ANN ARBOR, MI--(Marketwired - Aug 13, 2014) - University Bancorp, Inc. (
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." After a seasonally slow first quarter that was budgeted to be the least profitable quarter in 2014 because residential purchase transactions are typically at seasonal low ebb, results improved in the second quarter of 2014."
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 von 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 $179,463 under the budgeted net income for 1H2014.
For the 12 months ended June 30, 2014, the Company had unaudited net income attributable to University Bancorp, Inc. common stock shareholders of $348,628 or $0.074 per share on average shares outstanding of 4,697,052 and return on equity attributable to common stock shareholders was 3.7% on initial equity of $9,320,712.
After deducting minority interest of $399,864 and preferred stock dividends of $48,388, net income attributable to University Bancorp, Inc. common stock shareholders in the first half of 2013 was $1,774,791, $0.38 per share on average shares outstanding of 4,667,598. The 1H2013 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. Results were above budget in 1H2013 and unseasonably high due to higher than anticipated mortgage originations flowing from refinancing.
Tier 1 Capital was $13,484,000 or 12.94% of regulatory average quarterly assets at 6/30/2014, and is projected to be 13.79% at 12/31/2014, if we achieve our 2014 budget goal before any impact from the payment of dividends from the bank or if we conduct a stock buyback during 2014, which is very likely. During the quarter, all accumulated dividends on the Company's 9% preferred stock were paid and the remaining preferred shareholders agreed to extend the maturity date of the remaining preferred stock an additional year to June 30, 2015. Subsequent to quarter-end, the amount of 9% Preferred Stock was paid down from $1,031,450 to $350,000 from cash on hand at the Company. University Bank's board of directors initiated 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.
Shareholders' equity attributable to University Bancorp, Inc. common stock shareholders was $9,777,076 or $2.068 per share, based on shares outstanding at June 30, 2014 of 4,726,720. 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 $9,029,481 or $1.924 per share at 6/30/2014. (Please note that we do not see this latter statistic as particularly useful or meaningful.) Treasury Shares as of 6/30/2014 were 56,292 after the exercise of stock options covering 33,662 shares of common stock.
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 6/30/2014, a residential loan with a carrying value of $11,315 which is in the process of foreclosure and a residential loan with a carrying value of $161,571 that was 60 days late. Total classified loans on our watch list at June 30, 2014 were 5 in number for $1,221,687 and ORE were 3 in number for $359,629 for a total of 8 substandard assets carried at $1,581,316, or 11.73% of Tier 1 Capital. The Allowance for Loan Losses stands at $770,990, or 1.49% of the amount of portfolio loans excluding the loans held for sale, which have their own separate reserve of $344,100 at June 30, 2014.
In the first six months of 2014, our residential mortgage origination groups originated $266.7 million of mortgages sold to the secondary market, of which $164.2 million were originated by our retail origination group, University Lending Group, LLC, $59.2 million were originated by our Islamic banking unit, University Islamic Financial (UIF), and the remainder originated by our credit union origination group. 93% of ULG's retail originations financed purchase transactions and ULG's purchase transaction originations in 2Q2014 were 22% 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.
During the quarter, UIF was awarded a separate seller/servicer license by its key strategic secondary market investor, which achieves a major milestone in UIF's strategic plan.
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 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 bank's annual 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. The financial markets currently project it will rise starting in about three quarters.
At June 30, 2014, the Company had $664,352 on hand, and after quarter-end following the payoff of all but $350,000 of the Company's 9% preferred stock, the Company still retained $70,000 cash on hand.
The Company will host a conference call at Noon at Friday August 15, 2014 to discuss the 2Q2014 results with its shareholders. Please contact Stephen Lange Ranzini via email at ranzini@university-bank.com to receive the call-in information for this call.
Other key statistics as of 6/30/2014:
| • | 5-year annual average revenue growth*, | 31.5% | |
| • | 1-year annual revenue growth*, | -13.4% | |
| • | Debt to equity ratio+, | 9.7% | |
| • | Current Ratio,# | 35.2x | |
| • | Total Assets, | $125,114,700 | |
| • | Loans Held for Sale, before Reserves, | $43,303,400 | |
| • | Loans Held for Investment, before Reserves, | $51,614,400 | |
*Using Trailing 12 month 2Q2014 sales which were $34,633,977, 2012 sales which were $39,991,125 and 2008 sales which were $13,449,856.
+Outstanding Preferred Stock (including accrued dividends) of $1,046,964 and total Company equity capital (common stock plus maturing preferred stock) of $10,824,040.
#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 $15.5 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.
Contact Information:
Contact:
Stephen Lange Ranzini
President and CEO
Phone: 734-741-5858, Ext. 9226
Email: