UNIVERSITY BANCORP, INC.
ANN ARBOR, MI--(Marketwired - Nov 13, 2015) - University Bancorp, Inc. (
Net income for the nine months ended September 30, 2015 was $2,955,513 or $0.58 on average shares outstanding of 5,095,932 for the period, versus net income of $826,128 in the first nine months of 2014 or $0.175 on average shares outstanding of 4,713,281 for the period. In 9M2015 the net income of the Company's wholly-owned subsidiary, University Bank, was $2,982,729, above the budget by $1,692,624. For the first nine months of 2015 minority interest of $66,288 and preferred stock dividends of $5,273 were incurred versus minority interest of $139,646 and preferred stock dividends of $57,269 in the first nine months of 2014. All preferred stock was fully retired in the first quarter of 2015.
In 9M2015 the net income of the Company was decreased by several non-recurring, unusual losses net of unusual gains, which had an overall negative cumulative impact of $(1,198,686), before tax:
Unusual expenses:
1. Legal fees at UIF were $524,000 due to the trial and follow-up motions in 1Q2015 related to the litigation related to a competitor, Guidance. In addition, a reserve of $280,000 for future litigation expense including the cost of a possible appeal was established in 3Q2015, for total legal expense of $804,000;
2. With the fall in long term mortgage interest rates the valuation of mortgage servicing rights (MSRs) decreased $988,003, including a drop of $1,082,886 in 3Q2015. Of note, with the sharp rise in mortgage interest rates in the 4th quarter to date, if the portfolio were marked to market today, we estimate that 80% of this reserve would be reversed, increasing income in 4Q2015 by $800,000;
Unusual gains:
3. The value of the hedged mortgage origination pipeline rose $163,626 as the amount of locked loans rose over the level at year-end, however this amount decreased by $388,813 in 3Q2015 with the usual seasonal moderation of origination volumes;
4. Provision for loan losses fell by $330,552 due to improved asset quality and a lower projection of loan losses estimated by Invictus in the event of a CCAR Test style depression;
5. A recovery of foreclosure expenses advanced in 2010 from FHLMC of $99,139.
For the 12 months ended September 30, 2015, the Company had unaudited net income attributable to University Bancorp, Inc. common stock shareholders of $2,884,566 or $0.569 per share on average shares outstanding of 5,072,296 and return on equity attributable to common stock shareholders was 27.9% on initial equity of $10,329,410. Annualized return on equity in the first nine months of 2015 was 38.1%.
In 9M2014 the net income of the Company's wholly-owned subsidiary, University Bank, was $887,465, below the budget by $845,977, consolidated after-tax net income before minority interest was $1,027,111, below the budget by $1,140,312 and consolidated pre-tax income before minority interest was $1,543,007, below the budget by $1,741,143. The first nine months of 2014 were negatively impacted by a valuation mark to market on our mortgage servicing rights of negative $928,251 and legal expense related to two lawsuits of $716,000. One of these lawsuits was settled after quarter-end. These $1,644,251 of expenses, which were partially offset by a decrease in the required allowance for loan losses of $296,864, account for nearly the entire shortfall under the budgeted net income.
Based on the results of first nine months of 2015, we have re-forecasted our annual budgeted net income, which is currently projected to be $4,300,000 or $0.84 per share. This re-forecast takes our actual results in the 9M2015 plus our original budget for the final quarter of 2015, adjusted for all known major changes. The re-forecast assumes no change in mortgage interest rates from current levels. The bank's net income would benefit substantially from any future increases in the Fed Funds interest rate, since our mortgage subservicing business manages approximately $100 million of off-balance sheet escrow deposit accounts from which we earn all interest income and which are invested in overnight interest earning deposits at the Federal Home Loan Bank of Indianapolis. In addition, the bank's most recent Asset Liability Management Report indicates that our bank's own consolidated assets and liabilities are positioned so that we would benefit from increases in short term interest rates. The bank's original and re-forecasted budget did not assume any increase in the Fed Funds rate during 2015, to be conservative in our assumptions.
President Stephen Lange Ranzini noted, "The first nine months results were excellent. Revenue in the first nine months of 2015 was 16.7% above the prior year level and our five year annual average revenue growth rate was 20.0%."
