For Immediate Release
Ann Arbor, Michigan, November 24, 2014, — University Bancorp, Inc. (OTCQB: UNIB) announced that it had an unaudited net income attributable to University Bancorp, Inc. common stock shareholders in the third quarter of 2014 of $528,727, $0.112 per share on average shares outstanding of 4,737,220 for the period. Net income for the nine months ended September 30, 2014 was $826,128 or $0.175 on average shares outstanding of 4,713,358 for the period. In 9M2014 the net income of the Company’s wholly-owned subsidiary, University Bank, was $887,465, below the budget by $845,977, consolidated after-tax net income before minority interest was $1,027,111, below the budget by $1,140,312 and consolidated pre-tax income before minority interest was $1,543,007, below the budget by $1,741,143. For the first nine months of 2014 minority interest of $139,646 and preferred stock dividends of $57,269 were incurred.
President Stephen Lange Ranzini noted, “The budget for 2014 calls for the company to have net income attributable to University Bancorp, Inc. common stock shareholders of $2.68 million after-tax, $0.57 per share, and the bank to earn $5.17 million pre-tax.” The first nine months of 2014 were negatively impacted by a valuation mark to market on our mortgage servicing rights of negative $928,251 and legal expense related to two lawsuits of $716,000. One of these lawsuits was settled after quarter-end. These $1,644,251 of expenses, which were partially offset by a decrease in the required allowance for loan losses of $296,864, account for nearly the entire shortfall under the budgeted net income. The remaining shortfall is due to slower than anticipated ramp up of two new products, a one-time close construction permanent residential loan and a conventional renovation loan program, which was only partially offset by cost cutting.
For the 12 months ended September 30, 2014, the Company had unaudited net income attributable to University Bancorp, Inc. common stock shareholders of $648,841 or $0.138 per share on average shares outstanding of 4,708,225 and return on equity attributable to common stock shareholders was 6.8% on initial equity of $9,597,648.
For the first nine months of 2013, the consolidated pre-tax profit of the Company’s wholly-owned subsidiary, University Bank, was $4,407,487, above the budget by $47,903, and consolidated after-tax net income before minority interest was $3,058,659, above the budget by $181,336. For the first nine months of 2013 minority interest of $541,749, minority tax sharing payments of $431,416 and preferred stock dividends of $72,582 were incurred. Results were above budget in the 2013 period and elevated due to higher than anticipated mortgage originations flowing from refinancing.
Tier 1 Capital was $13,833,000 or 12.74% of regulatory average quarterly assets at 9/30/2014, and is currently forecast to be 13.95% at 12/31/2014, before any impact from the payment of dividends from the bank or if we conduct some stock buybacks during 4Q2014, which is very likely. During the quarter, all accumulated dividends on the Company’s 9% preferred stock were paid and the balance outstanding was reduced to $350,000 from cash on hand at the Company. University Bank’s board of directors paid a monthly dividend of 30% of monthly net income during the quarter, since the bank’s most recent stress test indicates that the bank has substantial excess capital to meet both its business plan and a severe economic downturn. We currently anticipate fully retiring the remaining 9% preferred stock from cash on hand by year-end.
Shareholders’ equity attributable to University Bancorp, Inc. common stock shareholders was $10,329,410 or $2.174 per share, based on shares outstanding at September 30, 2014 of 4,751,490. 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 $9,599,601 or $2.046 per share at 9/30/2014. (Please note that we do not see this latter statistic as particularly useful or meaningful because the goodwill mainly relates to our insurance agency which has a value higher than the amount of goodwill being carried.) Treasury Shares as of 9/30/2014 were 31,522 after the exercise of stock options covering 24,770 shares of common stock. If the pending acquisition of the final 20% of Midwest Loan Services common stock had closed as of 9/30/2014, we currently estimate that the book value per share of common stock of University Bancorp would have increased from $2.174 to $2.466 per share, or an increase of $0.292 per share.
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 two loans delinquent over 30 days at 9/30/2014, a residential loan with a carrying value of $11,315 which is in the process of foreclosure and a commercial real estate loan with a carrying value of $267,921 that was 46 days late. Total classified loans on our watch list at September 30, 2014 were 5 in number for $1,248,831 and ORE numbered 3 for $359,629, for a total of 8 substandard assets carried at $1,608,460, or 11.63% of Tier 1 Capital. The Allowance for Loan Losses stands at $676,000, or 1.31% of the amount of portfolio loans of $51,439,000 excluding the loans held for sale, which have their own separate reserve of $481,000 at September 30, 2014. Subsequent to quarter-end, we successfully resolved the final two outstanding buyback requests from secondary market investors and about half this reserve was released into earnings as a result.
In the first nine months of 2014, our residential mortgage origination groups originated $380.3 million of mortgages sold to the secondary market, of which $279.2 million were originated by our retail origination group, University Lending Group, LLC (ULG), $101.1 million were originated by our Islamic banking unit, University Islamic Financial (UIF), and the remainder originated by our credit union origination group. Year-to-date 92.1% of ULG’s retail originations financed purchase transactions and while overall originations declined 18% year over year, ULG’s purchase transaction originations for the 9M2014 were 6% ahead of the same period in 2013, indicating the progress we are making in building our retail mortgage origination business. It is our goal that our mortgage origination business is not dependent upon refinancing. Year-to-date 84.3% of UIF’s retail originations financed purchase transactions and UIF’s overall originations in 9M2014 declined just 3% from the same period in 2013, while purchase transactions also rose.
Liquidity remains excellent and we manage an additional $100 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 withdrawals in just a few minutes, and on which we earn the interest. The bank’s latest ALM report indicates that the bank’s income will rise significantly if short term rates rise, or rise if long term rates either rise or fall. The financial markets currently project it will rise starting in about two quarters.
At September 30, 2014, the Company had $234,914 in cash on hand.
The Company will host a conference call at Noon at Tuesday November 25, 2014 to discuss the 3Q2014 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 9/30/2014:
- 5-year annual average revenue growth*, 31.1%
- 1-year annual revenue growth*, -12.4%
- Debt to equity ratio+, 3.4%
- Current Ratio,# 8.9x
- Total Assets, $112,655,592
- Loans Held for Sale, before Reserves, $33,070,000
- Loans Held for Investment, before Reserves, $51,439,000
*Using Trailing 12 month 3Q2014 sales which were $35,028,732, 2012 sales which were $39,991,125 and 2008 sales which were $13,449,856.
+Outstanding Preferred Stock (including accrued dividends) of $362,836 and total Company equity capital (common stock plus maturing preferred stock) of $10,692,246.
#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, Company 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 billion in loans and assets and our 336 employees make us the 9th largest bank based in Michigan. 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 and an Equal Housing Lender. 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, Michigan;
- Midwest Loan Services, a residential mortgage subservicer based in Houghton, MI;
- University Islamic Financial, an Islamic banking firm based in Farmington Hills, MI;
- Community Banking, based in Ann Arbor, which provides traditional community banking services in the Ann Arbor, Michigan 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 business development, pre-tax income and net income, budgeted income and capital 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.