University Bancorp, Inc. (OTCQB: UNIB) announced that it had
unaudited net income attributable to University Bancorp, Inc.
common stock shareholders in the first nine months of 2012 of
$1,938,345, $0.416 per share on average shares outstanding of
4,659,265 for the first nine months. For the first nine months of
2012, University Bank had pre-tax income of $2,936,375. For the
first nine months of 2012 minority interest of $915,917 and
preferred stock dividends of $70,540 were incurred.
For the 12 months ended September 30, 2012, the Company had
unaudited net income attributable to University Bancorp, Inc.
common stock shareholders of $2,383,685 or $0.519 per share on
average shares outstanding of 4,592,214 and return on equity
attributable to common stock shareholders was 44.0% on initial
equity of $5,420,309. Net income attributable to University
Bancorp, Inc. common stock shareholders in the fourth quarter of
2011 was $445,340, or $0.101 per share on average shares
outstanding of 4,391,062.
Unaudited net income attributable to University Bancorp, Inc.
common stock shareholders in the three months ended September 30,
2012 was $493,601, or $0.106 per share on average shares
outstanding of 4,667,598. For the three months ended September 30,
2012, University Bank had pre-tax income of $842,090, minority
interest was $265,301 and preferred stock dividends of $26,240 were
incurred.
Until September 2012, the bank was tracking ahead of its annual
budget, which calls for the company to have net income attributable
to University Bancorp, Inc. common stock shareholders of $3,668,875
after-tax ($0.788 per share) and for University Bank to earn
$5,709,744 pre-tax for the entire 2012 year. Unusual expenses
totaling $1,289,254 in September included:
- $642,900 market valuation reserve on mortgage servicing rights,
as a result of the Fed's initialization of QE3, which manipulated
mortgage interest rates down to record low levels;
- $420,549 special addition to the economic risk assumption in
the Allowance for Loan Losses (a change in our methodology to a
more conservative posture) to discount the increasing possibility
of a national recession in 2013;
- $225,805 was added to the Allowance for Loan Losses to
write-off an unsecured commercial loan when the sale of the
business (a convenience store in Ann Arbor) fell through at the
last minute. We do anticipate full recovery of this loan from the
sale of the business later this year.
In every six month period following a write-down of mortgage
servicing rights, the bank earns more income from increased
mortgage originations as a result and we expect the same pattern in
the fourth quarter of 2012 and first quarter of 2013. We currently
expect 2013 earnings to be similar to the 2012 budgeted amounts and
for the results in the fourth quarter of 2012 to be ahead of the
budget. Our interest rate stress test models indicate that pre-tax
income for the next 12 months will range between $5.7 million and
$2.5 million if long and short term interest rates shift between
-100 b.p. to + 500 b.p., with pre-tax income of $5.1 million in the
+500 scenario. The low end of the profit range assumes scenarios
where our residential mortgage origination units are
unprofitable.
For the first ten months of 2012, University Bank had pre-tax
income of $3,577,782, and net income of $2,482,259, including
$641,406 of pre-tax income and $568,800 of net income in October
2012. The October 2012 result was $164,202 ahead of the budgeted
net income for the month, although $918,691 below the budgeted
income for the first ten months of 2012 due to factors noted above.
Both October 2012 and future results will be assisted by reduced
minority interest expense, as we completed the purchase of an
additional 12.4975% of University Lending Group, LLC at a price of
$500,000, bringing our ownership stake to 100% from 87.5025%.
Overall, we currently expect to meet or fall up to $500,000 short
of the budgeted net income for the 2012 year.
Federal income tax expense of $107,000 was accrued in the third
quarter of 2012 and also year-to-date, since the Company was in a
taxable position for the 2012 tax year, although the Company does
have tax carry forward assets which can absorb taxable income of
approximately $3.35 million in 2012 and subsequent years before
federal income tax is actually payable, as a result of an
investment in a low income housing tax credit partnership in prior
years.
