Ann Arbor, Michigan, May 15, 2018, — University Bancorp, Inc. (OTCQB: UNIB) announced that it had an unaudited net income attributable to University Bancorp, Inc. common stock shareholders in 1Q2018 of $625,247, $0.12 per share on average shares outstanding of 5,200,899 for the first quarter, versus an unaudited net income of $900,023, $0.175 per share on average shares outstanding of 5,200,899 for 1Q2017. For the 12 months ended March 31, 2018, net income was $4,849,582, $0.93 per share on average shares outstanding of 5,200,899 for the period. For the first three months of 2018 minority interest of $6,617 was incurred.
Results in 1Q2018 were assisted by a seasonal factor and a rise in the value of our mortgage servicing rights, only partially offset by an unusual expense, which had an overall positive cumulative impact of $1,453,347, before tax:
- The value of the hedged mortgage origination pipeline rose $968,641 as the amount of locked loans rose over the level at year-end;
- With the rise in long term mortgage interest rates during the quarter the valuation of mortgage servicing rights (MSRs) increased $605,956;
- Implementation costs related to the adoption of a new mortgage loan origination system in the amount of $121,250 were charged against income;
Results in 1Q2017 were assisted by a seasonal factor, only partially offset by two unusual expenses, which had an overall positive cumulative impact of $190,594, before tax:
- The value of the hedged mortgage origination pipeline rose $383,473 as the amount of locked loans rose over the level at year-end;
- With the fall in long term mortgage interest rates during the quarter the valuation of mortgage servicing rights (MSRs) decreased $117,879;
- A litigation was settled at an early stage for $75,000;
Management currently projects budgeted annual net income in 2018 of at least $5,366,728 or $1.03 per share. This forecast takes our actual results for 1Q2018, plus our original budget for the final three quarters of 2018, adjusted for all known major changes.
President Stephen Lange Ranzini noted, “The 1Q2018 result for profitability was good. Net income in the first quarter of each year is usually seasonally slow due to the lower pace of mortgage originations, and in 2016 and 2014, the Company had a loss in the first quarter, and in 2015, a small profit. In addition to strong profitability at our subservicing division we had good year over year growth in purchase related mortgage originations during the quarter and our locked and hedged pipeline of mortgage originations rebounded sharply from the seasonal low at December 2017 year-end, when the level of our locked and hedged pipeline was unusually low. Mortgage origination volumes continue to be ahead of the budget in 2Q2018. During the first quarter our UIF subsidiary went live on our new Loan Origination System and our ULG division completed its rollout in mid-April. Our mortgage businesses remain strong and our mortgage applications hit an all-time monthly record of $126.98 million in April 2018.” In 1Q2018, our residential mortgage origination groups originated $170.6 million of mortgages, of which $113.7 million were originated by our retail origination group, University Lending Group, LLC (ULG), $52.7 million were originated by our UIF unit, and the remainder originated by our credit union and community bank correspondent origination group. Home purchase transactions originated during 1Q2018 rose 8.7% at ULG and 19.8% at UIF over the 1Q2017 level and 94% of our retail originations at ULG and 85% of our UIF originations in 1Q2018 financed purchase transactions.
We were proud to be noted by American Banker newspaper as being #3 nationwide of all publicly traded U.S. banks for return on average equity for the three year period 2015-2017 and #4 nationwide for return on assets in 2017. This marks the 6th year in a row that University Bancorp has been ranked by American Banker magazine as being in the top 3 of all U.S. publicly traded banks based return on average equity (ROAE). We were the:
- #3 top performing publicly traded bank in the U.S. in 2017 based on ROAE;
- #1 top performing publicly traded bank in the U.S. in 2016 & 2015, based on ROAE;
- #2 top performing publicly traded bank in the U.S. based over the period 2014 to 2012, based on ROAE.”
Shareholders’ equity attributable to University Bancorp, Inc. common stock shareholders was $24,000,008 or $4.62 per share, based on shares outstanding at March 31, 2018 of 5,200,899.
For 1Q2018, the Company had an annualized return on equity attributable to common stock shareholders of 10.7% on initial equity of $23,376,660. Return on equity over the trailing twelve months was 25.2% on initial equity of $19,223,994.
Total Assets as of 3/31/2018 were $254,531,445, versus $245,936,968 at 12/31/2017, $263,830,000 at 9/30/2017, $269,775,000 at 6/30/2017, $235,232,000 at 3/31/2017, and $190,940,176 at 12/31/2016.
