FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2001
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File Number 0-16023
UNIVERSITY BANCORP, INC.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-2929531
-------- ----------
(State of incorporation) (IRS Employer Identification Number)
959 Maiden Lane, Ann Arbor, Michigan 48105
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (734) 741-5858
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $0.01 par value outstanding at October 31, 2001: 2,092,801
shares
page 1 of 29 pages
FORM 10-Q
TABLE OF CONTENTS
PART I - Financial Information
Item 1. Financial Statements PAGE
----
Consolidated Balance Sheets 3
Consolidated Statements of Operations 5
Consolidated Statements of Comprehensive Income 7
Consolidated Statements of Cash Flows 8
Notes to the Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Summary 11
Results of Operations 12
Capital Resources 21
Liquidity 22
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 23
PART II - Other Information
Item 1. Legal Proceedings 25
Item 5. Other Information:
Parent Company Financial Information 25
Item 6. Exhibits & Reports on Form 8-K 25
Signature 29
- ------------------------------------------------------------
The information furnished in these interim statements reflects all
adjustments and accruals, which are in the opinion of management, necessary for
a fair statement of the results for such periods. The results of operations in
the interim statements are not necessarily indicative of the results that may be
expected for the full year.
2
Part I. - Financial Information
Item 1.- Financial Statements
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 2001(Unaudited) and December 31, 2000
September 30, December 31,
ASSETS 2001 2000
------------- ------------
Cash and due from banks 2,371,864 $ 2,537,313
Short term investments 0 9,307
------------ ------------
Total cash and cash equivalents 2,371,864 2,546,620
Securities available for sale, at market 2,324,114 1,944,629
Federal Home Loan Bank Stock 848,400 848,400
Loans held for sale, at the lower of cost or market 2,788,109 267,570
Loans 35,005,212 36,206,544
Allowance for loan losses (603,867) (562,997)
------------ ------------
Loans, net 34,401,345 35,643,547
Premises and equipment, net 1,754,129 1,375,757
Investment in Michigan BIDCO Inc. 897,227 1,277,384
Investment in Michigan Capital Fund LPI 481,244 556,904
Mortgage servicing rights, net 474,349 582,210
Real estate owned, net 274,145 340,881
Accounts receivable 509,814 1,639,962
Accrued interest receivable 257,487 307,600
Prepaid expenses 281,452 168,195
Goodwill, net 67,908 139,412
Other assets 67,700 31,582
------------ ------------
TOTAL ASSETS 47,799,287 $ 47,670,653
============ ============
-Continued-
3
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
September 30, 2001(Unaudited) and December 31, 2000
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000
------------ ------------
Liabilities:
Deposits:
Demand - non interest bearing 3,755,947 $ 3,062,013
Demand - interest bearing 14,427,042 13,106,221
Savings 370,503 368,928
Time 21,037,951 21,641,561
------------ ------------
Total Deposits 39,591,443 38,178,723
Short term borrowings 3,387,463 4,093,954
Long term borrowings 874,588 926,130
Accounts payable 666,457 1,474,963
Accrued interest payable 240,012 426,470
Other liabilities 104,151 245,381
------------ ------------
Total Liabilities 44,864,114 45,345,621
Minority Interest 299,601 282,750
Stockholders' equity:
Preferred stock, $0.001 par value; $1,000
liquidation value; Authorized - 500,000 shares;
Issued 1,262 shares in 2001 and 725 shares
in 2000 1,262,000 725,000
Common stock, $0.01 par value;
Authorized - 5,000,000 shares;
Issued - 2,207,985 shares in 2001 and
2,142,985 shares in 2000 22,080 21,430
Additional paid-in-capital 3,923,560 3,817,608
Accumulated deficit (2,014,495) (1,846,627)
Treasury stock - 115,184 shares in 2001 and
2000 (340,530) (340,530)
Accumulated other comprehensive loss,
unrealized losses on securities available
for sale, net (217,043) (334,599)
------------ ------------
Total Stockholders' Equity 2,635,572 2,042,282
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 47,799,287 $ 47,670,653
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
4
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Periods Ended September 30, 2001 and 2000
(Unaudited)
For the Three Month For the Nine Month
Period Ended Period Ended
2001 2000 2001 2000
Interest income:
Interest and fees on loans $ 824,811 $ 784,816 $2,455,397 $2,268,989
Interest on securities:
U.S. Government agencies 172,907 36,303 262,235 108,399
Other securities 15,507 22,189 48,635 55,940
Interest on federal funds and other 1,451 510 22,968 1,375
---------- ---------- ---------- ----------
Total interest income 1,014,676 843,818 2,789,235 2,434,703
---------- ---------- ---------- ----------
Interest expense:
Interest on deposits:
Demand deposits 93,272 159,307 336,920 464,239
Savings deposits 1,507 1,777 5,112 4,655
Time deposits 281,773 285,200 1,016,400 738,143
Short term borrowings 27,773 61,188 69,585 162,271
Long term borrowings 13,436 25,177 47,303 106,069
---------- ---------- ---------- ----------
Total interest expense 417,761 532,649 1,475,320 1,475,377
---------- ---------- ---------- ----------
Net interest income 596,916 311,169 1,313,916 959,326
Provision for loan losses 22,500 22,500 67,500 88,500
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 574,416 288,669 1,246,416 870,826
Other income:
Loan origination and other fees 357,740 342,091 1,481,156 647,285
Loan servicing and subservicing fees 198,445 292,928 1,529,714 684,073
Gain on sale of mortgage loans 19,404 17,976 50,264 37,241
Merchant banking/ BIDCO income -- -- -- 234,739
Insurance and investment fee income 16,896 16,083 66,202 58,160
Deposit service charges and fees 25,047 14,729 60,256 47,516
Net security gains (losses) -- 20,625 -- 24,126
Other 21,605 40,935 60,589 62,966
---------- ---------- ---------- ----------
Total other income 639,137 745,367 3,248,181 1,796,106
---------- ---------- ---------- ----------
-Continued-
5
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Periods Ended September 30, 2001 and 2000
(Unaudited)
For the Three Month For the Nine Month
Period Ended Period Ended
2001 2000 2001 2000
Other expenses:
Salaries and benefits $ 793,519 $ 468,122 $ 2,598,066 $ 1,395,552
Legal and audit expense 15,034 49,009 83,648 299,640
Occupancy, net 99,971 66,532 348,470 224,389
Data processing and equipment
expense 52,851 86,998 207,947 248,308
Consulting fees 42,472 52,983 189,357 145,998
Advertising 28,775 17,388 80,889 70,223
Supplies and postage 78,480 34,364 283,660 122,456
Servicing rights amortization 225,550 26,421 298,821 85,361
Mortgage banking expense 28,470 41,159 63,720 134,987
Travel and entertainment 19,742 4,974 84,991 41,504
Insurance 19,392 21,963 65,582 76,892
Other operating expenses 13,747 161,112 312,113 359,934
----------- ----------- ----------- -----------
Total other expenses 1,418,003 1,031,025 4,617,264 3,205,244
----------- ----------- ----------- -----------
Income (loss) before income taxes (204,450) 3,011 (122,667) (538,312)
Income tax expense (benefit) (752) 4,294
----------- ----------- ----------- -----------
Net Income (loss) $ (204,450) $ 3,763 $ (122,667) $ (542,606)
=========== =========== =========== ===========
Preferred stock dividends 17,950 45,201
----------- ----------- ----------- -----------
Net income (loss) available to
common shareholders $ (222,400) $ 3,763 $ (167,868) $ (542,606)
=========== =========== =========== ===========
Basic and diluted loss per common share $ (0.11) $ 0.00 $ (0.08) $ (0.27)
=========== =========== =========== ===========
Weighted average shares outstanding 2,092,312 2,027,801 2,061,233 2,026,378
=========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
6
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the Periods Ended September 30, 2001 and 2000
(Unaudited)
For the Three Month For the Nine Month
Period Ended Period Ended
2001 2000 2001 2000
----------------------------------------------------------------
Net income (loss) ($204,450) $3,763 ($122,667) ($542,606)
Other comprehensive income (loss):
Unrealized gains/(losses) on securities
available for sale $230,081 ($16,781) 117,556 (67,365)
Less: reclassification adjustment
for accumulated losses/(gains)
included in net income (loss) ($20,625) (24,126)
----------------------------------------------------------------
Other comprehensive income/(loss),
before tax effect 230,081 (37,406) 117,556 (91,491)
Income tax expense (benefit)
Other comprehensive income (loss),
net of tax 230,081 (37,406) 117,556 (91,491)
----------------------------------------------------------------
Comprehensive loss $25,631 ($29,348) ($5,111) ($629,803)
================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
7
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the three month periods ended September 30, 2001 and 2000
(Unaudited)
2001 2000
Cash flow from operating activities:
Net income (loss) $ (122,667) $ (542,607)
Adjustments to reconcile net income (loss)
to net cash from Operating Activities:
Depreciation 141,693 183,896
Amortization 326,945 160,361
Provision for loan losses 67,500 88,500
Net gain on mortgage loan sales (30,860) (37,241)
Net (accretion) on investment securities (262,168) (85,129)
Net gain on sale of securities available for
sale -- (24,126)
Change in:
Minority interest 16,851 59,075
Mortgage servicing rights (190,960) (42,497)
Real estate owned 66,736 330,154
Accounts receivable 1,130,148 (219,154)
Accounts payable (808,506) (88,909)
Accrued interest receivable 50,113 (64,573)
Accrued interest payable (186,458) 78,834
Other assets (30,335) (172,412)
Other liabilities (186,664) 300,573
-----------------------------
Net cash used in operating activities (18,632) (75,255)
-----------------------------
Cash flow from investing activities:
Purchase of securities available for sale -- (37,500)
Proceeds from sales of securities available for sale -- 161,626
Proceeds from maturities and pay downs of securities
available for sale 472 2,976
Net change in market value of Michigan BIDCO equity
investments -- 197,302
Loans granted, net of repayments (1,314,977) (3,335,760)
Decrease in Investment in Michigan BIDCO, Inc. 380,157 --
Premises and equipment expenditures (520,065) (162,223)
-----------------------------
Net cash used in investing activities (1,454,413) (3,173,579)
-----------------------------
Cash flow used in financing activities:
Net increase in deposits 1,412,720 3,504,417
Net increase (decrease) in short term borrowings (706,491) 230,434
Principal payments on long term borrowings (127,822) (168,000)
-Continued-
8
2001 2000
Issuance of long term borrowings 76,280 60,000
Issuance of preferred stock 537,000 150
Issuance of common stock 106,602 31,100
----------- -----------
Net cash provided by financing activities 1,298,289 3,658,101
----------- -----------
Net change in cash and cash equivalents (174,756) 409,267
Cash and cash equivalents:
Beginning of period 2,546,620 1,551,320
----------- -----------
End of period $ 2,371,864 $ 1,960,587
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,659,033 $ 1,433,781
Income taxes $ -- $ --
The accompanying notes are an integral part of the consolidated financial
statements.
9
UNIVERSITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(1) General
See Note 1 of Notes to Financial Statements incorporated by reference
in the Company's 2000 Annual Report on Form 10-K for a summary of the Company's
significant accounting policies.
The unaudited financial statements included herein were prepared from
the books of the Company in accordance with generally accepted accounting
principles and reflect all adjustments which are, in the opinion of management,
necessary to provide a fair statement of the results of operations and financial
position for the interim periods. Such financial statements generally conform to
the presentation reflected in the Company's 2000 Annual Report on Form 10-K. The
current interim periods reported herein are included in the fiscal year subject
to independent audit at the end of the year.
Earnings per share are calculated based on the weighted average number
of common shares outstanding during each period as follows: 2,092,312 and
2,027,801 for the three months ended September 30, 2001 and 2000, respectively;
2,061,233 and 2,026,378 shares for the nine months ended September 30, 2001 and
2000, respectively. Stock options are considered anti-dilutive for 2001 and
2000, therefore, are not included in earnings per share calculations.
(2) Investment Securities
The Bank's available-for-sale securities portfolio at September 30,
2001 had a net unrealized loss of approximately $217,000 as compared with a net
unrealized loss of approximately $335,000 at December 31, 2000.
Securities available for sale at September 30, 2001:
($ in thousands) Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------- ---------------- ---------------- ----------------
U.S. agency mortgage-backed $ 2,015 $ - $ (168) $ 1,847
U.S. Treasury 526 - (49) 477
-------------------------------------------------------------------
Total $ 2,541 $ - $ (217) $ 2,324
===================================================================
Securities available-for-sale at December 31, 2000
($ in thousands) Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------- ---------------- ---------------- ----------------
U.S. agency mortgage-backed $ 1,774 $ - $ (293) $ 1,481
U.S. Treasury 506 - (42) 464
-------------------------------------------------------------------
Total $ 2,280 $ - $ (335) $ 1,945
===================================================================
Subsequent to September 30, 2001, the U.S. Treasury with an unrealized
loss at September 30, 2001 of $49,000 was sold for a $12,000 profit. A shorter
term Treasury bond was purchased to decrease the risk in the Bank's investment
portfolio.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains certain forward-looking statements which reflect
the Company's expectation or belief concerning future events that involve risks
and uncertainties. Among others, certain forward looking statements relate to
the continued growth of various aspects of the Company's community banking,
merchant banking, mortgage banking and investment activities, and the nature and
adequacy of allowances for loan losses. The Company can give no assurance that
the expectations reflected in forward-looking statements will prove correct.
Various factors could cause results to differ materially from the Company's
expectations. Among these factors are those referred to in the introduction to
the Company's Management Discussion and Analysis of Financial Condition and
Results of Operations which appear as Item 7 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000, which should be read in
conjunction with this Report.
The above cautionary statement is for the purpose of qualifying for the
"safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934.
SUMMARY
For the three months ended September 30, 2001, the Company had net loss
of $204,450 compared to net income of $3,763 for the three months ended
September 30, 2000. The loss was principally the result of a $224,175 special
impairment charge to write-down the value of Midwest Loan Services' mortgage
servicing rights portfolio during the third quarter of 2001. Net interest income
increased to $596,916 the 2001 period from $311,169 in the 2000 period, and
other income decreased to $639,137 the 2001 period from $745,367 in the 2000
period. Operating expenses increased to $1,418,003 in the 2001 period from
$1,031,025 in the 2000 period. Basic and diluted net loss per common share in
the three months ended September 30, 2001 was $(0.11), compared to ($0.00) for
the three months ended September 30, 2000.
