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University Bancorp 1Q2014 Loss $371,334, $0.079 per Share

ANN ARBOR, MI -- (Marketwired) -- 06/10/14 -- University Bancorp, Inc. (OTCQB: UNIB) announced that it had an unaudited net loss attributable to University Bancorp, Inc. common stock shareholders in the first three months of 2014 of $371,334, $0.079 per share on average shares outstanding of 4,692,828 for the first three months. In 1Q2014 the net loss of the Company's wholly-owned subsidiary, University Bank, was $353,491, below the budget by $21,536, and consolidated after-tax net loss before minority interest was $349,696, below the budget by $102,639. For the first three months of 2014 minority interest of $3,795 and preferred stock dividends of $23,144 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 and $3.4 million after-tax before minority interest.". Results in the second quarter of 2014 are improved and we are currently ahead of the budgeted net income, year to date. The first quarter was budgeted to be the least profitable quarter in 2014 because residential purchase transactions are typically at seasonal low ebb."

First quarter 2014 earnings at University Bank were negatively impacted by expected seasonally slow mortgage originations, a quarterly mark to market on our mortgage servicing rights of negative $257,510 and legal expense related to a lawsuit of $304,996. During the quarter, the bank made progress with the lawsuit and achieved summary judgment on additional counts, so that now 20 of the 22 counts in the complaint have been fully dismissed. Management believes that the bank's estimated exposure on the remaining counts is not material and the bank is entitled under applicable state law to reimbursement of $150,000 of legal fees since it achieved summary judgment on some of the primary claims in the complaint. Despite these expenses, which were also partially offset by a decrease in the required allowance for loan losses of $199,938, results for the quarter were just $21,536 under the budgeted net income.

For the 12 months ended March 31, 2014, the Company had unaudited net income attributable to University Bancorp, Inc. common stock shareholders of $972,606 or $0.208 per share on average shares outstanding of 4,686,446 and return on equity attributable to common stock shareholders was 12.9% on initial equity of $7,543,415.

After deducting minority interest of $145,248 and preferred stock dividends of $24,194, net income attributable to University Bancorp, Inc. common stock shareholders in the first quarter of 2013 was $486,848, or $0.104 per share on average shares outstanding for the quarter of 4,667,598. The 1Q2013 pre-tax profit of the Company's wholly-owned subsidiary, University Bank, was $1,001,200, was above the budget by $649,673, and consolidated after-tax net income before minority interest was $660,200, above the budget by $427,192. Results were above budget in 1Q2013 and unseasonably high due to higher than anticipated mortgage originations flowing from refinancing.

Tier 1 Capital rose to 12.99% at 3/31/2014, and was $12,789,000 on average 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.

Shareholders' equity attributable to University Bancorp, Inc. common stock shareholders was $9,064,642 or $1.932 per share, based on shares outstanding at March 31, 2014 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 was $8,299,262 or $1.768 per share at 3/31/2014. (Please note that we do not see this latter statistic as particularly useful or meaningful.) Treasury Shares as of 3/31/2014 were 89,954.

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 4/30/2014, a residential loan with a carrying value of $11,315 which is in the process of foreclosure. Total classified loans on our watch list at March 31, 2014 are 6 in number for $1,595,985 and ORE were 4 in number for $364,153 for a total of 10 substandard assets carried at $1,960,138, or 15.3% of Tier 1 Capital. During April, we sold an ORE property with a carrying value of $4,523 for a gain of $107,418 and we had a payoff of a substandard residential loan in the amount of $361,922. The Allowance for Loan Losses stands at $770,956, or 1.49% of the amount of portfolio loans excluding the loans held for sale, which have their own separate reserve of $366,800 at March 31, 2014.

In the first three months of 2014, our residential mortgage origination groups originated $103.1 million of mortgages sold to the secondary market, of which $62.9 million were originated by our retail origination group, University Lending Group, LLC, $24.4 million were originated by our Islamic banking unit, University Islamic Financial, and the remainder originated by our credit union origination group. 91% of our retail originations and 80% of our Islamic originations financed purchase transactions. It is our goal that our mortgage origination business is not dependent upon refinancing.

Liquidity remains excellent and we manage an additional $80 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, 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 bank's pre-tax income will rise approx. $1.5 million pre-tax or $1 million after-tax for each 1% rise in the Fed Funds rate from the escrow deposits and assets tied to short term interest rates that we control. We note the financial markets' expectations that the Fed Funds rate will rise starting in about a year.

After quarter-end, the Company paid all outstanding dividends on its 9% preferred stock through the end of April 2014 and still retained $600,000 cash on hand.

The Company will host a conference call at Noon at Friday June 13, 2014 to discuss the 1Q2014 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 as of 3/31/2014:

  • 5-year annual average revenue growth*, 33.9%
  • 1-year annual revenue growth*, -9.4%
  • Debt to equity ratio+, 11.6%
  • Current Ratio,# 38.1x
  • Total Assets, $113,183,000
  • Loans Held for Sale, before Reserves, $30,788,800

*Using Trailing 12 month 1Q2014 sales which were $36,235,572, 2012 sales which were $39,991,125 and 2008 sales which were $13,449,856.
+Outstanding Preferred Stock (including accrued dividends) of $1,194,476 and total Company equity capital (common stock plus maturing preferred stock) of $10,259,118.
#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, 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 $15 billion in loans and assets and our 337 employees make us the 9th largest bank based in Michigan. Our perfect IDC Rating of 300 out of 300 makes us one of the only two top rated banks currently headquartered 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. 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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