Tier 1 Capital rose to 10.19% at 9/30/2012, and was $12,738,000
on average assets of $125.0 million, was 11.04% at 10/31/2012 on
average assets of $116.6 million, and is projected to be 12.48% at
12/31/2012 if we achieve our 2012 budget goal and average assets
continue to shrink seasonally as expected. Our goal is to keep Tier
1 Capital above 10% of average assets, and not more than 14%, so we
have achieved the bottom-end of our goal. Shareholders' equity
attributable to University Bancorp, Inc. common stock shareholders
rose to $7,776,296 or $1.666 per share, based on shares outstanding
at September 30, 2012 of 4,667,598. Annualized return for the first
nine months of 2012 on equity attributable to University Bancorp,
Inc. common stock shareholders was 44.1% based on initial equity of
$5,865,649.
During the quarter, and based on the June 30, 2012 FDIC Call
Report data, the IDC Rating Agency, scored University Bank 289 out
of 300, the 8th best bank headquartered in Michigan and superior to
all other banks based in Washtenaw County:
- Ann Arbor State Bank 260
- Bank of Ann Arbor 232
- Chelsea State Bank 196
- United Bank & Trust 159
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. As of 9/30/2012 we had just 1 commercial
loan for $202,277 delinquent over 30 days, 1 consumer loan for
$2,876 delinquent over 30 days and 1 residential mortgage loan for
$61,113 delinquent over 30 days and still accruing and 1
residential mortgage loan for $319,407 on non-accrual that was
transferred to ORE after quarter-end. At quarter-end we had 4 ORE
properties carried at $570,007 left to sell, and three of these
totaling $370,607 are under contract to sell prior to year-end.
With the earnings as strong as they are, we are aggressively moving
to write-down, discount and sell substandard assets. In addition,
we charged $1,372,772 against earnings for the Allowance for Loan
Losses during the first nine months of 2012, leaving us with a
balance of $1,161.2k at quarter-end versus portfolio loans of
$58,848.2k, or 1.97%. Including the delinquent loans mentioned
above, total non-performing loans delinquent over 90 days, loans on
non-accrual and ORE totaled $1.09 million at 9/30/2012, down from
$1.61 million at 6/30/2012. The ratio of substandard and
non-performing assets to Tier 1 Capital was 17.1% at 10/31/2012 and
is projected to be 9.0% at 12/31/2012 with pending sales and loan
payoffs.
In the first nine months of 2012, our retail mortgage
origination group, University Lending Group, LLC, originated a new
record $294,730,154 in residential mortgage loans, of which 72%
financed purchase transactions, which is excellent. It is our goal
to build a sustainable mortgage origination business not dependent
upon refinancing.
During the past several months the bulk of the daily retail
originations from our credit union customers have been migrated to
the unified back office platform across which all of our other
residential originations flow. The remaining credit unions will be
migrated before year-end. This is expected to enable an increase in
the origination business won from our current 308 credit union
subservicing customers, since our unified origination platform is
significantly more competitive than the platform it is
replacing.
Liquidity remains excellent and we manage an additional $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, which are available to us to meet any withdraws in
just a few minutes.
President Stephen Lange Ranzini noted, "While the results for
the past 12 months are very encouraging, we remain very focused on
and concerned about our ability to fully comply with highly complex
compliance rules and the tremendous amount of work that these will
require of us to succeed in future regulatory examinations. Current
areas of major focus and follow-up include HMDA and BSA compliance
and preparation for our first CFPB examinations expected in
2013."
Other key statistics:
- 5-year annual average revenue growth*, 39.7%
- 1-year annual revenue growth*, 88.7%
- Debt to equity ratio+, 11.7%
- Current Ratio,# 2.64x
- Trailing 12 Months P-E Ratiox, 6.3x
*Annualizing October 2012 YTD sales which were $33.46 million,
2011 sales were $21,280,296 and 2008 sales were $13,449,856.
+Outstanding Preferred Stock of $1,031,450 and total Company equity
capital of $8,807,746. #Parent company only current assets divided
by 12 month projected expenses. xBased on last sale price of $3.25
per share.
Shareholders and investors are encouraged to refer to the
financial information including the audited financial statements,
available on our investor relations web page at:
http://www.university-bank.com/Bancorp.html.
Ann Arbor-based University Bancorp owns 100% of University Bank
which, together with its subsidiaries, holds and manages a total of
over $11.8 billion in loans and assets and our 317 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.
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.
Contact: Stephen Lange Ranzini President and CEO Phone:
734-741-5858, Ext. 9226 Email: Email Contact
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