ANN ARBOR, MI--(Marketwire - Nov 20, 2012) - University Bancorp, Inc. (
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.