United American Bank (OTCBB: UABK), has entered into an agreement with ATBancorp of Dubuque, Iowa, for an initial investment of $10 million in United American Bank’s capital stock. The initial investment is scheduled to be completed on October 31, 2011, subject to various closing conditions including regulatory approvals of the Federal Reserve Board, California Department of Financial Institutions, and the Federal Deposit Insurance Corporation. Additionally, the closing of the initial investment is subject to the restructuring of United American Bank’s TARP preferred stock to the satisfaction of ATBancorp. Upon completion of the initial investment, the Bank’s capital ratios would qualify as “well capitalized” as calculated under customary bank regulatory standards.

The investment agreement provides for ATBancorp’s initial purchase of $10.0 million in common and common stock equivalent preferred stock at the price of $0.30 per common share. ATBancorp will also receive warrants to acquire 2,500,000 common shares at $0.30 per share exercisable for 5 years following the initial closing. The agreement further provides that, on a quarterly basis over the next two years, ATBancorp will purchase and United American Bank will sell common stock in the future to maintain the Bank as adequately capitalized under regulatory computations. Any subsequent investments are expected to be purchased at a price based on sixty-eight percent of the then per share book value of the Bank. Under the terms of the investment agreement, the members of the Bank’s board of directors are also required to subscribe for the purchase of $1.1 million in common stock at $0.30 per common share. The Bank currently has approximately 2.4 million common shares outstanding. Following the investment by ATBancorp, United American Bank will continue to operate as a full service community bank in its current marketplace headquartered in San Mateo.

President and CEO John Schrup stated “We at United American Bank are pleased that ATBancorp has shown its confidence in our bank and that it will share its managerial resources with us as we work to resolve the challenges of our bank. There are still a number of hurdles to cross, including obtaining regulatory approvals and agreements, before this capital infusion becomes a reality. This capital is a critical component in stabilizing our bank and starting us on the path to a successful future. This allows our bank to maintain its commitment to serving our community and our customers.”