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University Bancorp 2013 Profit $1,826,008, $0.391 per Share

ANN ARBOR, MI -- (Marketwired) -- 04/04/14 -- University Bancorp, Inc. (OTCQB: UNIB) announced that it had audited net income attributable to University Bancorp, Inc. common stock shareholders in 2013 of $1,826,008, $0.391 per share on average shares outstanding of 4,673,980 for the year. For 2013, University Bancorp had pre-tax income of $3,678,893. For 2013, income allocated to non-controlling interests of $1,053,940, preferred stock dividends of $93,085 and income tax of $1,246,330 were incurred.

For 2013, the Company's return on equity attributable to common stock shareholders was 24.6% on initial equity of $7,436,190.

Net income (loss) attributable to University Bancorp, Inc. common stock shareholders in the fourth quarter of 2013 was ($177,287), or ($0.038) per share on average shares outstanding of 4,692,828. The final quarter of 2013 was negatively impacted by employee profit sharing in December 2013 of $400,000 with respect to the 2013 year. Profit sharing with respect to the 2012 year was accrued in March 2013 in the amount of $587,000 and the December 2013 charge represents a change in timing to recognize the employee profit sharing payments earlier based on estimates and at the time when actually approved by the board of directors. Also of note, we began amortizing the customer list related to our acquisition of the Ann Arbor Insurance Centre (AAIC) subsidiary, which resulted in a $71,143 expense in 4Q2013 and we will incur a similar charge at the rate of $17,786 per quarter for 2014 and each year until the end of 2019, when this acquisition cost will be fully amortized.

In addition to the extra $587,000 of profit sharing and new $71,143 insurance agency acquisition related amortization expense, unusual expenses in 2013 also included $80,000 expense related to the sale of $437,000 in substandard loans through DebtX, and the final payment of $447,385 under the tax sharing agreement with the minority investors in our University Islamic Financial subsidiary, fully completing these contractual payments. These were offset by MSR valuation gains of $1,151,405. Also of note, income from the fair value of hedged and rate locked loans held for sale dropped year over year by $1,228,212 as the mortgage origination pipeline ended 2013 at $17.7 million, significantly lower than the level at the end of 2012, which was $43.0 million.

Audited net income attributable to University Bancorp, Inc. common stock shareholders in 2012 was $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, income allocated to non-controlling interests was $859,534, preferred stock dividends were $93,938 and income tax of $1,955,885 was incurred. The effective tax rate differed 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.

Unusual expenses in 2012 included $3.46 million in reserves and write-offs related to ORE sales, Allowance for Loan Losses (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 ALLL.

The ALLL had a balance of $968,244 at 12/31/2013 versus portfolio loans of $49,464,710, or 1.96%. Substandard assets dropped 30% during 2013 to $1,892,138, 14.67% of Tier 1 Capital at 12/31/2013, including other real estate owned of $431,553.

Tier 1 Capital rose to 12.75% at 12/31/2013 on average assets of $101.1 million, was 12.69% at 9/30/2013 on average assets of $108.1 million, and is projected to be 13.79% at 12/31/2014, if we achieve our 2014 budget goal unless we opt to pay dividends or conduct a stock buyback during 2014, which is a possibility.

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 and $3.4 million after-tax before minority interest."

Shareholders' equity attributable to University Bancorp, Inc. common stock shareholders rose to $9,439,485 or $2.011 per share, based on shares outstanding at December 31, 2013 of 4,692,828. 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 rose to $8,656,318 or $1.845 per share at 12/31/2013. (Please note that we provide this statistic only because we are asked for it and do not see it as particularly useful or meaningful.)

Michigan and the Ann Arbor MSA continue to see increased employment and increased home prices and as a result, the performance of our portfolio loans and our overall asset quality continues to be superior with low loan delinquencies. As of 12/31/2013 in our loan portfolio held for investment we had no consumer or commercial loans delinquent over 30 days, and we had just two residential mortgage loans delinquent 30 days and one residential mortgage loan for $56,133 delinquent over 90 days.

In 2013, we originated $565.1 million in residential mortgage loans for our own account, versus $588.7 million in 2012. Of the 2013 retail originations, 80.2% of University Lending Group's and 66.8% of University Islamic Financial's residential mortgage originations financed purchase transactions. In addition we originated $89.8 million in portfolio residential mortgage loans for our credit union customers in 2013.

