------ ------
Totals........................................................ $6,823 $7,195
====== ======
Percentage of non-performing assets to total assets............. 3.61% 2.31%
====== ======
</TABLE>

A loan is impaired when, based on current information and events, management
believes it will be unable to collect all amounts contractually due under a
loan agreement. Loans are evaluated for impairment as part of the Company's
normal internal asset review process. When a loan is determined to be
impaired, a valuation allowance is established based upon the difference
between the Company's investment in the loan and the fair value of the
collateral securing the loan.

At December 31, 1997, the aggregate investment in loans considered to be
impaired was $6,630,000 of which $6,490,000 were on a nonaccrual basis. At
December 31, 1996 the aggregate investment in loans considered to be impaired
was $7,298,000 of which $6,196,000 were on a nonaccrual basis. Allowance for
loan losses was provided for all impaired loans at December 31, 1997 and 1996;
the related allowances were $1,033,000 and $984,000, respectively. For the
years ended December 31, 1997 and 1996, the Company recognized interest income
on impaired loans of $239,000 and $408,000, respectively. The average recorded
investment in impaired loans during the years ended December 31, 1997 and 1996
was approximately $6,774,000 and $7,022,000, respectively.

Under Federal regulations, the Company may not make real estate loans to one
borrower in an amount exceeding 15% of its unimpaired capital and surplus,
plus an additional 10% for loans secured by readily marketable collateral. At
December 31, 1996 and 1997, such limitation would have been approximately
$2.5 million and $3.4 million, respectively, or $4.1 million and $5.7 million
if secured by readily marketable collateral. There are no loans in excess of
these limitations.

5. FEDERAL HOME LOAN BANK STOCK

The Bank is a member of the Federal Home Loan Bank System ("FHLB") and as
such is required to maintain an investment in capital stock of the FHLB of San
Francisco. At December 31, 1996 and 1997 the Bank owned 12,880 and 19,450
shares, respectively, of the FHLB's $100 par value capital stock. The amount
of stock required is adjusted annually based on a determination made by the
FHLB. The determination is based on the balance of the Bank's outstanding
residential loans and advances from the FHLB.

6. INTEREST RECEIVABLE

Interest receivable is as follows:

<TABLE>
<CAPTION>
DECEMBER
31,
(DOLLARS IN THOUSANDS) -----------
1996 1997
---- ------
<S> <C> <C>
Loans............................................................... $824 $1,429
Investment securities............................................... 21 65
---- ------
Total............................................................. $845 $1,494
==== ======
</TABLE>

F-13
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. PREMISES AND EQUIPMENT

Premises and equipment are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
(DOLLARS IN THOUSANDS) -------------
1996 1997
----- ------
<S> <C> <C>
Furniture and equipment.......................................... $ 867 $3,650
Leasehold improvements........................................... 173 366
----- ------
1,040 4,016
Less accumulated depreciation and amortization................... (218) (931)
----- ------
$ 822 $3,085
===== ======
</TABLE>

Depreciation and amortization expense was $50,000, $163,000 and $715,000 for
the years ended December 31, 1995, 1996 and 1997, respectively.

8. DEPOSITS

Deposits are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1996 1997
--------------------- ---------------------
WEIGHTED WEIGHTED
AMOUNT AVERAGE RATE AMOUNT AVERAGE RATE
(DOLLARS IN THOUSANDS) -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Deposits with no stated maturity:
Regular and money market
passbook........................ $ 17,054 2.84% $ 26,095 3.76%
NOW accounts..................... 7,757 .88 6,558 .80
Money market checking............ 2,885 2.49 3,401 2.35
-------- ---- -------- ----
27,696 2.25 36,054 3.09
-------- ---- -------- ----
Time deposits less than $100,000... 123,914 5.47 144,926 5.56
Time deposits $100,000 and over.... 7,451 5.89 52,214 5.89
-------- ---- -------- ----
131,365 5.49 197,140 5.65
-------- ---- -------- ----
Total deposits................... $159,061 4.68% $233,194 5.25%
======== ==== ======== ====
</TABLE>

A summary of certificate accounts by remaining maturity is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
(DOLLARS IN THOUSANDS) -------- --------
<S> <C> <C>
Maturity within one year..................................... $103,369 $181,858
Maturity within two years.................................... 26,819 14,984
Maturity within three years.................................. 1,177 298
-------- --------
Total...................................................... $131,365 $197,140
======== ========
</TABLE>

Broker-originated deposits totaled $17.5 million at December 31, 1997. There
were no broker-originated deposits at December 31, 1996.

F-14
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. FEDERAL HOME LOAN BANK ADVANCES

The Company had short term FHLB advances of $4.0 million and $28.0 million
at December 31, 1996 and 1997, respectively. The advances outstanding at
December 31, 1996 and 1997 had a weighted average interest rate of 5.70% and
7.07%, respectively, and were secured by the Company's stock in the FHLB of
San Francisco and by pledges of certain mortgages with an aggregate balance of
$55.3 million at December 31, 1997.

10. NOTES PAYABLE

Notes payable consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1997
(DOLLARS IN THOUSANDS) ------- -------
<S> <C> <C>
RTC notes payable.............................................. $10,930 $10,930
Notes payable to stockholders.................................. -- 2,000
------- -------
$10,930 $12,930
======= =======
</TABLE>

The RTC notes payable were issued in connection with the Company's
acquisition of certain assets and liabilities from the RTC. See Note 15 for a
description of the terms and conditions of these notes.

The notes payable to stockholders are unsecured loans bearing interest at 8%
per year with interest payable semi-annually and principal maturing on June
30, 1999. The proceeds from the notes payable were contributed to United PanAm
Mortgage Corporation, a wholly-owned subsidiary of United PanAm Financial
Corp., for working capital purposes. The notes payable may be prepaid at any
time, without penalty.

The maturities of notes payable at December 31, 1997 are as follows:

<TABLE>
<S> <C>
Due in 1 year or less........................................... $ --
Due in 1 to 3 years............................................. 12,930
-------
$12,930
=======
</TABLE>

11. WAREHOUSE LINE OF CREDIT

The Company has available a $100.0 million uncommitted master repurchase
credit facility bearing interest based on one month LIBOR. At December 31,
1997, $6.2 million was outstanding under this credit facility at an interest
rate of 6.70%. The maximum amount outstanding at any month-end during the year
and the average amount outstanding during the year was $64.4 million and $8.9
million, respectively. The credit facility is secured by mortgage loans held
for sale.

F-15
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. INCOME TAXES

The provision for income taxes is comprised of the following:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1995 1996 1997
(DOLLARS IN THOUSANDS) ---- ---- -------
<S> <C> <C> <C>
Federal taxes:
Current.................................................... $233 $807 $ 4,705
Deferred................................................... 55 (302) (1,386)
---- ---- -------
288 505 3,319
---- ---- -------
State taxes:
Current.................................................... 58 304 1,565
Deferred................................................... 38 (118) (393)
---- ---- -------
96 186 1,172
---- ---- -------
Total..................................................... $384 $691 $ 4,491
==== ==== =======
</TABLE>

The tax effects of significant items comprising the Company's net deferred
taxes as of December 31 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
(DOLLARS IN THOUSANDS) ------ ------
<S> <C> <C>
Deferred tax assets:
Franchise taxes................................................ $ 239 $ 462
Loans marked to market for tax purposes........................ 1,348 2,866
Intangible assets.............................................. 82 95
Other.......................................................... 72 172
------ ------
Total gross deferred tax assets............................... 1,741 3,595
------ ------
Deferred tax liabilities:
Residual interests in securitizations.......................... -- (116)
Loan loss allowances........................................... (240) (197)
FHLB stock dividends........................................... (73) (98)
Other.......................................................... (36) (13)
------ ------
Total gross deferred tax liabilities.......................... (349) (424)
------ ------
Net deferred tax assets......................................... $1,392 $3,171
====== ======
</TABLE>

The Company believes a valuation allowance is not needed to reduce the net
deferred tax assets as it is more likely than not that the deferred tax assets
will be realized through recovery of taxes previously paid or future taxable
income.

The Company's effective income tax rate differs from the federal statutory
rate due to the following:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Expected statutory rate....................................... 34.0% 34.0% 34.0%
State taxes, net of federal benefits.......................... 7.5 7.5 7.2
Other, net.................................................... 4.1 0.6 0.6
---- ---- ----
Effective tax rate............................................ 45.6% 42.1% 41.8%
==== ==== ====
</TABLE>

F-16
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company filed its income tax returns using a fiscal year end of June 30,
1996 and 1997. Accordingly, the amounts reflected in this note are
management's estimates of income tax expenses and deferred income taxes at the
dates presented.

13. REGULATORY CAPITAL REQUIREMENTS

The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") established new capital standards for savings institutions,
requiring the Office of Thrift Supervision ("OTS") to promulgate regulations
to prescribe and maintain uniformly applicable capital standards for savings
institutions. Such regulations include three capital requirements: a tangible
capital requirement equal to 1.5% of adjusted total assets, a leverage limit
or core capital requirement equal to 3.0% of adjusted total assets, and a
risk-based capital requirement equal to 8.0% of risk-weighted assets. At
December 31, the Bank had the following regulatory capital requirements and
capital position:

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
------------------------- --------------------------
ACTUAL REQUIRED EXCESS ACTUAL REQUIRED EXCESS
(DOLLARS IN THOUSANDS) ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Tangible capital........ $16,499 $2,795 $13,704 $22,379 $ 4,619 $17,760
Tangible capital ratio.. 8.85% 1.50% 7.35% 7.27% 1.50% 5.77%
Core capital............ $16,499 $5,590 $10,909 $22,379 $ 9,239 $13,140
Core capital (leverage)
ratio.................. 8.85% 3.00% 5.85% 7.27% 3.00% 4.27%
Risk-based capital...... $17,893 $8,751 $ 9,142 $24,938 $16,171 $ 8,767
Percent of risk-weighted
assets................. 16.36% 8.00% 8.36% 12.34% 8.00% 4.34%
</TABLE>

The FDIC Improvement Act of 1991 ("FDICIA") required each federal banking
agency to implement prompt corrective actions for institutions that it
regulates. In response to these requirements, the OTS adopted final rules,
effective December 19, 1992, based upon FDICIA's five capital tiers: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized.

The rules provide that a savings association is "well capitalized" if its
leverage ratio is 5% or greater, its Tier 1 risk-based capital ratio is 6% or
greater, its total risk-based capital ratio is 10% or greater, and the
institution is not subject to a capital directive.

As used herein, leverage ratio means the ratio of core capital to adjusted
total assets, Tier 1 risk-based capital ratio means the ratio of core capital
to risk-weighted assets, and total risk-based capital ratio means the ratio of
total capital to risk-weighted assets, in each case as calculated in
accordance with current OTS capital regulations. Under these new regulations,
the Bank is deemed to be "well capitalized".

The Bank had the following regulatory capital calculated in accordance with
FDICIA's capital standards for a "well capitalized" institution:

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
------------------------- --------------------------
ACTUAL REQUIRED EXCESS ACTUAL REQUIRED EXCESS
(DOLLARS IN THOUSANDS) ------- -------- ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Leverage................ $16,499 $ 9,316 $7,183 $22,379 $15,398 $ 6,981
Leverage ratio.......... 8.85% 5.00% 3.85% 7.27% 5.00% 2.27%
Tier 1 risk-based....... $16,499 $ 6,563 $9,936 $22,379 $12,128 $10,251
Tier 1 risk-based
ratio.................. 15.08% 6.00% 9.08% 11.07% 6.00% 5.07%
Total risk-based........ $17,893 $10,939 $6,954 $24,938 $20,213 $ 4,725
Total risk-based ratio.. 16.36% 10.00% 6.36% 12.34% 10.00% 2.34%
</TABLE>

F-17
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

At periodic intervals, both the OTS and Federal Deposit Insurance
Corporation ("FDIC") routinely examine the Bank's financial statements as part
of their legally prescribed oversight of the savings and loan industry. Based
on these examinations, the regulators can direct that the Bank's financial
statements be adjusted in accordance with their findings.

On September 30, 1996, the Economic Growth and Regulatory Paperwork
Reduction Act ("Act") of 1996 was enacted. The Act included a Special
Assessment ("Special SAIF Assessment") related to the recapitalization of the
SAIF, which was levied based on a rate of 65.7 cents per $100 of SAIF-insured
domestic deposits held as of March 31, 1995. As a result of the Act, the
Company recorded a pre-tax charge of $820,000 in the year ended December 31,
1996.

14. COMMITMENTS AND CONTINGENCIES

Certain branch and office locations are leased by the Company under
operating leases expiring at various dates through the year 2006. Rent expense
was $227,000, $475,000 and $1,462,000 for the years ended December 31, 1995,
1996 and 1997, respectively.

Future minimum rental payments as of December 31, 1997 under existing leases
are set forth as follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
YEAR ENDING DECEMBER 31:
<S> <C>
1998............................................................ $1,930
1999............................................................ 1,837
2000............................................................ 1,457
2001............................................................ 971
2002............................................................ 589
Thereafter...................................................... 437
------
Total......................................................... $7,221
======
</TABLE>

Under the RTC Minority Preference Resolution Program, the Company's Mission
Street branch is subject to a rent-free lease and purchase option. This lease
and purchase option is available to minority owned institutions for branches
located in a predominantly minority neighborhood. The term of the lease is
five years with an option to purchase the branch at a price equal to 95% of
the appraised value at the time of the purchase and can be exercised anytime
during the term of the lease. The lease was effective as of April 30, 1994.

In order to meet the borrowing needs of its customers, the Company is a
party to certain commitments to extend credit which have specified interest
rates and fixed expiration dates. These commitments, substantially all of
which are to fund mortgages on one-to-four family residences, are considered
off-balance sheet financial instruments. These instruments involve elements of
credit risk and interest rate risk in excess of amounts recognized in the
accompanying statements of financial condition. The Company's exposure to
credit loss from these commitments to extend credit, in the event of borrower
nonperformance, is represented by the contractual amount of these commitments.
Certain of the commitments are expected to expire without being drawn upon
and, accordingly, the total commitment amounts do not necessarily represent
future cash requirements.

At December 31, 1996 and 1997, the Company had outstanding commitments to
originate loans of approximately $19.1 million and $117.4 million,
respectively. Commitments outstanding included $17.1 million and $93.3 million
of adjustable rate loans at December 31, 1996 and 1997 and $2.0 million and
$24.1 million of fixed rate loans at December 31, 1996 and 1997, respectively.
The fixed rate loan commitments have interest rates ranging from 8.88% to
14.90% at December 31, 1996 and 7.75% to 16.0% at December, 1997. At

F-18
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

December 31, 1996 and 1997, the Company had outstanding commitments to sell
loans on a nonrecourse basis of $1.3 million and $16.2 million, respectively.

The Company has entered into loan sale agreements with investors in the
normal course of business which include standard representations and
warranties customary to the mortgage banking industry. Violations of these
representations and warranties may require the Company to repurchase loans
previously sold or to reimburse investors for losses incurred. In the opinion
of management, the potential exposure related to the Company's loan sale
agreements will not have a material effect on the financial position and
operating results of the Company.

The Company is involved in various claims or legal actions arising in the
normal course of business. In the opinion of management, the ultimate
disposition of such matters will not have a material effect on the financial
position and operating results of the Company.

15. NOTES PAYABLE, RESTRICTION ON DIVIDEND PAYMENTS AND PLEDGE OF BANK STOCK.

In accordance with Federal Regulation 12 CFR 563.134, federal savings banks
which meet fully phased-in capital requirements may distribute dividends up to
100% of their net income to date plus the amount that would reduce by one-half
their surplus capital ratio at the beginning of the calendar year. The Bank
exceeds the fully phased-in capital requirements. In connection with the April
29, 1994 purchase of assets and assumption of certain liabilities from the
RTC, the Bank and the Company, entered into a five year Interim Capital
Assistance Loan Agreement ("ICA") with the RTC (the Bank is not a direct or
indirect obligor, or a guarantor of the loan) for $6,930,000 at a fixed
interest rate of 3.69% for two years and 0.125% above the 13-week Treasury
Bill auction rate for the remaining three years, adjusted annually. On
September 9, 1994, the Bank acquired deposits from the RTC totaling
approximately $65,000,000 located in Panorama City in Southern California.
This branch is located in a "Predominately Minority Neighborhood," as defined
by the RTC. In connection with this acquisition, the RTC provided the Bank's
Holding Company, Pan American Financial, Inc., $4,000,000 in the form of an
additional ICA loan for a term of five years with interest at 0.125% above the
13 week Treasury Bill auction rate, adjusted quarterly. The entire amount was
invested in the Bank and qualifies as regulatory capital for the Bank. In
addition, the OTS required $750,000 of additional capital from the
shareholders to be invested in the Bank in connection with the Panorama City
branch acquisition.

These Agreements, as amended, provide among other things, that the Bank may
not declare or pay any dividends until the loan is repaid by the Company.
Dividends may be paid to the Company if the funds are used exclusively for
payment of principal or interest on the obligation of PAFI to the RTC or the
Bank has provided the FDIC with 30 days prior written notice of its intent to
declare or pay such dividends and the Bank is in compliance with certain
conditions as required under the Agreements. The stock of the Bank was pledged
by PAFI to the RTC as collateral for the loan.

16. STOCK OPTIONS

In 1994, the Company adopted a stock option plan and, in November 1997,
amended and restated such plan as the United PanAm Financial Corp. 1997
Employee Stock Incentive Plan (the "Plan"). The maximum number of shares that
may be issued to officers, directors, employees or consultants under the Plan
is 2,287,500. Options issued pursuant to the Plan have been granted at an
exercise price of not less than fair market value on the date of grant.
Options generally vest over a three to five year period and have a maximum
term of ten years.

F-19
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Stock option activity is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
1995 PRICE 1996 PRICE 1997 PRICE
(DOLLARS IN THOUSANDS) ------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of
period................. 900,000 $0.80 900,000 $0.80 1,143,750 $0.80
Granted................. -- -- 243,750 .80 717,500 9.06
Canceled or expired..... -- -- -- -- -- --
Exercised............... -- -- -- -- (281,250) 0.80
------- --------- ---------
Balance at end of
period................. 900,000 $0.80 1,143,750 $0.80 1,580,000 $4.55
======= ========= =========
Options exercisable..... 225,000 510,938 833,125
======= ========= =========
Weighted average fair
value per share of
options granted during
the year............... -- $ 0.23 $ 2.61
======= ========= =========
</TABLE>

Shares exercised in 1997 were executed by a stockholder and officer of the
Company. In connection with this transaction, the Company loaned this
individual $225,000 to finance the exercise of these options which loan is
full recourse and secured by the shares purchased. The loan bears interest at
an annual rate of 5.81% payable on the earlier of October 15, 2000 or the
termination of this individual's employment with the Company.

The Company applies APB Opinion No. 25 in accounting for the Plan and
accordingly, no compensation cost has been recognized for its stock option
plan in the consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," the Company's net earnings and earnings per
share would have been reduced to the pro-forma amounts indicated below for the
years ended December 31:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------
1996 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) ----- ------
<S> <C> <C>
Net income to common stockholders:
As reported................................................. $ 950 $6,248
Pro-forma................................................... $ 942 $6,031
Net income per share:
As reported-basic........................................... $0.09 $ 0.58
As reported - diluted....................................... $0.09 $ 0.53
Pro-forma - basic........................................... $0.09 $ 0.56
Pro-forma - diluted......................................... $0.09 $ 0.51
</TABLE>

The fair value of options granted under the Plan was estimated on the date
of grant using the Black-Sholes option-pricing model with the following
weighted average assumptions used: no dividend yield, no volatility, risk-free
interest rate of 7% and expected lives of 5 years.

The Company's auto finance subsidiary has granted options to certain of its
key employees to purchase up to 13.5% of that subsidiary. These options are
exercisable only upon an initial public offering or sale of such subsidiary.
These options vest based upon the satisfaction of specified performance goals.

F-20
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

17. OTHER EXPENSES

Other expenses are comprised of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
(DOLLARS IN THOUSANDS) -------- -------- --------
<S> <C> <C> <C>
Marketing........................................... $ 78 $ 171 $ 1,740
Telephone........................................... 71 185 921
Professional fees................................... 224 339 788
Travel and entertainment............................ 88 170 885
Stationery and supplies............................. 115 217 741
Postage and delivery................................ 51 167 560
Data processing..................................... 284 364 529
Deposit insurance premiums.......................... 395 371 309
Loan servicing expense.............................. 84 168 349
Insurance premiums.................................. 102 93 253
Amortization of intangible assets................... 169 132 127
Other............................................... 344 395 946
-------- -------- --------
Total........................................... $ 2,005 $ 2,772 $ 8,148
======== ======== ========
</TABLE>

18. EARNINGS PER SHARE

On December 31, 1997, the Company adopted SFAS 128 for calculating earning
per share as shown below:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) -------- -------- --------
<S> <C> <C> <C>
Earnings per share - basic:
Net income applicable to common stock (numerator).. $ 458 $ 950 $ 6,248
======== ======== ========
Average common shares outstanding (denominator).... 10,669 10,669 10,739
======== ======== ========
Per share.......................................... $ 0.04 $ 0.09 $ 0.58
======== ======== ========
Earnings per share - diluted:
Net income (numerator)............................. $ 458 $ 950 $ 6,248
======== ======== ========
Average common shares outstanding.................. 10,669 10,669 10,739
Add: Stock options................................. -- -- 1,136
-------- -------- --------
Average common shares outstanding - diluted
(denominator)..................................... 10,669 10,669 11,875
======== ======== ========
Per share.......................................... $ 0.04 $ 0.09 $ 0.53
======== ======== ========
</TABLE>

19. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of the Company's financial instruments are as
follows at the dates indicated:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
----------------- -----------------
FAIR FAIR
CARRYING VALUE CARRYING VALUE
VALUE ESTIMATE VALUE ESTIMATE
(DOLLARS IN THOUSANDS) -------- -------- -------- --------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents.................. $ 26,063 $ 26,063 $ 19,026 $ 19,026
Securities................................. -- -- 1,002 1,002
Residual interests in securitizations...... -- -- 8,230 8,230
Loans, net................................. 134,821 143,926 148,535 161,324
Loans held for sale........................ 20,766 21,767 120,002 126,782
Federal Home Loan Bank Stock............... 1,288 1,288 1,945 1,945
Accrued interest........................... 845 845 1,494 1,494
Liabilities:
Deposits................................... $159,061 $159,506 $233,194 $233,538
Notes payable.............................. 10,930 10,930 12,930 12,930
Federal Home Loan Bank advances............ 4,000 4,000 28,000 28,000
Warehouse line of credit................... -- -- 6,237 6,237
</TABLE>

F-21
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following summary presents a description of the methodologies and
assumptions used to estimate the fair value of the Company's financial
instruments. Because no ready market exists for a significant portion of the
Company's financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision. The
use of different assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.

Cash and cash equivalents: Cash and cash equivalents are valued at their
carrying amounts included in the consolidated statements of financial
condition, which are reasonable estimates of fair value due to the relatively
short period to maturity of the instruments.

Securities: Securities are valued at quoted market prices where available.
If quoted market prices are not available, fair values are based on quoted
market prices of comparable instruments.

Residual interests in securitizations: The fair value of residual interests
in securitizations is determined by discounting the estimated cash flows
received over the life of the asset using prepayment, default, and interest
rate assumptions that market participants would use for similar financial
instruments also subject to prepayment, credit and interest rate risk.

Loans, net: For real estate loans, fair values were estimated using quoted
prices for equivalent yielding loans as adjusted for interest rates, margin
differences and other factors. For non-mortgage loans, fair values were
estimated at carrying amounts due to their short-term maturity and portfolio
interest rates that are equivalent to present market interest rates.

Loans held for sale: The fair value of loans held for sale is based on
current pricing of whole loan transactions that a purchaser unrelated to the
seller would demand for a similar loan.

Federal Home Loan Bank Stock: Since no secondary market exists for FHLB
stock and the stock is bought and sold at par by the FHLB, fair value of these
financial instruments approximates the carrying value.

Accrued interest: The carrying amounts of accrued interest approximate their
fair values.

Deposits: The fair values of demand deposits, passbook accounts, money
market accounts, and other deposits immediately withdrawable, by definition,
approximate carrying values for the respective financial instruments. For
fixed maturity deposits, the fair value was estimated by discounting expected
cash flows by the current offering rates of deposits with similar terms and
maturities.

Federal Home Loan Bank advances: The fair value of FHLB advances are valued
at their carrying amounts included in the consolidated statements of financial
condition, which are reasonable estimates of fair value due to the relatively
short period to maturity of the advances.

Notes payable: The fair value of notes payable is considered to approximate
carrying value as their note rates are consistent with present market rates.

Warehouse line of credit: The fair value of the warehouse line of credit is
considered to approximate carrying value as the note rate is consistent with
present market rates.

Financial Instruments With Off-Balance Sheet Risk: No fair value is ascribed
to the Company's outstanding commitments to fund loans since commitment fees
are not significant and predominantly all such commitments are variable-rate
loan commitments. There were no significant unrealized gains and losses on
commitments to sell loans.

F-22
<PAGE>

UNITED PANAM FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

20. HOLDING COMPANY FINANCIAL INFORMATION

Following are the financial statements of United PanAm Financial Corp.
(holding company only):

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1996 1997
- ---------------------- ------------ ------------
<S> <C> <C>
STATEMENTS OF FINANCIAL CONDITION
Cash........................................ $ 32 $ 290
Other assets................................ 29 297
Investment in subsidiary.................... 6,700 14,696
------ -------
Total assets............................... $6,761 $15,283
====== =======
Notes payable............................... -- $ 2,000
Other liabilities........................... -- 274
------ -------
Total liabilities.......................... -- 2,274
Stockholders' equity........................ 6,761 13,009
------ -------
Total liabilities and stockholders'
equity.................................... $6,761 $15,283
====== =======
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------------------
1995 1996 1997
------------ ------------ -------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS
Equity in income of subsidiary.............. $ 470 $ 952 $ 6,294
Interest income............................. 1 1 11
------ ------- -------
Total income............................... 471 953 6,305
------ ------- -------
Interest expense............................ -- -- 74
Other expense............................... 22 4 25
------ ------- -------
Total expense.............................. 22 4 99
------ ------- -------
Income before income taxes.................. 449 949 6,206
Income tax benefit.......................... 9 1 42
------ ------- -------
Net income................................. $ 458 $ 950 $ 6,248
====== ======= =======
STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income................................. $ 458 $ 950 $ 6,248
Equity in earnings of subsidiary........... (470) (952) (6,294)
(Increase) decrease in other assets........ (35) 7 (268)
Increase in other liabilities.............. -- -- 274
------ ------- -------
Net cash provided by (used in) operating
activities............................... (47) 5 (40)
------ ------- -------
Cash flows from financing activities:
Capital contributed to subsidiary.......... -- -- (1,702)
Increase in notes payable from
shareholders.............................. -- -- 2,000
------ ------- -------
Net cash provided by financing activities.. -- -- 298
------ ------- -------
Net increase (decrease) in cash and cash
equivalents............................... (47) 5 258
Cash and cash equivalents at beginning of
period.................................... 74 27 32
------ ------- -------
Cash and cash equivalents at end of
period.................................... $ 27 $ 32 $ 290
====== ======= =======
</TABLE>

F-23
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

No dealer, salesperson or any other person has been authorized to given any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made in this Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company or any of the Underwriters. This Prospectus
does not constitute an offer to sell or a solicitation of any offer to buy any
securities other than the shares of Common Stock to which it relates or an of-
fer to, or a solicitation of, any person in any jurisdiction where such an of-
fer or solicitation would be unlawful. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create any impli-
cation that the information contained herein is correct as of any time subse-
quent to the date hereof.

----------------------------

TABLE OF CONTENTS

----------------------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 12
Use of Proceeds.......................................................... 23
Dividend Policy.......................................................... 24
Dilution................................................................. 24
Capitalization........................................................... 25
Selected Consolidated Financial Data..................................... 26
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 29
Business................................................................. 51
Management............................................................... 85
Principal Shareholders................................................... 96
Description of Capital Stock............................................. 98
Underwriting............................................................. 101
Legal Matters............................................................ 102
Experts.................................................................. 103
Additional Information................................................... 103
Index to Consolidated Financial Statements............................... F-1
</TABLE>

----------------

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDI-
TION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UN-
DERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

5,500,000 SHARES

UNITED PANAM
LOGO FINANCIAL CORP.

COMMON STOCK

-----------------
PROSPECTUS
-----------------

NationsBanc MontgomerySecurities LLC

Piper Jaffray Inc.

, 1998

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses in connection with the Offering are as follows:

<TABLE>
<S> <C>
SEC registration fee............................................... $ 24,394
NASD filing fee.................................................... 8,550
Nasdaq National Market filing fee.................................. 58,641
Blue Sky filing fees and expenses.................................. 15,000
Printing and engraving expenses.................................... 200,000
Legal fees and expenses............................................ 325,000
Accounting fees and expenses....................................... 200,000
Registrar and transfer agent fees.................................. 15,000
Miscellaneous...................................................... 103,415
--------
Total............................................................ $950,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The California General Corporations Law provides that California
corporations may include provisions in their Articles of Incorporation
relieving directors of monetary liability for breach of their fiduciary duty
as directors, except for the liability of a director resulting from (i) any
transaction from which the director derives an improper personal benefit, (ii)
acts or omissions involving intentional misconduct or a knowing and culpable
violation of law, (iii) acts or omissions that a director believes to be
contrary to the best interest of the corporation or its shareholders or that
involve the absence of good faith on the part of the director, (iv) acts or
omissions constituting an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the corporation or its shareholders, (v)
acts or omissions showing a reckless disregard for the director's duty to the
corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders, (vi) any improper transaction between a director and the
corporation in which the director has a material financial interest, or (vii)
the making of an illegal distribution to shareholders or any illegal loan or
guaranty. The Registrant's Articles of Incorporation contain such a provision.

The Underwriting Agreement, a proposed form of which is filed as Exhibit 1.1
hereto, provides for the indemnification of directors, officers, employees,
agents and controlling persons of the Registrant by the Underwriters under
certain circumstances.

The Bylaws of the Registrant, in the form attached as Exhibit 3.2, and the
proposed form of Bylaws of United PanAm Financial Corp., a California
corporation, in the form attached as Exhibit 3.2.1, require the Registrant to
indemnify its directors, and permit the Registrant to indemnify its officers,
to the fullest extent permitted by applicable law.

The Registrant has entered into indemnification agreements with its
directors and executive officers that require the Registrant to indemnify the
directors and executive officers to the fullest extent permitted by applicable
law.

The Registrant maintains a standard policy of officers' and directors'
liability insurance.

II-1
<PAGE>

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since November 1, 1994, the Registrant has issued and sold (without payment
of any selling commission to any person) the following securities, which were
not registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance on Section 4(2) of the Securities Act as not involving a
public offering.

On October 18, 1994, the Registrant granted Lawrence J. Grill an option, as
partial consideration for his employment by the Registrant, to purchase
375,000 shares of Common Stock at $0.80 per share pursuant to the Stock
Incentive Plan. On October 15, 1997, Lawrence J. Grill exercised the option to
purchase 281,250 shares of Common Stock for an aggregate purchase price of
$225,000. The balance of the option will vest on May 1, 1998 and will expire
on October 18, 2004.

On June 1, 1996, the Registrant granted Ron R. Duncanson an option, as
partial consideration for his services as a director of the Registrant, to
purchase 18,750 shares of Common Stock at $0.80 per share pursuant to the
Stock Incentive Plan. Fifty percent of the option vested on June 1, 1996 and
25% on May 1, 1997, and 25% will vest on May 1, 1998. The option expires on
April 30, 2006.

On June 1, 1996, the Registrant granted Daniel L. Villanueva an option, as
partial consideration for his services as a director of the Registrant, to
purchase 18,750 shares of Common Stock at $0.80 per share pursuant to the
Stock Incentive Plan. Fifty percent of the option vested on June 1, 1996 and
25% on May 1, 1997, and 25% will vest on May 1, 1998. The option expires on
April 30, 2006.

On June 1, 1996, the Registrant granted Carol M. Bucci an option, as partial
consideration for her services as an officer of the Registrant, to purchase
56,250 shares of Common Stock at $0.80 per share pursuant to the Stock
Incentive Plan. Twenty-five percent of the option vested on each of June 1,
1996, March 1, 1997 and March 1, 1998, and 25% will vest on March 1, 1999. The
option expires on April 30, 2006.

On August 1, 1996, the Registrant granted Edmund M. Kaufman an option, as
partial consideration for his services as a director of the Registrant, to
purchase 18,750 shares of Common Stock at $0.80 per share pursuant to the
Stock Incentive Plan. Twenty-five percent of the option vested on August 1,
1996 and 25% on October 16, 1997, and 25% will vest on October 16, 1998 and
25% on October 16, 1999. The option expires on April 30, 2006.

On October 1, 1996, the Registrant granted John T. French an option, as
partial consideration for his services as a consultant to the Registrant, to
purchase 131,250 shares of Common Stock at $0.80 per share pursuant to the
Stock Incentive Plan. Twenty-five percent of the option vested on October 1,
1996 and 25% on October 1, 1997, and 25% will vest on October 1, 1998 and 25%
on October 1, 1999. The option expires on April 30, 2006.

On March 5, 1997, the Registrant granted Robert Wilson an option, in
connection with the termination of his employment by the Registrant, to
purchase 112,500 shares of Common Stock at $1.33 per share pursuant to the
Stock Incentive Plan. This option vested on the date of grant and will expire
on the third anniversary of the date of grant.

On October 15, 1997, the Registrant granted John T. French an option, as
partial consideration for his services as a director of the Registrant, to
purchase 60,000 shares of Common Stock at $10.50 per share. Twenty-five
percent of the option vested on the date of grant, and 25% will vest on the
first three anniversaries of the date of grant. The option expires on the
tenth anniversary of the date of grant.

Concurrently with the sale of the shares of Common Stock offered hereby, the
Registrant will grant Luis Maizel an option, as partial consideration for his
services as a director of the Registrant, to purchase 20,000 shares of Common
Stock at $10.50 per share. This option will become exercisable in four equal
annual installments commencing on the first anniversary of the date of grant
and will expire on the tenth anniversary of the date of grant.

II-2
<PAGE>

Concurrently with the sale of the shares of Common Stock offered hereby, the
Registrant will grant Lawrence J. Grill an option, as partial consideration
for his services as a director of the Registrant, to purchase 60,000 shares of
Common Stock at an exercise price equal to the initial offering price. This
option will become exercisable in four equal annual installments commencing on
the first anniversary of the date of grant and will expire on the tenth
anniversary of the date of grant.

Concurrently with the sale of the shares of Common Stock offered hereby, the
Registrant will grant Guillermo Bron an option, as partial consideration for
his services as a director of the Registrant, to purchase 60,000 shares of
Common Stock at an exercise price equal to 110% of the initial offering price.
This option will become exercisable in four equal annual installments
commencing on the first anniversary of the date of grant and will expire on
the tenth anniversary of the date of grant.

On October 15, 1997, the Registrant granted Carol Bucci an option, as
partial consideration for her services as an officer of the Registrant, to
purchase 40,000 shares of Common Stock at $10.50 per share. This option will
become exercisable in four equal annual installments commencing on the first
anniversary of the date of grant and will expire on the tenth anniversary of
the date of grant.

On October 15, 1997, the Registrant granted Stephen W. Haley an option, as
partial consideration for his services as an officer of the Registrant, to
purchase 60,000 shares of Common Stock at $10.50 per share. Twenty-five
percent of the option vested on the date of grant, and 25% will vest on the
first three anniversaries of the date of grant. The option will expire on the
tenth anniversary of the date of the grant.

On October 15, 1997, the Registrant granted 17 current employees options, as
partial consideration for their employment with the Registrant, to purchase up
to an aggregate of 445,000 shares of Common Stock at $10.50 per share. These
options will become exercisable in installments before October 15, 2001 and
will expire on the tenth anniversary of the date of grant.

II-3
<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a. Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of the Registrant.
3.1.1*** Form of Articles of Incorporation of United PanAm Financial Corp., a
California corporation.
3.2* Bylaws of the Registrant.
3.2.1*** Form of Bylaws of United PanAm Financial Corp., a California
corporation.
4.1**** Form of stock certificate.
4.2*** Form of Agreement of Merger of the Registrant into United PanAm
Financial Corp., a California corporation.
5.1**** Opinion of Manatt, Phelps & Phillips, LLP.
10.1* Insurance Premium Financing Management Agreement dated May 17, 1995,
between Pan American Bank, FSB and BPN Corporation.
10.2* First Amendment to Insurance Premium Financing Management Agreement
and Guaranties dated October , 1995, between Pan American Bank, FSB
and BPN Corporation.
10.3* Second Amendment to Insurance Premium Financing Management Agreement
and Guaranties dated February 28, 1996, among Pan American Bank,
FSB, BPN Corporation, Cornelius J. O'Shea, Peter Walski and Barbara
Walski.
10.4* Guaranty dated May 17, 1995 by Peter Walski and Barbara Walski to
Pan American Bank, FSB.
10.5* Guaranty dated May 17, 1995 by Cornelius J. O'Shea to Pan American
Bank, FSB.
10.6* Stock Option Agreement dated May 17, 1995, among BPN Corporation,
Pan American Group, Inc., Peter A. Walski, Barbara R. Walski,
Cornelius J. O'Shea and The Walski Family Trust.
10.7* First Amendment to Stock Option Agreement dated October 1, 1997,
among BPN Corporation, Pan American Group, Inc., Peter A. Walski,
Barbara R. Walski, Cornelius J. O'Shea and The Walski Family Trust.
10.8* Interim Capital Assistance Agreement dated September 9, 1994, among
Pan American Financial, Inc., Pan American Bank, FSB and the
Resolution Trust Corporation.
10.9* Amendment No. 1 to Interim Capital Assistance Agreement dated May 1,
1997, among Pan American Financial, Inc., Pan American Bank, FSB and
the Federal Deposit Insurance Corporation.
10.10* Interim Capital Assistance Agreement dated April 29, 1994, among Pan
American Financial, Inc., Pan American Bank, FSB and the Resolution
Trust Corporation.
10.11* Letter agreement dated March 2, 1995, between Pan American Bank, FSB
and the Resolution Trust Corporation.
10.12* Promissory Note dated September 9, 1994 in the amount of $4 million
by Pan American Financial, Inc. to the Resolution Trust Corporation.
10.13* Stock Pledge Agreement dated September 9, 1994, between Pan American
Financial, Inc. and the Resolution Trust Corporation.
10.14** Limited Branch Purchase and Assumption Agreement dated September 9,
1994, between the Resolution Trust Corporation as receiver of
Western Federal Savings Bank and Pan American Bank, FSB.
10.15** Lead Acquiror Waiver and Reimbursement Agreement dated September 9,
1994, between Home Savings of America, FSB and Pan American Bank,
FSB.
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
---------- -----------
<C> <S>
10.16** Indemnity Agreement dated September 9, 1994, between the Resolution
Trust Corporation and Pan American Bank, FSB.
10.17** Whole Purchase and Assumption Agreement dated April 29, 1994,
between the Resolution Trust Corporation and Pan American Bank,
FSB.
10.18** Indemnity Agreement dated April 29, 1994, between the Resolution
Trust Corporation and Pan American Bank, FSB.
10.19* Promissory Note dated April 29, 1994 in the amount of $6,930,000 by
Pan American Financial, Inc. to the Resolution Trust Corporation.
10.20* Stock Pledge Agreement dated April 29, 1994, between Pan American
Financial, Inc. and the Resolution Trust Corporation.
10.21** Advances and Security Agreement dated January 29, 1996, between the
Federal Home Loan Bank of San Francisco and Pan American Bank, FSB.
10.22** Retail CD Brokerage Agreement dated April 30, 1996, between Pan
American Bank, FSB and Merrill Lynch, Pierce, Fenner & Smith,
Incorporated.
10.23** Fixed Rate Interest bearing--3 Months and Longer Retail Certificate
of Deposit of Pan American, FSB, Master Certificate No. 2 dated May
12, 1997.
10.24** Fixed Rate Interest bearing--3 Months and Longer Retail Certificate
of Deposit of Pan American Bank, FSB, Master Certificate No. 3
dated May 12, 1997.
10.25** License, Services, and Purchase Agreement dated December 1996,
between Associated Software Consultants, Inc. and Pan American, FSB
and all addendums thereto.
10.26** Agreement for Remote Computing Services dated April 4, 1995,
between Pan American Bank, FSB and Fiserv Fresno, Inc.
10.27** Amendment to Computer Operating Agreement between Pan American
Bank, FSB and Fiserv Fresno, Inc.
10.28** Addendum No. 2 to Agreement for Remote Computing Services effective
as of April 1, 1996, between Pan American Bank, FSB and Fiserv
Fresno, Inc.
10.29** Item Processing Agreement dated April 26, 1993, between Systematics
Financial Services, Inc. and Pan American Savings Bank, FSB.
10.30** Support Services Agreement dated October 31, 1995, between Alan
King and Company, Inc. and Pan American Savings Bank, FSB.
10.31** Technical Support Services Agreement dated May 1, 1995, between
Alan King and Company, Inc. and Pan American Savings Bank, FSB.
10.32** License Agreement dated May 1, 1995, between Alan King and Company,
Inc. and Pan American Savings Bank, FSB.
10.33** Subservicing Agreement dated March 2, 1995, between Pan American
Bank, FSB and Dovenmuehle Mortgage, Inc.
10.34* Interim Operating Agreement dated July 1, 1997, between United
PanAm Mortgage Corporation and Pan American Bank, FSB.
10.34.1*** Amended and Restated Interim Operating Agreement dated as of
December 31, 1997, between United PanAm Mortgage Corporation and
Pan American Bank, FSB.
10.35** Inter-Company Agreement dated May 1, 1994, between Pan American
Financial, Inc. and Pan American Bank, FSB.
10.36** Inter-Company Agreement dated August 1, 1994, between Pan American
Group, Inc. and Pan American Bank, FSB.
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
---------- -----------
<C> <S>
10.37* Employment Agreement dated May 7, 1996, between Pan American Bank,
FSB and Ray C. Thousand.
10.38** Employment Agreement dated May 1, 1994, between Pan American Bank,
FSB and Lawrence J. Grill.
10.39* Employment Agreement dated October 1, 1997, among the Registrant,
Pan American Bank, FSB and Lawrence J. Grill.
10.39.1*** Amendment No. 1 to Employment Agreement dated November 1, 1997,
among the Registrant, Pan American Bank, FSB and Lawrence J. Grill.
10.40* Employment Agreement dated October 1, 1997, between the Registrant
and Guillermo Bron.
10.40.1*** Amendment No. 1 to Employment Agreement dated November 1, 1997,
between the Registrant and Guillermo Bron.
10.41* Employment Agreement dated October 1, 1997, between United PanAm
Mortgage Corporation and John T. French.
10.41.1** First Amendment to Employment Agreement dated November 14, 1997
between United PanAm Mortgage Corporation and John T. French.
10.42* Salary Continuation Agreement dated October 1, 1997, between Pan
American Bank, FSB and Lawrence J. Grill.
10.43* Salary Continuation Agreement dated October 1, 1997, between Pan
American Bank, FSB and Guillermo Bron.
10.44* Form of Indemnification Agreement between the Registrant and Ms.
Bucci and each of Messrs. Bron, French, Grill, Haley, Kaufman,
Maizel, Thousand and Villanueva.
10.45** Agreement and Mutual General Release dated March 5, 1997, between
Pan American Bank, FSB and Robert Wilson.
10.46 Pan American Group, Inc. 1994 Stock Option Plan, together with
forms of incentive stock option and non-qualified stock option
agreements.
10.47* Pan American Group, Inc. 1997 Stock Incentive Plan, together with
forms of incentive stock option, non-qualified stock option and
restricted stock agreements.
10.48** Pan American Bank, FSB Management Incentive Plan.
10.48.1*** Pan American Bank, FSB Retail Bank Management Incentive Plan.
10.48.2*** Pan American Bank, FSB Corporate Management Incentive Plan.
10.49*** Pan American Bank, FSB 401(k) Profit Sharing Plan, as amended.
10.50** Income Tax Allocation Agreement dated October 19, 1994, between Pan
American Bank, FSB, Pan American Financial, Inc. and the
Registrant.
10.51** Lease Agreement dated September 26, 1994, between the Resolution
Trust Corporation and Old Stone Bank of California and Pan American
Bank, FSB.
10.52** First Amendment to Lease Agreement dated November 19, 1995, between
the Resolution Trust Corporation and Old Stone Bank of California
and Pan American Bank, FSB.
10.53** Office Lease dated March 4, 1997, between Spieker Properties, L.P.
and Pan American Bank, FSB.
10.54** Office Space Lease dated January 18, 1996, between The Irvine
Company and Pan American Bank, FSB.
10.55** First Amendment to Office Space Lease dated July 2, 1996, between
The Irvine Company and Pan American Bank, FSB.
10.56** Standard Office Lease dated April 25, 1997, between CAL Portfolio
VI, L.L.C. and Pan American Bank, FSB.
</TABLE>

II-6
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
---------- -----------
<C> <S>
10.57** Office Lease Agreement dated February 28, 1997, between P.R.A.
Biltmore Investments, L.L.C. and Pan American Bank, FSB.
10.58** Office Lease dated December 9, 1996, between Bernal Corporate Park
and Pan American Bank, FSB.
10.59** Bernal Corporate Park Lease First Amendment to Lease dated January
27, 1997.
10.60** Shopping Center Sublease dated September 22, 1995, between Panorama
Towne Center, L.P. and Pan American Bank, FSB.
10.61** Promissory Note in the principal amount of $225,000 dated October
15, 1997 by Lawrence J. Grill to the Registrant.
10.62** Loan and Stock Pledge Agreement dated October 15, 1997, between
Lawrence J. Grill and the Registrant.
10.63* Promissory Note in the principal amount of $1,628,000 dated July 1,
1997 by the Registrant to Pan American Financial, L.P.
10.63.1*** Amended and Restated Promissory Note in the principal amount of
$1,628,000 dated January 15, 1998 by the Registrant to Pan American
Financial, L.P.
10.64* Promissory Note in the principal amount of $258,000 dated July 1,
1997 by the Registrant to BVG West Corporation.
10.64.1*** Amended and Restated Promissory Note in the principal amount of
$258,000 dated January 15, 1998 by the Registrant to BVG West
Corporation.
10.65* Promissory Note in the principal amount of $52,500 dated July 1,
1997 by the Registrant to Lawrence J. Grill.
10.65.1*** Amended and Restated Promissory Note in the principal amount of
$52,500 dated January 15, 1998 by the Registant to Lawrence J.
Grill.
10.66* Promissory Note in the principal amount of $33,000 dated July 1,
1997 by the Registrant to Robert Wilson.
10.66.1*** Amended and Restated Promissory Note in the principal amount of
$33,000 dated January 15, 1998 by the Registrant to Robert Wilson.
10.67* Promissory Note in the principal amount of $28,500 dated July 1,
1997 by the Registrant to Villanueva Management, Inc.
10.67.1*** Amended and Restated Promissory Note in the principal amount of
$28,500 dated January 15, 1998 by the Registrant to Villanueva
Management, Inc.
10.68*+ Master Repurchase Agreement Governing Purchases and Sales of
Mortgage Loans dated as of October 31, 1997, between Lehman
Commercial Paper Inc. and Pan American Bank, FSB.
10.69* Custodial Agreement dated November 6, 1997, among Lehman Commercial
Paper Inc., Pan American Bank, FSB and Bankers Trust Company of
California, N.A.
10.70* Loan Purchase and Sale Agreement dated April 1, 1997, among Aames
Capital Corporation, Aames Funding Corporation and Pan American
Bank, FSB.
10.71* Continuing Loan Purchase Agreement dated February 27, 1997, between
AMRESCO Residential Capital Markets, Inc. and Pan American Bank,
FSB.
10.72* Mortgage Loan Purchase Agreement dated May 28, 1997, between Saxon
Mortgage, Inc. and Pan American Bank, FSB.
10.73*** Letter Agreement dated as of January 6, 1998, by and among the
Registrant, NIPF Holding Company and Providian National Bank.
</TABLE>

II-7
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------- -----------
<C> <S>
10.74*** Master Assignment Agreement dated as of January 21, 1998 by and
between Pan American Bank, FSB d/b/a "Classic Plan" and Providian
National Bank d/b/a "Commonwealth," and National IPF Company.
10.75*** Pooling and Servicing Agreement dated as of December 1, 1997, by and
among United PanAm Mortgage Corporation, Lehman ABS Corporation, Pan
American Bank, FSB and Bankers Trust Company of California, N.A.
10.76*** Mortgage Loan Purchase and Sale Agreement dated as of December 1,
1997, by and among United PanAm Mortgage Corporation, Pan American
Bank, FSB and Lehman ABS Corporation.
10.77*** Insurance and Indemnity Agreement dated as of December 1, 1997, by
and among United PanAm Mortgage Corporation, Lehman ABS Corporation,
Pan American Bank, FSB and Financial Security Assurance Inc.
10.78*** Indemnification Agreement dated as of December 22, 1997, by and
among United PanAm Mortgage Corporation, Financial Security
Assurance Inc., Pan American Bank, FSB, Lehman ABS Corporation and
Lehman Brothers Inc.
10.79***+ Subservicing Agreement dated as of December 1, 1997, by and between
Pan American Bank, FSB and Ocwen Federal Bank, FSB.
10.80*** Premium Letter by and among United PanAm Mortgage Corporation,
Lehman ABS Corporation and Financial Security Assurance Inc.
10.81*** Indemnification Agreement dated as of December 30, 1997 among United
PanAm Mortgage Corporation, Pan American Bank, FSB and Lehman
Brothers Inc.
10.82*** Certificate and Prepayment Fee Purchase Agreement dated March 25,
1998 between Pan American Bank, FSB and Ocwen Partnership, L.P.
10.83*** Residential Flow Servicing Agreement dated effective as of the
November 10, 1997, by and between Ocwen Federal Bank FSB, Servicer,
and Pan American Bank, FSB and United PanAm Mortgage Corporation.
10.84*** United PanAm Mortgage Corporation 1998 Management Incentive Plan.
10.85*** United Auto Credit Corporation 1998 Management Incentive Plan.
10.85.1 Forms of Incentive Stock Option Agreement and Nonqualified Stock
Option Agreement.
21.1* Subsidiaries.
23.1 Consent of KPMG Peat Marwick LLP.
23.2**** Consent of Manatt, Phelps & Phillips, LLP (see Exhibit 5.1).
27.1*** Financial Data Schedule.
</TABLE>
- --------
* Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(File No. 333-39941) filed with the Commission on November 12, 1997 (the
"Registration Statement").
** Filed as an exhibit to Amendment No. 1 to the Registration Statement filed
with the Commission on December 22, 1997.

*** Filed as an exhibit to Amendment No. 2 to the Registration Statement filed
with the Commission on March 31, 1998.

**** To be filed by amendment.
+ Confidential treatment requested.

b. Financial Statement Schedules.

The schedules are omitted because they are not applicable or the required
information is shown in the Registrant's financial statements or the related
notes thereto.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit

II-8
<PAGE>

or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes:

(i) That for the purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.

(ii) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new Registration Statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified n the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

II-9
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF SAN MATEO, STATE OF CALIFORNIA, ON APRIL 13, 1998.

United PanAm Financial Corp.

/s/ Lawrence J. Grill
By __________________________________
LAWRENCE J. GRILL, PRESIDENT,
CHIEF EXECUTIVE OFFICER AND
SECRETARY

PURSUANT TO THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 3 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE

/s/ Guillermo Bron Chairman of the
- ------------------------------------- Board April 13, 1998
GUILLERMO BRON

/s/ Lawrence J. Grill President, Chief
- ------------------------------------- Executive Officer, April 13, 1998
LAWRENCE J. GRILL Secretary and
Director (Principal
Executive Officer)

/s/ Carol Bucci Senior Vice
- ------------------------------------- President, April 13, 1998
CAROL BUCCI Chief Financial
Officer and
Treasurer
(Principal
Financial and
Accounting Officer)

/s/ Stephen W. Haley Senior Vice
- ------------------------------------- President-- April 13, 1998
STEPHEN W. HALEY Compliance and Risk
Management

* Director
- ------------------------------------- April 13, 1998
JOHN T. FRENCH

* Director
- ------------------------------------- April 13, 1998
EDMUND M. KAUFMAN

* Director
- ------------------------------------- April 13, 1998
DANIEL L. VILLANUEVA

* Director
- ------------------------------------- April 13, 1998
LUIS MAIZEL

*By: /s/ Lawrence J. Grill
---------------------------------
Lawrence J. Grill,
Attorney-in-fact

II-10
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of the
Registrant.
3.1.1*** Form of Articles of Incorporation of United PanAm Financial Corp.,
a California corporation.
3.2* Bylaws of the Registrant.
3.2.1*** Form of Bylaws of United PanAm Financial Corp., a California
corporation.
4.1**** Form of stock certificate.
4.2*** Form of Agreement of Merger of the Registrant into United PanAm
Financial Corp., a California corporation.
5.1**** Opinion of Manatt, Phelps & Phillips, LLP.
10.1* Insurance Premium Financing Management Agreement dated May 17,
1995, between Pan American Bank, FSB and BPN Corporation.
10.2* First Amendment to Insurance Premium Financing Management
Agreement and Guaranties dated October , 1995, between Pan
American Bank, FSB and BPN Corporation.
10.3* Second Amendment to Insurance Premium Financing Management
Agreement and Guaranties dated February 28, 1996, among Pan
American Bank, FSB, BPN Corporation, Cornelius J. O'Shea,
Peter Walski and Barbara Walski.
10.4* Guaranty dated May 17, 1995 by Peter Walski and Barbara Walski to
Pan American Bank, FSB.
10.5* Guaranty dated May 17, 1995 by Cornelius J. O'Shea to Pan American
Bank, FSB.
10.6* Stock Option Agreement dated May 17, 1995, among BPN Corporation,
Pan American Group, Inc., Peter A. Walski, Barbara R. Walski,
Cornelius J. O'Shea and The Walski Family Trust.
10.7* First Amendment to Stock Option Agreement dated October 1, 1997,
among BPN Corporation, Pan American Group, Inc., Peter A. Walski,
Barbara R. Walski, Cornelius J. O'Shea and The Walski Family
Trust.
10.8* Interim Capital Assistance Agreement dated September 9, 1994,
among Pan American Financial, Inc., Pan American Bank, FSB and the
Resolution Trust Corporation.
10.9* Amendment No. 1 to Interim Capital Assistance Agreement dated May
1, 1997, among Pan American Financial, Inc., Pan American Bank,
FSB and the Federal Deposit Insurance Corporation.
10.10* Interim Capital Assistance Agreement dated April 29, 1994, among
Pan American Financial, Inc., Pan American Bank, FSB and the
Resolution Trust Corporation.
10.11* Letter agreement dated March 2, 1995, between Pan American Bank,
FSB and the Resolution Trust Corporation.
10.12* Promissory Note dated September 9, 1994 in the amount of $4
million by Pan American Financial, Inc. to the Resolution Trust
Corporation.
10.13* Stock Pledge Agreement dated September 9, 1994, between Pan
American Financial, Inc. and the Resolution Trust Corporation.
10.14** Limited Branch Purchase and Assumption Agreement dated September
9, 1994, between the Resolution Trust Corporation as receiver of
Western Federal Savings Bank and Pan American Bank, FSB.
10.15** Lead Acquiror Waiver and Reimbursement Agreement dated September
9, 1994, between Home Savings of America, FSB and Pan American
Bank, FSB.
10.16** Indemnity Agreement dated September 9, 1994, between the
Resolution Trust Corporation and Pan American Bank, FSB.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.17** Whole Purchase and Assumption Agreement dated April 29, 1994,
between the Resolution Trust Corporation and Pan American Bank,
FSB.
10.18** Indemnity Agreement dated April 29, 1994, between the Resolution
Trust Corporation and Pan American Bank, FSB.
10.19* Promissory Note dated April 29, 1994 in the amount of $6,930,000
by Pan American Financial, Inc. to the Resolution Trust
Corporation.
10.20* Stock Pledge Agreement dated April 29, 1994, between Pan American
Financial, Inc. and the Resolution Trust Corporation.
10.21** Advances and Security Agreement dated January 29, 1996, between
the Federal Home Loan Bank of San Francisco and Pan American Bank,
FSB.
10.22** Retail CD Brokerage Agreement dated April 30, 1996, between Pan
American Bank, FSB and Merrill Lynch, Pierce, Fenner & Smith,
Incorporated.
10.23** Fixed Rate Interest bearing--3 Months and Longer Retail
Certificate of Deposit of Pan American, FSB, Master Certificate
No. 2 dated May 12, 1997.
10.24** Fixed Rate Interest bearing--3 Months and Longer Retail
Certificate of Deposit of Pan American Bank, FSB, Master
Certificate No. 3 dated May 12, 1997.
10.25** License, Services, and Purchase Agreement dated December 1996,
between Associated Software Consultants, Inc. and Pan American,
FSB and all addendums thereto.
10.26** Agreement for Remote Computing Services dated April 4, 1995,
between Pan American Bank, FSB and Fiserv Fresno, Inc.
10.27** Amendment to Computer Operating Agreement between Pan American
Bank, FSB and Fiserv Fresno, Inc.
10.28** Addendum No. 2 to Agreement for Remote Computing Services
effective as of April 1, 1996, between Pan American Bank, FSB and
Fiserv Fresno, Inc.
10.29** Item Processing Agreement dated April 26, 1993, between
Systematics Financial Services, Inc. and Pan American Savings
Bank, FSB.
10.30** Support Services Agreement dated October 31, 1995, between Alan
King and Company, Inc. and Pan American Savings Bank, FSB.
10.31** Technical Support Services Agreement dated May 1, 1995, between
Alan King and Company, Inc. and Pan American Savings Bank, FSB.
10.32** License Agreement dated May 1, 1995, between Alan King and
Company, Inc. and Pan American Savings Bank, FSB.
10.33** Subservicing Agreement dated March 2, 1995, between Pan American
Bank, FSB and Dovenmuehle Mortgage, Inc.
10.34*** Interim Operating Agreement dated July 1, 1997, between United
PanAm Mortgage Corporation and Pan American Bank, FSB.
10.34.1*** Amended and Restated Interim Operating Agreement dated as of
December 31, 1997, between United PanAm Mortgage Corporation and
Pan American Bank, FSB.
10.35** Inter-Company Agreement dated May 1, 1994, between Pan American
Financial, Inc. and Pan American Bank, FSB.
10.36** Inter-Company Agreement dated August 1, 1994, between Pan American
Group, Inc. and Pan American Bank, FSB.
10.37* Employment Agreement dated May 7, 1996, between Pan American Bank,
FSB and Ray C. Thousand.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
---------- -----------
<C> <S>
10.38** Employment Agreement dated May 1, 1994, between Pan American Bank,
FSB and Lawrence J. Grill.
10.39* Employment Agreement dated October 1, 1997, among the Registrant,
Pan American Bank, FSB and Lawrence J. Grill.
10.39.1*** Amendment No. 1 to Employment Agreement dated November 1, 1997,
among the Registrant, Pan American Bank, FSB and Lawrence J. Grill.
10.40* Employment Agreement dated October 1, 1997, between the Registrant
and Guillermo Bron.
10.40.1*** Amendment No. 1 to Employment Agreement dated November 1, 1997,
between the Registrant and Guillermo Bron.
10.41* Employment Agreement dated October 1, 1997, between United PanAm
Mortgage Corporation and John T. French.
10.41.1** First Amendment to Employment Agreement dated November 14, 1997
between United PanAm Mortgage Corporation and John T. French.
10.42* Salary Continuation Agreement dated October 1, 1997, between Pan
American Bank, FSB and Lawrence J. Grill.
10.43* Salary Continuation Agreement dated October 1, 1997, between Pan
American Bank, FSB and Guillermo Bron.
10.44* Form of Indemnification Agreement between the Registrant and Ms.
Bucci and each of Messrs. Bron, French, Grill, Haley, Kaufman,
Maizel, Thousand and Villanueva.
10.45** Agreement and Mutual General Release dated March 5, 1997, between
Pan American Bank, FSB and Robert Wilson.
10.46 Pan American Group, Inc. 1994 Stock Option Plan, together with
forms of incentive stock option and non-qualified stock option
agreements.
10.47* Pan American Group, Inc. 1997 Stock Incentive Plan, together with
forms of incentive stock option, non-qualified stock option and
restricted stock agreements.
10.48** Pan American Bank, FSB Management Incentive Plan.
10.48.1*** Pan American Bank, FSB Retail Bank Management Incentive Plan.
10.48.2*** Pan American Bank, FSB Corporate Management Incentive Plan.
10.49*** Pan American Bank, FSB 401(k) Profit Sharing Plan, as amended.
10.50** Income Tax Allocation Agreement dated October 19, 1994, between Pan
American Bank, FSB, Pan American Financial, Inc. and the
Registrant.
10.51** Lease Agreement dated September 26, 1994, between the Resolution
Trust Corporation and Old Stone Bank of California and Pan American
Bank, FSB.
10.52** First Amendment to Lease Agreement dated November 19, 1995, between
the Resolution Trust Corporation and Old Stone Bank of California
and Pan American Bank, FSB.
10.53** Office Lease dated March 4, 1997, between Spieker Properties, L.P.
and Pan American Bank, FSB.
10.54** Office Space Lease dated January 18, 1996, between The Irvine
Company and Pan American Bank, FSB.
10.55** First Amendment to Office Space Lease dated July 2, 1996, between
The Irvine Company and Pan American Bank, FSB.
10.56** Standard Office Lease dated April 25, 1997, between CAL Portfolio
VI, L.L.C. and Pan American Bank, FSB.
10.57** Office Lease Agreement dated February 28, 1997, between P.R.A.
Biltmore Investments, L.L.C. and Pan American Bank, FSB.
10.58** Office Lease dated December 9, 1996, between Bernal Corporate Park
and Pan American Bank, FSB.
10.59** Bernal Corporate Park Lease First Amendment to Lease dated January
27, 1997.
10.60** Shopping Center Sublease dated September 22, 1995, between Panorama
Towne Center, L.P. and Pan American Bank, FSB.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.61** Promissory Note in the principal amount of $225,000 dated October
15, 1997 by Lawrence J. Grill to the Registrant.
10.62** Loan and Stock Pledge Agreement dated October 15, 1997, between
Lawrence J. Grill and the Registrant.
10.63* Promissory Note in the principal amount of $1,628,000 dated July
1, 1997 by the Registrant to Pan American Financial, L.P.
10.63.1*** Amended and Restated Promissory Note in the principal amount of
$1,628,000 dated January 15, 1998 by the Registrant to Pan
American Financial, L.P.
10.64* Promissory Note in the principal amount of $258,000 dated July 1,
1997 by the Registrant to BVG West Corporation.
10.64.1*** Amended and Restated Promissory Note in the principal amount of
$258,000 dated January 15, 1998 by the Registrant to BVG West
Corporation.
10.65* Promissory Note in the principal amount of $52,500 dated July 1,
1997 by the Registrant to Lawrence J. Grill.
10.65.1*** Amended and Restated Promissory Note in the principal amount of
$52,500 dated January 15, 1998 by the Registrant to Lawrence J.
Grill.
10.66* Promissory Note in the principal amount of $33,000 dated July 1,
1997 by the Registrant to Robert Wilson.
10.66.1*** Amended and Restated Promissory Note in the principal amount of
$33,000 dated January 15, 1998 by the Registrant to Robert Wilson.
10.67* Promissory Note in the principal amount of $28,500 dated July 1,
1997 by the Registrant to Villanueva Management, Inc.
10.67.1*** Amended and Restated Promissory Note in the principal amount of
$28,500 dated January 15, 1998 by the Registrant to Villanueva
Management, Inc.
10.68*+ Master Repurchase Agreement Governing Purchases and Sales of
Mortgage Loans dated as of October 31, 1997, between Lehman
Commercial Paper Inc. and Pan American Bank, FSB.
10.69* Custodial Agreement dated November 6, 1997, among Lehman
Commercial Paper Inc., Pan American Bank, FSB and Bankers Trust
Company of California, N.A.
10.70* Loan Purchase and Sale Agreement dated April 1, 1997, among Aames
Capital Corporation, Aames Funding Corporation and Pan American
Bank, FSB.
10.71* Continuing Loan Purchase Agreement dated February 27, 1997,
between AMRESCO Residential Capital Markets, Inc. and Pan American
Bank, FSB.
10.72* Mortgage Loan Purchase Agreement dated May 28, 1997, between Saxon
Mortgage, Inc. and Pan American Bank, FSB.
10.73*** Letter Agreement dated as of January 6, 1998, by and among the
Registrant, NIPF Holding Company and Providian National Bank.
10.74*** Master Assignment Agreement dated as of January 21, 1998 by and
between Pan American Bank, FSB d/b/a "Classic Plan" and Providian
National Bank d/b/a "Commonwealth," and National IPF Company.
10.75*** Pooling and Servicing Agreement dated as of December 1, 1997, by
and among United PanAm Mortgage Corporation, Lehman ABS
Corporation, Pan American Bank, FSB and Bankers Trust Company of
California, N.A.
10.76*** Mortgage Loan Purchase and Sale Agreement dated as of December 1,
1997, by and among United PanAm Mortgage Corporation, Pan American
Bank, FSB and Lehman ABS Corporation.
10.77*** Insurance and Indemnity Agreement dated as of December 1, 1997, by
and among United PanAm Mortgage Corporation, Lehman ABS
Corporation, Pan American Bank, FSB and Financial Security
Assurance Inc.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.78*** Indemnification Agreement dated as of December 22, 1997, by and
among United PanAm Mortgage Corporation, Financial Security
Assurance Inc., Pan American Bank, FSB, Lehman ABS Corporation and
Lehman Brothers Inc.
10.79***+ Subservicing Agreement dated as of December 1, 1997, by and
between Pan American Bank, FSB and Ocwen Federal Bank, FSB.
10.80*** Premium Letter by and among United PanAm Mortgage Corporation,
Lehman ABS Corporation and Financial Security Assurance Inc.
10.81*** Indemnification Agreement dated as of December 30, 1997 among
United PanAm Mortgage Corporation, Pan American Bank, FSB and
Lehman Brothers Inc.
10.82*** Certificate and Prepayment Fee Purchase Agreement dated March 25,
1998 between Pan American Bank, FSB and Ocwen Partnership, L.P.
10.83*** Residential Flow Servicing Agreement dated effective as of
November 10, 1997, by and between Ocwen Federal Bank FSB,
Servicer, and Pan American Bank, FSB and United PanAm Mortgage
Corporation.
10.84*** United PanAm Mortgage Corporation 1998 Management Incentive Plan.
10.85*** United Auto Credit Corporation 1998 Management Incentive Plan.
10.85.1 Forms of Incentive Stock Option Agreement and Nonqualified Stock
Option Agreement.
21.1* Subsidiaries.
23.1 Consent of KPMG Peat Marwick LLP.
23.2**** Consent of Manatt, Phelps & Phillips, LLP (see Exhibit 5.1).
27.1*** Financial Data Schedule.
</TABLE>
- --------
* Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(File No. 333-39941) filed with the Commission on November 12, 1997 (the
"Registration Statement").
** Filed as an exhibit to Amendment No. 1 to the Registration Statement filed
with the Commission on December 22, 1997.

*** Filed as an exhibit to Amendment No. 2 to the Registration Statement filed
with the Commission on March 31, 1998.

**** To be filed by amendment.
+ Confidential treatment requested.

<PAGE>

EXHIBIT 10.46

PAN AMERICAN GROUP, INC.

1994 STOCK OPTION PLAN

I. THE PLAN.

1.1 Purpose.
-------

The purpose of this Plan is to promote the success of the Company and
the interests of its stockholders by providing an additional means through the
grant of Options to attract, motivate, retain and reward key employees,
including officers, directors, and certain consultants by providing them long-
term incentives to improve the financial performance of the Company and to
attract, motivate and retain experienced and knowledgeable independent
directors. Capitalized terms are defined in Article IV.

1.2 Administration and Authorization; Power and Procedure.
-----------------------------------------------------

(a) Committee. This Plan shall be administered by and all Options to
---------
Eligible Persons shall be authorized by the Committee. Action of the Committee
with respect to the administration of this Plan shall be taken pursuant to a
majority vote or by written consent of its member(s).

(b) Options; Interpretation; Powers of Committee. Subject to the
--------------------------------------------
express provisions of this Plan, the Committee shall have the authority:

(i) to determine the particular Eligible Persons who will
receive Options;

(ii) to grant Options to Eligible Persons, determine the price
at which securities will be exercised and awarded and the amount of
securities to be offered or awarded to any of such persons, and determine
the other specific terms and conditions of such Options, consistent with
the express limits of this Plan, and to establish the installments (if any)
in which such Options shall become exercisable or shall vest, or determine
that no delayed exercisability or vesting is required, and to establish the
events of termination or reversion of such Options;

(iii) to approve the forms of Option Agreements (which need not
be identical either as to type of award or among Participants);

i
<PAGE>

(iv) to construe and interpret this Plan and any agreements
defining the rights and obligations of the Company and Participants under
this Plan, further define the terms used in this Plan, and prescribe, amend
and rescind rules and regulations relating to the administration of this
Plan;

(v) to cancel, modify, or waive the Corporation's rights with
respect to, or modify, discontinue, suspend, or terminate any or all
outstanding Options held, by Eligible Persons, subject to any required
consent under Section 3.6;

(vi) to accelerate the exercisability or the vesting of any
Options under such circumstances as the Committee shall determine,
including a Change in Control Event, or to extend the exercisability or
extend the term of any or all such outstanding Options within the maximum
ten-year term of Options under Section 1.6; and

(vii) to make all other determinations and take such other action
as contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.

(c) Binding Determinations. Any action taken by, or inaction of, the
----------------------
Corporation, any Subsidiary, the Board or the Committee relating or pursuant to
this Plan shall be within the absolute discretion of that entity or body and
shall be conclusive and binding upon all persons. No member of the Board or
Committee, or officer of the Corporation or any Subsidiary, shall be liable for
any such action or inaction of the entity or body, of another person or, except
in circumstances involving bad faith, of himself or herself. Subject only to
compliance with the express provisions hereof, the Board and Committee may act
in their absolute discretion in matters within their authority related to this
Plan.

(d) Reliance on Experts. In making any determination or in taking or
-------------------
not taking any action under this Plan, the Committee or the Board, as the case
may be, may obtain and may rely upon the advice of experts, including
professional advisors to the Corporation. No director, officer or agent of the
Company shall be liable for any such action or determination taken or made or
omitted in good faith.

(e) Delegation. The Committee may delegate ministerial, non-
----------
discretionary functions to individuals who are officers or employees of the
Company.

ii
<PAGE>

1.3 Participation.
-------------

Options may be granted by the Committee only to those persons that the
Committee determines to be Eligible Persons. An Eligible Person who has been
granted an Option may, if otherwise eligible, be granted additional Options if
the Committee shall so determine.

1.4 Shares Available for Options.
----------------------------

Subject to the provisions of Section 3.2, the capital stock that may
be delivered under this Plan shall be shares of the Corporation's authorized but
unissued Common Stock and any shares of its Common Stock held as treasury
shares. The shares may be delivered for any lawful consideration, but not for
less than the minimum lawful consideration under applicable state law.

(f) Number of Shares; Individual Limit. The maximum number of shares
----------------------------------
of Common Stock that may be delivered pursuant to Options granted to Eligible
Persons under this Plan shall not exceed 600 shares, subject to adjustments
contemplated by Section 3.2. The maximum number of shares of Common Stock which
may be delivered pursuant to Options granted during any calendar year to any
Eligible Person shall not exceed 400.

(g) Calculation of Available Shares and Replenishment. Shares subject
-------------------------------------------------
to outstanding Options shall be reserved for issuance. If any Option shall
expire or be canceled or terminated without having been exercised or paid in
full, the unpurchased, unvested or undelivered shares of Common Stock subject
thereto shall again be available for the purposes of this Plan; provided,
however, that if the Corporation withholds Common Stock pursuant to Section 3.5,
the aggregate number of shares issuable with respect to the applicable Option
and under this Plan shall be reduced by the number of shares withheld and such
shares shall not be available for additional Options under this Plan.

1.5 Grant of Options.
----------------

Subject to the express provisions of this Plan, the Committee shall
determine those individuals who are Eligible Persons, the number of shares of
Common Stock subject to each Option, the price to be paid for the shares and the
other terms of the Option. Each Option shall be evidenced by an Option
Agreement signed by the Corporation and, if required by the Committee, by the
Participant. Each Option shall be subject to the terms and conditions set forth
in this Plan and such other terms and conditions established by the Committee as
are not inconsistent with the specific provisions of this Plan.

iii
<PAGE>

1.6 Option Period.
-------------

Each Option and all executory rights or obligations under the related
Option Agreement shall expire on such date (if any) as shall be determined by
the Committee, but not later than ten (10) years after the Option Date and shall
be subject to earlier termination as provided herein or in the applicable Option
Agreement.

1.7 Limitations on Exercise and Vesting of Options.
----------------------------------------------

(h) Provisions for Exercise. Unless the Committee otherwise expressly
-----------------------
so provides, no Option shall be exercisable or shall vest less than twelve
months after the initial Option Date, and once exercisable an Option shall
remain exercisable until the expiration or earlier termination of the Option.
Unless the Committee otherwise provides, an Option shall become exercisable in
installments at the rate of 25% of the shares initially subject to the Option
(subject to Section 3.2) on the Option Date, per annum, commencing on the first
anniversary of the Option Date.

(i) Procedure. Any exercisable Option shall be deemed to be exercised
---------
when the Corporation receives written notice of such exercise from the
Participant, together with the required payment made in accordance with Section
2.2.

(j) Other Vesting. If the Employment Contract terminates and it is
-------------
not renewed after three years then all option not vested will accelerate and
vest. Upon sale of the Company, change of control in parent through merger, sale
of assets, etc or if William Bron is no longer in control of Pan American Group,
Inc. then all options not yet vested should accelerate and vest.

(k) Fractional Shares/Minimum Issue. Fractional share interests shall
-------------------------------
be disregarded, but may be accumulated. The Committee, however, may determine
that cash, other securities, or other property will be paid or transferred in
lieu of any fractional share interests. No fewer than 2 shares may be purchased
on exercise of any Option at one time unless the number purchased is the total
number at the time available for purchase under the Option.

1.8 Acceptance of Notes to Finance Exercise.
---------------------------------------

If the Committee in its sole discretion approves, the Corporation may
accept one or more notes from any Eligible Person in connection with the
exercise or receipt of any outstanding Option, provided that any such note shall
--------
be subject to the following terms and conditions:

iv
<PAGE>

(l) The principal of the note shall not exceed the amount required to
be paid to the Corporation upon the exercise or receipt of one or more Options
under this Plan, and the note shall be delivered directly to the Corporation in
consideration of such exercise or receipt.

(m) The initial term of the note shall be determined by the
Committee; provided that the term of the note, including extensions, shall not
--------
exceed a period of ten (10) years.

(n) The note shall provide for full recourse to the Participant and
shall bear interest at a rate determined by the Committee but not less than the
interest rate necessary to avoid the imputation of interest under the Code.

(o) The unpaid principal balance of the note shall become due and
payable on the tenth business day after Termination of Employment of a
Participant.

(p) If required by the Committee or by applicable law, the note shall
be secured by a pledge of any shares or rights financed thereby (and/or other
collateral required by the Committee) in compliance with applicable law.

(q) The terms, repayment provisions, and collateral release
provisions of the note and any pledge securing the note shall conform with
applicable law, including (if applicable) the rules and regulations of the
Federal Reserve Board as then in effect.

1.9 No Transferability of Options.
-----------------------------

Options may be exercised only by, and shares issuable pursuant to an
Option shall be paid only to (or registered only in the name of), the
Participant or, if the Participant has died, the Participant's Beneficiary or,
if the Participant has suffered a Disability, the Participant's Personal
Representative, if any, or if there is none, the Participant. Other than by
will or the laws of descent and distribution or other exception to transfer
restrictions expressly authorized by the Committee, no right or benefit under
this Plan or any Option, shall be transferrable by the Participant or shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge (other than to the Corporation) and any such
attempted action shall be void. The Corporation shall disregard any attempt at
transfer, assignment or other alienation prohibited by the preceding sentences
and shall deliver such shares of Common Stock in accordance with the provisions
of this Plan. The designation of a Beneficiary for purposes hereof shall not
constitute a transfer for these purposes.

v
<PAGE>

1.10 Restrictions on Transfer of Shares.
----------------------------------

(a) Restrictions. Notwithstanding anything else contained herein,
------------
each Participant upon exercise of any Option shall become a "Restricted
Stockholder" under the Stockholders Agreement and the shares acquired upon
exercise of any Option by the Participant (or, in the event of the Participant's
death or Disability, his Beneficiary or Personal Representative, as applicable)
shall be deemed "Shares" under the Stockholders Agreement. The Restricted
Stockholder and such Shares shall be subject to all of the terms, conditions and
restrictions imposed on Restricted Stockholders and Shares under the
Stockholders Agreement. Each Participant (or his Beneficiary or Personal
Representative, as applicable) shall execute and deliver such other agreements
or documents as the Corporation may reasonably request to further enforce the
restrictions herein and under the Stockholders Agreement on the Options and
shares issuable on exercise thereof.

(b) Miscellaneous. Any transfer by a Participant (or a Participant's
-------------
Beneficiary or Personal Representative) or by a transferee of shares of Common
Stock acquired pursuant to the exercise or vesting of an Option or any interest
therein shall be subject to such additional restrictions as the Committee may
from time to time specify with respect to such Option and shares in the related
Option Agreement. All certificates evidencing shares subject to the
restrictions of this Section shall bear the following legends and/or any other
appropriate or required legends under applicable laws:

"OWNERSHIP OF THIS CERTIFICATE AND THE SHARES EVIDENCED BY THIS
CERTIFICATE AND ANY INTEREST THEREIN ARE SUBJECT TO SUBSTANTIAL
RESTRICTIONS ON TRANSFER UNDER APPLICABLE LAW AND UNDER AGREEMENTS
WITH THE COMPANY, INCLUDING RESTRICTIONS ON THE SALE, ASSIGNMENT,
TRANSFER, PLEDGE OR OTHER DISPOSITION UNDER SECTION 1.10 OF THE
CORPORATION'S 1994 STOCK OPTION PLAN, COPIES OF WHICH ARE AVAILABLE
FOR REVIEW AT THE OFFICE OF THE SECRETARY OF THE CORPORATION."

"THE OWNERSHIP, SALE, TRANSFER, OR OTHER DISPOSITION OF THE SHARES
EVIDENCED BY THIS CERTIFICATE ARE RESTRICTED BY THE PROVISIONS OF A
STOCKHOLDERS AGREEMENT (THE "AGREEMENT") DATED AS OF MAY 1, 1994, AND
THE CORPORATION'S RIGHT TO ACQUIRE THE SHARES PURSUANT TO SECTION
4.1(b) THEREOF. TRANSFEREES OF THE SHARES ARE BOUND BY THE TERMS OF
THE AGREEMENT. A COPY OF THE STOCKHOLDER'S AGREEMENT MAY BE INSPECTED
AT THE PRINCIPAL OFFICE OF THE CORPORATION OR OBTAINED FROM THE
CORPORATION WITHOUT CHARGE. ALL THE

vi
<PAGE>

PROVISIONS OF THE AGREEMENT ARE HEREBY INCORPORATED BY REFERENCE IN
THIS CERTIFICATE."

"THESE SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. NEITHER THESE
SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
AND QUALIFICATION UNDER SUCH LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED."

II. OPTIONS.

2.1 Grants.
------

One or more Options may be granted under this Article to any
Eligible Person. Each Option granted shall be designated by the Committee in the
applicable Option Agreement as either a Nonqualified Stock Option or an
Incentive Stock Option. Notwithstanding anything contained herein to the
contrary, Incentive Stock Options may be granted only to Eligible Employees.

2.2 Option Price.
------------

(r) Pricing Limits. The purchase price per share of the Common Stock
--------------
covered by each Option shall be determined by the Committee at the time of the
Option, provided that such purchase price shall not be less than the lesser of
--------
(i) 100% of the Fair Market Value per share of the Common Stock on the date of
grant, or determined in good faith by the Board of Directors (ii) $2,000
(subject to adjustment under Section 3.2); provided further, that in any event
-------- -------
the purchase price of Incentive Stock Options shall not be less than 100% (110%
in the case of a Participant described in Section 2.4) of the Fair Market Value
of the Common Stock on the date of grant.

(s) Payment Provisions. The purchase price of any shares purchased on
------------------
exercise of an Option granted under this Article shall be paid in full at the
time of each purchase in one or a combination of the following methods: (i) in
money; (ii) by check payable to the order of the Corporation; or (iii) if
authorized by the Committee or specified in the applicable Option Agreement, by
a promissory note of the Participant consistent with the requirements of Section
1.8. The Corporation shall not be obligated to deliver certificates for the
shares unless and until it receives

vii
<PAGE>

full payment of the exercise price therefor and any related withholding
obligations have been satisfied.

2.3 Limitations on Grant and Terms of Incentive Stock Options.
---------------------------------------------------------

(t) $100,000 Limit. To the extent that the aggregate Fair Market
--------------
Value of stock with respect to which incentive stock options first become
exercisable by a Participant in any calendar year exceeds $100,000, taking into
account both Common Stock subject to Incentive Stock Options under this Plan and
stock subject to incentive stock options under all other plans of the Company or
any parent corporation, such options shall be treated as nonqualified stock
options. For this purpose, the Fair Market Value of the stock subject to
options shall be determined as of the date the options were awarded. In
reducing the number of options treated as incentive stock options to meet the
$100,000 limit, the most recently granted options shall be reduced first. To
the extent a reduction of simultaneously granted options is necessary to meet
the $100,000 limit, the Committee may, in the manner and to the extent permitted
by law, designate which shares of Common Stock are to be treated as shares
acquired pursuant to the exercise of an Incentive Stock Option.

(u) Other Code Limits. There shall be imposed in any Option Agreement
-----------------
relating to Incentive Stock Options such terms and conditions as from time to
time are required in order that the Option be an "incentive stock option" as
that term is defined in Section 422 of the Code.

2.4 Limits on 10% Holders.
---------------------

No Incentive Stock Option may be granted to any person who, at the
time such Option is granted, owns (or is deemed to own under Section 424(d) of
the Code) shares of outstanding Common Stock possessing more than 10% of the
total combined voting power of all classes of stock of the Corporation or any
Subsidiary or parent, unless the exercise price of such Option is at least 110%
of the Fair Market Value of the stock subject to the Option and such Option by
its terms is not exercisable after the expiration of five years from the date
such Option is granted.

2.5 Option Repricing/Cancellation and Regrant/Waiver of Restrictions.
----------------------------------------------------------------

Subject to Section 1.4 and Section 3.6 and the specific limitations on
Options contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Participant any
adjustment in the exercise or purchase price, the vesting schedule, the number
of shares subject to, the restrictions upon, or the term of, an Option granted
under this Article by cancellation of an outstanding Option and a subsequent
regranting Option, by

viii
<PAGE>

amendment, by substitution of an outstanding Option, by waiver or by other
legally valid means. Subject to Section 1.4 and Section 3.6 and the specific
limitations on Options contained in this Plan, such amendment or other action
may, among other changes, result in an exercise or purchase price which is
higher or lower than the exercise or purchase price of the original or prior
Option, provide for a greater or lesser number of shares subject to the Option,
or provide for a longer or shorter vesting or exercise period.

III. OTHER PROVISIONS.

3.1 Rights of Eligible Employees, Participants and Beneficiaries.
------------------------------------------------------------

(v) Employment Status. Status as an Eligible Employee shall not be
-----------------
construed as a commitment that any Option will be granted under this Plan to an
Eligible Employee or to Eligible Employees generally. The Committee, however,
may require a commitment regarding continued employment in connection with the
grant of any Option hereunder.

(w) No Employment Contract. Nothing contained in this Plan (or in any
----------------------
other documents related to this Plan or to any Option) shall confer upon any
Eligible Employee or other Participant any right to continue in the employ or
other service of the Company or constitute any contract or agreement of
employment or other service, nor shall interfere in any way with the right of
the Company to change such person's compensation or other benefits or to
terminate the employment of such person, with or without cause, but nothing
contained in this Plan or any document related hereto shall adversely affect any
independent contractual right of such person without his or her consent thereto.

(x) Plan Not Funded. Options granted under this Plan shall be payable
---------------
in shares of the Corporation, and (except as provided in Section 1.4(b)) no
special or separate reserve, fund or deposit shall be made to assure payment of
such Options. No Participant, Beneficiary or other person shall have any right,
title or interest in any fund or in any specific asset (including shares of
Common Stock, except as expressly otherwise provided) of the Company by reason
of any Option hereunder.

Neither the provisions of this Plan (or of any related documents), nor the
creation or adoption of this Plan, nor any action taken pursuant to the
provisions of this Plan shall create, or be construed to create, a trust of any
kind or a fiduciary relationship between the Company and any Participant,
Beneficiary or other person. To the extent that a Participant, Beneficiary or
other person acquires a right to receive

ix
<PAGE>

payment pursuant to any Option hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Company.

3.2 Adjustments; Early Termination.
------------------------------

(y) Adjustments. If the outstanding shares of Common Stock are
-----------
changed into or exchanged for cash, other property or a different number or kind
of shares or securities of the Corporation, or if additional shares or new or
different securities are distributed with respect to the outstanding shares of
the Common Stock, through a reorganization or merger in which the Corporation is
the surviving entity, or through a combination, consolidation, recapitalization,
reclassification, stock split, stock dividend, reverse stock split, stock
consolidation, dividend or distribution of cash or property to the shareholders
of the Corporation, or if there shall occur any other extraordinary corporate
transaction or event in respect of the Common Stock or a sale of substantially
all the assets of the Corporation as an entirety which in the judgment of the
Committee materially affects the Common Stock, then the Committee shall, in such
manner and to such extent (if any) as it deems appropriate and equitable, (1)
proportionately adjust any or all of (i) the number and kind of shares of Common
Stock (or other securities) which thereafter may be made the subject Options
(including the specific maxima and numbers of shares set forth elsewhere in this
Plan), (ii) the number, amount and type of shares of Common Stock (or other
securities or property) subject to any or all outstanding Options, (iii) the
grant, purchase, or exercise price of any or all outstanding Options, (iv) the
minimum grant price set forth in Section 2.2(a)(ii) of this Plan as to any
Options to be granted after such event, and (v) the securities deliverable upon
exercise of any outstanding Options; or (2) in the case of an extraordinary
dividend or other distribution, merger, reorganization, consolidation,
combination, sale of assets, split up, exchange or spin off, make provision for
a cash payment or for the substitution or exchange of any or all outstanding
Options or the cash, securities or property deliverable to the holder of any or
all outstanding Options based upon the distribution or consideration payable to
holders of the Common Stock of the Corporation upon or in respect of such event;
provided, however, in each case, that with respect to awards of Incentive Stock
- -------- -------
Options, no such adjustment shall be made which would cause this Plan to violate
Section 424(a) of the Code or any successor provisions thereto without the
consent of any affected Participant.

(z) Possible Early Termination of Options. If any Option or other
-------------------------------------
right to acquire Common Stock has not been exercised or has not become vested or
exercisable prior to (i) a dissolution or liquidation of the Corporation or (ii)
a reorganization event described in Section 3.2(a) that the Corporation does not
survive, and no provision has been made for the substitution, exchange or other
settlement of such Option, such Option shall thereupon terminate.

x
<PAGE>

3.3 Termination of Employment; Termination of Subsidiary Status.
-----------------------------------------------------------

Any Option to the extent not exercised shall terminate and become null
and void upon a Termination of Employment of the Participant, except as set
forth in subsections (a) through (c) below or otherwise expressly provided by
the Committee. Notwithstanding anything contained in this Section to the
contrary, all Options shall be subject to earlier termination pursuant to or as
contemplated by Section 1.6 and Section 3.2 of the Plan, and any and all rights
to an Option, to the extent not exercised or vested, shall expire immediately
upon a Termination of Employment of the Participant for cause, of which the
Committee (in the case of any dispute about cause) shall be the sole judge.

(aa) Nonqualified Stock Options. Unless the Committee otherwise
--------------------------
expressly provides in the Option Agreement:

(i) If the Participant's employment by the Company
terminates by reason other than death, Disability or cause, or by reason of
a Subsidiary ceasing to be a Subsidiary, then the Participant shall have
twelve months after the date of Termination of Employment to exercise any
Nonqualified Stock Option to the extent that it was exercisable on such
date;

(ii) If the Participant's employment by the Company
terminates by reason of a Disability, or if Participant suffers a
Disability within three months of a Termination of Employment under
subsection (i) above, then the Participant or Participant's Personal
Representative, as the case may be, shall have twelve months after the date
of Disability (or, if earlier, Termination of Employment) to exercise any
Nonqualified Stock Option to the extent that it was exercisable on such
date; and

(iii) If the Participant dies while in the employ of the
Company, or within twelve months after a Termination of Employment under
subsection (i) or (ii) above, then the Participant's Beneficiary may
exercise at any time within twelve months after the Participant's
Termination of Employment, any Nonqualified Stock Option to the extent that
it was exercisable on the date of the Participant's Termination of
Employment;

provided, however, that in no event shall the Option be exercised after the
- -------- -------
expiration of its term or its earlier termination under any other provisions of
the Plan.

(bb) Incentive Stock Options. Unless the Committee otherwise
-----------------------
expressly provides in the Option Agreement:

xi
<PAGE>

(i) If the Participant's employment by the Company
terminates by reason other than death, Disability or cause, or by reason of
a Subsidiary ceasing to be a Subsidiary, then the Participant shall have
twelve months after the date of Termination of Employment to exercise any
Incentive Stock Option to the extent that it was exercisable on such date;

(ii) If the Participant's employment by the Company
terminates by reason of a Disability, or if Participant suffers a
Disability within twelve months of a Termination of Employment under
subsection (i) above, then the Participant or Participant's Personal
Representative, as the case may be, shall have twelve months after the date
of Disability (or, if earlier, Termination of Employment) to exercise any
Incentive Stock Option to the extent that it was exercisable on such date;
and

(iii) If the Participant dies while in the employ of the
Company, or within twelve months after a Termination of Employment under
subsection (i) or (ii) above, then the Participant's Beneficiary may
exercise, at any time within twelve months after the Participant's
Termination of Employment, any Incentive Stock Option to the extent that it
was exercisable on the date of the Participant's Termination of Employment;

provided, however, that in no event shall the Option be exercised after the
- -------- -------
expiration of its term or its earlier termination under any other provision of
this Plan.

