United American Bank lost $169,000 in the second quarter compared with a profit of $349,000 in last year's second quarter due to a substantial increase in its loan-loss provision.

The loss comes as no surprise. The San Mateo-based bank previously said it was taking adding $500,000 to reserves for potential loan losses after an individual holding two loans totaling $2.3 million sought bankruptcy court protection. The loans are partially collateralized, and the bank said it's monitoring bankruptcy proceedings to determine whether additional money needs to be set aside for potential losses from the loans.

Generally, the bank's faring rather well, given the credit crisis.

The bank's assets, primarily loans, are up 22 percent to almost $275 million at the end of June from a year earlier. Assets are up almost 7 percent, or $17.7 million, from March 31, 2008. Total deposits reached almost $240 million at the end of June, up from $195.8 million a year earlier and $226.5 million on March 31.

"Our earnings have been impacted by the dramatic and rapid decline in the interest rate environment and the two aforementioned loans," said John Schrup, president and CEO of United American Bank. (OTCBB: UABK) "We believe our balance sheet to be solid and that our earnings will improve once a stable economy returns."

During the second quarter, United American Bank also completed its third stock offering, raising $5.3 million in additional capital. The bank sold 334,540 shares for $16 each.

"We are quite pleased with the success of our third offering in these challenging economic times," Schrup said. "This additional capital will provide immediate liquidity reserves and will allow the bank to continue to grow."

Schrup was quick to note that the bank has experienced "no unusual deposit withdrawal activity" and that the bank has "contingency liquidity in excess of $50 million to further augment our financial strength."