In 1Q2014 we completed the migration of all our credit union's retail originations to the unified back office platform across which our other residential originations flow. This is expected to enable an increase in the origination business won from our current 340 credit union and 7 community bank subservicing customers, since our unified origination platform is significantly more competitive than the platform it is replacing.

Liquidity remains excellent. We manage $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 (FHLBI), which are available to us to meet any withdraws in just a few minutes, and on which we earn interest at Fed Funds rate.

President Stephen Lange Ranzini noted, "Although we didn't meet the 2013 budget due to an unbudgeted drop in mortgage originations in the fourth quarter, 2013 continued the long track record of success for the Company. Based on the rankings from our FDIC Call Report data, IDC Financial Publishing, Inc. (IDC) has rated University Bank with a perfect 300 out of 300 rating for three quarters in a row, and we are one of only two banks headquartered in Michigan the past two quarters with a perfect IDC rating. IDC is generally considered to be the best and most prestigious organization that rates the financial quality and strength of banks in the U.S."

The Company will host a conference call at Noon at Thursday April 10, 2014 to discuss the 2013 results with its shareholders. Please contact Stephen Lange Ranzini via
email at [email protected] to receive the call-in information for this call.

Other key statistics:

  • 5-year annual average revenue growth*, 37.7%
  • 1-year annual revenue growth*, -2.8%
  • Debt to equity ratio+, 11.1%
  • Current Ratio,# 38.3x
  • Trailing 12 Months P-E Ratiox, 19.2x

*2013, 2012 and 2008 sales were $38,856,573, $39,991,125 and $13,449,856, respectively.
+Outstanding Preferred Stock (including dividends payable) was $1,171,332 and total Company equity capital (common stock plus preferred stock) was $10,614,778.
#Parent company only current assets were $723,796 divided by 12 month proj. cash expenses.
xBased on last sale price of $7.50 per share.

Highlights for the year include:

  • Mortgages subserviced by Midwest Loan Services grew 12.5% to 92,763 from 82,456, the total of mortgages subserviced grew to $14.3 billion and revenue at Midwest Loan Services fell 5.0% to $12,808,888 from $13,478,140 due to a drop in mortgage origination from credit unions;
  • Deposit mortgage escrow deposits at University Bank including sweep accounts at the FHLBI grew 39.6% to $201,267,000 from $144,264,091;
  • Our Islamic division booked its third annual operating profit, pre-tax profit of $2,952,535 up 85.4% from $1,592,400 in 2012, Islamic assets under management rose to $377.5 million and revenues grew 33.1% to $8,050,093 from $6,047,000;
  • University Bank and its subsidiaries continue to actively lend in our local communities with $565,088,069 in residential mortgage originations in 2013 down 4.0% from $588,680,377 in 2012.

Key metrics for the year ended December 31, 2013 were:

  • Total Revenue decreased to $38.9 million from $40.0 million, down 2.8%;
  • Total Assets decreased to $111.2 million from $132.2 million, down 15.9%;
  • Net Interest and financing income decreased to $4.24 million, down 2.8%;
  • Loans and financings held for portfolio decreased 9.8% to $48.5 million;
  • Islamic residential originations fell 7.4% to $132,212,140 from $142,747,243;
  • Islamic residential real estate financings originated since inception of our Islamic business unit hit $500,179,343 at 12/31/2013;
  • University Lending Group (ULG) residential real estate financings originated since inception hit $2,005,140,075 at 12/31/2013;
  • ULG revenue fell 8.6% to $16,517,253 from $18,069,467 despite a 32% rise in residential purchase transactions financed;
  • Total FTE employees rose 0.6% to 311 from 309;
  • Tier 1 Capital rose to 12.75% from 9.69%;
  • Return on common stockholders' equity was 24.6%.

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:

Ann Arbor-based University Bancorp owns 100% of University Bank which, together with its Michigan-based subsidiaries, holds and manages a total of over $14.7 billion in loans and assets and our 331 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:

  • University Lending Group, a retail residential mortgage originator based in Clinton Township;
  • Midwest Loan Services, a residential mortgage subservicer based in Houghton;
  • University Islamic Financial, an Islamic banking firm based in Farmington Hills;
  • Community Banking, based in Ann Arbor, 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.

Stephen Lange Ranzini
President and CEO
Phone: 734-741-5858, Ext. 9226
Email: Email Contact

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