Ann Arbor, Michigan, April 24, 2015, — University Bancorp, Inc. (OTCQB: UNIB) announced that it had audited net income attributable to University Bancorp, Inc. common stockholders in 2014 of $755,181, $0.16 per share on average shares outstanding of 4,722,891. Audited net income for 2013 attributable to common stockholders was $1,826,008, or $0.391 per share on average shares outstanding of 4,673,980 for the year. In 2014, University Bancorp had pre-tax income of $986,757, versus pre-tax income of $3,678,893 in 2013. For 2014, loss allocated to non-controlling interests was $129,261, preferred stock dividends totaled $65,209 and income tax expense was $380,837. In 2013, income allocated to non-controlling interests was $1,053,940, preferred stock dividends totaled $93,085 and income tax expense was $1,246,330.
For 2014, the Company’s return on equity attributable to common stock shareholders was 8.0% on initial equity of $9,492,494, versus 24.6% in 2013 on initial equity of $7,436,190.
Results in 2014 were restrained by several non-recurring, unusual expenses net of unusual gains, which had an overall negative cumulative impact of $2,788,360, before tax:
- With the drop in long term mortgage interest rates the valuation of mortgage servicing rights (MSRs) dropped $1,522,592;
- Legal fees at UIF were $905,287 above budget due litigation related to a competitor, Guidance Residential, and a reserve of $848,000 was booked as of 12/31/2014 due to the jury ruling in early March 2015 following the trial;
- Legal fees at Midwest Loan Services (MLS) were $264,673 above budget due to the completed litigation regarding a credit reporting error involving a customer and Cal Coast Credit Union in California;
- Secondary market loan buybacks from Lehman Brothers, as well as FNMA and FHLMC’s one-time historical multi-year look-back, which is now finished, cost $159,682.
- The value of the hedged mortgage origination pipeline rose $416,070 as the amount of locked loans rose year over year;
- Provision for loan losses fell by $303,164 due to improved asset quality at the bank;
- Gains on sale of foreclosed real estate (ORE) were $172,052.
Net income (loss) attributable to University Bancorp, Inc. common stock shareholders in the fourth quarter of 2014 was ($70,947), or ($0.015) per share on average shares outstanding of 4,722,891, versus ($177,287), or ($0.038) per share on average shares outstanding of 4,692,828 in the fourth quarter of 2013.
Results in 4Q2014 were restrained by several non-recurring, unusual expenses net of unusual gains, which had an overall negative cumulative impact of $1,752,171, before tax:
- With the drop in long term mortgage interest rates the valuation of mortgage servicing rights (MSRs) dropped $468,346;
- Legal fees at UIF were $376,361 above budget due to the Guidance Residential litigation and a reserve of $848,000 was booked as of 12/31/2014 due to the jury ruling in early March 2015 following the trial;
- Legal fees at MLS were $100,000 above budget due to the settlement related to the litigation regarding a credit reporting error involving a customer and Cal Coast Credit Union in California;
- The reserve for secondary market loan buybacks was reduced by $40,536, as two loan buyback requests were withdrawn during the quarter after being successfully defended, partially offset by two buyback requests from Lehman Brothers.
Results in the final quarter of 2013 were negatively impacted by employee profit sharing in December 2013 of $400,000 with respect to the 2013 year.
Results in 2013 had several non-recurring, unusual expenses net of unusual gains, which had an overall positive cumulative impact of $37,020, before tax:
- With the drop in long term mortgage interest rates the valuation of mortgage servicing rights (MSRs) rose $1,151,405.
- Profit sharing in the amount of $587,000 was expensed which related to 2012. The bank began to accrue profit sharing in 2013 in the year the profits were accrued rather than when declared by the board in the following year after the audit was finalized, so that two years of profit sharing were expensed in 2013;
- Expense of $80,000 related to the sale of $437,000 in substandard loans through DebtX;
- The final payment of $447,385 under the tax sharing agreement with the minority investors in our UIF subsidiary, fully completing these contractual payments;
- Not an unusual expense but of note, income from the fair value of hedged and rate locked loans held for sale dropped year over year by $1,228,212 as the mortgage origination pipeline ended 2013 at $17.7 million, significantly lower than the level at the end of 2012, which was $43.0 million.
- Not an unusual expense but of note, we began amortizing the customer list related to our acquisition of the Ann Arbor Insurance Centre (AAIC) subsidiary, which resulted in a $71,143 expense in 4Q2013 and we will incur a similar charge at the rate of $17,786 per quarter for 2014 and each year until the end of 2019, when this acquisition cost will be fully amortized.
