For Immediate Release
Ann Arbor, Michigan, April 27, 2015, — University Bancorp, Inc. (OTCQB: UNIB) announced that it had unaudited net income attributable to University Bancorp, Inc. common stock shareholders in the first three months of 2015 of $67,864, $0.014 per share on average shares outstanding of 5,001,389 for the first three months, versus an unaudited net loss in the first quarter of 2014 of $371,334, ($0.079) per share on average shares outstanding of 4,692,828. For the first three months of 2015 minority interest (loss) of ($58,241) and preferred stock dividends of $5,273 were incurred.
In 1Q2015 the net income of the Company was below the budget by $6,931 despite stronger than budgeted mortgage originations because results in 1Q2015 were restrained by several non-recurring, unusual expenses net of unusual gains, which had an overall negative cumulative impact of $1,061,000, before tax:
- With the drop in long term mortgage interest rates the valuation of mortgage servicing rights (MSRs) dropped $1,181,000;
- Legal fees at UIF were $315,000 above budget due related to the now completed trial and follow-up motions related to the litigation related to a competitor, Guidance, as well as one-time outside legal compliance work for our retail mortgage origination operations to ensure our full compliance with new regulations;
- The value of the hedged mortgage origination pipeline rose $316,000 as the amount of locked loans rose over the quarter from the level at year-end;
- Provision for loan losses fell by $119,000 due to a lower projection of loan losses from Invictus in the event of a CCAR Test style depression.
For the 12 months ended March 31, 2015, the Company had unaudited net income attributable to University Bancorp, Inc. common stock shareholders of $1,194,379 or $0.249 per share on average shares outstanding of 4,799,916 and return on equity attributable to common stock shareholders was 13.2% on initial equity of $9,064,642.
In 1Q2014 the net loss of the Company’s wholly-owned subsidiary, University Bank, was $353,491, and consolidated after-tax net loss before minority interest was $349,696. For the first three months of 2014 minority interest of $3,795 and preferred stock dividends of $23,144 were incurred.
First quarter 2014 earnings at University Bank were negatively impacted by expected seasonally slow mortgage originations, a quarterly mark to market valuation on our mortgage servicing rights of negative $257,510 and legal expense related to the Guidance lawsuit of $304,996. Despite these expenses, which were also partially offset by a decrease in the required allowance for loan losses of $199,938 from an improvement in asset quality, results for the quarter were just $21,536 under the budgeted net income.
With the implementation of the new Basel 3 Capital Rules, the Tier 1 Leverage Capital Ratio fell to 10.12% at 3/31/2015 on average assets of $106.9 million, versus 12.77% at 12/31/2014 on average assets of $104.9 million using the old Basel 2 Capital Rules, and is projected to be 12.93% at 12/31/2015, if we achieve our 2015 budget goal unless we opt to sell MSRs, pay dividends or conduct a stock buyback during 2015, all of which is a possibility. Basel 3 Common Equity Tier 1 Capital at 3/31/2015 was $9,412,000 and Basel 3 Total Risk Weighted Assets were $86,927,000, and the CET1 Risk Weighted Capital Ratio was 10.83% at 3/31/2015.
Shareholders’ equity attributable to University Bancorp, Inc. common stock shareholders was $11,791,308 or $2.304 per share, based on shares outstanding at March 31, 2015 of 5,118,399. 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 was $11,097,071 or $2.168 per share at 3/31/2014. (Please note that we do not see this latter statistic as particularly useful or meaningful but we are asked for it.) Treasury Shares as of 3/31/2015 were zero.
Total Assets as of 3/31/2015 were $132,715,000 versus $120,976,779 as of 12/31/2014, and 113,183,000 as of 3/31/2014.
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. We had only three loans delinquent over 30 days at 3/31/2015, a well secured commercial loan with a carrying value of $290,525 in the process of foreclosure, a commercial real estate loan that was 31 days delinquent and is now current and a residential loan with a carrying value of $22,136 which is in the process of foreclosure. The Allowance for Loan Losses stands at $549,870, or 1.06% of the amount of portfolio loans excluding the loans held for sale. Substandard assets dropped 28.7% during 1Q2015 to $1,139,730, 8.24% of Tier 1 Capital at 3/31/2015, including other real estate owned of $366,421.
In the first three months of 2015, our residential mortgage origination groups originated $155.2 million of mortgages sold to the secondary market, of which $97.3 million were originated by our retail origination group, University Lending Group, LLC (ULG), $45.0 million were originated by our UIF unit, and the remainder originated by our credit union origination group. 75% of our retail originations and 54% of our UIF originations financed purchase transactions. Purchase transactions originated during 1Q2015 also rose 16% at ULG and 23% at UIF over the 1Q2014 level. Loans Held for Sale, before Reserves as of 3/31/2015 were $48,533,000, versus $40,078,919 as of 12/31/2014 and $30,788,800 as of 3/31/2014.
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, “The first quarter was budgeted to be the least profitable quarter in 2015 because residential purchase transactions are typically at seasonal low ebb however this was not the case this year. Although our net income result was slightly under the 1Q2015 budget, this was due to an unbudgeted drop in the value of our mortgage servicing rights and the costs of the litigation with Guidance, which more than offset the current level of underlying operating profitability of the Company. 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.”
President Stephen Lange Ranzini noted, “Based on the 1st quarter and 2nd quarter results to date, we expect to exceed the budget for 2015. Originations are at record levels, well above the budgeted levels. 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 miscarriage of justice.”
The Company will host a conference call at Noon ET at Thursday April 30, 2015 to discuss the 1Q2015 and 2014 results with its shareholders. Please contact Stephen Lange Ranzini via email at firstname.lastname@example.org to receive the call-in information for this call.
Other key statistics as of 3/31/2015:
- 5-year annual average revenue growth*, 16.8%
- 1-year annual revenue growth*, 9.4%
- Debt to equity ratio+, 0%
- Current Ratio,# 7.2x
- Total Assets, $132,715,000
- Loans Held for Sale, before Reserves, $48,533,000
*Using Trailing 12 month 1Q2015 sales which were $40,164,487, 2013 sales which were $38,856,573 and 2009 sales which were $21,814,793.
+Outstanding Preferred Stock (including accrued dividends) of zero and total Company equity capital (common stock) of $11,791,308.
#Parent company only current assets divided by 12 month projected cash expenses.
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.