Union Acceptance Reaches Interim Settlement with MBIA

    INDIANAPOLIS--Jan. 10, 2003--Union Acceptance Corporation (OTC Bulletin Board:UACAQ) ("UAC") today announced that it has reached an interim settlement with MBIA Insurance Corporation (MBIA) in respect to its adversary proceeding against MBIA in connection with UAC's pending Chapter 11 Bankruptcy proceeding. The interim agreement was approved by the U.S. Bankruptcy Court in an agreed order on January 7, 2003.
    Under the interim agreement, UAC has dismissed its proceeding against MBIA without prejudice. In addition, MBIA and UAC have agreed that UAC will continue as servicer of UAC's MBIA-wrapped securitization and warehouse portfolios at least through March 31, 2003. MBIA would be permitted to terminate this standstill period on seven days notice if UAC's cash availability were to fall below $1.5 million. Both parties have reserved all rights following termination of the standstill period.
    MBIA currently wraps all 18 of UAC's outstanding securitizations and its Bank of America warehouse portfolio of approximately $300 million in receivables. UAC sold approximately $200 million of receivables held under its warehouse facility with Wachovia Securities on December 18, 2002 and has indicated its intention to pursue a sale of the Bank of America warehouse as well.
    "We are pleased with our discussions with MBIA," said Lee Ervin, president and chief executive officer of Union Acceptance Corporation. "Our dialogue continues with MBIA, and we are hopeful that all open issues can be amicably resolved."
    "With the completion of the sale of our Wachovia-warehoused portfolio last month, our cash position has improved," Ervin continued. "Our cash reserves should remain well above the minimum we have stipulated with MBIA and should be sufficient for our working capital needs as we work through the reorganization process."
    UAC also announced that its employee retention plan was approved by the Bankruptcy Court on January 8, 2003. The plan provides certain financial assurances to encourage current employees to remain with the company through the reorganization process. "We are pleased that we were able to work with our creditors to provide this important safeguard for our valuable employees," commented John M. Eggemeyer, chairman of Union Acceptance Corporation.

    About Union Acceptance

    Union Acceptance Corporation is a specialized financial services company headquartered in Indianapolis, Indiana. The company's primary business is the servicing of automobile retail installment sales contracts representing primarily late model used, and to an extent, new automobiles purchased by customers who exhibit favorable credit profiles. Union Acceptance Corporation commenced business in 1986 and became an independent public corporation in 1995. By using state-of-the art technology in a highly centralized servicing environment, Union Acceptance enjoys one of the lowest cost servicing structures in the independent prime automobile finance industry.

    Forward-Looking Information

    This news release contains forward looking statements regarding matters such as prospects for the company during and after completion of the bankruptcy proceeding, prospects for a sale of receivables, and UAC's efforts to address short term and long term capital needs and other issues. Readers are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risk and uncertainties including but not limited to the difficulty inherent in predicting the outcome of bankruptcy in the early stages, changes in delinquency and credit loss rates, limited availability of financing and other capital resources and dependency on credit and surety providers, as well as general economic conditions that affect consumer loan performance. These and other important factors are detailed in the company's annual report on Form 10K for the six months ended December 31, 2001 which was filed with the Securities and Exchange Commission.