With the Bank’s payment of dividends to the Company only partially offset by a decline in average assets due to seasonal factors, the Tier 1 Leverage Capital Ratio fell to 10.27% on net average assets of $179.4 million from 10.60% at 12/31/2017 on net average assets of $190.0 million, and 8.64% at 12/31/2016 on net average assets of $183.3 million.
Basel 3 Common Equity Tier 1 Capital at 3/31/2018 was $17,465,000, at 12/31/2017 was $19,352,000, and at 12/31/2016 was $14,215,000.
Basel 3 Total Risk Weighted Assets at 3/31/2018 was $157,460,000, at 12/31/2017 were $159,683,000 and at 12/31/2016 were $96,908,000. Risk Weighted Assets will decline materially over the balance of 2018 due to improved contractual terms on the sale of our mortgage loans to secondary market investors.
The CET1 Risk Weighted Capital Ratio at 3/31/2018 was 11.09%, at 12/31/2017 was 12.12%, and at 12/31/2016 was 14.67%.
While 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 be excellent, we did experiencing an uptick in loan delinquencies due to the collapse of a home builder that was in the process of building two homes for our borrowers with a total loan balance of $674,178. The homes are progressing towards completion with a new home building firm. A third delinquent loan with a carrying balance of $166,000 is in the process of being paid-off via the sale of the property securing the loan. The bank had no foreclosed other real estate owned during the quarter. Due to the loans discussed above, substandard assets rose during 1Q2018 to $1,127,867, 6.12% of Tier 1 Capital at 3/31/2018. The allowance for loan losses stands at $399,683 or 0.64% of the amount of portfolio loans, excluding the loans held for sale.
Liquidity remains excellent. The bank is positioned to benefit from rising short term interest rates. We manage an average of over $130 million of deposits in an off-balance sheet sweep arrangement through a series of deposit accounts at the Federal Home Loan Bank of Indianapolis on which we earn interest just under the Fed Funds rate.
Other key statistics as of 3/31/2018:
- 5-year annual average revenue growth*, 8.4%
- 1Q2018 vs. 1Q2017 revenue growth*, 9.5%
- 5 Year Average ROE 20.5%
- LLR/NPAs>90 % 47.6%
- Debt to equity ratio, 0%
- Current Ratio,# 36.4x
- Efficiency Ratio, %+ 97.0%
- Total Assets, $254,531,445
- Loans Held for Sale, before Reserves, $55,324,616
- NPAs >90 days $840,177
- TTM ROA % 2.34%
- TCE/TA % 9.03%
- Total Capital Ratio % 14.54%
- NPAs/Assets % 0.44%
- Texas Ratio % 4.82%
- NIM % 2.52%
- NCOs/Loans % -0.003%
*Using Trailing 12 month 1Q2018 sales which were $8,047,793, 1Q2017 sales which were $7,348,802, 2017 sales which were $54,493,179 and 2013 sales which were $38,856,573.
#Parent company only current assets divided by 12 month projected cash expenses.
+Calculated as: (non-interest expense/(net interest income + non-interest income))
- Trailing 12 Months P-E Ratiox 11.6x
xBased on last sale of $10.80 per share.
Excluding goodwill & other intangibles related to the acquisition of Midwest Loan Services and Ann Arbor Insurance Center, net tangible shareholders’ equity attributable to University Bancorp, Inc. common stock shareholders was $23,519,198 or $4.52 per share at 3/31/2018. Please note that we do not see this latter statistic as particularly meaningful because the value of the insurance agency and Midwest Loan Services substantially exceed their carrying value including this goodwill, but we are asked for it. Treasury shares as of 3/31/2018 were zero.
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 $21 billion in financial assets for over 120,000 customers, and our 399 employees make us the 5th 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 the 15th oldest bank headquartered in Michigan. We are 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 members of University Bank’s corporate family, ranked by their size of revenues are:
- University Lending Group, a retail residential mortgage originator based in Clinton Township, MI;
- Midwest Loan Services, a residential mortgage subservicer based in Houghton, MI;
- UIF, a faith-based banking firm based in Southfield, MI;
- Community Banking, based in Ann Arbor, MI, which provides traditional community banking services in the Ann Arbor area;
- Midwest Loan Solutions, a residential mortgage correspondent lender based in Southfield, MI;
- 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, mortgage origination levels and margins, 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.