(cc) Extension of Exercise. Notwithstanding the foregoing
---------------------
provisions, in the event of, or in anticipation of, a Termination of Employment
with the Company for any reason other than discharge for cause, the Committee
may, in its discretion, increase the portion of the Option available to the
Participant (or Participant's Beneficiary or Personal Representative, as the
case may be) or extend the exercisability period (subject to Section 1.6) upon
such terms as the Committee shall determine and consistent with the requirements
of Section 422 of the Code.

3.4 Compliance With Laws.
--------------------

This Plan, the granting and vesting of Options under this Plan and the
offer, issuance and delivery of shares of Common Stock and/or the payment of
money under this Plan or under Options granted hereunder are subject to
compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing agency or any
regulatory or governmental authority as may, in the opinion of counsel for the
Corporation, be necessary or advisable in connection therewith. Any securities
delivered under this Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the

xii
<PAGE>

Corporation, provide such assurances and representations to the Corporation as
the Corporation may deem necessary or desirable to assure compliance with all
applicable legal requirements.

3.5 Tax Withholding.
---------------

Upon any exercise of any Option, unless the Committee otherwise
provides, the Participant (or the Participant's Personal Representative or
Beneficiary, as the case may be) shall pay or provide for payment in cash or by
check of the amount of any applicable taxes which the Company may be required to
withhold with respect to such transaction. In any case where a tax is required
to be withheld in connection with the delivery of shares of Common Stock under
this Plan, the Committee in its sole discretion may authorize (subject to
Section 3.4) the Participant, pursuant to such rules and subject to such
conditions as the Committee may establish, to have the Corporation reduce the
number of shares to be delivered by the appropriate number of shares valued at
their then Fair Market Value to satisfy such withholding obligation.

3.6 Plan Amendment, Termination and Suspension.
------------------------------------------

(dd) Board or Committee Authorization. The Board may at any time
--------------------------------
terminate or, from time to time, amend, modify or suspend this Plan, in whole or
in part. No Options may be granted during any suspension of this Plan or after
termination of this Plan, but the Committee shall retain jurisdiction as to
Options then outstanding in accordance with the terms of this Plan.

(ee) Shareholder Approval. To the extent then required under Sections
--------------------
422 and 424 of the Code in the case of Incentive Stock Options or required by
any other applicable law, or deemed necessary or advisable by the Board, any
amendment to this Plan shall be subject to shareholder approval.

(ff) Amendments to Options. Without limiting any other express
---------------------
authority of the Committee under, but subject to the express limits of, this
Plan, the Committee by agreement or resolution may waive conditions of or
limitations on Options to Participants that the Committee in the prior exercise
of its discretion has imposed and may make other changes to the terms and
conditions of Options, provided that any such changes do not affect, in any
-------- ----
manner materially adverse to the Participant, his or her rights and benefits
under an Option, without the consent of the Participant.

(gg) Limitations on Amendments to Plan and Options. No amendment,
---------------------------------------------
suspension or termination of this Plan or change of or affecting any outstanding
Option shall, without written consent of the Participant, affect in any

xiii
<PAGE>

manner materially adverse to the Participant any rights or benefits of the
Participant or obligations of the Corporation under any Option granted under
this Plan prior to the effective date of such change. Changes contemplated by
Section 3.2 shall not be deemed to constitute changes or amendments for purposes
of this Section 3.6.

3.7 Privileges of Stock Ownership.
-----------------------------

Except as otherwise expressly authorized by the Committee or this
Plan, a Participant shall not be entitled to any privilege of stock ownership as
to any shares of Common Stock not actually delivered to and held of record by
him or her. No adjustment will be made for dividends or other rights as a
shareholder for which a record date is prior to such date of delivery.

3.8 Effective Date of this Plan.
---------------------------

This Plan shall be effective as of May 1, 1994, subject to shareholder
approval.

3.9 Term of this Plan.
-----------------

No Option shall be granted after May 1, 2004 (the "Termination Date").
Unless otherwise expressly provided in this Plan or in an applicable Option
Agreement, any Option theretofore granted may extend beyond such date, and all
authority of the Committee with respect to Options hereunder, including its
authority to amend an Option, shall continue during any suspension of this Plan
and in respect of outstanding Options on such Termination Date.

3.10 Governing Law/Construction/Severability.
---------------------------------------

(hh) Choice of Law. This Plan, the Options, all documents evidencing
-------------
Options and all other related documents shall be governed by and construed in
accordance with the laws of the state of incorporation of the Corporation.

(b) Severability. If any provision shall be held by a court of
------------
competent jurisdiction to be invalid and unenforceable, the remaining provisions
of this Plan shall continue in effect.

3.11 Captions.
--------

Captions and headings are given to the sections and subsections of
this Plan solely as a convenience to facilitate reference. Such headings shall
not

xiv
<PAGE>

be deemed in any way material or relevant to the construction or interpretation
of this Plan or any provision thereof.

3.12 Non-Exclusivity of Plan.
-----------------------

Nothing in this Plan shall limit or be deemed to limit the authority
of the Board or the Committee to grant awards or authorize any other
compensation, with or without reference to the Common Stock, under any other
plan or authority.

IV. DEFINITIONS

4.1 Definitions.
-----------

(ii) "Beneficiary" shall mean the person, persons, trust or trusts
-----------
entitled by will or the laws of descent and distribution to receive the benefits
specified in the Option Agreement and under this Plan in the event of a
Participant's death, and shall mean the Participant's executor or administrator
if no other Beneficiary is identified and able to act under the circumstances.

(jj) "Board" shall mean the Board of Directors of the
-----
Corporation.

(kk) "Book Value" determined as of a particular date shall mean the
----------
book value (total assets less total liabilities) of the Corporation as
determined in good faith by the Committee based on the most recent available
financial statements prepared in accordance with generally accepted accounting
principles. The Book Value per share determined as of a particular date is the
total Book Value divided by the total number of shares of Common Stock then
outstanding.

(ll) "Change in Control Event" shall mean any of the following:
-----------------------

(i) Approval by the shareholders of the Corporation of the
dissolution or liquidation of the Corporation;

(ii) Approval by the shareholders of the Corporation of an
agreement to merge or consolidate, or otherwise reorganize, with or into
one or more entities that are not Subsidiaries or other affiliates, as a
result of which less than 50% of the outstanding voting securities of the
surviving or resulting entity immediately after the reorganization are, or
will be, owned, directly or indirectly, by shareholders or other affiliates
of the Corporation immediately before such reorganization (assuming for
purposes of such determination that there is no change in the record
ownership of the Corporation's securities from the record date for such
approval until such reorganization but including in

xv
<PAGE>

such determination any securities of the other parties to such
reorganization held by affiliates of the Corporation);

(iii) Approval by the shareholders of the Corporation of the sale
of substantially all of the Corporations' business and/or assets to a
person or entity which is not a Subsidiary or other affiliate; or

(iv) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) (other than a person having more than 10%
ownership at the time of adoption of this Plan) becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing more than 50% of
the combined voting power of the Corporation's then outstanding securities
entitled to then vote generally in the election of directors of the
Corporation.

(mm) "Code" shall mean the Internal Revenue Code of 1986, as
----
amended from time to time.

(nn) "Committee" shall mean a committee appointed by the Board to
---------
administer this Plan, which committee shall be comprised of one or more
directors or such greater number of directors as may be required under
applicable law.

(oo) "Common Stock" shall mean the Common Stock of the Corporation and
------------
such other securities or property as may become the subject of Options, or
become subject to Options, pursuant to an adjustment made under Section 3.2 of
this Plan.

(pp) "Company" shall mean, collectively, the Corporation and its
-------
Subsidiaries.

(qq) "Corporation" shall mean Pan American Group, Inc., a
-----------
Delaware corporation, and its successors.

(rr) "Disability" shall mean, in the case of an Incentive Stock
----------
Option, a "permanent and total disability" within the meaning of Section
22(e)(3) of the Code and, in the case of Nonqualified Stock Options, such other
disabilities, infirmities, afflictions or conditions as the Committee by rule
may include.

(ss) "Eligible Employee" shall mean an officer (whether or not a
-----------------
director) or key employee of the Company, as determined by the Committee in its
discretion.

xvi
<PAGE>

(tt) "Eligible Person" shall mean any Eligible Employee, Other
---------------
Eligible Person or Non-Employee Director.

(uu) "Exchange Act" shall mean the Securities Exchange Act of
------------
1934, as amended from time to time.

(vv) "Fair Market Value" shall mean the value of the Common Stock as
-----------------
determined by the Committee in a reasonable good faith manner consistent with
the requirements of Section 422 of the Code and regulations promulgated
thereunder, based upon available financial information about the Company and/or
such other information obtained from any exchange, market or other source of
data as the Committee deems appropriate for determining such value for purposes
of this Plan.

(ww) "Incentive Stock Option" shall mean an Option which is
----------------------
designated as an incentive stock option within the meaning of Section 422 of the
Code and which contains such provisions as are necessary to comply with that
section.

(xx) "Non-Employee Director "shall mean a member of the Board of
---------------------
Directors of the Corporation who is not an officer or employee of the Company.

(yy) "Nonqualified Stock Option" shall mean an Option that is
-------------------------
designated as a nonqualified stock option and shall include any Option intended
as an Incentive Stock Option that fails to meet the applicable legal
requirements thereof. Any Option granted hereunder that is not designated as an
incentive stock option shall be deemed to be designated a Nonqualified Stock
Option under this Plan and not an incentive stock option under the Code.

(zz) "Option" shall mean an option to purchase Common Stock under
------
this Plan. The Committee shall designate any Option granted to an Eligible
Person as a Nonqualified Stock Option or an Incentive Stock Option, subject to
the requirements of Section 2.1.

(aaa) "Option Agreement" shall mean any writing setting forth
----------------
the terms of an Option that has been authorized by the Committee.

(bbb) "Option Date" shall mean the date upon which the
-----------
Committee took the action granting an Option or such later date as the Committee
designates as the Option Date at the time of the grant of Option.

(ccc) "Option Period" shall mean the period beginning on an
-------------
Option Date and ending on the expiration date of such Option.

xvii
<PAGE>

(ddd) "Other Eligible Person" shall mean any other person
---------------------
(including a significant agent or consultant) who performs substantial services
for the Company of a nature similar to those performed by key employees, as may
be selected (consistent with Section 3.4) to participate in this Plan by the
Committee from time to time.

(eee) "Participant" shall mean an Eligible Person who has been granted
-----------
an Option under this Plan.

(fff) "Personal Representative" shall mean the person or persons who,
-----------------------
upon the Disability or incompetence of a Participant, shall have acquired on
behalf of the Participant, by legal proceeding or otherwise, the power to
exercise the rights or receive benefits under this Plan by virtue of having
become the legal representative of the Participant.

(ggg) "Plan" shall mean this Pan American Group, Inc. 1994 Stock
----
Option Plan.

(hhh) "Stockholders Agreement" shall mean the Stockholders
----------------------
Agreement dated as of May 1, 1994, among the Corporation and certain
stockholders designated Restricted Stockholders, as amended from time to time.

(iii) "Subsidiary" shall mean any corporation or other entity
----------
a majority of whose outstanding voting stock or voting power is beneficially
owned directly or indirectly by the Corporation.

(jjj) "Termination of Employment" shall mean, with respect to
-------------------------
an Eligible Employee, any termination of the Eligible Employee's employment with
the Company. If an entity ceases to be a Subsidiary, a Termination of
Employment shall be deemed to have occurred with respect to each employee of
such Subsidiary who does not continue as an employee of another entity owned,
controlled by or under common control with the Company. In the case of a Non-
Employee Director, Termination of Employment shall mean the termination of such
Non-Employee Director's service as a director of the Corporation. In the case
of an Other Eligible Person, Termination of Employment shall mean the
termination of such Other Eligible Person's rendering of services to the Company
of a nature similar to the services performed by key employees. As to any
Eligible Employee, absence from work caused by military service or authorized
sick leave shall not be considered as a Termination of Employment for purposes
of this Plan or any Option hereunder.

xviii
<PAGE>

NONQUALIFIED STOCK OPTION AGREEMENT
-----------------------------------

THIS AGREEMENT, dated as of the ____ day of ____________, is entered
into by and between Pan American Group, Inc., a Delaware corporation (the
"Corporation"), and _________________ ("Optionee").

W I T N E S S E T H
-------------------

WHEREAS, pursuant to the Pan American Group, Inc. 1994 Stock Option
Plan, as amended (the "Plan"), the Corporation has granted to Optionee effective
as of the ____ day of _____________ (the "Award Date") a nonqualified stock
option to purchase all or any part of ____ authorized but unissued or treasury
shares of Common Stock, $.001369863 par value, of the Corporation upon the terms
and conditions set forth herein and in the Plan.

NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties agree as
follows:

1. Defined Terms. Capitalized terms used herein and not otherwise
-------------
defined herein shall have the meaning assigned to such terms in the Plan.

2. Grant of Option. This Agreement evidences the Corporation's
---------------
grant to Optionee of the right and option to purchase, on the terms and
conditions set forth herein and in the Plan, up to ____ shares of the Common
Stock at the price of _________ per share (the "Option"), exercisable from time
to time to the extent provided herein, subject to the provisions of this
Agreement and the Plan, prior to the close of business on April 30, 2001, or
such earlier termination date as provided in Sections 5 and 6 below (the
"Expiration Date").

3. Exercisability of Option. The Option may be exercised in
------------------------
installments as to 25% of the aggregate number of shares set forth in Section 2
hereof (subject to adjustment) on and after ___________ and as to an additional
25% of such aggregate number of such shares (subject to adjustment) on May 1 in
each of ____, ____ and ____.

To the extent Optionee does not in any year purchase all or any part
of the shares to which Optionee is entitled, Optionee has the right cumulatively
thereafter to purchase any shares not so purchased and such right shall continue
until the Option terminates or expires. Fractional share interests shall be
disregarded, but may be cumulated. No fewer than five. shares may be purchased
at any one time, unless the number purchased is the total number at the time
available for purchase under the

1
<PAGE>

Option.

4. Method of Exercise of Option. The Option shall be exercisable by
----------------------------
the delivery to the Corporation of a written notice stating the number of shares
to be purchased pursuant to the Option and accompanied by payment in cash or by
check payable to the order of the Corporation for the full purchase price of the
shares to be purchased, and as applicable, tax withholding required pursuant to
Section 3.5 of the Plan and the agreements and other written statements required
pursuant to Section 1.10 of the Plan.

5. Effect of Termination of Employment or Death: Change in
-------------------------------------------------------
Subsidiary Status. The Option and all other rights hereunder, to the extent not
- -----------------
exercised, shall terminate and become null and void at such time as Optionee
ceases to be employed by either the Corporation or any Subsidiary, except that:

(a) if such employment is terminated by reason of voluntary
retirement or resignation (other than pursuant to a dismissal for cause or
in anticipation of such a dismissal (as determined by the Committee in its
sole discretion) or in the circumstances described in subsections (b), (c)
or (d) below), Optionee may at any time within a period of three months
after such termination exercise the Option to the extent the Option was
exercisable at the date of such termination;

(b) if Optionee becomes permanently disabled (within the meaning
of Code Section 22(e)(3) or as otherwise defined by the Committee) while in
the employ of the Corporation or any Subsidiary, then the Option shall be
deemed to have been accelerated and become fully exercisable immediately
prior to such termination and may be exercised within a period of three
months after Optionee's termination from employment, if not earlier
terminated pursuant to the terms of Section 6 of this Agreement;

(c) if Optionee dies while in the employ of the Corporation, then
the Option shall be deemed to have been accelerated and become fully
exercisable immediately prior to such termination and may be exercised
within a period of three months after Optionee's termination from
employment, if not earlier terminated pursuant to the terms of Section 6 of
this Agreement; and

(d) if such employment is terminated by the Corporation (other
than pursuant to a dismissal for cause or in anticipation of such dismissal
(as determined by the Committee in its sole discretion)), then the Option
shall be deemed to have been accelerated and become fully exercisable
immediately prior to such termination and may be exercised for a period of
three months after Optionee's termination from employment, if not earlier
terminated pursuant to the

2
<PAGE>

terms of Section 6 of this Agreement;

provided, however, that in no event may the Option be exercised by anyone under
this Section 5 or otherwise after the Expiration Date. If Optionee is employed
by an entity which ceases to be a Subsidiary, such event shall be deemed for
purposes of this Section 5 to be a termination of employment under subsection
(d) in respect of Optionee if Optionee does not continue as an employee of
another entity owned, controlled by or under common control with the
Corporation. In the case of a non-employee director, termination of employment
shall mean the termination of such non-employee director's service as a director
of the Corporation and its Subsidiaries. In the case of any other eligible
person, termination of employment shall mean the termination of such eligible
person's rendering of services to the Corporation of a nature similar to the
services performed by key employees. Absence from work caused by military
service or authorized sick leave shall not be considered as a termination of
employment for purposes of this Section 5.

6. Termination of Option Under Certain Events. As contemplated by
------------------------------------------
Section 3.2 of the Plan, the Option may be terminated by the Corporation to the
extent not previously exercised, upon an event or transaction which the
Corporation does not survive.

7. Non-Transferability of Option. The Option and any other rights
-----------------------------
of Optionee under this Agreement or the Plan are nontransferable as provided in
Section 1.9 of the Plan.

8. Notices. Any notice to be given under the terms of this
-------
Agreement shall be in writing and addressed if to the Corporation to its
principal office located at 1999 Avenue of the Stars, Suite 2960, Los Angeles,
90067, Attention: William Bron, and if to Optionee to the address given beneath
Optionee's signature hereto, or at such other address as either party may
hereafter designate in writing to the other.

9. Plan. The Option and all rights of Optionee thereunder are
----
subject to, and Optionee agrees to be bound by, all of the terms and conditions
of the provisions of the Plan, incorporated herein by this reference. Optionee
acknowledges receipt of a copy of the Plan, which is made a part hereof by this
reference, and agrees to be bound by the terms thereof. Unless otherwise
expressly provided in other Sections of this Agreement, provisions of the Plan
that confer discretionary authority on the Committee do not (and shall not be
deemed to) create any rights in Optionee unless such rights are expressly set
forth herein or are otherwise in the sole discretion of the Committee so
conferred by appropriate action of the Committee under the Plan after the date
hereof.

10. Notice of Disposition. Optionee agrees to notify the Corporation
---------------------
of

3
<PAGE>

any sale or other disposition of any shares of Common Stock received upon
exercise of the Option, if such sale or disposition occurs within two years
after the Award Date or within one year after the date of such exercise.

11. Consideration to Corporation. In consideration of the granting
----------------------------
of this Option by the Corporation, Optionee agrees to render faithful and
efficient services to the Corporation or its Subsidiaries, with such duties and
responsibilities as the Corporation or its subsidiaries shall from time to time
prescribe, for a period of at least one (1) year from the date this Option is
granted.

12. Acceptance of Stockholder Agreement. Optionee agrees that upon
-----------------------------------
the exercise of all or any part of the Option granted hereunder, Optionee and
the shares of Common Stock acquired thereby shall be subject to all of the terms
and conditions of that certain Stockholder's Agreement dated as of May 1, 1994,
by and among the Corporation and the other stockholders of the Corporation whose
names appear on the signature pages thereto.

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed on its behalf by a duly authorized officer and Optionee has hereunto
set his or her hand.

PAN AMERICAN GROUP, INC.
(a Delaware corporation)

By:___________________________________
Name:
Title:
OPTIONEE

___________________________
(Signature)

___________________________
(Print Name)

4
<PAGE>

___________________________
(Address)

___________________________
(City, State, Zip Code)

5
<PAGE>

CONSENT OF SPOUSE
-----------------

In consideration of the execution of the foregoing Nonqualified Stock
Option Agreement by Pan American Group, Inc., I, ____________________________,
the spouse of Optionee herein named, do hereby join with my spouse in executing
the foregoing Nonqualified Stock Option Agreement and do hereby agree to be
bound by all of the terms and provisions thereof and of the Plan.

DATED: ________________ ________________________________
Signature of Spouse

6
<PAGE>

EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT
-----------------------------------------

THIS AGREEMENT, dated as of the day of , is entered
-- -------------
into by and between Pan American Group, Inc., a Delaware corporation (the
"Corporation"), and, ("Employee").
---------------

W I T N E S S T H
-----------------

WHEREAS, pursuant to the Pan American Group, Inc. 1994 Stock Option Plan
(the "Plan"), the Corporation has granted to Employee effective as of the day
--
of (the "Award Date"), an option to purchase all or any part
-----------------
of authorized but unissued or treasury shares of Common Stock, $.001369863
----
par value, of the Corporation upon the terms and conditions set forth herein and
in the Plan.

NOW, THEREFORE, in consideration of the mutual promises and covenants made
herein and the mutual benefits to be derived herefrom, the parties agree as
follows:

1. Defined Terms. Capitalized terms used herein and not otherwise defined
-------------
herein shall have the meaning assigned to such terms in the Plan.

2. Grant of Option. This Agreement evidences the Corporation's grant to
---------------
Employee of the right and option to purchase, on the terms and conditions set
forth herein and in the Plan, up to shares of the Common Stock at the price
----
of $ per share (the "Option"), exercisable from time to time to the extent
-----
provided herein, subject to the provisions of this Agreement and the Plan, prior
to the close of business on April 30, 2001, or such earlier termination date as
provided in Sections 3, 6 and 7 below (the "Expiration Date"). It is the intent
of the Corporation that this Option constitute (to the extent permitted by law)
an incentive stock option ("ISO") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended ("Code").

3. Exercisability of Option. The Option may be exercised in installments as
------------------------
to 25% of the aggregate number of shares set forth in Section 2 hereof (subject
to adjustment) on and after and as to an additional 25% of such
----------
aggregate number of such shares (subject to adjustment) on in each of ,
----- ----
and .
- ----- -----

To the extent Employee does not purchase all or any part of the shares to
which Employee is entitled, Employee has the right cumulatively thereafter to
purchase any shares not so purchased for three (up to five if allowed by law)
years thereafter only, at

<PAGE>

which time that portion of the Option not so purchased shall terminate and
expire. Fractional share interests shall be disregarded, but may be cumulated.
No fewer than five shares may be purchased at any one time, unless the number
purchased is the total number at the time available for purchase under the
Option.

4. Additional Limitations on Exercise of Option as an ISO. In the event
-------------------------------------------------------
Employee is granted incentive stock options (whether under this Award Agreement
or any other incentive stock option agreement with the Corporation or any parent
corporation) and the aggregate Fair Market Value (determined as of the
respective dates of grant of such options) of the Common Stock with respect to
which such options are first exercisable in any calendar year exceeds $100,000,
the most recently granted options shall be treated as nonqualified stock options
to the extent of the excess. In addition, in the case of simultaneously granted
options, the Corporation may, in the manner and to the extent permitted by law,
designate which shares are to be treated as stock acquired pursuant to the
exercise of an incentive stock option.

5. Method of Exercise of Option. The Option shall be exercisable by the
-----------------------------
delivery to the Corporation of a written notice stating the number of shares to
be purchased pursuant to the Option and accompanied by payment in cash or by
check payable to the order of the Corporation for the full purchase price of the
shares to be purchased, and as applicable, tax withholding required pursuant to
Section 3.5 of the Plan and the agreements and other written statements required
pursuant to Section 1.10 of the Plan.

6. Effect of Termination of Employment or Death; Change in Subsidiary
------------------------------------------------------------------
Status. The Option and all other rights hereunder, to the extent not exercised,
- -------
shall terminate and become null and void at such time as Employee ceases to be
employed by either the Corporation or any Subsidiary, except that:

(a) if such employment is terminated by reason of voluntary retirement
or resignation (other than pursuant to a dismissal for cause or in
anticipation of such a dismissal (as determined by the Committee in its
sole discretion) or in the circumstances described in subsections (b), (c)
or (d) below), Employee may at any time within a period of twelve months
after such termination exercise the Option to the extent the Option was
exercisable at the date of such termination;

(b) if Employee becomes permanently disabled (within the meaning of
Code Section 22(e)(3) or as otherwise defined by the Committee) while in
the employ of the Corporation or any Subsidiary, then the Option shall be
deemed to have been accelerated and become fully exercisable immediately
prior to such termination and may be exercised within a period of twelve
months after Employee's termination from employment, if not earlier
terminated pursuant to the terms of Sections 3 and 7 of this Agreement;

2
<PAGE>

(c) if Employee dies while in the employ of the Corporation, then the
Option shall be deemed to have been accelerated and become fully
exercisable immediately prior to such termination and may be exercised
within a period of twelve months after Employee's termination from
employment, if not earlier terminated pursuant to the terms of Sections 3
and 7 of this Agreement; and

(d) if such employment is terminated by the Corporation (other than
pursuant to a dismissal for cause or in anticipation of such dismissal (as
determined by the Committee in its sole discretion)), then the Option shall
be deemed to have been accelerated and become fully exercisable immediately
prior to such termination and may be exercised for a period of twelve
months after Employee's termination from employment, if not earlier
terminated pursuant to the terms of Sections 3 and 7 of this Agreement.

provided, however, that in no event may the Option be exercised by anyone under
this Section 6 or otherwise after the Expiration Date. If Employee is employed
by an entity which ceases to be a Subsidiary, such event shall be deemed for
purposes of this Section 6 to be a termination of employment under subsection
(d) in respect of Employee if Employee does not continue as an employee of
another entity owned, controlled by or under common control with the
Corporation. Absence from work caused by military service or authorized sick
leave shall not be considered as a termination of employment for purposes of
this Section 6.

7. Termination of Option Under Certain Events. As contemplated by Section
-------------------------------------------
3.2 of the Plan, the Option may be terminated by the Corporation to the extent
not previously exercised, upon an event or transaction which the Corporation
does not survive in accordance with the Stock Option Plan.

8. Non-Transferability of Option. The Option and any other rights of
-----------------------------
Employee under this Agreement or the Plan are nontransferable as provided in
Section 1.9 of the Plan.

9. Notices. Any notice to be given under the terms of this Agreement shall
--------
be in writing and addressed if to the Corporation to its principal office
located at 1999 Avenue of the Stars, Suite 2960, Los Angeles, 90067, Attention:
William Bron, and if to Employee to the address given beneath Employee's
signature hereto, or at such other address as either party may hereafter
designate in writing to the other.

10. Plan. The Option and all rights of Employee thereunder are subject to,
----
and Employee agrees to be bound by, all of the terms and conditions of the
provisions of the Plan, incorporated herein by this reference. Employee
acknowledges receipt of a copy of the Plan, which is made a part hereof by this
reference, and agrees to be bound by the terms thereof. Unless otherwise
expressly provided in other Sections of

3
<PAGE>

this Agreement, provisions of the Plan that confer discretionary authority on
the Committee do not (and shall not be deemed to) create any rights in Employee
unless such rights are expressly set forth herein or are otherwise in the sole
discretion of the Committee so conferred by appropriate action of the Committee
under the Plan after the date hereof.

11. Consideration to Corporation. In consideration of the granting of this
----------------------------
Option by the Corporation, Employee agrees to render faithful and efficient
services to the Corporation or its Subsidiaries pursuant to the Employment
Agreement between Pan American Bank, FSB and Employee dated as of May 1, 1994.

12. Notice of Disposition. Employee agrees to notify the Corporation of
---------------------
any sale or other disposition of any shares of Common Stock received upon
exercise of the Option, if such sale or disposition occurs within two years
after the Award Date or within one year after the date of such exercise.

13. Acceptance of Stockholder Agreement. Employee agrees that upon the
-----------------------------------
exercise of all or any part of the Option granted hereunder, Employee and the
shares of Common Stock acquired thereby shall be subject to all of the terms and
conditions of that certain Stockholder's Agreement dated as of May 1, 1994, by
and among Employee, the Corporation and the other stockholders of the
Corporation whose names appear on the signature pages thereto.

4
<PAGE>

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed on its behalf by a duly authorized officer and Employee has hereunto
set his or her hand.

PAN AMERICAN GROUP, INC.
(a Delaware corporation)

By:
---------------------------
Name:
Title:

EMPLOYEE

- ---------------------------------
(Signature)

- ---------------------------------
(Print Name)

- ---------------------------------
(Address)

- ---------------------------------
(City, State, Zip Code)

CONSENT OF SPOUSE
-----------------

In consideration of the execution of the foregoing Nonqualified Stock
Option Agreement by Pan American Group, Inc., I, , the spouse
of Optionee herein named, do hereby join with my spouse in executing the
foregoing Nonqualified Stock Option Agreement and do hereby agree to be bound by
all of the terms and provisions thereof and of the Plan.

DATED: October 18, 1994

-------------------------------
Signature of Spouse

5
<PAGE>

<PAGE>

EXHIBIT 10.85.1

UNITED AUTO CREDIT CORP.

1998 EMPLOYEE STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT
--------------------------------

This Stock Option Agreement ("AGREEMENT") is made and entered into as
of the Date of Grant indicated below by and between United Auto Credit Corp., a
California corporation (the "COMPANY"), and the person named below ("EMPLOYEE").

WHEREAS, Employee is an employee of the Company or one or more of its
subsidiaries; and

WHEREAS, pursuant to the Company's 1998 Employee Stock Incentive Plan
(the "PLAN"), the committee of the Board of Directors of the Company
administering the Plan (the "COMMITTEE") has approved the grant to Employee of
an option to purchase shares of the common stock of the Company (the "COMMON
STOCK"), on the terms and conditions set forth herein; and

WHEREAS, the amount of compensation the recipient of the Option (as
defined below) could receive hereunder is based solely on an increase in the
value of the stock of the Company after the date of the grant;

NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:

1. Grant of Option; Certain Terms and Conditions. The Company
---------------------------------------------
hereby grants to Employee, and Employee hereby accepts, as of the Date of Grant,
an option to purchase the number of shares of Common Stock indicated below (the
"OPTION SHARES") at the Exercise Price per share indicated below, which option
shall expire at 5:00 p.m., California time, on the Expiration Date indicated
below and shall be subject to all of the terms and conditions set forth in this
Agreement (the "OPTION"). On each anniversary of the Date of Grant, the Option
shall become exercisable to purchase, and shall vest with respect to, that
number of Option Shares (rounded to the nearest whole share) equal to the total
number of Option Shares multiplied by the Annual Vesting Rate indicated below.

Employee: __________________________

Date of Grant: March 25, 1998

Number of shares purchasable: See Exhibit "A" hereto

Exercise Price per share: See Exhibit "A" hereto
<PAGE>

Expiration Date: March 25, 2008

Annual Vesting Rate: See Exhibit "A" hereto

The Option is intended to qualify as an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended (an "INCENTIVE
STOCK OPTION"), and consequently:

(i) the Expiration Date shall not be more than ten years
after the Date of Grant and the Exercise Price per share shall not be less than
the Fair Market Value (as defined for purposes of the Plan) per share on the
Date of Grant; provided, however, that if, on the Date of Grant, Employee owns
-------- -------
(after application of the family and other attribution rules of Section 425(d)
of the Internal Revenue Code of 1986, as amended) more than 10% of the total
combined voting power of all classes of stock of the Company or of its parent or
subsidiary corporations, then the Expiration Date shall not be more than five
years after the Date of Grant and the Exercise Price per share shall not be less
than 110% of the Fair Market Value per share on the Date of Grant; and

(ii) the aggregate Fair Market Value (determined as of the
date such options are granted) of the shares of Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by Employee
during any calendar year (under the Plan and all other stock option plans of the
Company and its parent and subsidiary corporations) shall not exceed $100,000.

2. Acceleration and Termination of Option.
--------------------------------------

(a) Change of Control. In the event of a Change of Control (as
-----------------
hereinafter defined), any portion of the Option that is first scheduled to vest
on or after the date of such Change of Control shall fully vest on such date.
"CHANGE OF CONTROL" shall mean the first to occur of the following:

(A) Pan American Bank, FSB (the "BANK"), its parent Company,
United PanAm Financial Corp. ("UPFC") and entities controlled, directly or
indirectly, by the Bank or UPFC ("AFFILIATES") no longer own in the
aggregate, securities representing 50% or more of the beneficial ownership
of the Company or an entity controlling, directly or indirectly, the
Company other than by reason of the completion of an initial public
offering by the Company of shares of its common stock to the public
pursuant to a Registration Statement filed under the Securities Act of 1933
(an "INITIAL PUBLIC OFFERING") or a subsequent offering; or

(B) A sale of all or substantially all the property and
assets of the Company to any party other than a sale to the Bank, UACC or
an Affiliate unless arrangements are made to grant the Employee options or
equivalent equity interests in the party acquiring such assets in lieu of
the Option granted hereunder.

2
<PAGE>

(i) Retirement. If Employee shall cease to be an
----------
employee, director or independent contractor of the Company (such event shall be
referred to herein as the "TERMINATION" of Employee's "EMPLOYMENT") by reason of
Employee's retirement in accordance with the Company's then current retirement
policy ("RETIREMENT"), then (A) the portion of the Option that has not vested on
or prior to the date of such Retirement shall terminate on such date, and (B)
the remaining vested portion of the Option shall terminate on the earlier of the
Expiration Date or one year after Retirement.

(ii) Death or Permanent Disability. If Employee's
-----------------------------
Employment is Terminated by reason of the death or Permanent Disability (as
hereinafter defined) of Employee, then (A) the portion of the Option that has
not vested on or prior to the date of such Termination of Employment shall
terminate on such date, and (B) the remaining vested portion of the Option shall
terminate upon the earlier of the Expiration Date or the first anniversary of
the date of such Termination of Employment. "PERMANENT DISABILITY" shall mean
the inability to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to
result in death or that has lasted or can be expected to last for a continuous
period of not less than 12 months. Employee shall not be deemed to have a
Permanent Disability until proof of the existence thereof shall have been
furnished to the Board in such form and manner, and at such times, as the Board
may require. Any determination by the Board that Employee does or does not have
a Permanent Disability shall be final and binding upon the Company and Employee.

(iii) Other Termination. If Employee's Employment
-----------------
is Terminated for no reason, or for any reason other than Retirement, death or
Permanent Disability, then the Option shall terminate 30 days following the date
of such Termination of Employment; provided, that if Employee's employment is
--------
terminated "FOR CAUSE," including personal dishonesty, incompetence, breach of
fiduciary duty involving personal profit, failure to perform stated duties,
willful violation of any law, rule or regulation (other than traffic violations
or similar offenses) or of any agreement with any regulatory agency, then the
Option shall terminate in its entirety as of the date of Termination of
Employment.

(b) Death Following Termination of Employment. Notwithstanding
-----------------------------------------
anything to the contrary contained in this Agreement, if Employee shall die at
any time after the Termination of his or her Employment and prior to the
Expiration Date, then (i) the portion of the Option that has not vested on or
prior to the date of such death shall terminate on such date, and (ii) the
remaining vested portion of the Option shall terminate on the earlier of the
Expiration Date or the first anniversary of the date of such death.

(c) Other Events Causing Acceleration of Option. The Committee,
-------------------------------------------
in its sole discretion, may accelerate the exercisability of the Option at any
time and for any reason.

(d) Other Events Causing Termination of Option. Notwithstanding
------------------------------------------
anything to the contrary contained in this Agreement, the Option shall terminate
upon the consummation of any of the following events, or, if later, the
thirtieth day following the first date upon which such event shall have been
approved by both the Board and the shareholders of the Company:

3
<PAGE>

(i) the dissolution or liquidation of the Company; or

(ii) a sale of substantially all of the property and
assets of the Company which would not be deemed a Change of Control under
Section 2(a) above, unless the terms of such sale shall provide otherwise.

3. Adjustments. In the event that the outstanding securities of the
-----------
class then subject to the Option are increased, decreased or exchanged for or
converted into cash, property or a different number or kind of securities, or
cash, property or securities are distributed in respect of such outstanding
securities, in either case as a result of a reorganization, merger,
consolidation, recapitalization, reclassification, dividend (other than a
regular cash dividend) or other distribution, stock split, reverse stock split
or the like, or in the event that substantially all of the property and assets
of the Company are sold, then, unless such event shall cause the Option to
terminate pursuant to Section 2(d) hereof, the Committee shall make appropriate
and proportionate adjustments in the number and type of shares or other
securities or cash or other property that may thereafter be acquired upon the
exercise of the Option; provided, however, that any such adjustments in the
-------- -------
Option shall be made without changing the aggregate Exercise Price of the then
unexercised portion of the Option.