The ALLL had a balance of $665,080 at 12/31/2014 versus portfolio loans of $51,337,557, or 1.30%. Substandard assets dropped 15% during 2014 to $1,598,629, 11.56% of Tier 1 Capital at 12/31/2014, including other real estate owned of $355,107.
The Tier 1 Capital Ratio rose to 12.77% at 12/31/2014 on average assets of $104.9 million, was 12.74% at 9/30/2014 on average assets of $108.5 million, and is projected to be 12.93% at 12/31/2015, if we achieve our 2015 budget goal unless we opt to pay dividends or conduct a stock buyback during 2015, which is a possibility.
President Stephen Lange Ranzini noted, “The budget for 2015, which was set with very conservative assumptions, calls for the company to have net income attributable to University Bancorp, Inc. common stock shareholders of $1.73 million after-tax, $0.34 per share, and the bank to earn $2.81 million pre-tax and $1.86 million after-tax before minority interest, however, based on the 1st quarter and 2nd quarter results to date, we expect to exceed the budget. Originations are at record levels this year, well above the budgeted levels. Net income in the 1st quarter of 2015 was $67.9k, only $6.9k less than budgeted, despite large unusual unbudgeted expenses (a net amount of $1,061k pre-tax primarily driven by a decrease in the value of our MSRs caused by a drop in long term mortgage interest rates), because we had much higher loan originations than budgeted based on higher purchase mortgage transactions. The second quarter looks very promising as originations are at record highs due to higher Realtor™ referred purchase transactions, the locked and hedged pipeline is at record highs and other areas of the bank’s business are performing well. Second quarter earnings will be excellent unless there is any further negative impact from the Guidance lawsuit. The judge still has to make two key rulings and we are exploring an appeal, since we believe that the jury’s surprising ruling is a gross miscarriarge of justice.”
Shareholders’ equity attributable to University Bancorp, Inc. common stock shareholders rose to $10,356,429, or $2.18 per share based on shares outstanding at December 31, 2014 of 4,751,260, versus $9,439,485 or $2.011 per share, based on shares outstanding at December 31, 2013 of 4,692,828. Excluding goodwill & other intangibles related to the acquisition of Midwest Loan Services and AAIC, net tangible shareholders’ equity attributable to University Bancorp, Inc. common stock shareholders rose to $9,644,406 or $2.055 per share at 12/31/2014. (Please note that we provide this statistic only because we are asked for it and do not see it as particularly useful or meaningful.) Treasury shares at 12/31/2014 were 31,522.
Michigan and the Ann Arbor MSA continue to see increased employment and increased home prices and as a result, the performance of our portfolio loans and our overall asset quality continues to be superior with low loan delinquencies. As of 12/31/2014 in our loan portfolio held for investment we had one residential loan delinquent 60 days for $159,848, one well secured residential loan in foreclosure delinquent over 90 days for $11,315 and one well secured commercial real estate loan delinquent in foreclosure for $267,087 delinquent over 90 days.
In 2014, we originated $532.1 million in residential mortgage loans for our own account, versus $565.1 million in 2013. Of the 2014 retail originations, 90.5% of University Lending Group’s and 81.2% of UIF’s residential mortgage originations financed purchase transactions. In addition we originated $80.8 million in residential mortgage loans for our credit union customers in 2014.
Liquidity remains excellent. We manage an average of $80 million of deposits in an off-balance sheet sweep arrangement through a series of deposit accounts at the Federal Home Loan Bank of Indianapolis (FHLBI), which are available to us to meet any withdrawals in just a few minutes, and on which we earn interest at Fed Funds rate.
In February 2015, the Company acquired the 20% noncontrolling interest in MLS for $521,390 in cash, 309,361 shares of common stock of the Company, and an earn-out totaling $430,012. The earn-out is to be paid monthly and determined by multiplying the federal funds interest rate minus 0.5%, by the monthly average MLS escrow deposits held at the bank and the FHLBI, divided by 12. In conjunction with this acquisition, in January 2015, the Company amended its articles of incorporation which increased the number of authorized common shares from 5,000,000 to 6,000,000.
