For Immediate Release
Contact: Stephen Lange Ranzini, President and CEO
Phone: 734-741-5858, Ext. 226
Email: ranzini@university-bank.com
UNIVERSITY BANCORP REPORTS RECORD PROFIT FOR 2005
DUE TO NEW ISLAMIC SUBSIDIARY AND GROWTH AT MIDWEST LOAN SERVICES
Ann Arbor, Michigan, March 31, 2006 -- University Bancorp, Inc.
(NASDAQ: UNIB) reported audited net income of $1,989,169 in 2005, versus a net
loss of $584,820 in 2004. Basic earnings (loss) per share for 2005 and 2004 were
$0.48 and (0.14), respectively and diluted earnings (loss) per share for 2005
and 2004 were $0.47 and (0.14), respectively.
Community Banking had pretax earnings of $1,518,000 during the current
year as opposed to a loss of $388,000 in 2004. Income in 2005 was positively
impacted by a $359,442 or 18.3% increase in net interest income; a $800,000 fee
from the relocation of the bank's headquarters partially offset by $300,000 in
additional carrying costs for holding two headquarters for six months during
2005; and a $1,000,000 gain from the formation of University Islamic Financial
Corporation (UIFC) partially offset by a $80,000 charge related to the buy-out
of the interest of our former partner in the new residential securitization
business of UIFC. In February, we announced that FHLMC had agreed to create a
secondary market for UIFC's Islamic Murabaha mortgage alternative loan
transactions in the amount of up to $100,000,000 over the next 12 months. The
Islamic Banking Subsidiary ended the year with $14.50 million in Islamic
residential mortgage alternative loan transactions and $5.58 million of Islamic
deposits.
The 2004 results were impacted by $305,000 in expenses for resolution
of other real estate owned and a $156,000 impairment of the tax credit
partnership that more than offset general operational improvement in Community
Banking, including a 23.1% increase in loans and a 14.9% increase in deposits
over 2003. Community Banking also incurred approximately $10,000 a month in
expenses in 2004 to grow the Islamic banking program.
Midwest had pretax income of $426,000 in 2004 as compared to a pretax loss
of $27,000 in 2004. In 2005, Midwest had a 44.9% increase in mortgage loans
subserviced, to 26,414 loans at December 31, 2005.
Income at Midwest in 2004 was negatively impacted in the first half of
2004 by investments of about $30,000 a month in overhead intended to grow
Midwest's jumbo and non-standard originations through a secondary market conduit
established with Lehman Brothers and by a $68,000 write down of its mortgage
servicing rights.
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UNIVERSITY BANCORP REPORTS 2005 RECORD PROFIT
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Midwest is bringing on 3,700 additional mortgages effective April 15th
for a group of 50 credit unions previously serviced by competitor, CMCU, which
left the business and will finish April with over 30,000 mortgages subserviced
with $3.7 billion in balances.
The net income reported in 2005 exceeds the upper end of the projection
provided in April 2005 of between $1,500,000 and $1,950,000 ($0.35 to $0.46 per
share). Management will issue further guidance for 2006 earnings with its first
quarter earnings press release.
Community Banking's loan portfolio at December 31, 2005 was $45.65
million, a new all-time high, and an increase of $2.65 million or 6.2% from the
balance at December 31, 2004. Community Banking's deposits at December 31, 2005
were $56.02 million, a new all-time high, and an increase of 25.6% from the
balance at December 31, 2004. During the fourth quarter, the amount of mortgage
escrow deposits at University Bank related to Midwest Loan Services more than
doubled to $13.5 million average monthly balance. We expect this balance of low
cost escrow deposits to double again in the second quarter of 2006 to over $27
million.
Total non-performing assets at December 31, 2005 decreased by 47.0%
to $626,668, versus $1,182,063 at December 31, 2004. During 2004, the ratio of
net charge offs during 2004 to average loans outstanding during 2005 was 0.05%,
versus 0.04% in 2004 and 0.41% in 2003.
Total non-interest income increased to $5,891,330 for the year ended
December 31, 2004 from $3,822,548 for period ended in 2004. The increase was
principally a result of the gains from the formation of UIFC, the gains from the
relocation of the bank's headquarters and increases in Midwest's subservicing
revenue.
Non-interest expense decreased to $6,304,707 in the period ended
December 31, 2005 from $6,375,181 for the same period in 2004. The decrease was
due principally to decreases in other real estate owned expense, mortgage
banking expense, amortization of servicing rights and the tax credit partnership
write-off mentioned above which were only partially offset by increases in
salaries and benefits and temporarily increased occupancy expenses related to
the bank carrying two headquarters for six months of 2005.
At December 31, 2005, the Bank was "well capitalized" according to the
FDIC's classification with a Tier 1 leverage capital ratio of 14.00%.
On February 15, 2006, Virtue Investors, LLC made the final $1,500,000
payment related to the purchase by it of 20% of University Islamic Financial
Corporation.
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UNIVERSITY BANCORP REPORTS 2005 RECORD PROFIT
Page 3 of 4
For the For the
Quarter Ended Year Ended
Dec. 31, Dec. 31,
(in 000s) (in 000s)
2005 2004 2005 2004
Net interest income $ 612 $ 531 $2,320 $1,960
Provision (credit)
for loan losses 0 (106) 17 (88)
Total securities gains 0 (1) 0 0
Total other income 2,792 935 5,891 3,822
Total other expense 1,627 1,669 6,305 6,375
Income tax (benefit) (100) 0 (100) 80
Net income (loss) $1,877 $( 97) $1,989 $(585)
Basic and diluted income
(loss) per common share $ 0.46 $(0.01) $ 0.48 ($0.14)
Diluted income (loss per
common share $ 0.45 (0.01) $ 0.47 ($0.14)
Average shares outstanding 4,149 4,101 4,147 4,085
Net interest margin 5.19% 3.96% 4.89% 4.68%
Period-end: December 31,
2005 2004
Loans & Loans Held for Sale $45,652 $43,846
Allowance for loan losses 349 353
Deposits 56,021 44,588
Assets 64,540 50,786
Equity 5,301 3,002
Book value per share $1.21 $0.73
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UNIVERSITY BANCORP REPORTS 2005 RECORD PROFIT
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The following table summarizes the pre-tax (loss)income of each profit
center of the Company for the years ended December 31, 2005, 2004, and 2003 (in
thousands):
2005 2004 2003
---- ---- ----
Community Banking $1,518 $(388) $(301)
Midwest Loan Services 426 (27) 426
Corporate Office (55) (90) (111)
------ ----- ------
Total $1,889 $(505) $ 14
====== ====== ====
Three months ended December 31, 2005 and 2004 Income (Loss) Summary
2004 2003
---- ----
Community Banking $1,576 $(138)
Midwest Loan Services 205 74
Corporate Office (4) (33)
------ ------
Total $1,777 $( 97)
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* * *
Ann Arbor based University Bancorp owns 100% of University Bank which
manages a total of $3.35 billion in assets. University Bank is an FDIC-insured,
locally owned and managed Community Bank primarily serving the cities of Ann
Arbor and Ypsilanti of Washtenaw County. The Community Banking operation focuses
on local businesses, minorities and the non-profit communities. University Bank
is the only financial institution headquartered in Washtenaw County to be rated
"Outstanding" by the FDIC for Community Service and Community Reinvestment.
Other Community Banking specialties include highly competitive deposit products
for business owners, residential mortgages, commercial real estate lending and
insurance, investments and money management through its wholly-owned subsidiary
University Insurance & Investments, Inc. In addition to its Community Banking
operations, University Bancorp specializes in mortgage subservicing and mortgage
origination primarily serving over 230 credit unions (representing 2.4% of all
credit unions nationwide) through the Bank's Houghton-based 80%-owned
subsidiary, Midwest Loan Services.
Any prediction of the future is inherently not assured. Investors
should read the risk factors listed on pages 21 and 22 in the Company's report
on Form 10K for the year ended December 31, 2005 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.
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