4. Exercise. The Option shall be exercisable during Employee's
--------
lifetime only by Employee or by his or her guardian or legal representative, and
after Employee's death only by the person or entity entitled to do so under
Employee's last will and testament or applicable intestate law. The Option may
only be exercised by the delivery to the Company of a written notice of such
exercise, which notice shall specify the number of Option Shares to be purchased
(the "PURCHASED SHARES") and the aggregate Exercise Price for such shares (the
"EXERCISE NOTICE"), together with payment in full of such aggregate Exercise
Price in cash or by check payable to the Company.

5. Payment of Withholding Taxes. If the Company becomes obligated
----------------------------
to withhold an amount on account of any tax imposed as a result of the exercise
of the Option, including, without limitation, any federal, state, local or other
income tax, or any F.I.C.A., state disability insurance tax or other employment
tax, then Employee shall, on the first day upon which the Company becomes
obligated to pay such amount to the appropriate taxing authority, pay such
amount to the Company in cash or by check payable to the Company.

6. Notices. All notices and other communications required or
-------
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed given if delivered personally or five days after mailing by certified
or registered mail, postage prepaid, return receipt requested, to the Company at
17744 Skypark Circle, Suite 165, Irvine, California 92614, Attention: Chief
Financial Officer, or to Employee at the address set forth beneath his or her
signature on the signature page hereto, or at such other addresses as they may
designate by written notice in the manner aforesaid.

4
<PAGE>

shares have not been admitted to listing upon official notice of issuance on
each stock exchange upon which shares of that class are then listed or (ii) in
the opinion of counsel to the Company, such issuance or delivery would cause the
Company to be in violation of or to incur liability under any federal, state or
other securities law, or any requirement of any stock exchange listing agreement
to which the Company is a party, or any other requirement of law or of any
administrative or regulatory body having jurisdiction over the Company.

8. Nontransferability. Neither the Option nor any interest therein
------------------
may be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner other than by will or the laws of descent and
distribution.

9. Plan. The Option is granted pursuant to the Plan, as in effect
----
on the Date of Grant, and is subject to all the terms and conditions of the
Plan, as the same may be amended from time to time; provided, however, that no
-------- -------
such amendment shall deprive Employee, without his or her consent, of the Option
or of any of Employee's rights under this Agreement. The interpretation and
construction by the Committee of the Plan, this Agreement, the Option and such
rules and regulations as may be adopted by the Committee for the purpose of
administering the Plan shall be final and binding upon Employee. Until the
Option shall expire, terminate or be exercised in full, the Company shall, upon
written request therefor, send a copy of the Plan, in its then-current form, to
Employee or any other person or entity then entitled to exercise the Option.

10. Shareholder Rights. No person or entity shall be entitled to
------------------
vote, receive dividends or be deemed for any purpose the holder of any Option
Shares until the Option shall have been duly exercised to purchase such option
Shares in accordance with the provisions of this Agreement.

11. Employment Rights. No provision of this Agreement or of the
-----------------
Option granted hereunder shall (i) confer upon Employee any right to continue in
the employ of the Company or any of its subsidiaries, (ii) affect the right of
the Company and each of its subsidiaries to terminate the employment of
Employee, with or without cause, or (iii) confer upon Employee any right to
participate in any employee welfare or benefit plan or other program of the
Company or any of its subsidiaries other than the Plan. Employee hereby
acknowledges and agrees that the Company and each of its subsidiaries may
terminate the employment of Employee at any time and for any reason, or for no
reason, unless Employee and the Company or such subsidiary are parties to a
written employment agreement that expressly provides otherwise.

12. Governing Law. This Agreement and the option granted hereunder
-------------
shall be governed by and construed and enforced in accordance with the laws of
the State of California without reference to choice or conflict of law
principles.

13. Additional Matters Affecting Shares.
-----------------------------------

5
<PAGE>

SHARES"), the name and address of the transferee or transferees, if known, and
the price and other material terms of the proposed sale. The Sale Notice shall
constitute an irrevocable offer to sell to the Bank, or such other person or
persons as may be designated by the Bank to acquire such Offered Shares (a
"DESIGNATED PURCHASER"), all, but not less than all of the Offered Shares for
cash on the terms specified in the Sale Notice. The Bank shall have a period of
90 days from its receipt of the Sale Notice to purchase or arrange for the sale
of the Offered Shares to one or more Designated Purchasers at the price and on
the terms specified in the Sale Notice. In the event, the Bank shall fail to
arrange for the sale of such shares and to complete such sale prior to the end
of such 90 day period, the Employee shall be free to dispose of the Offered
Shares to any purchaser it may choose at a price and on terms no more favorable
to the purchaser of the Offered Shares and those proposed in the Sale Notice;
provided, that the purchaser and the Employee provide to the Company such
- --------
assurances as may be required by the Company to the effect that the proposed
sale or disposition of such Shares shall be in compliance with the applicable
requirements of all state and federal securities law; and provided further that
-------- -------
the sale of such shares is completed within 6 months from the date of the Sale
Notice.

(b) Drag Along Rights. In the event the Bank, UPFC or their
-----------------
Affiliates elect to sell any Shares of the Company owned by them to any
purchaser prior to the completion of an Initial Public Offering, the Employee
agrees that such shareholder may cause Employee to include a proportionate share
of all of the Shares of Employee within the shares to be sold by such selling
shareholder on the same terms and conditions applicable to the sale of the
shares by the selling shareholder as set forth in a notice delivered to the
Employee not later than 15 days prior to the date proposed for completion of the
sale of the shares proposed to be sold by the selling shareholder. The
"PROPORTIONATE SHARE" of the Employee shall be equal to the total number of
shares to be sold to the purchaser multiplied by the percentage of the total of
the then issued and outstanding shares and all shares subject to vested options
of the Company represented by the shares owned by the Employee or covered by
vested options of the Employee. The sale by the Employee shall close
concurrently with the sale of the shares by the selling shareholder.

14. Legend. Prior to the completion of an Initial Public Offering,
------
all certificates representing shares shall bear the following legend:

"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH IN A STOCK OPTION AGREEMENT DATED
___________________, 1998, A COPY OF WHICH HAS BEEN FILED WITH THE
SECRETARY OF THE CORPORATION."

The foregoing legend shall be in addition to any other legends
required under state or federal securities laws.

6
<PAGE>

IN WITNESS WHEREOF, the Company and Employee have duly executed this
Agreement as of the Date of Grant.

UNITED AUTO CREDIT CORP.

By____________________________
Authorized Representative

EMPLOYEE

______________________________
Signature

______________________________
Printed Name

______________________________
Street Address

______________________________
City, State and Zip Code

______________________________
Social Security Number

7
<PAGE>

UNITED AUTO CREDIT CORP.

1998 EMPLOYEE STOCK INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------

This Stock option Agreement ("AGREEMENT") is made and entered into as
of the Date of Grant indicated below by and between United Auto Credit Corp., a
California corporation (the "COMPANY"), and the person named below
("PARTICIPANT").

WHEREAS, Participant is an employee, director or independent
contractor of the Company or one or more of its subsidiaries; and

WHEREAS, pursuant to the Company's 1998 Employee Stock Incentive Plan
(the "PLAN"), the committee of the Board of Directors of the Company
administering the Plan (the "COMMITTEE") has approved the grant to Participant
of an option to purchase shares of the common stock of the Company (the "COMMON
STOCK"), on the terms and conditions set forth herein; and

NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:

1. Grant Of Option; Certain Terms and Conditions. The Company
---------------------------------------------
hereby grants to Participant, and Participant hereby accepts, as of the Date of
Grant, an option to purchase the number of shares of Common Stock indicated
below (the "OPTION SHARES") at the Exercise Price per share indicated below,
which option shall expire at 5:00 p.m., California time, on the Expiration Date
indicated below and shall be subject to all of the terms and conditions set
forth in this Agreement (the "OPTION"). On each anniversary of the Date of
Grant, the option shall become exercisable to purchase, and shall vest with
respect to, that number of Option Shares (rounded to the nearest whole share)
equal to the total number of Option Shares multiplied by the Annual Vesting Rate
indicated below.

Participant: ___________________________

Date of Grant: March 25, 1998

Number of shares purchasable: See Exhibit "A" hereto

Exercise Price per share: See Exhibit "A" hereto

Expiration Date: March 25, 2008
<PAGE>

Annual Vesting Rate: See Exhibit "A" hereto

The Option is not intended to qualify as an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as amended (an
"INCENTIVE STOCK OPTION").

2. Acceleration and Termination of Option.
--------------------------------------

(a) Change of Control. In the event of a Change of
-----------------
Control (as hereinafter defined), then the portion of
the Option that is first scheduled to vest on or after
the date of such Change of Control shall fully vest on
such date. "CHANGE OF CONTROL" shall mean the first to
occur of the following:

(A) Pan American Bank, FSB (the "BANK"), its parent
Company, United PanAm Financial Corp. ("UPFC") and entities
controlled, directly or indirectly, by the Bank or UPFC ("AFFILIATES")
no longer own in the aggregate, securities representing 50% or more of
the beneficial ownership of the Company or an entity controlling,
directly or indirectly, the Company other than by reason of the
completion of an initial public offering by the Company of shares of
its common stock to the public pursuant to a Registration Statement
filed under the Securities Act of 1933 (an "INITIAL PUBLIC OFFERING");
or

(B) A sale of all or substantially all the property and
assets of the Company to any party other than a sale to the Bank, UACC
or an Affiliate unless arrangements are made to grant the Employee
options or equivalent equity interests in the party acquiring such
assets in lieu of the Option granted hereunder.

2
<PAGE>

furnished to the Board in such form and manner, and at such times, as the Board
may require. Any determination by the Board that Employee does or does not have
a Permanent Disability shall be final and binding upon the Company and Employee.

(iii) Other Termination. If Employee's Employment
-----------------
is Terminated for no reason, or for any reason other than Retirement, death or
Permanent Disability, then the Option shall terminate 30 days following the date
of such Termination of Employment; provided, that if Employee's employment is
--------
terminated "for cause," including personal dishonesty, incompetence, breach of
fiduciary duty involving personal profit, failure to perform stated duties,
willful violation of any law, rule or regulation (other than traffic violations
or similar offenses) or of any agreement with any regulatory agency, then the
Option shall terminate in its entirety as of the date of Termination of
Employment.

(b) Death Following Termination of Employment.
-----------------------------------------
Notwithstanding anything to the contrary contained in
this Agreement, if Employee shall die at any time after
the Termination of his or her Employment and prior to
the Expiration Date, then (i) the portion of the Option
that has not vested on or prior to the date of such
death shall terminate on such date, and (ii) the
remaining vested portion of the Option shall terminate
on the earlier of the Expiration Date or the first
anniversary of the date of such death.

(c) Other Events Causing Acceleration of Option.
-------------------------------------------
The Committee, in its sole discretion, may accelerate
the exercisability of the Option at any time and for
any reason.

(d) Other Events Causing Termination of Option.
------------------------------------------
Notwithstanding anything to the contrary contained in
this Agreement, the Option shall terminate upon the
consummation of any of the following events, or, if
later, the thirtieth day following the first date upon
which such event shall have been approved by both the
Board and the shareholders of the Company:

(i) the dissolution or liquidation of the Company;
or

3
<PAGE>

distribution, stock split, reverse stock split or the like, or in the event that
substantially all of the property and assets of the Company are sold, then,
unless such event shall cause the Option to terminate pursuant to Section 2(d)
hereof, the Committee shall make appropriate and proportionate adjustments in
the number and type of shares or other securities or cash or other property that
may thereafter be acquired upon the exercise of the Option; provided, however,
-------- -------
that any such adjustments in the Option shall be made without changing the
aggregate Exercise Price of the then unexercised portion of the Option.

5. Payment of Withholding Taxes. If the Company becomes obligated
----------------------------
to withhold an amount on account of any tax imposed as a result of the exercise
of the Option, including, without limitation, any federal, state, local or other
income tax, or any F.I.C.A., state disability insurance tax or other employment
tax, then Participant shall, on the first day upon which the Company becomes
obligated to pay such amount to the appropriate taxing authority, pay such
amount to the Company in cash or by check payable to the Company.

6. Notices. All notices and other communications required or
-------
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed given if delivered personally or five days after mailing by certified
or registered mail, postage prepaid, return receipt requested, to the Company at
17744 Skypark Circle, Suite 165, Irvine, California 92614, Attention: Chief
Financial Officer, or to Participant at the address set forth beneath his or her
signature on the signature page hereto, or at such other addresses as they may
designate by written notice in the manner aforesaid.

7. Stock Exchange Requirements; Applicable Laws. Notwithstanding
--------------------------------------------
anything to the contrary in this Agreement, no shares of stock purchased upon
exercise of the Option, and no certificate representing all or any part of such
shares, shall be issued or delivered if (i) such shares have not been admitted
to listing upon official notice of issuance on each stock exchange upon which
shares of that class are then listed or (ii) in the opinion of counsel to the
Company, such issuance or delivery would cause the Company to be in violation of
or to incur liability under any federal, state or other securities law, or any
requirement of any stock exchange listing agreement to which the Company is a
party, or any other requirement of law or of any administrative or regulatory
body having jurisdiction over the Company.

4
<PAGE>

9. Plan. The Option is granted pursuant to the Plan, as in effect
----
on the Date of Grant, and is subject to all the terms and conditions of the
Plan, as the same may be amended from time to time; provided, however, that no
-------- -------
such amendment shall deprive Participant, without his or her consent, of the
Option or of any of Participant's rights under this Agreement. The
interpretation and construction by the Committee of the Plan, this Agreement,
the Option and such rules and regulations as may be adopted by the Committee for
the purpose of administering the Plan shall be final and binding upon
Participant. Until the Option shall expire, terminate or be exercised in full,
the Company shall, upon written request therefor, send a copy of the Plan, in
its then-current form, to Participant or any other person or entity then
entitled to exercise the Option.

10. Shareholder Rights. No person or entity shall be entitled to
------------------
vote, receive dividends or be deemed for any purpose the holder of any Option
Shares until the Option shall have been duly exercised to purchase such Option
Shares in accordance with the provisions of this Agreement.

11. Employment or Contract Rights. No provision of this Agreement or
-----------------------------
of the Option granted hereunder shall (i) confer upon Participant any right to
continue in the employ of or contract with the Company or any of its
subsidiaries, (ii) affect the right of the Company and each of its subsidiaries
to terminate the employment or contract of Participant, with or without cause,
or (iii) confer upon Participant any right to participate in any employee
welfare or benefit plan or other program of the Company or any of its
subsidiaries other than the Plan. Participant hereby acknowledges and agrees
that the Company and each of its subsidiaries may terminate the employment or
contract of Participant at any time and for any reason, or for no reason, unless
Participant and the Company or such subsidiary are parties to a written
employment or independent contractor agreement that expressly provides
otherwise.

12. Governing Law. This Agreement and the Option granted hereunder
-------------
shall be governed by and construed and enforced in accordance with the laws of
the State of California without reference to choice or conflict of law
principles.
13. Additional Matters Affecting Shares.
-----------------------------------

(a) Right of First Refusal. If Employee desires to sell any
----------------------
shares of Common Stock acquired upon the exercise of this Option prior to
completion of an Initial Public Offering, the Employee shall give written notice
(the "SALE NOTICE") to the Company and the Bank setting forth the number of
Shares proposed to be disposed of (the "OFFERED SHARES"), the name and address
of the transferee or transferees, if known, and the price and other material
terms of the proposed sale. The Sale Notice shall constitute an irrevocable
offer to sell to the Bank, or such other person or persons as may be designated
by the Bank to acquire such Offered Shares (a "DESIGNATED PURCHASER"), all, but
not less than all of the Offered Shares for cash on the terms specified in the
Sale Notice. The Bank shall have a period of 90 days from its receipt of the
Sale Notice to purchase or arrange for the sale of the Offered Shares to one or
more Designated Purchasers at the price and on the terms specified in the Sale
Notice. In the event, the Bank shall fail to arrange for the sale of such shares
and to complete such sale prior to the end of such 90 day period, the Employee
shall be free to dispose of the Offered Shares to any purchaser it may choose at
a price and on terms no more favorable to the purchaser of the Offered Shares
and those proposed in the Sale Notice;

5
<PAGE>

provided, that the purchaser and the Employee provide to the Company such
- --------
assurances as may be required by the Company to the effect that the proposed
sale or disposition of such Shares shall be in compliance with the applicable
requirements of all state and federal securities law; and provided further that
-------- -------
the sale of such shares is completed within 6 months from the date of the Sale
Notice.

(b) Drag Along Rights. In the event the Bank, UPFC or their
-----------------
Affiliates elect to sell any Shares of the Company owned by them to any
purchaser prior to the completion of an Initial Public Offering, the Employee
agrees that such shareholder may cause Employee to include a "proportionate
share" of all of the Shares of Employee within the shares to be sold by such
selling shareholder on the same terms and conditions applicable to the sale of
the shares by the selling shareholder as set forth in a notice delivered to the
Employee not later than 15 days prior to the date proposed for completion of the
sale of the shares proposed to be sold by the selling shareholder. The
proportionate share of the Employee shall be equal to the total number of shares
to be sold to the purchaser multiplied by the percentage of the total of the
then issued and outstanding shares and all shares subject to vested options of
the Company represented by the shares owned by the Employee or covered by vested
options of the Employee. The sale by the Employee shall close concurrently with
the sale of the shares by the selling shareholder.

14. Legend. Prior to the completion of an Initial Public Offering,
------
all certificates representing shares shall bear the following legend:

The foregoing legend shall be in addition to any other legends
required under state or federal securities laws.

6
<PAGE>

IN WITNESS WHEREOF, the Company and Participant have duly executed
this Agreement as of the Date of Grant.

UNITED AUTO CREDIT CORP.

By____________________________
Authorized Representative

PARTICIPANT

______________________________
Signature

______________________________
Printed Name

______________________________
Street Address

______________________________
City, State and Zip Code

______________________________
Social Security Number

7
<PAGE>

EXHIBIT "A"

<PAGE>

EXHIBIT 23.1
The Board of Directors
United PanAm Financial Corp.:

We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus. Our report refers to a
change in the Company's method of accounting for transfers and servicing of
financial assets in 1997.

/s/ KPMG Peat Marwick LLP

San Francisco, California

April 13, 1998