For Immediate Release
UNIVERSITY BANCORP 9M2013 PROFIT $2,003,295 $0.43 PER SHARE
Ann Arbor, Michigan, November 18, 2013, – University Bancorp, Inc. (OTCQB: UNIB) announced that it had unaudited net income attributable to University Bancorp, Inc. common stock shareholders in the first nine months of 2013 of $2,003,295, $0.43 per share on average shares outstanding of 4,667,750 for the first nine months. Year-to-date, the consolidated pre-tax profit of the Company’s wholly-owned subsidiary, University Bank, was $4,407,487 above the budget by $47,903, and consolidated after-tax net income before minority interest was $3,058,659, above the budget by $181,336. For the first nine months of 2013 minority interest of $541,749, minority tax sharing payments of $431,416 and preferred stock dividends of $72,582 were incurred.
After deducting minority interest of $915,917 and preferred stock dividends of $70,540, net income attributable to University Bancorp, Inc. common stock shareholders in the first nine months of 2012 was $1,938,345 or $0.416 per share on average shares outstanding for the period of 4,659,265.
Year to date the net income attributable to University Bancorp, Inc. common stock shareholders in the first nine months of 2013 was $172,324 above the budget. President Stephen Lange Ranzini noted, “The budget for 2013 calls for the company to have net income attributable to University Bancorp, Inc. common stock shareholders of $2,708,857 after-tax, $0.58 per share, the bank to earn $6.36 million pre-tax and $4.2 million after-tax before minority interest. Due to a decrease in mortgage purchase activity that began in October, we currently do not expect to meet budget in the fourth quarter or for the entire year, though the bank’s profits overall are excellent and should still far exceed the bank’s peer group on a ROA and ROE basis for the balance of the 4th quarter of 2013. In October 2013, University Bank had excellent pre-tax income of $279,012 and net income of $166,245. Our stress test had projected a 50% decline in mortgage originations would result in pre-tax earnings of $200,000 per month, double the industry average for a bank our size, and the decline in October was 25% under the 3rd quarter levels and about 15% under the average of the nine months ended 9/30/2013. We do have plans to reverse this trend in future months and increase our monthly profits back to budgeted levels.”
For the trailing 12 months ended September 30, 2013, the Company had unaudited net income attributable to University Bancorp, Inc. common stock shareholders of $1,980,809 or $0.424 per share on average shares outstanding of 4,667,712 and our return on equity attributable to common stock shareholders was 26% on initial equity of $7,616,839. Annualized return on equity for the first nine months of 2013 was 35.2% on initial equity of $7,594,353.
Tier 1 Capital rose to 12.69% or $13,719,000 at 9/30/2013, was 12.45% or $13,384,000 on average assets of $107.5 million at 6/30/2013, was 11.25% at 3/31/2013 or $11,966,000 on average assets of $106.4 million, and was 9.69% at 12/31/2012 on average assets of $117.4 million. The budget calls for the Tier 1 capital ratio to be 14.18% by year-end 2013 however with the recent slowdown in our mortgage business we currently anticipate Tier 1 Capital will rise to $14,269,000 by 12/31/2013 and the Tier 1 capital ratio will rise to 13.92%. Tier 1 Capital at 10/31/2013 was $13,883,000 or 13.90%, as average assets fell to $99.85 million. Between now and the end of the year, we expect average assets to rise to $104 million (average assets rise or fall with mortgage origination activity).
Shareholders’ equity attributable to University Bancorp, Inc. common stock shareholders rose to $9,597,648 or $2.05 per share, based on shares outstanding at September 30, 2013 of 4,692,828, and excluding purchase related goodwill related to our insurance agency and Midwest Loan Services division of $854,000, rose to $8,743,648 or $1.86 per share. Tier 1 Capital includes common stock equity from investors that own 20% of the bank’s operating subsidiaries Midwest Loan Services and University Islamic Financial.
Michigan and the Ann Arbor MSA continue to increase employment and as a result, the performance of our portfolio loans and our overall asset quality continues to improve and we are experiencing low loan delinquencies. Following a sale of substandard loans through DebtX during the quarter at a cost of $80,000 in additional loan loss provisions, total classified loans on our watch list at 9/30/2013 number 5 for $1,375,166 and ORE numbered 5 for $432,962 for a total of 10 substandard assets carried at $1,808,128, or 13.18% of Tier 1 Capital. The Allowance for Loan Losses stands at $1,022,500, or 2.09% of the amount of portfolio loans excluding the loans held for sale, which have their own separate reserve of $343,100 at September 30, 2013.
In the first nine months of 2013, our residential mortgage origination groups originated $520.5 million of mortgages sold to the secondary market, of which $316.4 million were originated by our retail origination group, University Lending Group, LLC, $104.2 million were originated by our Islamic banking unit, University Islamic Financial, and the remainder originated by our credit union origination group. 77% of our retail originations and 63% of our Islamic originations financed purchase transactions. We have been focused on our objective of building a sustainable mortgage origination business not dependent upon refinancing. Shortages of houses for sale are negatively impacting residential purchase transaction levels in our markets. We have over five months worth of volume related to customers who are pre-approved for a home loan in our Islamic division, for example, but cannot find a property to buy that meets their requirements.
With the end of the latest refinancing boom and recent regulatory changes, we expect many competitors to exit the mortgage lending business, which will improve the long run profitability of our mortgage origination business. We took advantage of the turmoil among some of our competitors to hire some outstanding originators who focus on Realtor® referred purchase transactions and continue to recruit additional ones. We are also working towards introducing a construction permanent mortgage product underwritten to FNMA, FHLMC and VA guidelines, which will give our originators a superior competitive position in their markets.
President Ranzini noted, “I am very pleased that based on this quarter’s rankings from our FDIC Call Report data, IDC has rated University Bank one of only two banks headquartered in Michigan with a perfect 300 out of 300 IDC Rating. IDC is generally considered to be the best and most prestigious organization that rates the financial quality and strength of banks in the U.S.”
Liquidity remains excellent and we manage an additional $70 million of deposits in an off-balance sheet sweep arrangement through a series of deposit accounts at the Federal Home Loan Bank of Indianapolis, which are available to us to meet any withdraws in just a few minutes.
With the tax sharing payments made year to date in the amount of $431,416 and the tax sharing payments made in late 2012 in the amount of $37,500, the $500,000 payment required from the profits of our Islamic Banking subsidiary, University Islamic Financial, to our minority shareholders under the terms of the December 2005 shareholders agreement are nearly completed. After a final payment of $31,084 expected in 2013, this agreement will be satisfied in full and the expense will end and that will improve earnings in 2014.
Other key statistics:
- 5-year annual average revenue growth*, 43.7%
- 1-year annual revenue growth*, 7.1%
- Debt to equity ratio+, 10.7%
- Current Ratio,# 4.0x
- Trailing 12 Months P-E Ratiox, 6.7x
*Using Trailing 12 month 3Q2013 sales which were $42,838,633, 2011 sales which were $21,280,296 and 2008 sales which were $13,449,856.
+Outstanding Preferred Stock including accrued dividends of $1,150,829 and total Company equity capital (including common stock $9,597,648 plus preferred stock of $1,150,829) for total equity capital of $10,748,477.
#Parent company only current assets and investment securities of $68,094 divided by 12 month projected cash expenses of $17,141.
xBased on last sale price of $2.85 per share.
Shareholders and investors are encouraged to refer to the financial information including the audited financial statements, strategic plan and prior press releases, available on our investor relations web page at: http://www.university-bank.com/bancorp/.
Ann Arbor-based University Bancorp owns 100% of University Bank which, together with its subsidiaries, holds and manages a total of over $14 billion in loans and assets and our 325 employees make us the 9th largest bank based in Michigan. University Bank is an
FDIC-insured, locally owned and managed community bank, and meets the financial needs of its community through its creative and innovative services. Founded in 1890, University Bank® is proud to have been selected as the “Community Bankers of the Year” by American Banker magazine and as the recipient of the American Bankers Association’s Community Bank Award. University Bank is a Member FDIC. The operating subsidiaries of University Bank which are members of our corporate family, ranked by their size of revenues are:
- Midwest Loan Services, a residential mortgage subservicer based in Houghton, Michigan;
- University Lending Group, a retail residential mortgage originator based in Clinton Township, Michigan;
- University Islamic Financial, an Islamic banking firm based in Farmington Hills, Michigan;
- Community Banking, based in Ann Arbor, Michigan, which provides traditional community banking services in the Ann Arbor area.
- Ann Arbor Insurance Centre, an independent insurance agency based in Ann Arbor, Michigan.
Contact: Stephen Lange Ranzini, President and CEO
Phone: 734-741-5858, Ext. 9226
CAUTIONARY STATEMENT: This press release contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning future growth in assets, pre-tax income and net income, budgeted income levels, the sustainability of past results, and other expectations and/or goals. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting our operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.