With the implementation of the new Basel 3 Capital Rules and a rise in average assets due to increased mortgage originations, the Tier 1 Leverage Capital Ratio fell to 10.34% at 9/30/2015 on net average assets of $132.7 million and was 9.66% at 6/30/2015 on net average assets of $133.4 million and 10.12% at 3/31/2015 on net average assets of $106.9 million, versus 12.77% at 12/31/2014 on average assets of $104.9 million using the old Basel 2 Capital Rules, and is projected to be 12.93% at 12/31/2015, if we achieve our 2015 re-forecasted budget projection, which assumes that mortgage originations will revert to lower budgeted levels by year end, unless we opt to sell MSRs, pay dividends or conduct a stock buyback during 2015, all of which is a possibility. Basel 3 Common Equity Tier 1 Capital at 9/30/2015 was $12,258,000, at 6/30/2015 was $11,413,000, and at 3/31/2015 was $9,412,000. Basel 3 Total Risk Weighted Assets at 9/30/2015 were $83,210,000, at 6/30/2015 were $90,790,000, and at 3/31/2015 were $86,927,000. The CET1 Risk Weighted Capital Ratio at 9/30/2015 was 14.73%, at 6/30/2015 was 12.57% and at 3/31/2015 was 10.83%.
Shareholders' equity attributable to University Bancorp, Inc. common stock shareholders was $14,567,688 or $2.851 per share, based on shares outstanding at September 30, 2015 of 5,109,649. Excluding goodwill & other intangibles related to the acquisition of Midwest Loan Services and Ann Arbor Insurance Center, net tangible shareholders' equity attributable to University Bancorp, Inc. common stock shareholders was $13,909,022 or $2.722 per share at 9/30/2015. (Please note that we do not see this latter statistic as particularly useful or meaningful but we are asked for it.) Treasury Shares as of 9/30/2015 were zero.
Total Assets as of 9/30/2015 were $159,769,000 versus $166,589,000 as of 6/30/2015, $132,715,000 as of 3/31/2015, $120,976,779 as of 12/31/2014, and $112,655,592 as of 9/30/2014.
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 9/30/2015, both well secured real estate loans delinquent 30-60 days with a total carrying value of $326,175. The Allowance for Loan Losses stands at $471,120 or 0.79% of the amount of portfolio loans excluding the loans held for sale. Substandard assets fell 8.8% during 3Q2015 to $1,083,203, 7.83% of Tier 1 Capital at 9/30/2015, including other real estate owned of $530,641. In October we sold an ORE land parcel carried at $228,800 for a gain of approx. $50,000
In the first nine months of 2015, our residential mortgage origination groups originated $570.6 million of mortgages sold to the secondary market, of which $369.5 million were originated by our retail origination group, University Lending Group, LLC (ULG), $151.4 million were originated by our UIF unit, and the remainder originated by our credit union origination group. 86% of our retail originations and 71% of our UIF originations financed purchase transactions. Purchase transactions originated during 9M2015 also rose 23% at ULG and 27% at UIF over the 9M2014 level. The ULG operation was assisted in 9M2015 by changes to the FHA loan program that made it more competitive nationwide and caused it to gain market share. ULG specializes in FHA and VA lending and derives about 60% of its volume from these programs. The UIF operation continues to increase its volume as it expands its business and trained lenders nationwide into additional markets.
Loans Held for Sale, before Reserves as of 9/30/2015 were $40,114,000, versus $59,209,000 as of 6/30/2015, $48,533,000 as of 3/31/2015, $40,078,919 as of 12/31/2014 and $33,070,000 as of 9/30/2014.
Liquidity remains excellent. We manage an average of $100 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 withdrawals in just a few minutes, and on which we earn interest at Fed Funds rate.
The Company will host a conference call at Noon ET at Monday November 23, 2015 to discuss the 3Q2015 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 9/30/2015:
| • | 5-year annual average revenue growth*, | 20.0% |
| • | 1-year annual revenue growth*, | 16.7% |
| • | 5 Year Average ROE | 15.1% |
| • | LLR/NPAs > 90% | 44.4% |
| • | Debt to equity ratio, | 0% |
| • | Current Ratio,# | 6.6x |
| • | Efficiency Ratio,%@ | 87.1% |
| • | Total Assets, | $159,769,000 |
| • | Loans Held for Sale, before Reserves, | $40,114,000 |
| • | NPAs > 90 days | $530,641 |
| • | TTM ROA% | 2.41% |
| • | TCE/TA% | 8.99% |
| • | Total Capital Ratio% | 12.61% |
| • | NPAs/Assets% | 0.68% |
| • | Texas Ratio% | 7.29% |
| • | NIM% | 4.12% |
| • | NCOs/Loans% | -0.005% |
*Using Trailing 12 month 9M2015 sales which were $43,608,780, 2013 sales which were $38,856,573 and 2009 sales which were $21,814,793.
#Parent company only current assets divided by 12 month projected cash expenses.
@Calculated as: (non-interest expense/(net interest income + non-interest income))
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: 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 $18 billion in financial assets for over 110,000 customers and our 339 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 members of University Bank's corporate family, ranked by their size of revenues are:
- University Lending Group, a retail residential mortgage originator based in Clinton Township, MI;
- Midwest Loan Services, a residential mortgage subservicer based in Houghton, MI;
- UIF, an Islamic banking firm based in Farmington Hills, MI;
- Community Banking, based in Ann Arbor, MI, 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.
