For Immediate Release
Ann Arbor, Michigan, July 29, 2015, — University Bancorp, Inc. (OTCQB: UNIB) announced that it had unaudited net income attributable to University Bancorp, Inc. common stock shareholders in the second quarter of 2015 of $2,184,026, $0.427 per share on average shares outstanding of 5,118,302 for the second quarter, versus an unaudited net income of $668,735, $0.142 per share on average shares outstanding of 4,710,025 for the 2014 period. For the second quarter of 2015 minority interest of $149,927 was incurred.
Net income for the six months ended June 30, 2015 was $2,251,890 or $0.445 on average shares outstanding of 5,059,846 for the period, versus net income of $297,401 in the first six months of 2014 or $0.063 on average shares outstanding of 4,701,426 for the period. In 1H2015 the net income of the Company’s wholly-owned subsidiary, University Bank, was $2,273,610, above the budget by $1,700,864, and consolidated after-tax net income before minority interest was $2,365,296, above the budget by $1,633,000. For the first six months of 2015 minority interest of $91,686 and preferred stock dividends of $5,273 were incurred versus minority interest of $71,351 and preferred stock dividends of $46,021 in the first half of 2014. All preferred stock was fully retired in the first quarter of 2015.
In 1H2015 the net income of the Company was increased by several non-recurring, unusual gains net of unusual expenses, which had an overall positive cumulative impact of $355,045, before tax:
- Legal fees at UIF were $524,000 due to the now completed trial and follow-up motions related to the litigation related to a competitor, Guidance;
- With the rise in long term mortgage interest rates the valuation of mortgage servicing rights (MSRs) increased $94,883;
- The value of the hedged mortgage origination pipeline rose $552,439 as the amount of locked loans rose over the level at year-end;
- Provision for loan losses fell by $132,584 due to a lower projection of loan losses from Invictus in the event of a CCAR Test style depression and improved asset quality;
- A recovery of foreclosure expenses advanced in 2010 from FHLMC of $99,139.
For the 12 months ended June 30, 2015, the Company had unaudited net income attributable to University Bancorp, Inc. common stock shareholders of $2,709,670 or $0.553 per share on average shares outstanding of 4,901,985 and return on equity attributable to common stock shareholders was 27.7% on initial equity of $9,777,076. Annualized return on equity in the first half of 2015 was 43.5%.
In 1H2014 the pre-tax income of the Company’s wholly-owned subsidiary, University Bank, was $623,978, below the budget by $543,113, however, first half 2014 earnings at University Bank were negatively impacted by a quarterly valuation mark to market from our mortgage servicing rights of negative $707,982 and legal expense related to a lawsuit of $508,979. These $1,216,961 of expenses, which were partially offset by a decrease in the required allowance for loan losses of $201,130, account for the entire shortfall of $1,015,831 under the budgeted pre-tax income for 1H2014.
Based on the results of the first half, we have re-forecasted our annual budgeted net income, which is currently projected to be $5,716,280 pre-tax with net income of $3,697,877, or net income of $0.72 per share. This re-forecast takes our actual results in the 1H2015 plus our original budget for the second half of 2015, adjusted for all known major changes except for the currently higher than budgeted level of mortgage originations we have seen in July and are seeing at this time, which based on our current higher than budgeted rate of applications, submission and locked pipeline of loans pending closing, is expected to persist for at least the next month or two. In addition, the bank’s net income would benefit substantially from any future increases in the Fed Funds interest rate, since our mortgage subservicing business manages approximately $100 million of off-balance sheet escrow deposit accounts from which we earn all interest income and which are invested in overnight interest earning deposits at the Federal Home Loan Bank of Indianapolis. In addition, the bank’s most recent Asset Liability Management Report indicates that our bank’s own consolidated assets and liabilities are positioned so that we would benefit from increases in short term interest rates. The bank’s original and re-forecasted budget did not assume any increase in the Fed Funds rate during 2015, to be conservative in our assumptions.
President Stephen Lange Ranzini noted, “The first half results were excellent and we have excellent momentum in all of our business units at this time. Revenue in the first half of 2015 was 23.6% above the prior year level. Based on operations in July, we expect the third quarter to exceed the re-forecasted budget. Originations are at record levels, well above the budgeted levels. The third quarter looks very promising as originations are above budget due to higher Realtor™ referred purchase transactions, the locked and hedged pipeline is above budget and other areas of the bank’s business are performing well. Our mortgage subservicing business continues to grow and we are seeing increases in loans originated for portfolio investment. Third 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 was a gross miscarriarge of justice.”
