ANN ARBOR, MI--(Marketwire - May 16, 2008) - University Bancorp, Inc. (
NASDAQ:
UNIB)
reported unaudited net income available for common stockholders of $245,290
for the three months ended March 31, 2008 versus net income of $152,121 in
the first quarter of 2007. Basic and diluted earnings per share for 2008
and 2007 were $0.06 and $0.04, respectively.
Common stockholders' annualized return on equity rose to 17.8% for the
quarter. Total assets rose 15.6% versus year-end 2007 to exceed $100
million for the first time in the 108-year history of the bank.
Total deposits rose 16.7% versus year-end 2007.
President & CEO Stephen Lange Ranzini stated, "First quarter 2008 earnings
were ahead of our budget. We remain on course to produce earnings of
between $2 million and $2.5 million in 2008."
At March 31, 2008, the Bank's Tier 1 leverage capital ratio was 9.2%, down
from 9.7% at December 31, 2007 as increased custodial escrow and Islamic
deposits expanded the bank's balance sheet as planned. Several commercial
loans on our watch list were paid in full during the quarter releasing
specific reserves from our allowance for loan losses. During the quarter
the only commercial building held as other real estate owned was sold. In
addition, three of the five residential loans held as other real estate
owned were either sold subsequent to quarter-end or are under contract for
sale in the month of May.
Taking advantage of the recent turmoil in the mortgage bond market
University Bank in late March and early April purchased a total of $25.4
million in AAA rated U.S. Government Agency guaranteed bonds in the form of
U.S. government agency issued collateralized mortgage obligations with an
expected yield based on current consensus mortgage repayment rates of 6.02%
and an average expected life of 0.92 years. The bonds were purchased with
a mix of Fed Funds on hand and some borrowings from the Federal Home Loan
Bank of Indianapolis at a blended cost of the funds of 2.05% and assuming
no substantial changes in the interest rate curve and that mortgage
prepayment speeds for the mortgage underlying the securities pay at current
consensus, would generate additional annualized earnings at the rate of
$1,005,000 per year declining over time as the securities prepay or an
estimated $768,000 in additional net income over the next 12 months. The
bank's average monthly balance sheet was expanded by about 11% as a result
of the transactions and the bank's securities portfolio now represents
about 25% of its assets, which is more in line with peer group levels.
During the quarter, the Bank formed a new corporation called University
Lending Group, LLC, ("Lending") which commenced operations on April 1,
2008. The purpose of Lending will be to market, originate, process, close
and sell secondary mortgage market loans primarily to HUD, but also to
FHLMC and FNMA and other investors on a servicing released basis. The
primary source for these originations will be mortgage brokers from a
number of states. Additionally, production is expected to come from retail
originators working for Lending including one serving as the inside
mortgage sales originator for one of the largest regional Realtor® firms
in southeast Michigan. The funding of the mortgage loans will come from
University Bank. The expertise to run the operation will come from the
Managing Members of Lending, including an experienced management team with
whom the Bank has previously been in a successful partnership in a similar
business. University Bank will also provide accounting back office support
to Lending.
The Managing Members of Lending have been in the Mortgage Banking business
for over 50 years collectively and have been in this business before with
University Bank. The previous joint venture was known as Varsity Mortgage
Services, LLC and while operated between the years 1996 and 2000 brought
combined profits to the partners of over $4.2 million on a $300,000 initial
investment. In addition, University Bank made substantial profits from
the net interest income generated by the mortgage loans held for sale
generated by that business. A pipeline of mortgage loans held for sale of
this type offers University Bank a low risk high return use of funds for
its excess liquidity and excess capital. As part of the deal, University
Bank is guaranteed a minimum 15% return on its Tier 1 capital employed in
Lending, once Lending reaches cumulative retained earnings of $25,000.
The Managing Members of Lending have invested $300,000 in cash equity in
Lending for a 49.99% stake, which was matched by another $300,000 from
University Bank, which will hold a 50.01% stake. The business plan of
Lending contemplates initial start-up expenses of about $100,000 over the
first four months, which will be borne by the Managing Members, and then
ongoing monthly profit for University Bank of about $50,000 a month
starting later in the year, if the business volumes and margins are
achieved. The risks of this business based on current market conditions
are more closely tied to a scarcity of loans than market risk. The
substantial industry contacts that the management team have should provide
the expected level of business particularly in light of the fact that HUD
mortgage lending nationwide is currently growing rapidly and the fact that
the market share of FHA and VA lending under HUD's single family mortgage
programs has risen from 3% in 2006 to over 25% today.
