Ann Arbor, Michigan, July 30, 2013,– University Bancorp, Inc. (OTCQB: UNIB) announced that it had unaudited net income attributable to University Bancorp, Inc. common stock shareholders in the first half of 2013 of $1,774,791, $0.38 per share on average shares outstanding of 4,667,598 for the first six months. Year-to-date, the pre-tax profit of the Company’s wholly-owned subsidiary, University Bank, was $3,373,850, above the budget by $1,187,657, and consolidated after-tax net income before minority interest was $2,229,700, above the budget by $786,815. For the first six months of 2013 minority interest of $399,864 and preferred stock dividends of $48,388 were incurred.
After deducting minority interest of $650,616 and preferred stock dividends of $44,300, net income attributable to University Bancorp, Inc. common stock shareholders in the first half of 2012 was $1,400,444 or $0.301 per share on average shares outstanding for the period of 4,655,098.
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. We are on track to exceed that. The first three months of the first half of the year are expected to be the least profitable period of each year because residential purchase transactions are typically slow in the winter season.”
For the trailing 12 months ended June 30, 2013, the Company had unaudited net income attributable to University Bancorp, Inc. common stock shareholders of $2,290,206 or $0.491 per share on average shares outstanding of 4,667,598 and our return on equity attributable to common stock shareholders was 32.6% on initial equity of $7,030,506. Annualized return on equity for the first half of 2013 was 47.0% on initial equity of $7,545,921.
Tier 1 Capital rose to 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, was 9.69% at 12/31/2012 on average assets of $117.4 million, and is projected to be 14.18% at 12/31/2013 if we achieve our 2013 budget goal. Shareholders’ equity attributable to University Bancorp, Inc. common stock shareholders rose to $9,320,712 or $2.00 per share, based on shares outstanding at June 30, 2013 of 4,667,598. 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. As a result of a pending sale of half the bank’s mortgage servicing rights to Nationstar Mortgage Holding Inc., the current values on half the bank’s investment in mortgage servicing rights will be locked in via a cash sale. “Unless the bank initiates a dividend, in the fourth quarter of 2013 the bank may reach its target of 14% Tier 1 Capital Ratio,” noted President Stephen Lange Ranzini.
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. Total classified loans on our watch list at 6/30/2013 number 13 for $1,715,106 (with 3 of those fully reserved) and ORE numbered 4 for $370,262 for a total of 17 substandard assets carried at $2,085,368, or 15.58% of Tier 1 Capital. The Allowance for Loan Losses stands at $1,176,900, or 2.29% of the amount of portfolio loans excluding the loans held for sale, which have their own separate reserve of $689,600 at June 30, 2013. We are in the middle of the process of exploring a sale of substandard loans through DebtX and if the sale occurs as DebtX believes it will, we will be left with under $700,000 of substandard loans for a cost expected to be about $145,000.
In the first six months of 2013, our residential mortgage origination groups originated $340.9 million of mortgages sold to the secondary market, of which $206.3 million were originated by our retail origination group, University Lending Group, LLC, $72.6 million were originated by our Islamic banking unit, University Islamic Financial, and the remainder originated by our credit union origination group. 72% of our retail originations and 51% 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.
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.
Other key statistics:
- 5-year annual average revenue growth*, 45.7%
- 1-year annual revenue growth*, 107.7%
- Debt to equity ratio+, 10.8%
- Current Ratio,# 1.50x
- Trailing 12 Months P-E Ratiox, 5.6x
*Using Trailing 12 month 2Q2013 sales which were $44,206,337, 2011 sales which were $21,280,296 and 2008 sales which were $13,449,856.
+Outstanding Preferred Stock including accrued dividends of $1,126,635 and total Company equity capital (including common stock $9,320,712 plus preferred stock of $1,126,635) for total equity capital of $10,447,347.
#Parent company only current assets and investment securities of $25,639 divided by 12 month projected cash expenses of $17,141.
xBased on last sale price of $2.75 per share.
President Stephen Lange Ranzini noted, “While the results for the past 6 months are very encouraging, we remain 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 prepare our residential mortgage subservicing business for its first CFPB examination and work to enhance internal controls around accounts payable and reimbursable business expenses incurred by staff. 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 or early 2014.”
The bank’s 1Q2013 Capital Stress Test from our outside vendor projects that in two years, the bank would have 14.8% Tier 1 Capital in a Recession Scenario (Adverse Case) and 12.9% Tier 1 Capital in a Depression Scenario (Severely Adverse Case). The Depression scenario also models a 50% decline in mortgage originations. The initial Tier 1 Capital used for the stress test was the 11.25% ratio the bank had as of 3/31/2013.
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. Closings in July are tracking higher than June and may end the month slightly above budgeted levels and margins have decreased slightly from budgeted levels as we react to some recent competitive pressure from those competitors who were overly reliant on refinancing.
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 $13.3 billion in loans and assets and our 328 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.
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.