For the nine months ended September 30, 2001, a net loss of $122,667
was incurred versus a net loss of $542,606 in the same period in 2000. As in the
three-month period, the loss was principally the result of a $224,175 special
impairment charge to write-down the value of Midwest Loan Services' mortgage
servicing rights portfolio during the third quarter of 2001. Net interest income
increased to $1,313,916 in the 2001 period from $959,326 in the 2000 period.
Other income was $3,248,181 in the 2001 period versus $1,796,106 in the 2000
period. Operating expenses increased to $4,617,264 in the 2001 period from
$3,205,244 in the 2000 period. Basic and diluted net loss per share in the nine
months ended September 30, 2001 was $(0.08), compared to a net loss of ($0.27)
for the nine months ended September 30, 2000.
The following table summarizes the pre-tax income (loss) of each profit
center of the Company for the for the three and nine months ended September 30,
2001(in thousands):
Three Months Nine months
Community Banking $ 87 $ (315)
Midwest Loan Services (327) 274
Corporate Office 35 (82)
-----------------------------------
Total $ (205) $ (123)
===================================
11
Pre-tax income (loss) summary for the three and nine months ended
September 30, 2000:
Three Months Nine months
Community Banking $ (142) $ (819)
Midwest Loan Services 187 273
Merchant Banking (Michigan BIDCO) - 114
Corporate Office (41) (111)
-------------------------------
Total $ 4 $ (543)
===============================
RESULTS OF OPERATIONS
Net Interest Income
Net interest income increased to $596,916 for the three months ended
September 30, 2001 from $311,169 for the three months ended September 30, 2000.
Net interest income rose from the year ago period as a result of a higher net
yield on interest earning assets. The yield on interest earning assets increased
from 9.19% in the 2000 period to 10.17% in the 2001 period. The cost of interest
bearing liabilities decreased from 5.72% in the 2000 period to 4.17% in the 2001
period. Net interest income as a percentage of total average earning assets
increased from 3.39% to 5.98% in 2001.
Net interest income increased to $1,313,916 for the nine months ended
September 30, 2001 from $959,326 for the nine months ended September 30, 2000.
As in the three month period noted above, net interest income for the nine
months in 2001 rose from the previous period because of a higher net yield on
interest earning assets. The yield on interest earning assets increased from
9.08% in the 2000 period to 9.32% in the 2001 period. The cost of interest
bearing liabilities decreased from 5.34% for the 2000 period to 4.93% for the
nine months ended September 30, 2001. Net interest income as a percentage of
total average earning assets increased from 3.58% to 4.39%.
Interest income
Interest income increased to $1,014,677 in the quarter ended September
30, 2001 from $843,818 in the quarter ended September 30, 2000. The average
volume of interest earning assets increased to $40,033,601 in the 2001 period
from $36,837,789 in the 2000 period, an increase of 8.7%. Despite a declining
interest rate environment during the third quarter in 2001, the yield on
interest bearing assets rose from 9.19% in 2000 to 10.17% in 2001. The increase
was due to income earned on the securities portfolio. During the third quarter
of 2001, this portfolio yielded a rate of 26.19%. The yield resulted from
accelerated income recognized on a collateralized mortgage obligation. As
12
the interest rates declined, the expected duration period for this bond was
shortened from over 6 years to 4 years. The decrease in average expected
duration stimulated an accelerated accretion of the bond discount.
Generally, the yield on other interest bearing assets declined in response to
the rate environment.
Interest income increased to $2,789,235 in the nine months ended
September 30, 2001 from $2,434,703 in the nine months ended September 30, 2000.
The average volume of interest earning assets increased to $39,991,896 in the
2001 period from $35,848,754 in the 2000 period, an increase of 11.5%. The
overall yield on the loan portfolio increased to 9.32% from 9.08%, despite a
declining interest rate during 2001. As in the third quarter, the overall yield
on the interest bearing assets increased in 2001 from 2000 due the accelerated
income on the bond portfolio.
Interest Expense
Interest expense decreased to $417,761 in the three months
ended September 30, 2001 from $532,649 in the 2000 period. The decrease was due
to a drop in the yield in 2001 to 4.14% from 5.72% in 2000, mitigated by an
increase in interest bearing liabilities. The yield declined as the interest
rate liabilities re-priced in the declining rate environment occurring in 2001.
The average volume of interest bearing liabilities increased to $40,199,598 in
2001 from $37,375,109 in 2000.
Interest expense decreased slightly to $1,475,320 in the nine months
ended September 30, 2001 from $1,475,377 in the 2000 period. The decrease was
due to a lower yield on the interest rate liabilities mitigated by an increase
in volume. The yield dropped to 4.92% in 2001 from 5.34% in 2000. As rates
dropped in 2001, the liabilities re-priced at rates lower than in 2000. The
volume of interest rate liabilities increased to $40,014,903 in 2001 from
$36,940,498 in 2000. The increase in volume primarily occurred in time deposits.
