University Bancorp 3Q2018 Net Income $1,170,465; $0.225 Per Share

Author's Avatar
Apr 12, 2019
Article's Main Image

ANN ARBOR, MI / ACCESSWIRE / November 8, 2018 / University Bancorp, Inc. (OTCQB: UNIB) announced that it had an unaudited net income attributable to University Bancorp, Inc. common stock shareholders in 3Q2018 of $1,170,465; $0.225 per share on average shares outstanding of 5,200,921 for the third quarter, versus an unaudited net income of $844,103, $0.162 per share on average shares outstanding of 5,200,899 for 3Q2017. For the third quarter of 2018 minority interest income in the amount of $230,821 was incurred, versus a loss of ($28,292) for 3Q2017.

Unaudited net income attributable to University Bancorp, Inc. common stock shareholders for the first nine months of 2018 was $2,684,973, $0.516 per share on average shares outstanding of 5,200,906 for the first nine months, versus an unaudited net income of $2,653,081, $0.512 per share on average shares outstanding of 5,182,658 for 9M2017.

Net income and net income per share for the 12 months ended September 30, 2018 was $5,156,249 and $0.99, respectively.

In the first nine months of 2018, net income of the Company was decreased by three large non-recurring, unusual expenses, which were more than offset by a seasonal factor and a large non-recurring, unusual income item, which had an overall positive cumulative impact of $414,231, before tax:

Unusual expenses:

  1. Two Midwest Loan Services lawsuits were settled out of court for a total of $(260,000);
  2. Obtaining the final ruling on an appeal related to the Guidance Residential litigation resulted in total legal costs of $(143,000). This litigation is now ended and the time for any further appeals has lapsed;
  3. Implementation costs related to the adoption of a new mortgage loan origination system in the amount of $(121,250) were charged against income. The system is now fully operational though continuous improvement is ongoing.

Unusual gains:

  1. The value of the hedged mortgage origination pipeline rose $226,420 as the amount of locked loans rose over the level held as of 12/31/2017;
  2. With the rise in long term mortgage interest rates the valuation of mortgage servicing rights (MSRs) increased $712,061;

In the first nine months of 2017, net income of the Company was decreased by four large non-recurring, unusual expenses, only partially offset by a seasonal factor, which had an overall negative cumulative impact of $(1,255,487), before tax:

Unusual expenses:

  1. With the decline in long term mortgage interest rates the valuation of mortgage servicing rights (MSRs) decreased by $834,241;
  2. A litigation was settled at an early stage for $75,000;
  3. Retention stock option expense of $213,667;
  4. Implementation costs related to the adoption of a new mortgage loan origination system in the amount of $271,250 were charged against income.

Unusual gains:

  1. The value of the hedged mortgage origination pipeline rose $138,671 as the amount of locked loans rose over the level at year-end due to seasonal factors and record mortgage production levels.

For 9M2018, the Company had a return on equity attributable to common stock shareholders of 17.2% annualized on initial equity of $23,376,660. Return on equity over the trailing twelve months was 24.3% on initial equity of $21,188,576.

Management currently projects annual net income in 2018 of at least $3,650,000 or $0.70 per share. This forecast takes our actual results for 9M2018 and the actual and estimated results in the 4Q2018 based on our original budget, adjusted for all known major changes. The re-forecast assumes no change in mortgage interest rates from current levels.

President Stephen Lange Ranzini noted, ''2018 net income through the end of September was $(1,662,338) below budgeted levels, with the shortfall caused by decreased margins in our mortgage origination business in line with overall industry conditions, only partially offset by higher origination volumes, about $(403,000) in pre-tax legal expense, related to the final disposition of three lawsuits and $(1,298,953) in net losses at American Mortgage Solutions (AMS), which were $(1,148,921) above the budgeted levels due to delays in the restart of its correspondent origination business. AMS now appears to be on track to have better results in future periods.''

  • Towards the end of the third quarter of 2018, the new CEO of AMS hired a group of former colleagues who are key sales personnel and key underwriting personnel from competitor organizations, which should position this business unit to return to profitability in the first half of 2019, reaching substantial profitability in 2020, based upon a revised business plan for this unit. The team we have hired has the track record and ability to increase the volume of this business unit towards $2 billion a year, from current de minimus levels of under $10 million per quarter, while we work on renovating the business unit by positioning it with a fully competitive product offering. We believe that this potential will be unlocked with the completion of a technology enhancement project that is schedule to take about 120 days to complete.
  • The pipeline of interested mortgage subservicing prospects for our Midwest Loan Services division is the largest it's been in years. Also we are making changes to the software of our core subservicing system that will enable us to offer home equity line of credit subservicing starting no later than March 2019 and have identified three initial customers for that new line of business. We currently project a 15% increase in loans subserviced in 2019.

In 9M2018, our residential mortgage origination groups originated $662.2 million of mortgages, versus $644.5 million in 9M2017, of which $437.5 million were originated by our retail origination group, University Lending Group, LLC (ULG), versus $422.0 million in 9M2017, $204.8 million were originated by our UIF unit, versus $184.3 million in 9M2017 and the remainder originated by AMS. Home purchase transactions originated during 9M2018 rose 7.8% at ULG and 17.1% at UIF over the 9M2017 level and 95% of our retail originations at ULG and 91% of our UIF originations in 9M2018 financed home purchase transactions. The turmoil in the mortgage banking industry is providing us with excellent recruitment opportunities of seasoned loan originators who fit our model. Our ULG retail lending business is seeing success in recruitment, especially Loan Officers focused on high margin Renovation & Construction to Permanent Lending and high margin FHA/VA/USDA lending programs. UIF is continuing to develop additional markets in states that it has recently expanded into and will be expanding its business further by year-end.

AAIC is expanding into additional states with niche products.

Shareholders' equity attributable to University Bancorp, Inc. common stock shareholders was $26,072,743 or $5.01 per share, based on shares outstanding at September 30, 2018 of 5,202,899.

The annual shareholders meeting was held as scheduled on November 2, 2018 and the six current directors of the Company stood for reelection and were reelected.

Total Assets as of 9/30/2018 were $265,660,000, versus $294,888,000 at 6/30/2018, $255,647,000 at 3/31/2018, $226,823,000 at 12/31/2017, $263,830,000 at 9/30/2017, $269,775,000 at 6/30/2017, $235,232,000 at 3/31/2017, and $190,940,176 at 12/31/2016.

The Tier 1 Leverage Capital Ratio as of 6/30/2018 fell to 8.33% on net average assets of $231.1 million, from 8.92% on net average assets of $208.1 million, as the increase in mortgage production increased the size of the balance sheet. It was 10.60% at 12/31/2017 on net average assets of $190.0 million and 8.64% at 12/31/2016 on net average assets of $183.3 million. A proposed change by our regulatory agencies to the Basel 3 Capital Rules that would add about $3.5 million in Tier 1 Capital to our Company was postponed, and is now expected to be finalized in the first quarter of 2019.

Basel 3 Common Equity Tier 1 Capital at 9/30/2018 was $18,252,000, at 6/30/2018 was $17,537,000, at 3/31/2018 was $17,465,000, at 12/31/2017 was $19,352,000, and at 12/31/2016 was $14,215,000.

Basel 3 Total Risk Weighted Assets at 9/30/2018 were $118,670,000, at 6/30/2018 were $144,618,000, at 3/31/2018 were $139,284,000, at 12/31/2017 were $159,683,000 and at 12/31/2016 were $96,908,000. Risk Weighted Assets will continue to decline materially over the balance of 2018 due to improved contractual terms on the sale of our mortgage loans to secondary market investors.

The CET1 Risk Weighted Capital Ratio at 9/30/2018 was 15.38%, at 6/30/2018 was 12.13%, at 3/31/2018 was 12.54%, at 12/31/2017 was 12.12%, and at 12/31/2016 was 14.67%.

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 be excellent. Issues flowing from the collapse of a homebuilder building two homes for our borrowers with a total current loan balance of $935,416 that were delinquent at quarter-end were resolved and should be completed and the loans sold prior to year-end. Meanwhile however the loans are on non-accrual until the construction process ends. The bank had no foreclosed other real estate owned at quarter end. Due to the resumed construction related to these delinquent loans with a new builder during the quarter, substandard assets rose during 3Q2018 to $1,080,723, 5.87% of Tier 1 Capital at 9/30/2018 (there is a third residential loan in the amount of $145,307 that is well secured but was 60 days delinquent at quarter-end). The allowance for loan losses stands at $370,997 or 0.60% of the amount of portfolio loans, excluding the loans held for sale.

Liquidity remains excellent. The bank is positioned to benefit from rising short term interest rates. We manage an average of over $130 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) on which we earn interest at the Fed Funds rate minus 15 basis points.

Other key statistics as of 9/30/2018:

  • 10-year annual average revenue growth*, 32.5%
  • 1-year annual revenue growth*, 12.2%
  • 5 Year Average ROE 19.1%
  • LLR/NPAs>90 % 42.7%
  • Debt to equity ratio, 0%
  • Current Ratio,# 49.7x
  • Efficiency Ratio, %+ 91.8%
  • Total Assets, $265,660,000
  • Loans Held for Sale, before Reserves, $62,162,268
  • NPAs >90 days $868,775
  • TTM ROA % 2.48%
  • TCE/TA % 9.29%
  • Total Capital Ratio % 12.08%
  • NPAs/Assets % 0.41%
  • Texas Ratio % 4.31%
  • NIM % 3.74%
  • NCOs/Loans % -0.33%
  • Trailing 12 Months P-E Ratiox 10.3x

*Using Trailing 12 month 9M2018 revenues which were $57,147,297, 2016 revenues which were $50,948,149 and 2008 revenues which were $13,449,856.

#Parent company only current assets divided by 12 month projected cash expenses.

+Calculated as: (non-interest expense/(net interest income + non-interest income))

xBased on the last sale of $10.25 per share.

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 $25,627,505 or $4.926 per share at 9/30/2018. Please note that we do not see this latter statistic as particularly useful or meaningful because the value of the insurance agency and Midwest Loan Services substantially exceed their carrying value including this goodwill, but weare asked for this number. Treasury shares as of 9/30/2018 were zero.

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:

Ann Arbor-based University Bancorp owns 100% of University Bank which, together with its Michigan-based subsidiaries, holds and manages a total of over $21.6 billion in financial assets for over 125,000 customers, and our 394 employees make us the 5th 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 the 15th oldest bank headquartered in Michigan. We are 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, a faith-based banking firm based in Southfield, MI;
  • Community Banking, based in Ann Arbor, MI, which provides traditional community banking services in the Ann Arbor area;
  • Midwest Loan Solutions, a residential mortgage correspondent lender based in Southfield, MI, also doing business as American Mortgage Solutions;
  • Ann Arbor Insurance Centre, an independent insurance agency based in Ann Arbor.


Stephen Lange Ranzini, President and CEO

Phone: 734-741-5858, Ext. 9226

Email: [email protected]

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 changes in assets, pre-tax income, net income and 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, technological and legal 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.

SOURCE: University Bancorp, Inc.


0 / 5 (0 votes)