With the implementation of the new Basel 3 Capital Rules and a rise in average assets due to increase mortgage originations, the Tier 1 Leverage Capital Ratio fell to 9.66% at 6/30/2015 on net average assets of $133.4 million and was 10.12% at 3/31/2015 on net 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 14.52% at 12/31/2015, if we achieve our 2015 re-forecasted budget projection, which assumes that mortgage originations will revert to lower budgeted levels by year end, 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 6/30/2015 was $11,413,000, and at 3/31/2015 was $9,412,000. Basel 3 Total Risk Weighted Assets at 6/30/2015 were $90,790,000, and at 3/31/2015 were $86,927,000. The CET1 Risk Weighted Capital Ratio at 6/30/2015 was 12.57% and at 3/31/2015 was 10.83%.
Shareholders’ equity attributable to University Bancorp, Inc. common stock shareholders was $13,922,376 or $2.725 per share, based on shares outstanding at June 30, 2015 of 5,109,649. 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 $13,245,924 or $2.592 per share at 6/30/2014. (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 6/30/2015 were zero, however the Company did privately purchase and retire 8,750 shares of common stock in June 2015.
Total Assets as of 6/30/2015 were $166,589,000 versus $132,715,000 as of 3/31/2015, $120,976,779 as of 12/31/2014, and $126,234,300 as of 6/30/2014.
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 one loan delinquent over 30 days at 6/30/2015, a well secured real estate loan with a carrying value of $139,563 which was 75 days delinquent as of 6/30/2015. However the borrower made a $40,000 payment recently and the loan is now current and is well secured. The Allowance for Loan Losses stands at $534,270, or 0.95% of the amount of portfolio loans excluding the loans held for sale. Substandard assets rose 4.2% during 2Q2015 to $1,187,889, 8.59% of Tier 1 Capital at 6/30/2015, including other real estate owned of $530,641.
In the first six months of 2015, our residential mortgage origination groups originated $373.7 million of mortgages sold to the secondary market, of which $235.4 million were originated by our retail origination group, University Lending Group, LLC (ULG), $104.0 million were originated by our UIF unit, and the remainder originated by our credit union origination group. 82% of our retail originations and 65% of our UIF originations financed purchase transactions. Purchase transactions originated during 1H2015 also rose 18% at ULG and 35% at UIF over the 1H2014 level. Loans Held for Sale, before Reserves as of 6/30/2015 were $59,209,000, versus $48,533,000 as of 3/31/2015, $40,078,919 as of 12/31/2014 and $43,303,000 as of 6/30/2014.
Liquidity remains excellent. We manage an average of $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 (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.
The Company will host a conference call at Noon ET at Monday August 3, 2015 to discuss the 2Q2015 results with its shareholders. Please contact Stephen Lange Ranzini via email at email@example.com to receive the call-in information for this call.
Other key statistics as of 6/30/2015:
- 5-year annual average revenue growth*, 19.6%
- 1-year annual revenue growth*, 17.9%
- 5 Year Average ROE 15.6%
- LLR/NPAs>90 % 100.7%
- Debt to equity ratio, 0%
- Current Ratio,# 4.8x
- Efficiency Ratio, %@ 84.7%
- Total Assets, $166,589,000
- Loans Held for Sale, before Reserves, $59,209,000
- NPAs >90 days $530,641
- TTM ROA % 2.39%
- TCE/TA % 8.21%
- Total Capital Ratio % 12.10%
- NPAs/Assets % 0.71%
- Texas Ratio % 8.31%
- NIM % 3.66%
- NCOs/Loans % -0.003%
*Using Trailing 12 month 1H2015 sales which were $43,155,999, 2013 sales which were $38,856,573 and 2009 sales which were $21,814,793.
#Parent company only current assets divided by 12 month projected cash expenses.
@Calculated as: (non-interest expense/(net interest income + non-interest income))
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 336 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 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, an Islamic banking firm based in Farmington Hills, MI;
- Community Banking, based in Ann Arbor, MI, 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.