Union Acceptance Corporation Responds to Rating Issued by Fitch

    INDIANAPOLIS--Jan. 16, 2002--Union Acceptance Corporation ("UAC") issued the following statement in response to an announcement made by Fitch. Earlier today, Fitch reported that it has lowered UAC's senior debt rating by one notch from `B+' to `B'.
    In the first calendar quarter of 2001 the management of UAC, with the direction and support of its board of directors, initiated an orderly process to restructure and recapitalize the Company with the objective of making it highly profitable and among the most soundly capitalized companies in the independent auto finance business. Pursuant to that plan, in the second calendar quarter of 2001 the Company completed an oversubscribed rights offering that raised $88 million in equity capital. The ongoing recapitalization process continued in the third calendar quarter of 2001 as management began the process of arranging for additional capital to insure the orderly repayment of senior debt over the next fifteen months. While that process is ongoing, management has thus far deferred early refinancing to pay off outstanding indebtedness ahead of scheduled maturities, to avoid paying substantial premiums that would be required in connection with such prepayment.
    As a part of its restructuring process, management utilized its risk based pricing tools based on its unique database of over $9.6 billion in auto receivables representing approximately 650,000 consumers to revalue its retained interest asset. This has been reported by the Company in detail over the past two quarters. It was management's conviction that such a revaluation was in the best long-term interests of the Company and its shareholders as it was driven by the methodology the Company now employs when pricing new receivables. This pricing methodology and revaluation of the retained interest asset should reduce the projected future earnings volatility of the Company.
    The Company has, as a result of its restructuring process, also taken several new initiatives to lower costs and increase non-interest income, as reported by the Company in it's January 10, 2002 press release. These initiatives are expected to add significantly to the Company's ongoing profitability starting in the March 2002 quarter.
    UAC regrets the timing of the announcement by Fitch as the process to recapitalize and restructure the Company, which began a year ago, has been planned for and is ongoing.

    Corporate Description

    UAC is one of the nation's largest independent, indirect automobile finance companies. The Company's primary business is purchasing and servicing prime automobile retail installment sales contracts. These contracts are originated by dealerships affiliated with major domestic and foreign manufacturers, nationally recognized rental car outlets, and used car superstores. UAC focuses on acquiring receivables related to late model used and, to a lesser extent, new automobiles purchased by customers who exhibit favorable credit profiles. Union Acceptance Corporation commenced business in 1986 and currently acquires receivables from over 5,600 manufacturer-franchised dealerships in 40 states. By using state-of-the-art technology in a highly centralized underwriting and servicing environment, Union Acceptance Corporation enjoys one of the lowest cost operating structures in the independent prime automobile finance industry.

    Forward Looking Information

    This news release contains forward-looking statements regarding matters such as profitability, delinquency and credit loss trends and estimates, recoveries of repossessed vehicles, receivable acquisitions, the ability of the Company to timely refinance long-term indebtedness, the impact of new initiatives described on revenues and profits, and other issues. Readers are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, the difficulty inherent in predicting changes in delinquency and credit loss rates, changes in acquisition volume, the ability of the Company to collect newly implemented fees, limited availability and terms of new credit facilities and other capital resources, general economic conditions that affect consumer loan performance and consumer borrowing practices and other important factors detailed in the Company's annual report on Form 10-K for the fiscal year ended June 30, 2001 which was filed with the Securities and Exchange Commission.