At September 30, 2001, the Company had $9,967,000 of brokered time deposits, 25%
of total deposits. To reduce the dependency on these higher cost funds,
management has implemented a plan to increase core deposits from individuals and
businesses. It is intended that the percentage of brokered time deposits will
reduce over the next year.
13
AVERAGE BALANCE SHEET AND INTEREST MARGIN ANALYSIS
The following tables summarize average balances, revenues from earning
assets, expenses of interest bearing liabilities, their associated yield or cost
and the net return on earning assets for the three and nine months ended
September 30, 2001 and 2000.
Three Months Ended Three Months Ended
September 30, September 30,
----------------------------------------------- ----------------------------------------
2001 2000
----------------------------------------------- ----------------------------------------
Average Interest Average Average Interest Average
Yield Yield
Balance Inc(Exp) (1) Balance Inc(Exp) (1)
Interest Earning Assets:
Loans:
Commercial $ 15,857,311 $ 369,804 9.35% $ 13,401,989 $ 328,347 9.83%
Real Estate 16,605,624 325,999 7.87% 15,170,382 340,402 9.00%
Installment/Consumer 4,527,998 129,008 11.43% 4,728,843 116,067 9.84%
--------------------------------- --------------------------------
Total Loans 36,990,933 824,811 8.94% 33,301,214 784,816 9.45%
Investment Securities 2,885,254 188,414 26.19% 3,479,129 58,492 6.74%
Federal Funds & Bank Deposits 157,414 1,451 3.70% 57,446 510 3.56%
--------------------------------- --------------------------------
Total Interest Bearing
Assets 40,033,601 1,014,676 10.17% 36,837,789 843,818 9.19%
--------------------------------- --------------------------------
Interest Bearing Liabilities:
Deposit Accounts:
Demand 4,210,377 16,456 1.57% 2,794,612 19,144 2.75%
Savings 351,892 1,507 1.72% 353,503 1,777 2.02%
Time 21,515,665 281,773 5.25% 17,703,268 285,199 6.46%
Money Market Accts 10,873,333 76,816 2.83% 11,837,473 140,164 4.75%
Short-term borrowings 2,357,602 27,773 4.73% 3,649,753 61,188 6.72%
Long-term borrowings 890,729 13,436 6.05% 1,036,500 25,177 9.74%
--------------------------------- --------------------------------
Total Interest Bearing
Liabilities 40,199,598 417,761 4.17% 37,375,109 532,649 5.72%
--------------------------------- --------------------------------
Net Earning Assets, net interest
income, and interest rate spread $ (165,997) $ 596,916 6.00% $ (537,320) $ 311,169 3.47%
Net yield on interest-earning assets 5.98% 3.39%
(1) Yield is annualized.
14
Nine Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------------- ----------------------------------------
2001 2000
--------------------------------------------- ----------------------------------------
Average Interest Average Average Interest Average
Yield Yield
Balance Inc(Exp) (1) Balance Inc(Exp) (1)
Interest Earning Assets:
Loans:
Commercial $15,552,429 $1,111,936 9.56% $ 13,251,665 $ 973,700 9.82%
Real Estate 16,043,827 972,979 8.11% 14,443,749 948,380 8.78%
Installment/Consumer 4,879,119 370,482 10.15% 4,629,632 346,909 10.02%
----------- ---------- ------------- ----------
Total Loans 36,475,375 2,455,397 9.00% 32,325,046 2,268,989 9.38%
Investment Securities 2,842,687 310,870 14.62% 3,474,009 164,339 6.32%
Federal Funds & Bank
Deposits 673,834 22,968 4.56% 49,669 1,375 3.70%
----------- ---------- ------------- ----------
Total Interest Bearing
Assets 39,991,896 2,789,235 9.32% 35,848,724 2,434,703 9.08%
----------- ---------- ------------- ----------
Interest Bearing Liabilities:
Deposit Accounts:
Demand 3,270,771 58,209 2.38% 2,899,751 60,627 2.80%
Savings 359,186 5,112 1.90% 310,326 4,655 2.01%
Time 23,458,076 1,016,400 5.79% 15,958,714 738,143 6.18%
Money Market Accts 10,314,021 278,711 3.61% 12,644,009 403,612 4.27%
Short-term borrowings 1,699,141 69,585 5.48% 3,472,609 162,271 6.25%
Long-term borrowings 913,708 47,303 6.92% 1,655,089 106,069 8.57%
----------- ---------- ------------- ----------
Total Interest Bearing
Liabilities 40,014,903 1,475,320 4.93% 36,940,498 1,475,377 5.34%
----------- ---------- ------------- ----------
Net Earning Assets, net interest
income, and interest rate spread $ (23,007) $1,313,916 4.40% $ (1,091,774) $ 959,326 3.74%
Net yield on interest-earning assets 4.39% 3.58%
(1) Yield is annualized.
15
Allowance for Loan Losses
The provision to the allowance for loan loss was $67,500 for the nine
months ended September 30, 2001. In the nine month period ended September
30,2000, the provision was $88,500. The Bank went from net charge-offs of
$86,867 for the nine month period ended September 30,2000 to net charge-offs of
$26,630 for the same period in 2001. Illustrated below is the activity within
the allowance for the nine month period ended September 30, 2001 and 2000,
respectively.
2001 2000
---- ----
Balance, January 1 $ 562,997 $ 532,585
Provision for loan losses 67,500 88,500
Loan charge-offs (43,942) (144,036)
Recoveries 17,312 57,169
------------------- ---------------
Balance, September 30 $ 603,867 $ 534,218
=================== ===============
At September 30, 2001 At December 31, 2000
--------------------- --------------------
Total loans (1) $35,005,212 $36,206,544
Reserve for loan losses $603,867 $562,997
Reserve/Loans % (1) 1.73% 1.55%
</Table>
The allowance for loan losses is calculated using the following assumptions:
<Table>
Bank's Ratio Used
Average Peer Group By Bank in
5 Year Average Allowance
Loss Ratio Loss Ratio Calculation
---------- ---------- -----------
Commercial loans, performing (1) 0.61% 0.43% 0.61%
Commercial loans, classified (2) N/A N/A (2)
Commercial loan commitments to lend 0.00% N/A 0.20%
Real estate mortgage, performing 0.22% 0.07% 0.30%
Real estate mortgage, classified (3) N/A N/A (3)
Installment loans to individuals (4) 0.00% 0.74% 1.00%
Home Equity loans, performing (5) 0.00% 0.04% 0.50%
Credit Cards (6) 0.00% 1.83% 2.76%
Overdrafts (7) N/A N/A 15.00%
(1) Performing Loans:
The Bank's actual 5-year average losses were 0.61%, and this is the rate used.
Per the FDIC Quarterly Banking Profile (FDIC Profile) the loss rate for loans in
the central region is .38%. Real estate construction loans are included in
commercial loan balances.
(2) Commercial Classified Loans: The allocation for the classified loans was
determined by a combination of the risk rating and the collateral value. The
loan loss allowance is the greater of the collateral deficiency or the required
loan loss allowance for the risk rating. All loans are rated 1 (highest quality)
to 8 (lowest quality), with performing loans rated 1 to 4. A Special Mention or
Watch List loan (5) requires a minimum of a 5%
16
allocation, a Substandard loan (6) requires a minimum of a 15% allocation, a
Doubtful loan (7) requires a minimum of a 50% allocation and a Loss loan (8)
requires a complete charge off of the loan.
(3) Classified Residential Mortgages: A specific analysis is used, based on the
Broker Price Opinion value of the home, less a 15% liquidation expense. If the
estimated loss is $0, then a 5% (Watch List) allocation ratio is used to account
for increased administration costs and risks associated with the foreclosure
process.
(4) Installment loans to individuals: The FDIC Profile loss ratio is 1.39%. All
Installment loans are rated A-D, with A being highest quality and D being lowest
quality. For loans between 32 -120 days delinquent, an allocation can be taken
as follows: "A" & "B" Loans - 2.5%, "C" - 5%, "D" - 15%. The Bank typically
gives a 15% allocation for all installment loans over 32 days delinquent.
However, a specific analysis, based on the FMV of the collateral, less
liquidation costs was used for Secured Installment loans greater than 120 days
past due. See the UB Classified Loan Report for specific allocations.
(5) Home Equity: Term Loans & Lines of Credit: The rate shown above of 0.50% is
for Home Equity Term Loans. The allocation ratio for Home Equity Lines of Credit
is .75% since they carry higher risk since they do not amortize during the life
of the loan.
(6) Credit Cards: The FDIC Profile loss ratio is 4.13%.
(7) Overdrafts: Overdrafts generally carry an unusually high risk of loss as
they are generally unsecured and are rated the same way as non-performing
installment loans with an allocation ratio of 15%.
The Bank's overall loan portfolio is geographically concentrated in Ann
Arbor and the future performance of these loans is dependent upon the
performance of relatively limited geographical areas. Since the Bank has a
limited experience with its loan portfolio in Ann Arbor, the Bank's historical
loss ratios may be less than future loss ratios.
17
The following schedule summarizes the Company's non-performing assets for the
periods indicated:
At September 30, 2001 At December 31, 2000
--------------------- --------------------
Past due 90 days and over
and still accruing (1):
Real estate $380,000 $457,486
Installment - 4,059
Commercial - 158,299
----------------- ----------------------
Subtotal 380,000 619,844
Non-accrual loans (1):
Real estate 174,294 72,375
Installment - -
Commercial - -
----------------- ----------------------
Subtotal 174,294 72,375
Other real estate owned 274,145 340,881
----------------- ----------------------
Total non-performing $828,439 $1,033,100
================= ======================
Ratio of non-performing to total loans (1) 2.37% 2.85%
================= ======================
Ratio of loans past due over 90 days and
non-accrual loans to loan loss reserve 92% 123%
================= ======================
(1) Excludes loans held for sale which are valued at fair market value.
18
During 2001, management directed lending personnel to focus on reducing
delinquencies and act proactively in light of a possible recession. If the
current economic slowdown becomes a recession, loan delinquencies would likely
increase, negatively impacting net interest income.
Other real estate owned at September 30, 2001 December 31, 2000
includes a commercial development site in Sault Ste. Marie, Michigan, which
based on a recent appraisal, management believes has a fair market value more
than its carrying cost of $200,000 at September 30, 2001. The Bank executed an
agreement to sell the property to a commercial developer who is planning a major
development on the site. The purchase price will be determined by averaging two
new appraisals.
Economic conditions in the Bank's primary market area in Ann Arbor were
strong during the period. Management believes that the current allowance for
loan losses is adequate to absorb losses inherent in the loan portfolio,
although the ultimate adequacy of the allowance is dependent upon future
economic factors beyond the Company's control. A downturn in the general
nationwide economy will tend to aggravate, for example, the problems of local
loan customers currently facing some difficulties, and could decrease
residential home prices. A general nationwide business expansion could
conversely tend to diminish the severity of any such difficulties.
Non-Interest Income
Total non-interest income decreased to $639,137, for the three months
ended September 30, 2001 from $745,367 for the three months ended September
30,2000. The significant decrease was primarily due to decreased loan servicing
and sub-servicing fees and other loan set-up fees resulting from the decreased
servicing and sub-servicing portfolios at Midwest Loan Services.
Total non-interest income increased to $3,248,181 for the nine months
ended September 30, 2001 from $1,796,106 for the nine months ended September 30,
2000. The increase was principally a result of increases in loan origination and
loan sub-servicing fee income at Midwest Loan Services. During the second
quarter, Midwest's largest customer, the mortgage division of one of the top
five mortgage firms on Wall Street, decided to significantly scale back the
amount of business it was providing to Midwest. As of July 1, 2001, 18,500 loans
or 95% of the mortgages sub-serviced by Midwest for this customer had been
transferred to other sub-servicers including a subsidiary of this Wall Street
firm. As of July 1, 2001, Midwest was sub-servicing approximately 5,600 loans,
including 1,000 for this customer.
Midwest has been increasing its emphasis on mortgage loan originations
through its credit union customers. In the first quarter of 2001, Midwest
originated an average of 26 loans per month. This has increased to an average of
100 loans per month. Management of Midwest expects to be able to replace a
substantial portion of the monthly revenue lost from the decreased business from
the Wall Street firm with fee income from mortgage originations from its credit
union focused Members for Life mortgage origination program. The Wall Street
firm generated an average of $154,000 in revenue per month for Midwest in the
first quarter of 2001, and an average $209,000 in revenue per month for Midwest
in the second quarter of 2001.
19
Michigan BIDCO. In May 2000, the BIDCO converted or redeemed all
outstanding bonds into common stock of Michigan BIDCO, thus diluting the
Company's ownership to 28.8%. The BIDCO has agreed to repurchase the shares held
by University Bank, but is awaiting regulatory approval to do so. Management of
the Bank and BIDCO has already approved the transaction.
Non-Interest Expense
Non-interest expense increased to $1,418,003 in the three months ended September
30, 2001 from $1,031,025 for the three months ended September 30, 2000. The
increase was primarily the result of a special $224,175 impairment charge for
Midwest Loan Services' mortgage servicing rights portfolio due to the decline in
long-term interest rates and increased operational expenses, principally
personnel costs, at Midwest Loan Services due to the increased mortgage
origination volume. At September 30, 2001, the Bank and Midwest owned the rights
to service mortgages for Freddie Mac, Fannie Mae and other institutions, most of
which was owned by Midwest Loan Services, and the remainder by the Bank. The
carrying value of these servicing rights was $474,349 at September 30, 2001. For
the three months ended September 31, 2001, servicing rights amortization totaled
$225,550 as compared to $26,421 for the same period in 2000. Based on recent
comparable sales and indications of market value from industry brokers,
management believes that the current market value of the Bank's portfolio of
mortgage servicing rights approximates cost. Market interest rate conditions can
quickly affect the value of mortgage servicing rights in a positive or negative
fashion, as long-term interest rates rise and fall. The amortization of these
rights is based upon the level of principal pay-downs received from respective
mortgage loan customers of Midwest and the Bank.
The increased expenses at Midwest more than offset cost control efforts
in other areas at the Bank.
Non-interest expense increased to $4,617,264 in the nine months ended
September 30, 2001 from $3,205,244 for the nine months ended September 30, 2000.
The increase was primarily the result of increased operational expenses at
Midwest Loan Services, which more than offset cost control efforts in other
areas at the Bank.
Non-interest operating expense for the parent company decreased to
$(35,078) for the three month 2001 period from $43,109 for the 2000 period. The
net credit in 2001 resulted from the adjustment to goodwill amortization. In
2001, the goodwill recorded in the last quarter of 2000 was revised downward to
reflect expenses borne by the sellers of Midwest.