President Stephen Lange Ranzini noted, “Although we didn’t meet the 2014 budget due to an unbudgeted drop in the value of our mortgage servicing rights and the costs of the litigation with Guidance, we are very encouraged by the current level of underlying operating profitability of the Company and expect a good result in 2015. In addition, we are making progress on key strategic goals. In the first quarter of 2015, we acquired 100% of our key subsidiary, Midwest Loan Services and redeemed the remaining $350,000 of outstanding preferred stock of the Company and paid the related accrued dividends.”
The Company will host a conference call at Noon ET at Thursday April 30, 2015 to discuss the 2014 results with its shareholders. Please contact Stephen Lange Ranzini via email at email@example.com to receive the call-in information for this call.
Other key statistics as of 12/31/2014:Other key statistics as of 12/31/2014:
- 5-year annual average revenue growth*, 13.6%
- 1-year annual revenue growth*, -8.5%
- Debt to equity ratio+, 3.5%
- Current Ratio,# 16.1x
- Trailing 12 Months P-E Ratiox, 50.0x
*2014, 2013 and 2009 total revenues were $36,598,052, $38,856,573 and $21,814,793, respectively.
+Outstanding Preferred Stock (including dividends payable) was $370,776 and total Company equity capital (common stock plus preferred stock) was $10,727,205.
#Parent company only current assets were $423,494 divided by 12 month proj. cash expenses.
xBased on last sale price of $8.00 per share.
Highlights for the year include:
- Mortgages sub-serviced by Midwest Loan Services grew 9.8% to 101,846 from 92,763, the total of mortgages sub-serviced grew to $16.1 billion however revenue at Midwest Loan Services fell 7.0% to $12,148,125 from $13,055,632 due to a drop in refinancing mortgage originations from credit unions;
- In October 2014, the American Bankers Association, through its Corporation for American Banking subsidiary, exclusively endorsed Midwest Loan Services, to provide residential mortgage subservicing services to member banks and their borrowers nationwide. Midwest is known for friendly, responsive service and industry-leading technology that help lenders retain customers, reduce costs and ensure regulatory and operational compliance. Midwest’s mortgage customers have 14x fewer complaints than the industry average according to the Consumer Financial Protection Bureau’s complaint database.
- Deposit mortgage escrow deposits at University Bank including sweep accounts at the FHLBI grew 22.2% to $147,622,000 from $120,789,000;
- UIF’s assets under management rose 20.7% to $455.8 million;
- ULG originated 460 Veterans Administration (VA) residential loans totaling $92.4 million, up 5.4% from 343 VA loans totaling $87.7 million in 2013;
- ULG originated 643 Federal Housing Administration (FHA) residential loans totaling $80.9 million, down 4.3% from 658 FHA loans totaling $84.5 million in 2013;
- University Bank and its subsidiaries continue to actively lend in our local communities with $532,064,911 in residential mortgage originations in 2014 down 5.8% from $565,088,069 in 2013.
Key metrics for the year ended December 31, 2014 were:
- Total Assets increased to $121.0 million from $111.2 million, up 8.8%;
- Total Revenue decreased 8.5% to $36.6 million from $38.9 million;
- Net Interest and financing income decreased 0.1% to $4.23 million;
- Loans and financings held for portfolio increased 5.8% to $51.3 million;
- UIF’s residential originations rose 3.2% to $136,269,497 from $132,212,140, with purchase transactions rising 25.0% to $110.6 million;
- UIF’s residential real estate financings originated since inception of this business unit hit $636,448,840 at 12/31/2014;
- University Lending Group (ULG) residential originations fell 13.0% to $345,441,513 from $396,868,433, with purchase transactions rising 8.5% to $312.6 million;
- ULG residential real estate financings originated since inception hit $2,350,581,588 at 12/31/2013;
- ULG revenue rose 0.03% to $16,521,722 from $16,517,253 despite a 8.5% rise in residential purchase transactions financed;
- Total FTE employees rose 3.2% to 321 from 311;
- Tier 1 Capital rose to 12.77% from 12.75%;
- Return on common stockholders’ equity declined to 8.0% from 24.6%.
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 Michigan-based subsidiaries, holds and manages a total of over $16.7 billion in loans and assets and our 326 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:
- University Lending Group, a retail residential mortgage originator based in Clinton Township;
- Midwest Loan Services, a residential mortgage subservicer based in Houghton;
- UIF, an Islamic banking firm based in Farmington Hills;
- Community Banking, based in Ann Arbor, which provides traditional community banking services in the Ann Arbor area;
- Ann Arbor Insurance Centre, an independent insurance agency based in Ann Arbor.
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.