President & CEO Ranzini noted, "Teams skilled in HUD wholesale lending are
in strong demand today and we are pleased to be able to add such a strong
group of managers to form this new subsidiary of University Bank."
Mortgage loans subserviced passed the $5 billion mark on April 1, 2008 and
are now currently at $5.2 billion with over 39,600 mortgages subserviced.
The following table summarizes the pre-tax net income (loss) of each profit
center of the Company for the three months ended March 31, 2008 and 2007
(in thousands):
2008 2007
-------- --------
Community and Islamic Banking $ (311) $ (296)
Midwest Loan Services 583 544
Corporate Office (15) (15)
Eliminations (20) (73)
-------- --------
Total $ 237 $ 160
Note that the allocation of costs between Midwest Loan Services and
Community & Islamic Banking for the interest on custodial deposits of
Midwest Loan Services held on deposit at Community Banking skews the profit
of the individual units as Midwest earns interest on the escrow deposits
which is eliminated in consolidation; the expense is an inter-company
expense among our two subsidiaries. Most of the eliminations are at the
University Bank level among University Bank, Midwest Loan Services and
Community & Islamic Banking.
(Unaudited)
For the
Quarter Ended
March 31,
(in 000s)
2008 2007
Net interest & financing income $ 871 $ 874
Provision (benefit) for loan &
financing losses (16) 22
Net trading securities gains 10 -
Total other income 1,425 1,297
Total other expense 2,065 1,916
Minority interest in consolidated
subsidiaries' earnings 20 73
Income tax benefit 20 -
Net income $ 257 $ 160
Preferred stock dividends 12 8
Net income available for Common
stockholders $ 245 $ 152
Basic earnings per common share $ 0.06 $ 0.04
Diluted earnings per common share $ 0.06 $ 0.04
Average shares outstanding
Basic 4,248 4,248
Diluted 4,288 4,287
Net interest & profit margin 4.27% 4.95%
Period-end: March 31, At December 31,
2008 2007 2007
Loans & financings including those
held for sale $59,120 $56,553 $60,063
Allowance for loan & financing
losses 447 466 686
Deposits 91,817 80,751 78,657
Assets 101,992 89,663 88,238
Equity 6,267 5,408 5,984
Book value per common share $1.35 $1.27 $1.29
Ann Arbor-based University Bancorp owns 100% of University Bank which
services a total of over $5.2 billion in loans. University Bank is an
FDIC-insured, locally owned and managed community bank, and is the only
financial institution headquartered in Washtenaw County rated "Outstanding"
by the FDIC for Community Service and Community Reinvestment through its
creative and innovative services to meet the financial needs of its
community. University Bank also engages in Islamic Banking through
80%-owned University Islamic Financial Corporation, the first and only
Islamic Banking subsidiary of a bank in the U.S. University Islamic
Financial offers residential and commercial real estate financing, the only
FDIC-insured Islamic deposits (offered through University Bank) and Islamic
equity mutual funds (offered through University Insurance & Investments).
University Bank also specializes in mortgage subservicing and mortgage
origination primarily serving over 250 credit unions (representing 2.6% of
all credit unions in the U.S.) through its Houghton-based 80%-owned
subsidiary, Midwest Loan Services, Inc. University Insurance & Investment
Services is a 100%-owned subsidiary that provides a full range of insurance
services as an independent agent for 49 insurance companies and investment
brokerage account services. University Lending Group is a Farmington
Hills-based 50.01%-owned subsidiary that originates HUD and other mortgage
loans on a wholesale and retail basis.
Any prediction of the future is inherently not assured. Investors should
read the risk factors listed on pages 23 through 24 in the Company's report
on Form 10K for the year ended December 31, 2007 and any prediction in this
release is intended to be covered by the Safe Harbor provisions of Section
21E of the Securities Exchange Act of 1934.
Contact Information: Contact:
Stephen Lange Ranzini
President and CEO
Phone: 734-741-5858, Ext. 226
Email: