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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

Commission File Number 000-24051

UNITED PANAM FINANCIAL CORP.

(Exact name of Registrant as specified in its charter)

3990 Westerly Place, Suite 200

Newport Beach, CA 92660

(Address of principal executive offices) (Zip Code)

(949) 224-1917

(Registrant’s telephone number, including area code)

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

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

The number of shares outstanding of the Registrant’s Common Stock as of August 13, 2004 was 16,166,365 shares.

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UNITED PANAM FINANCIAL CORP.

FORM 10-Q

JUNE 30, 2004

INDEX

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FINANCIAL INFORMATION

PART I.

Item 1. Financial Statements.

United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Financial Condition

(Unaudited)

See accompanying notes to consolidated financial statements.

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United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

See accompanying notes to consolidated financial statements.

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United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

See accompanying notes to consolidated financial statements

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United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to consolidated financial statements.

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United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

(Unaudited)

See accompanying notes to consolidated financial statements

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United PanAm Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements

Three and Six Months Ended June 30, 2004 and 2003

(Unaudited)

1. Organization

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

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

2. Restatements

The Company has restated its Financial Statements for the years ended December 31, 2003 and 2002 to correct errors in the application of the individual static pool methodology used in the computation of its allowance for loan losses and corresponding provision for loan losses. Overall, this restatement increased the allowance for loan losses and the related deferred tax asset and decreased retained earnings. These restatements also increased the provision for loan losses and lowered income taxes and net income in 2002.

In addition, the Company also made the following restatements: (a) restated its consolidated financial statements to exclude the gain on sale of residual interests in securitization in 2003 from income from continuing operations and reporting it, net of taxes, as income from discontinued operations, and (b) restated its consolidated financial statements for the year ended December 31, 2003, 2002 and 2001 to correct errors in the computation of the dilutive effect of outstanding stock options to consider the tax benefit of the Company receives as part of the assumed proceeds under the “treasury stock method”, which decreased the number of fully diluted shares outstanding to be utilized in the earnings per share calculations.

The Company has filed a Form 10-K/A for 2003 and a Form 10-Q/A for the quarter ended March 31, 2004. Readers should refer to the Form 10-K/A and Form 10-Q/A for more information relating to the restatements.

3. Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of United PanAm Financial Corp., Pan American Financial, Inc., Pan American Bank, FSB and United Auto Credit Corporation (UACC). Substantially all of the Company’s revenues are derived from the operations of UACC and they represent substantially all of the Company’s consolidated assets and liabilities as of June 30, 2004 and December 31, 2003. Significant inter-company accounts and transactions have been eliminated in consolidation.

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial condition and results of operations for the interim periods presented in this Form 10-Q have been included. Operating results for the interim periods are not necessarily indicative of financial results for the

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full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2003.

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

4. Earnings Per Share

Basic EPS and diluted EPS are calculated as follows for the three and six months ended June 30, 2004 and 2003:

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5. Stock-Based Compensation

At June 30, 2004 and 2003, the Company has issued stock options to certain of its employees and directors. The Company accounts for these options under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. Had compensation cost for the Company’s stock option plan been determined based on the fair value consistent with the Provisions of SFAS No. 123, Accounting for Stock-Based Compensation, the Company’s net income and income per share would have been reduced to the pro forma amounts indicated below for the three months and six months ended June 30, 2004 and 2003:

6. Allowance for Loan Losses

The total allowance for loan losses was $24.5 million at June 30, 2004 compared with $25.0 million at June 30, 2003, representing 4.96% of loans at June 30, 2004 and 6.45% at June 30, 2003.

The following is a summary of the changes in the allowance for loan losses on auto loans allocated to loans

purchased before January 1, 2003.

7. Recent Accounting Developments

In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation of Variable Interest Entities, which was issued in January 2003. We are required to apply FIN 46R to variable interests in variable interest entities created after December 31, 2003. For variable interest in variable interest entities created before January

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1, 2004 the Interpretation is applied beginning January 1, 2005. For any variable interest entities that must be consolidated under FIN 46R that were created before January 1, 2004, the assets, liabilities and noncontrolling interest of the variable interest entity initially are measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an account change. If determining the carrying amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities and noncontrolling interest of the variable interest entity. The Company has evaluated the impact of applying FIN 46R to existing variable interest entities in which it has variable interests. The adoption of FIN 46R did not have a material impact on the Company’s financial statements.

