UNIVERSITY BANCORP, INC.
2015 Washtenaw Avenue
Ann Arbor, Michigan 48104
(734) 741-5858
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
June 15, 2007
To the Holders of Common Stock of University Bancorp, Inc.:
The Annual Meeting (the "Meeting") of Stockholders of University Bancorp,
Inc. (the "Company") will be held at the main office of University Bank (the
"Bank"), the Company's bank subsidiary, 2015 Washtenaw Avenue, Ann Arbor,
Michigan 48104, at 12:00 noon, local time, on Wednesday, June 15, 2007 for the
following purposes:
1. To elect seven directors to serve until the next Annual Meeting of
Stockholders;
2. To transact such other business as may properly come before the
Meeting.
The Board of Directors has set 5:30 p.m. Central Standard Time, on April
27, 2007 as the record date for the determination of the stockholders entitled
to vote at the Meeting. All stockholders as of the record date are entitled to
receive this notice. The Proxy Statement and form of proxy for the Meeting are
being mailed with this notice and the initial mailing including the Proxy
Statement and form of proxy will be sent to stockholders on approximately May 1,
2007.
By order of the Board of Directors,
Stephen L. Ranzini,
President and Chief Executive Officer
April 27, 2007
If you wish to participate in the vote on the matters coming before the Annual
Meeting and do not intend to attend in person, please mark, sign and date the
enclosed form of proxy and return it promptly to the Company, c/o University
Bank, 2015 Washtenaw Avenue, Ann Arbor, Michigan 48104.
UNIVERSITY BANCORP, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
June 15, 2007
TABLE OF CONTENTS
Page
General Information 3
Election of Directors 5
Security Ownership of Certain Beneficial
Owners and Management 6
Executive Officers 9
Executive Compensation 9
Section 16(a) Beneficial Ownership Reporting Compliance 10
Compensation Plans 11
Certain Relationships and Related Transactions 13
Independent Public Accountants 14
Other Matters 14
GENERAL INFORMATION
By appointing "proxies", stockholders may vote their shares at the Annual
Meeting of Stockholders (the "Meeting") of University Bancorp, Inc. (the
"Company"), which is scheduled to be held on June 15, 2007 and any adjournments
thereof, whether or not they attend. With this Proxy Statement, the Company's
Board of Directors provides information on the items of business scheduled for
the Meeting and asks you to appoint proxies selected by the Board of Directors
to vote your shares. The Company's Board of Directors is soliciting your proxy.
The Company is paying for the cost of such solicitation.
The proxies will vote your shares according to your instructions. The Board
of Directors recommends a vote "FOR" the election of each of the nominees for
election as directors of the Company indicated in the accompanying form of
proxy. You may vote "FOR" or "WITHHOLD" as to all or any one or more nominees
for election as directors.
You have one vote for each share of Common Stock, par value $.01 per share,
of the Company ("Common Stock") registered in your name on the Company's books
on April 27, 2007 at 5:30 p.m., Central Standard Time, the record date for the
determination of stockholders entitled to notice of and to vote at the Meeting.
At that time, the Company had 4,248,378 shares of Common Stock outstanding and
entitled to vote.
If you wish to participate in the vote on the matters coming before the
Meeting, please sign, date and promptly return your form of proxy to the
Company, c/o University Bank, 2015 Washtenaw Avenue, Ann Arbor, Michigan 48104.
If you return a properly signed and dated form of proxy but do not mark any
choices for the election of directors your shares will be voted in accordance
with the recommendations of the Board of Directors as to such election.
You may revoke the proxy solicited by the Board of Directors before its
exercise by delivering written notice of such revocation to the Company c/o
University Bank, 2015 Washtenaw Avenue, Ann Arbor, Michigan 48104, or by
submitting a subsequently dated proxy, or by attending the Meeting and voting by
ballot.
Directors will be elected by plurality of the votes of Common Stock cast at
the Meeting. For these purposes, abstentions and broker non-votes are not
considered votes cast.
Presentation of Proposals of Stockholders
It is expected that the next annual meeting of stockholders of the Company
will be held in the 2008 calendar year. Proposals of stockholders to be
presented at such annual meeting must be received by the Company prior to
December 31, 2007 to be included in the Company's proxy statement and form of
proxy for such annual meeting. The notice and any such proposal must comply with
the applicable provisions of Rule 14a-8 under the Securities Exchange Act of
1934, as amended.
Corporate Governance - Attendance at Board of Director and Committee Meetings
The Board of Directors oversees the management of the business of the
Company. The Board of Directors met four times during 2006 and each member
attended each meeting except that Robert Goldthorpe was unable to attend two
meetings, Joseph Lange Ranzini was unable to attend three meetings, Paul Lange
Ranzini was unable to attend one meeting and Michael Talley was unable to attend
one meeting, due to scheduling conflicts. In addition, directors received
monthly information packages and communicated frequently on an ongoing basis
between meetings. During the year Robert Goldthorpe resigned as Chairman of the
Board and Charles McDowell was elected his successor. Michael Concannon was
elected to fill the vacancy caused by Robert Goldthorpe's resignation.
The Board of Directors has an Audit Committee consisting of Gary Baker,
Michael Concannon, Charles McDowell and Michael Talley, which met four times
during 2006 and each member attended each meeting except that Robert Goldthorpe
missed one meeting because he was traveling overseas before he retired from the
board.
The Compensation Committee of the Board of Directors consists of four
members of the board, presently Messrs. Gary Baker, Robert Goldthorpe, Charles
McDowell and Michael Talley. The Compensation Committee did not meet during
2006.
The board's audit committee also served as the Nominating Committee
during the fiscal year ended December 31, 2006. The members of the nominating
committee are all independent directors. The nominating committee does not have
a charter. The company considers nominations from any source and suggestions for
nominations are welcome to the Chairman of the Board, Charles McDowell at the
address listed for him, below. No standard for minimum director candidate
qualifications has been established, however, the board believes that experts in
their field are critical to a well functioning board. We have no formal process
for identifying and evaluating director candidates. We have not rejected any
candidates proposed in the past year.
Corporate Governance - Discussion of Committees
The Audit Committee receives audit reports and management recommendations
from the Company's outside independent auditors and responds to these reports
and recommendations. All members of the Audit Committee are independent as
required by 4200(a)(15) of the National Association of Securities Dealers
listing standards.
The Compensation Committee sets the amount and type of pay for the
employees of the Company. Each subsidiary has its own compensation committee and
independent compensation process. The Company has a policy that executives of
the Company do not draw pay directly from the Company because they spend their
time mainly on the business of the subsidiaries. The Company's Compensation
Committee establishes the level of ESOP and Stock Option compensation for the
Company and all subsidiaries of the Company through recommendations to the
Company's Board of Directors.
Compensation of Directors
Directors are not compensated for attendance at meetings or otherwise,
although they are reimbursed for travel expenses to attend in person meetings.
In addition, each of the outside directors was awarded 25,000 stock options to
buy common stock at the then prevailing price of the common stock either in 2002
or at the time of their election, whichever was later. The last previous award
of stock options to the outside directors had been in 1993.
Code of Ethics
We have adopted a written code of ethics that applies to all of our
employees including our senior officers which covers honest ethical conduct
including handling of conflicts of interest, full, fair, accurate, timely and
understandable disclosure in reports, SEC filings and other public
communications, compliance with applicable laws and regulations, prompt internal
reporting of code violations, and accountability for adherence to the code.
ELECTION OF DIRECTORS
The Board of Directors recommends a vote "FOR" the slate of seven directors
named below. Biographical information is included below for each nominee.
Persons elected at the Meeting will hold office until a successor is elected or
until earlier resignation or removal. In the event that any of these director
nominees becomes unavailable to serve, proxies will be voted for the election of
such other person(s) as may be recommended by the Board of Directors.
Nominees for Election as Directors of the Company
Stephen Lange Ranzini, age 42, has been President, CEO and a director of
the Company or its Predecessors since July 1988, and in addition has served in a
variety of other management position at the Company, University Bank and the
Bank's subsidiaries since July 1988. In November 1997, he became President and
Chairman of the Bank. Since July 1991, Mr. Ranzini has been a director of
CityFed Financial Corp., an SEC reporting company traded over the counter, and
was elected its President in October 2005. Since July 1997, Mr. Ranzini has
served as a Director of Newco Bancorp and its predecessor, a CEDAR reporting
Canadian company previously listed on the Toronto Stock Exchange. In May 1993,
Mr. Ranzini co-founded and became a Director and the Treasurer of Michigan
Business Development Company, a community development lending organization, and
was elected President and Chairman in January 2003. Mr. Ranzini was also elected
Chairman of Jove Corporation in December 2003, an SEC reporting company traded
over the counter that acquired Michigan Business Development Company in late
2004. He earned a B.A. from Yale in 1986. He is the brother of Joseph Lange
Ranzini and Paul Lange Ranzini.
Gary Baker, age 52, was elected as a director of the Company in April 2002.
Until December 2005 he was EDS's Director, GM Global Supply Chain & eGM. He also
hosts a radio show called the Internet Advisor on Detroit's WJR 760AM and a
similar TV segment on Detroit's WXYZ-TV Channel 7 Action News. Gary is a former
Partner in the Advanced Technology Group in Arthur Andersen and in April 1994
founded and was the CEO of Online Technologies Corporation, one of the oldest
ISPs in Michigan specializing in hosting and developing business Websites. He
earned a BA and an MBA from the University of Michigan. Mr. Baker sits on our
audit committee and is considered a financial expert under the Sarbanes-Oxley
Act.
Michael Concannon, age 55, is proposed to join the Company's board of
directors. Mr. Concannon has served as a Director of University Bank since
December 2005. For more than the past five years, Mr. Concannon has been
President of The Concannon Company, a diversified real estate holding company
with operations in southeast Michigan. He is also a practising attorney. Mr.
Concannon is proposed to sit on our audit committee.
Charles McDowell, age 71, was elected to the board of directors in March
2004 and was elected Chairman of the Board in December 2006. He is a Director
of Northern Michigan Foundation where he has served since its formation in
October 1995 and also served as its Executive Vice President from its formation
until June 2005, and was a Director of Michigan Business Development Company
from July 2001 to March 2004. He also was a co-founder and served as Executive
Vice President of Michigan Business Development Company from May 1993 to March
2004. Past employment experiences prior to joining Michigan Business Development
Company include serving as Chairman and CEO of Northwestern State Bank in East
Jordan, Michigan from 1978 to 1990 and as President of the Michigan Association
of Community Bankers in 1985. A graduate of the Rutgers School of Banking, Mr.
McDowell sits on our audit committee and is considered a financial expert under
the Sarbanes-Oxley Act.
Dr. Joseph Lange Ranzini, age 47, has served as a director of the Company
since April 1996. A graduate of Dartmouth College in 1982, he earned his M.D.
from the University of Virginia in 1986, and completed his residency with a
specialty in General Surgery at Mary Imogene Bassett Hospital, an affiliate of
Columbia University in Cooperstown, New York, in 1992. Since that time he has
been in a general surgery private practice at Augusta Medical Center in
Fishersville, Virginia, where he has also served as President of the Board of
Directors. He is the brother of Stephen Lange Ranzini and Paul Lange Ranzini.
Paul Lange Ranzini, age 45, has served as a director of the Company since
April 1996. He is President of American Institute of Musicology and Managing
Editor at A-R Editions, two leading musicology book publishers, and a Doctoral
Candidate in Music History and Theory at the University of Chicago. In 1994 and
1995, he earned a Fulbright Fellowship to Germany for Dissertation Research. At
the University of Chicago, he was also employed part-time as the computer data
center manager at the University's International House. From 1984 to 1988 he was
a graduate student at the University of Michigan in Ann Arbor, Michigan, where
he earned two Masters, an M.A. in Musicology and an M.M. in Organ and Church
Music. From 1979 to 1983 he was a student at the College of William and Mary,
where he received a B.A. in Philosophy. He is the brother of Stephen Lange
Ranzini and Joseph Lange Ranzini.
Michael Talley, age 56, has served as a director of the Company or its
Predecessors since 1988. Mr. Talley is the lead independent director and
Chairman of the Audit Committee. Since March 1990, Mr. Talley has served as a
broker at Ladenburg, Thalmann & Co. Inc. in New York, New York where he is
currently a Vice President. Between February 1988 and March 1990 Mr. Talley
served as a broker at Oppenheimer & Co., Inc. in New York, New York. For more
than five years until February 1988, he served as a broker at L.F. Rothschild
Unterberg Towbin in New York, New York. Mr. Talley is a native of Detroit,
Michigan, and a graduate of Michigan State University, in East Lansing,
Michigan. Mr. Talley chairs our audit committee and is considered a financial
expert under the Sarbanes-Oxley Act.
There is no family relationship between any current director or executive
officer of the Company and any other current director or executive officer of
the Company, except as indicated above.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information with respect to number and percentage of
outstanding shares of the Company beneficially owned by certain persons,
including those known to the Company to own beneficially more than 5% of the
Company's outstanding Common Stock, the directors of the Company individually
and the directors and officers of the Company as a group. The information in the
table is as of April 9, 2006, except as otherwise indicated.
Amount and Nature Percent
Title of of Beneficial of
Name and Address Class Ownership (1) Class
Stephen Lange Ranzini Common 2,618,596 (2)(3) 61.70%
c/o University Bank Stock (6)(7)
2015 Washtenaw Avenue
Ann Arbor, MI 48104
Dr. Joseph Lange Ranzini Common 2,017,479 (2)(3) 47.53%
675 Cherry Avenue Stock (8)
Waynesboro, VA 22980
Paul Lange Ranzini Common 1,998,357 (2)(3) 47.08%
5312 Manitowoc Parkway Stock
Madison, WI 53705
Gary Baker Common 25,000 (4) 0.59%
2215 Londonderry Stock
Ann Arbor, MI 48104
Michael J. Concannon Common 0 0.00%
4179 Lake Forest Court Stock
Ann Arbor, MI 48108
Charles McDowell Common 65,000 (4) 1.52%
3358 Joe Marks Trail Stock
Kewadin, MI 49648
Michael Talley Common 25,000 (4) 0.59%
55 Payson Ave. #4I Stock
New York, NY 10034
Orpheus Capital, L.P. Common 1,958,757 (2) 44.98%
2015 Washtenaw Avenue Stock
Ann Arbor, MI 48104
Ranzini Family Trust Common 1,998,357 (2)(3) 45.89%
dated 12/20/89 Stock
c/o University Bank
2015 Washtenaw Avenue
Ann Arbor, MI 48104
Nicholas Fortson Common 35,150 (9) 0.81%
2638 Page Court Stock
Ann Arbor, MI 48104
Mildred Lange Ranzini Common 623,774 (6)(7) 14.70%
43 Sweetwater Drive Stock
Belle Mead, NJ 08502
All Current Officers Common 2,787,868 (2)(3) 64.02%
and Directors, as a Stock (4)(6)
Group (Eight Persons) (7)(9)
- ----------------------------------------------------
(Footnotes to the table continued on following page)
(1) Unless otherwise indicated, the indicated person is believed to
have sole voting and investment power over shares indicated as beneficially
owned by such person.
(2) Includes 1,958,757 shares of Common Stock held by Orpheus Capital
Limited Partnership, the primary beneficiaries of which are Mr. Stephen Lange
Ranzini, Dr. Joseph Lange Ranzini, Mr. Paul Lange Ranzini, Ms. Mildred Lange
Ranzini and the other children and grandchildren of Ms. Mildred Lange Ranzini
and former Chairman Joseph Louis Ranzini (deceased), or trusts for their
benefit. The general partner of the limited partnership is the Ranzini Family
Trust of 12/20/1989 and the trustees of the trust are Mr. Stephen Lange Ranzini,
Dr. Joseph Lange Ranzini and Mr. Paul Lange Ranzini.
(3) Includes 39,600 shares of Common Stock held by Ranzini Family Trust
of 12/20/1989, the General Partner of Orpheus Capital, L.P. the primary
beneficiaries of which are and the five adult children of former Chairman Joseph
Louis Ranzini (deceased) and Ms. Mildred Lange Ranzini. The trustees of the
trust are Mr. Stephen Lange Ranzini, Dr. Joseph Lange Ranzini and Mr. Paul Lange
Ranzini. Mr. Stephen Lange Ranzini, Dr. Joseph Lange Ranzini and Mr. Paul Lange
Ranzini are each primary beneficiaries of one-fifth or 7,920 each of the shares
of Common Stock held under the terms of the trust.
(4) Includes currently exercisable options on 25,000 shares of common
stock are held by each of Mr. Baker, Mr. McDowell and Mr. Talley. The shares
subject to such person's respective option are included in such person's
respective holdings and in the total shares held by all current officers and
directors as a group.
(5) Includes 28,371 shares of Common Stock allocated to Mr. Stephen
Lange Ranzini under the terms of the Company's Employee Stock Ownership Plan.
Such shares are fully vested.
(6) Includes 294,549 shares of Common Stock of the shares held by
Orpheus Capital, which is 15.038% of the total shares held by Orpheus Capital,
L.P. The Mildred Lange Ranzini Trust owns 15.038% of Orpheus Capital, L.P., and
Ms. Mildred Lange Ranzini is the primary beneficiary of the Mildred Lange
Ranzini Trust. Stephen Lange Ranzini is a trustee of this trust. Also includes
10,500 shares of the Common Stock held by Orpheus Capital, which is 0.536% of
the total shares held by Orpheus Capital, L.P. which is held directly by Mildred
Lange Ranzini.
(7) Includes 35,000 shares of Common Stock held by CityFed Financial
Corp., of which Stephen Lange Ranzini is President & Director and of which
Mildred Lange Ranzini and Stephen Lange Ranzini are major indirect shareholders.
(8) Includes 19,122 shares of Common Stock held by Joseph Lange Ranzini
Profit Sharing Plan.
(9) Includes currently exercisable options on 23,000 shares of common
stock and an additional 12,000 shares of options on common stock that are
subject to future vesting that are held by Mr. Fortson. The shares subject to
such options are included in Mr. Fortson's holdings and in the total shares held
by all current officers and directors as a group.
EXECUTIVE OFFICERS
Officers of the Company serve at the discretion of the Board of Directors
and generally are elected annually.
Stephen Lange Ranzini is the President and Chief Executive Officer of the
Company, as indicated above under "Election of Directors".
Nicholas K. Fortson is the Chief Financial Officer of the Company, Chief
Executive Officer and a Director of University Bank, Chief Executive Officer and
a Director of University Islamic Financial Corporation and a director of Midwest
Loan Services and University Insurance & Investment Services. He has served in
those positions since March 2000 with the exception of Chief Executive Officer
of University Bank to which position he was appointed in January 2004 and his
positions with University Islamic Financial Corporation to which he was
appointed in January 2006.
Edward Burger is the President and a Director of Midwest Loan Services, a
subsidiary of University Bank. He has served in those positions since the
founding of the firm in 1992 (University Bank purchased 80% of Midwest Loan
Services in November 1995).
John N. Sickler is the Executive Vice President Residential Loans and Chief
Operating Officer of University Islamic Financial Corporation. He was appointed
Vice President Residential Loans in April 2001, Chief Operating Officer of
University Islamic Financial Corporation in January 2006 and Executive Vice
President Residential Loans in June 2006.
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash compensation
paid or accrued for services rendered in all capacities to the Company and
affiliates for the fiscal years ended December 31, 2006 and 2005, of the Chief
Executive Officer and Chief Financial Officer of the Company and all other
Executive Officers whose total compensation from the Company or its affiliates
for the latest fiscal year exceeded $100,000 (please note that all salary, bonus
and other compensation comes from University Bank or its subsidiaries and none
from the Company):
Summary Compensation Table (1)
All Other
Name and Principal Position Year Salary Bonus Compensation Total
- --------------------------- ---- ------ ----- ------------- -----
Stephen Lange Ranzini, 2006 $ 99,369 $ 40,050 $ 0 $139,819
President & CEO
Stephen Lange Ranzini, 2005 $ 68,686 $ 0 $ 0 $68,686
President & CEO
Nicholas K. Fortson, 2006 $ 93,344 $ 5,450 $ 0 $98,794
Chief Financial Officer
Edward Burger 2006 $118,354 $ 7,704 $ 0 $126,058
President,
Midwest Loan Services
John N. Sickler 2006 $ 91,515 $ 13,950 $ 0 $105,465
Executive VP, Residential Loans
We were not required to disclose compensation data for 2005 for Nicholas K.
Fortson, Edward Burger and John N. Sickler.
- --------------------------------------------------------------------------
(1) None of the following were granted to the executive officers named
in the above summary compensation table during 2005 or 2006: o Stock Awards o
Option Awards o Non-equity incentive plan compensation o Pension and Deferred
Compensation Earnings o Option exercises o Stock vested o Pension benefits o
Nonqualified deferred compensation (none exist) o Other potential
post-employment payments (none exist)
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The management of the Company ("we") reviewed the Forms 3 and 4 and
amendments thereto furnished to the Company pursuant to Rule 16a-3(e)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), during its most recent fiscal year. We also reviewed the Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and written representations from executive officers and directors
of the Company that did not file a Form 5 with respect to its most recent fiscal
year, to the effect that no filing of a Form 5 is required with respect to such
person. Based upon our review, no person who, at any time during the Company's
most recent fiscal year, was a director, officer or beneficial owner of more
than 10% of the Company's Common Stock, failed, as disclosed in the above Forms,
to file on a timely basis, any reports required by Section 16(a) of the Exchange
Act.
COMPENSATION PLANS
University Bancorp, Inc. 1995 Stock Plan. The 1995 Stock Plan of the
Company was adopted by the Board of Directors in November 1995 (and amended in
April 1996) and later approved by the Company's stockholders. The purpose of the
1995 Stock Plan is to provide incentives to officers, directors, employees and
consultants of the Company. Under the 1995 Stock Plan, officers and other
employees of the Company and any present or future parent or subsidiary
(collectively "Related Corporations") are provided with the opportunity to
purchase shares of Common Stock as "incentive stock options" ("ISOs"), as
defined in Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), and directors, officers, employees and consultants of the Company and
Related Corporations are provided with the opportunity to purchase shares of
Common Stock of the Company pursuant to options which do not qualify as ISOs
("Non-Qualified Options") and, in addition, such directors, officers, employees
and consultants may be granted awards of stock in the Company ("Awards") and
opportunities to make direct purchases of stock in the Company ("Purchases").
Both ISOs and Non-Qualified Options are referred to hereafter individually as an
"Option" and collectively as "Options". Options, Awards and Purchases are
referred to hereafter as "Stock Rights".
The 1995 Stock Plan terminated on November 15, 2005 however all outstanding
options under the plan remain outstanding until expiration, exercise or
forfeiture. During 2006, no options were exercised. As of April 9, 2006, options
for a total of 348,026 shares of Common Stock were outstanding under the 1995
Stock Plan.
Outstanding Equity Awards at Fiscal Year-End Table (1)
Option Option
Exercise Exercise
Name and Principal Position Exercisable Unexercisable Price Date
- --------------------------- ----------- ------------- ----- ----
Stephen Lange Ranzini, - - - -
President & CEO
Nicholas K. Fortson, 8,000 2,000 $2.00 1/31/2008
Chief Financial Officer 15,000 10,000 $2.47 12/31/2008
Edward Burger President, 20,000 - $2.00 7/1/2008
Midwest Loan Services
John N. Sickler 6,000 1,500 $2.00 1/31/2008
Executive VP, Residential Loans 4,500 3,000 $2.47 12/31/2008
(1) The executive officers named in the above outstanding equity awards
at fiscal year-end table had no stock awards outstanding at the fiscal year-end.
University Bancorp, Inc. Employee Stock Ownership Plan. The Company has in
effect an employee stock ownership plan (the "ESOP") for eligible employees of
the Company and its subsidiaries. The ESOP is a qualified plan under section
401(a) of the Internal Revenue Code, as amended. The ESOP provides that the
employer may contribute thereto such amounts as it may determine and the
contributions may be in cash or in stock, at the election of the Company.
Contributions are allocated among employees who have reached age 21, have at
least one year of service and are employed more than 500 hours throughout the
year. Contributions are allocated in the proportion that the employee's total
compensation for the year (up to $200,000) bears to the total compensation of
all ESOP participants for the year (up to $200,000 per participant). However,
the sum of contributions and forfeitures allocated to an employee in any year
cannot exceed the lesser of $30,000 or 25 percent of his or her compensation for
the year, subject to indexing in accordance with Internal Revenue Service
regulations to reflect changes in the cost of living. Employees who retire, die,
become disabled or terminate their employment for any other reason would receive
the value of the vested portion of their accounts, in cash or stock. Employees
vest in their accounts in accordance with a vesting schedule based on years of
credited service. No shares were contributed to the ESOP in 2006 or 2005.
University Bank 401(k) Profit Sharing Plan. The Bank established a 401(k)
Profit Sharing Plan (the "401(k) Plan"), effective January 1, 1996, which allows
an employee of the Company or any of its subsidiaries who has reached age 18 and
has completed one year of service to elect to reduce their compensation by up to
12% (subject to specified maximum limitations) and have such amounts contributed
on their behalf to the 401(k) Plan. The 401(k) Plan provides for matching
employer contributions for each employee who elects to reduce his or her
compensation. The amount of matching contribution is up to the sole discretion
of the employer. The employer can also make additional discretionary
contributions for participating employees. The sum of an employee's salary
reductions, and the matching and discretionary contributions and forfeitures
allocated to an employee in the year could not exceed the lesser of $30,000 or
25 percent of his or her compensation for the year, subject to indexing in
accordance with Internal Revenue Service regulations to reflect changes in the
cost of living. Participants in the 401(k) Plan who retire, die or terminate
their employment for any other reason after having completed at least five years
of service would receive the total amount of their account; others receive their
own salary reduction contributions plus only a portion of any employer matching
contributions based on a vesting schedule. No matching contributions were made
by the Bank for the years ended December 31, 2006 and 2005.
University Bank Profit Sharing Plan. The Bank established a profit
sharing plan for the employees of University Bank, Midwest Loan Services and
University Insurance & Investment Services. Under the plan, no profit sharing is
paid unless the Company earns at least a 10% return on common stockholders'
equity during the calendar year. For each subsidiary which also earns at least a
10% return on equity (excluding unusual one-time gains) profit sharing is to be
paid to all employees of that subsidiary. The profit sharing plan takes into
consideration the existing 401k and ESOP plans and also includes a cash bonus
component. The following is a chart which shows how the total bonus will be
calculated assuming that the return of equity ratio of at least 10% is achieved:
If ROE is 401K ESOP
Above Below Match(1) Contribution(2) Cash Bonus(3)
0% 10.00% 0.00% 0.00% 0.00%
5% of the amount
10.00% 12.00% 1.50% 0.25% over 10% of ROE
12.00% 15.00% 2.50% 0.50% 10% of the amount over 10% of ROE
15.00% 18.00% 3.50% 0.50% 15% of the amount over 10% of ROE
18.00% 4.00% 0.50% 20% of the amount over 10% of ROE
(1) The percentage applied to the 401K will be multiplied times the
amount of salaries of staff members in the 401K program. The 401K match is only
paid to 401K accounts. Accordingly, staff members not in the 401K plan will not
participate. If one subsidiary achieves the minimum income to qualify for profit
sharing but not the others, the 401k contribution will be made as a Cash Bonus
instead.
(2) The percentage applied to the ESOP will be multiplied times the
amount of total salaries paid to all staff members. If one subsidiary achieves
the minimum income to qualify for profit sharing but not the others, the ESOP
contribution will be made as a Cash Bonus instead.
(3) The cash bonus will be paid to the staff members based on the
calculation noted above and will be paid in cash as part of the medical benefits
program. The payment will not be classified as salaries for tax purposes. The
cash bonuses will be paid to the staff members based on their entities
contribution to the overall profit.
A contribution of $27,837 was paid to the employees of Midwest Loan
Services with respect to the year ended December 31, 2005 because they achieved
a 19.36% return on equity for the year and the Company exceeded the 10% return
on equity threshold (the return on equity was actually 66.3%). No contributions
under the profit sharing plan were made by the Bank for the year ended December
31, 2006.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1993, a Rural Business and Industrial Development Company now called
Michigan Business Development Company, Inc. was established (the "BIDCO"). The
BIDCO was established to invest in businesses in Michigan with the objective of
fostering job growth and economic development. Stephen Lange Ranzini is the
President, Treasurer, and Chairman of the Board of BIDCO. Stephen Lange Ranzini
received $12,000 in salary and board fee compensation from BIDCO in 2006 and
$12,000 in 2005. University Bank receives Community Reinvestment Act ("CRA")
credit for the BIDCO's activities which contributed to University Bank earning
an "Outstanding" rating from the Federal Deposit Insurance Corporation ("FDIC")
for Community Service and Community Reinvestment in its latest CRA examination.
BIDCO is wholly-owned by Jove Corporation and the majority shareholder of Jove
Corporation is Lyre, LLC, of which Stephen Lange Ranzini, his mother, two
sisters and brother are the majority shareholders.
University Bank and the BIDCO provide management services to Northern
Michigan Foundation, an IRS approved 501(c)3 non-profit organization (the
"Foundation"), under contract. University Bank receives $500 a month for
accounting support and BIDCO receives $4,000 a month for management support from
the Foundation. Stephen Lange Ranzini is the President, Treasurer, and Chairman
of the Board of the Foundation and received $400 per year in board fees from the
Foundation in 2006 and 2005. The Foundation's Board of Directors has a majority
of non-affiliated, independent directors.
Jove Corporation reimbursed University Bancorp, Inc. $23,000 in 2006
and $48,000 in 2005 for the services of Stephen Lange Ranzini and Nicholas
Fortson. Neither the Bank nor the Company currently has any investment in any of
Lyre, LLC, Jove Corporation, BIDCO or the Foundation, although each is a
depositor in University Bank.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountant selected to be the Company's principal
external auditor for the fiscal year ending December 31, 2006 is UHY, LLP. A
representative of the UHY firm is expected to be available by speaker telephone
at the Meeting. Such representative will have an opportunity to make a
statement, if he or she desires to do so, or to respond to appropriate
questions.
The Company paid a total of $120,060 in audit fees to UHY and Grant
Thornton, LLP, its independent public accountants for the year ended December
31, 2006 and an additional $40,000 through the end of the first quarter of 2007.
The Company also paid $22,450 in fees for income tax return preparation services
in 2006 to its independent public accountants (with no additional tax services
paid in 2007 to date) and a total of $0 in All Other Fees to its independent
public accountants.
OTHER MATTERS
The cost of proxy solicitation will be borne by the Company. Banks, brokers
and other nominees will be reimbursed for their customary expenses incurred in
connection with the forwarding of proxy materials. Directors, officers and other
regular employees of the Company and its subsidiaries may solicit proxies by
telephone, fax, in person, or by other electronic means without additional
compensation.
Dated: April 27, 2007
UNIVERSITY BANCORP, INC.
Annual Meeting of Shareholders -- June 15, 2007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned revokes all previous proxies, acknowledges receipt of
the Notice of the Annual Meeting of Shareholders to be held on June 15, 2007 and
the Proxy Statement, and appoints Stephen Lange Ranzini, Joseph Lange Ranzini
and Paul Lange Ranzini, and each of them, the proxy of the undersigned, with
full power of substitution to vote all shares of common stock of University
Bancorp, Inc. (the "Company") that the undersigned is entitled to vote, either
on his or her own behalf or on behalf of any entity or entities, at the Annual
Meeting of Shareholders of the Company to be held at University Bank, 2015
Washtenaw Avenue, Ann Arbor, Michigan on June 15, 2007 at Noon, local time, and
at any adjournment or postponement thereof, with the same force and effect as
the undersigned might or could do if personally present thereat. The shares
represented by this proxy shall be voted in the manner set forth on the reverse
side.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
1. Election of Directors
[ ] FOR ALL Gary Baker
[ ] WITHHOLD ALL Michael Concannon
[ ] FOR ALL EXCEPT Charles McDowell
(See instructions below) Dr. Joseph Lange Ranzini
Paul Lange Ranzini
Stephen Lange Ranzini
Michael Talley
To withhold authority to vote for fewer than all of the nominees, mark "For All
Except" and write the nominee's name in the list below.
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2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before this meeting.
IF YOU RETURN YOUR PROPERLY EXECUTED PROXY, THE PROXIES WILL VOTE YOUR SHARES AS
YOU DIRECT. IF YOU DO NOT SPECIFY ON YOUR PROXY HOW YOU WANT TO VOTE YOUR
SHARES, THE PROXIES WILL VOTE THEM "FOR" PROPOSAL 1 AND IN THE DISCRETION OF THE
PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENTS THEREOF.
Please sign EXACTLY as your name appears
hereon. When signing as attorney, executor,
administrator, trustee or guardian, please
give your full title as such. If more than one
trustee, all should sign. If shares are held
jointly, both owners must sign.
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Signature Date
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Signature (Joint Owners) Date