Correction: Fitch Dwngr United National Bancorp S-T Rtg To 'F3'; Remains On Rating Watch Negative.

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 8, 2002

(This is an amended version of a press release dated October 7, 2002, which includes the correct name of 'UNB Capital Trust I' in the first paragraph and in the ratings list below)

Fitch Ratings has lowered the Short-term debt rating of United National Bancorp to 'F3' from 'F2'. The ratings for United National Bancorp (UNBJ) and UNB Capital Trust I (UNBC) remain on Rating Watch Negative. A list of all ratings is provided at the end of this release.

This rating action reflects concerns over loan concentration at UNBJ as the company maintains a number of relationships over 5% of total equity. Management has indicated its intent to reduce loan concentration by curtailing the size of individual loans going forward. We will monitor the company's progress in this area in coming quarters. Should the company fail to achieve more granularity in its loan book, all ratings for UNBJ and UNBC could be negatively impacted. UNBJ's current short-term debt rating of 'F3' is more reflective of the company's financial position, and is in line with its Long-term debt rating.

The ratings of UNBJ and UNBC were placed on Rating Watch Negative on June 10, 2002 after the company announced the deterioration to non-accrual status of a $21 million commercial loan to an insurance premium financier. The announcement came on the heels of the disclosure of a $5.3 mln participation in a $130 mln credit facility to Suprema Specialities Inc. (Suprema), a Patterson, NJ-based cheese maker in bankruptcy. During 2Q02, UNBJ took a $2.8 mln charge-off in connection with its $5.3 mln participation to Suprema, and a $2.4 mln charge-off related to the loan to the insurance premium financier. To cover these charges, UNBJ recorded a higher loan loss provision ($4.3 mln) in 2Q02, which reduced net income in the fist half of 2002 to $7.1 mln compared to $11.8 mln a year ago. Non-performing assets totaled $32.9 mln at 2Q02 (2.63% of loans and OREO) up from $4.5 mln (0.36% of loans and OREO) a year earlier. On August 27, 2002, UNBJ announced that the balance of the commercial facility to the insurance premium finance company has been repaid, and non-performing loans have been reduced accordingly. Additionally, on August 21, 2002, UNBJ completed the acquisition of Vista Bancorp, Inc. (Vista), a $712 mln bank holding company headquartered in Phillipsburg, NJ.

Following recent discussions with management, it would appear that these two large problem loans were isolated events rather than an indication of a substandard underwriting process or an overall weakening of the quality of loan portfolio. Regarding the facility extended to the premium finance company, management's decision was based on the structure of the loan, which included a surety bond agreement by a highly rated insurance company. While the surety bond agreement helped mitigate losses, the sheer size of the exposure (almost 15% of equity at the time) has raised some concerns over UNBJ's risk profile. While the company's largest loans have performed well over the past few years, the sputtering economy and the on-going integration of Vista have heightened event risk at UNBJ. Management has indicated that it will take steps to address this risk by reducing in-house lending limits, maintaining a reserve coverage of loans in the 1.2%-1.25% range (up from recent levels of 0.9%-1%), and increasing staff within its credit area to reflect the recent Vista acquisition. Going forward, we will monitor the company's implementation of this new credit management framework, and we expect UNBJ's asset quality and performance metrics to return to levels consistent with historic norms.

Ratings downgraded

United National Bancorp

-- Short-term to 'F3' from 'F2'.

Ratings maintained on Rating Watch Negative:

United National Bancorp

-- Long-term 'BBB-' ;

-- Short-term 'F3' ;

-- Individual 'B/C' .

UNB Capital Trust I

-- Trust Preferred 'BB+'.