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

In March 2004, the FASB issued Emerging Issues Task Force Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”. This EITF describes a model that involves three steps: (1) determine whether an investment is impaired, (2) determine whether the impairment is other-than-temporary, and (3) to recognize the impairment loss in earnings. The EITF also requires several additional disclosures for cost-method investments. The EITF’s impairment accounting guidance is effective for reporting periods beginning after June 15, 2004. The Company expects that the adoption of this EITF will not have a material impact on its consolidated financial statements.

8. Operating Segments

The Company has three reportable segments: automobile finance, insurance premium finance and banking. The automobile finance segment acquires, holds for investment and services nonprime retail automobile installment sales contracts generated by franchised and independent dealers of used automobiles. The insurance premium finance segment underwrites and finances automobile and commercial insurance premiums in California. The banking segment operates a three-branch federal savings bank and is the principal funding source for the Company’s automobile and insurance premium finance segments. The Company is in the process of implementing a strategic plan to no longer use insured deposits of the Bank as a funding source and, instead, to fund the automobile and insurance premium finance segments through securitizations and warehouse lines of credit.

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

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

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

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9. Subsequent Events

The Bank has entered into definitive agreements to sell all its deposits liabilities, which includes the sale of all three branches, its wholesale deposits and Internet deposits, to various parties. All of the definitive agreements are subject to regulatory approval and satisfaction of other conditions to the closing as set forth in the agreements. These agreements are expected to be consummated during the third and fourth quarter of 2004.

UPFC has engaged Deutsche Bank Securities Inc. and/or one its affiliates to arrange for up to a $250 million warehouse financing facility and to act as financial advisor, underwriter and placement agent in connection with a term securitization of up to $500 million for its portfolio of automobile loan receivables. These transactions are expected to be consummated during the third quarter.

Item 2. Mangement’s Discussion and Analysis of Finanacial Condition and Results of Operations.

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

General

Company

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

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

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

As part of our strategic plan, we have retained financial advisors to assist with structuring and executing our plan. Our plan is to exit the federal thrift charter and concurrently receive cash proceeds from third parties to finance the automobile and insurance premium receivables. To execute a key element of the plan, we and the Bank have entered into definitive agreements to sell the remaining three branches of the Bank and certain of the

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Bank’s brokered certificates of deposits. Additionally, as part of our strategic plan, we expect that the Bank will distribute all non-cash assets and excess capital to us before it exits the thrift charter, including the automobile finance and insurance premium finance businesses. Until our strategic plan is completed, we are continuing with our planned expansion of the automobile finance branch network and may, from time to time, sell automobile receivables in order to control the amount of non-prime automobile loans in our portfolio and reduce our reliance on insured deposits of the Bank. For more information see “Liquidity and Capital Resources — Strategic Plan Relating to Shift In Funding Sources.”

Automobile Finance Business

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

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

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

Insurance Premium Finance Business

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

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

The Bank

The Bank is a federally chartered stock savings bank, which was formed in 1994 and has three retail branch offices in California and $521.0 million in deposits at June 30, 2004. During 2003, the Bank sold one of its retail bank branches in a transaction that closed on February 7, 2004. The deposits sold were approximately $34 million. As described in more detail below, as part of our strategic plan to shift the funding source of our business, the Bank has recently entered into definitive agreements to sell its remaining three branches and certain of its brokered certificates of deposit, which amount to approximately $404 million. The Bank has focused its branch marketing efforts on building a middle-income customer base, including some efforts targeted at local Hispanic communities.

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Under federal regulatory requirements, the Bank must maintain at least 60% of its assets in mortgage-related securities. The Bank has chosen to meet this requirement by investing solely in AAA-rated, United States Government Agency securities. The mortgage-related securities we purchase are typically adjustable-rate investments, which we finance through similarly indexed adjustable rate repurchase agreements. As of June 30, 2004, we had approximately $1.3 billion in available repurchase contracts, typically one year committed lines, with staggered maturities to reduce our risk of liquidity shortfalls. We manage our investment securities portfolio with an emphasis on preserving capital by locking in a net spread between our asset yields and our cost of funds.

We have historically funded our automobile finance and our insurance premium finance businesses mainly with retail and wholesale bank deposits held by the Bank. However, we have implemented a strategic plan to shift the funding source of our automobile finance and insurance premium finance business to a source outside of the federal thrift charter. Our plan is to exit the federal thrift charter and concurrently receive cash proceeds from third parties to finance the automobile and insurance premium receivables. To execute a key element of the plan, we and the Bank have entered into definitive agreements to sell the remaining three branches of the Bank and the Bank’s brokered certificates of deposit. Additionally, as part of our strategic plan, we expect that the Bank will distribute all non-cash assets and excess capital to us before it exits the thrift charter, including the automobile finance and insurance premium finance businesses (which currently operate as subsidiaries of the Bank) and United States Government Agency Securities. For more information see “Liquidity and Capital Resources — Strategic Plan Relating to Shift In Funding Sources.”

Critical Accounting Policies

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

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

As discussed above, the Company has restated its financial condition and results operations for the years ended December 31, 2003 and 2002 and the three-months ended March 31, 2004 and 2003 to reflect the following: 1) a correction of an error in the application of the individual static pool methodology utilized in estimating the appropriate amount of the allowance for loan losses and the related provision for loan losses for 2003 and 2002, 2) a reclassification of a gain on sale of residual interests in 2003 as discontinued operations, and 3) a correction in the computation of earnings per share to consider the tax benefit that the Company will receive as part of the assumed proceeds under the “treasury stock method”. For more information see “Note 2. Restatements” to the accompanying notes to the consolidated financial statements in this Form 10-Q.

Allowance for Loan Losses

Our loan loss allowances are monitored by management based on a variety of factors including an assessment of the credit risk inherent in the portfolio, prior loss experience, the levels and trends of nonperforming loans, current and prospective economic conditions and other factors. Management also undertakes a review of various quantitative and qualitative analyses. Quantitative analyses include the review of charge-off trends by loan type, analysis of cumulative losses by static pool and evaluation of credit loss

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experienced by credit tier and geographic location. Other quantitative analyses include the concentration of any credit tier, the level of nonperformance and the percentage of delinquency. Qualitative analysis includes trends in charge-offs over various time periods and at various statistical midpoints and high points, the severity of depreciated values of repossession and trends in the economy generally or in specific geographic locations.

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

For automobile contracts purchased prior to January 1, 2003 the Company accounts for such contracts by static pool, stratified into six-month buckets, so that the credit risk in each individual static pool can be evaluated independently, on a periodic basis, in order to estimate the future losses within each static pool. Additional provisions for credit losses are recognized immediately for pools whereby the remaining amount of the initial discount set aside was determined to be insufficient to cover losses expected to be incurred based on an analysis of projected losses.

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

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

Factors Affecting Future Results of Operations

In addition to the factors detailed in our Annual Report on Form 10-K/A under “Item 1. Business—Factors that May Affect Future Results of Operations” and other risks we may be subject to, we are subject to the following:

We may not meet the continued listing criteria for The NASDAQ National Market, which could materially adversely affect the price and liquidity of our stock, our business and our financial condition.

For continued listing of our common stock on The NASDAQ National Market, we are required to, among other things, file in a timely manner our annual and quarterly reports. As a result of the delayed filing of this quarterly report, we received a Nasdaq Staff Determination on August 26, 2004 indicating that we have failed to supply The Nasdaq Stock Market with our quarterly report for the period ended June 30, 2004 as required by Marketplace Rule 4310(c)(14) and we have, therefore, failed to comply with requirements for continued listing. Accordingly, our securities are subject to delisting from the Nasdaq National Market. We have requested a hearing before a Nasdaq Listing Qualifications Panel to review the Nasdaq Staff Determination, although no assurance although that the Panel will grant our request for continued listing.

If we are unable to continue to list our common stock for trading on The NASDAQ National Market, there may be an adverse impact on the market price and liquidity of our common stock. Delisting of our common stock from The Nasdaq National Market could also materially affect our business, including, among other things, our ability to raise additional financing to fund our operations, and our ability to attract and retain personnel, including management personnel. In addition, if we were unable to list our common stock for trading on

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NASDAQ, many institutional investors would no longer be able to retain their interests in and/or make further investments in our common stock because of their internal rules and protocols.

Average Balance Sheets

The following table sets forth information relating to the Company for the three and six-month periods ended June 30, 2004 and 2003. The yields and costs are derived by dividing annualized income or expense by the average balance of assets or liabilities allocated to continuing operations, respectively, for the periods shown. The yields and costs include fees, which are considered adjustments to yields.