For Immediate Release
Ann Arbor, Michigan, April 26, 2013,– University Bancorp, Inc. (OTCQB: UNIB) announced that it had audited net income attributable to University Bancorp, Inc. common stock shareholders in 2012 of $1,915,859, $0.411 per share on average shares outstanding of 4,661,348 for the year. For 2012, University Bancorp had pre-tax income of $4,678,663. For 2012, minority interest of $806,919, preferred stock dividends of $93,938 and income tax of $1,955,885 were incurred. The effective tax rate differs from the statutory federal income tax rate as a result of permanent tax differences and changes in tax estimates as a result of two acquisitions.
For 2012, the Company’s return on equity attributable to common stock shareholders was 32.5% on initial equity of $5,887,158.
Net income (loss) attributable to University Bancorp, Inc. common stock shareholders in the fourth quarter of 2012 was ($28,112), or $0.006 per share on average shares outstanding of 4,667,598. In addition to the unusually high income tax provision, 4Q2012 was negatively impacted by reserve building at our Midwest Loan Services mortgage subservicing subsidiary related to foreclosure management timeline penalties, which, as a result of a change towards strengthened business processes, are not anticipated to be material going forward. These items more than offset a strong quarterly operating profit in the rest of the Bank.
Audited net income attributable to University Bancorp, Inc. common stock shareholders in 2011 was a net loss of $297,794 ($0.07 per share) on average shares outstanding of 4,275,878 after preferred stock dividends of $82,590 were incurred. For 2011, University Bancorp had pre-tax income (loss) of ($1,139,974), minority interest was ($634,280) and income tax (benefit) was ($181,900). 2011 results were negatively impacted by $2.9 million in unusual expenses that we incurred, as detailed in our 2011 earnings press release.
Unusual expenses in 2012 included $3.46 million in reserves and write-offs related to ORE sales, ALLL reserves and other reserves only partially offset by $414,000 in unusual gains related to MSR valuation gains and hedged pipeline gains. We moved aggressively in 2012 to write-down, discount and sell substandard assets and add to our Allowance for Loan Losses, leaving us with a balance of $1,158,182 at quarter-end versus portfolio loans of $54,902,321, or 2.11%. As a result, substandard assets dropped 45% to $2,702,000 or 22.45% of Tier 1 Capital, including other real estate owned of $851,633. In the first quarter of 2013 an additional $600,000 in disposals closed which reduced non-performing other real estate owned.
In 4Q2012 we completed the purchase of an additional 12.4975% of University Lending Group, LLC at a price of $500,000 plus the absorption of certain taxes on 2012 LLC income from March 31, 2012 to the date of the acquisition, bringing our ownership stake to 100% from 87.5025%. This subsidiary had audited net income of $4,235,046 in 2012 (ULG’s earnings are taxed at the University Bank level).
Tier 1 Capital rose to 9.69% at 12/31/2012 on average assets of $117.4 million, was 10.19% at 9/30/2012 on average assets of $125.0 million, and is projected to be 14.18% at 12/31/2013, if we achieve our 2013 budget goal.
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.”
Shareholders’ equity attributable to University Bancorp, Inc. common stock shareholders rose to $7,553,121 or $1.618 per share, based on shares outstanding at December 31, 2012 of 4,667,598.
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. As of 12/31/2012 in our loan portfolio held for investment we had no consumer or commercial loans delinquent over 30 days and we had just five residential mortgage loans delinquent over 30 days, for a total of $216,590 including just one loan for $51,956 delinquent over 90 days.
In 2012, our retail mortgage origination group, University Lending Group, LLC, originated a new record $408,477,203 in residential mortgage loans, of which 70% financed purchase transactions, which is more than double the industry average. It is our goal to build a sustainable mortgage origination business not dependent upon refinancing.
During 2012 the bulk of the daily retail originations from our credit union customers have been migrated to the unified back office platform across which all of our other residential originations flow. This is expected to enable an increase in the origination business won from our current 320 credit union subservicing customers, since our unified origination platform is significantly more competitive than the platform it is replacing.
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.
President Stephen Lange Ranzini noted, “While the results for the past 3 months are very encouraging, we remain very focused on and concerned about our ability to fully comply with highly complex compliance rules and the tremendous amount of work that these will require of us to succeed in future regulatory examinations. Recent successes by our compliance team include the completion of work to enhance the processes in BSA and HMDA. Current areas of major focus and follow-up include enhancements to internal audit for which we doubled our 2013 budget to $700,000 a year and preparation for our first CFPB examinations expected later in 2013.”
Other key statistics:
- 5-year annual average revenue growth*, 39.5%
- 1-year annual revenue growth*, 87.9%
- Debt to equity ratio+, 12.5%
- Current Ratio,# 2.25x
- Trailing 12 Months P-E Ratiox, 6.1x
*Using Trailing 2012, 2011 and 2008 sales which were $39,991,125, $21,280,296 and $13,449,856, respectively.
+Outstanding Preferred Stock of $1,078,247 and total Company equity capital (common stock plus maturing preferred stock) of $8,631,368.
#Parent company only current assets divided by 12 month projected cash expenses.
xBased on last sale price of $2.50 per share.
Highlights for the year include:
- Mortgages subserviced by Midwest Loan Services grew 16.3% to 82,456 from 70,889, the total of mortgages subserviced grew to $12.2 billion and revenue at Midwest Loan Services rose 56.3% to $13,478,140 from $8,620,516;
- Deposit mortgage escrow deposits at University Bank including sweep accounts grew 27.8% to $144,264,091 from $112,866,935;
- Our Islamic division booked its second annual operating profit, pre-tax profit of $1,592,400 up 5.36x from $296,938 in 2011, and the amount of loans serviced as agent for FHLMC rose 66.5% to $233.6 million and revenues grew 75.8% to $6,047,000 from $2,856,983;
- University Bank and its subsidiaries continue to actively lend in our local communities despite the ongoing business recession, with $588,680,377 in residential mortgage originations in 2012 up 87.6% from $313,815,218 in 2011.
Key metrics for the year ended December 31, 2012 were:
- Total Revenue increased to $40.0 million from $21.3 million, up 87.9%;
- Total Assets increased to $132.2 million from $121.7 million, up 8.6%;
- Net Interest and financing income increased to $4.36 million, up 10.6%;
- Loans and financings held for portfolio decreased 5.1% to $54.9 million;
- Islamic revenue grew 75.8% to $6,047,000 from $3,439,611 in 2011;
- Islamic residential originations grew 79.5% to $142,747,243 from $79,504,125 in 2011;
- Tier 1 Capital rose to 9.69% from 8.90% at 12/31/2011;
- Return on common stockholders’ equity was 32.5%
- Total FTE employees rose 14.9% to 309 from 269 at 12/31/2011.
Shareholders and investors are encouraged to refer to the financial information including the audited financial statements, 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 $12.7 billion in loans and assets and our 330 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.
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.