Non-interest operating expense for the parent company decreased to
$82,088 for the nine month period September 30, 2001 from $111,435 for the same
period in 2000. The decrease in 2001 resulted primarily from the adjustment of
amortization of goodwill. Otherwise, expenses were higher in 2001 as compared
with 2000 due to the parent company issuing shares of common stock to a key
executive of the Bank as a hiring bonus.
Internet Banking. The Bank has developed an internet banking product
and is currently completing compliance testing to make the product available to
customers.
20
Capital Resources
The table below sets forth the Bank's risk based assets, capital ratios
and risk-based capital ratios of the Bank. At September 30, 2001, the Bank was
considered "well-capitalized".
Allocation by Risk Weight Category
Items not
Balance Sheet Asset Categories Subject to
Total Assets Weighting 0% 20% 50% 100%
------------ --------- -- --- --- ----
Cash and Balances due from
Depository Institutions 2,372 -- 396 1,976 -- --
Available-for-sale
Securities 2,324 (217) 526 2,015 -- --
Loan Held for Sale 2,788 -- -- 2,718 70
Loans 35,005 -- 139 -- 12,511 22,355
Allowance for loan losses (604) (604) -- -- -- --
All Other Assets 6,412 47 -- 848 -- 4,670
-------------------------------------------------------------------------
Total Assets 47,450 (774) 922 4,978 15,229 27,095
=========================================================================
</Table>
<Table>
TOTAL AVERAGE ASSETS
Average Total Assets for Leverage Capital Purposes 46,622
Other identifiable Intangible Assets (47)
---------------
Total Average Assets 46,575
===============
35,548
Total Risk-Based Assets
TIER 1 CAPITAL
Total Equity Capital 2,870
Unrealized losses on available-for-Sale Securities 217
Minority Interest 300
Other identifiable Intangible Assets (47)
---------------
Total Tier 1 Capital 3,340
TIER 2 CAPITAL
Allowance for loans & Lease losses 604
Less: Excess Allowance (158)
---------------
Total Tier 2 Capital 446
---------------
Total Tier 1 & Tier 2 Capital 3,786
CAPITAL RATIOS
Tier 1/Total Average Assets 7.17%
Tier 1/Total Risk-Weighted Assets 9.40%
Tier 1 & 2/Total Risk-Weighted Assets 10.65%
21
Liquidity
Bank Liquidity. The Bank's primary sources of liquidity are customer
deposits, scheduled amortization and prepayments of loan principal, cash flow
from operations, maturities of various investments, borrowings from
correspondent lenders secured by securities, residential mortgage loans and/or
commercial loans. In addition, the Bank invests in overnight federal funds. At
September 30, 2001, the Bank had cash and cash equivalents of $2,371,864. The
Bank has a $6,500,000 line of credit secured by investment securities and
residential mortgage loans and a $2,300,000 line of credit secured by commercial
loans. In order to bolster liquidity from time to time, the Bank also sells
brokered time deposits. At September 30, 2001, the Bank had $9.9 million of
these deposits outstanding.
Parent Company Liquidity. In an effort to maintain the Bank's Tier 1
capital to assets ratio above 7% and to increase capital through retained
earnings, management does not expect that the Bank will pay dividends to the
Company during 2001 or 2002. Management intends to raise additional capital
through a stock rights offering currently under way. This capital is needed for
the Company's operating expenses and for the expected principal reductions on
the Company's long-term borrowings. These borrowings totaled $874,588 and
$926,130 at September 30, 2001 at December 31, 2000, respectively. Long-term
borrowings at September 30, 2001 also include $184,082 of equity conversion
notes of the Company that were converted into common stock on October 30, 2001
pursuant to the Company's rights offering.
The Company also has authorized 500,000 shares of preferred stock with
a liquidation value of $1,000. 725 shares or $725,000 was issued in November
2000 to help boost capital levels, and another 300 shares or $300,000 was issued
in March 2001 and contributed to University Bank. Year-to-date through September
30, 2001, 537 shares of preferred stock were issued. These shares are 6%
cumulative, non-voting, and convertible into common stock of the Company. These
shares were converted into common stock on October 30, 2001 pursuant to the
Company's rights offering.
Impact of Inflation
The primary impact of inflation on the Company's operations is
reflected in increased operating costs. Since the assets and liabilities of the
Company are primarily monetary in nature, changes in interest rates have a more
significant impact on the Company's performance than the general effects of
inflation. However, to the extent that inflation affects interest rates, it also
affects the net income of the Company.
22
Item 3. Quantitative and Qualitative Disclosures about Market Risk
All financial institutions are significantly affected by fluctuations in
interest rates commonly referred to as "interest rate risk." The principal
exposure of a financial institution's earnings to interest rate risk is the
difference in time between interest rate adjustments or maturities on
interest-earning assets compared to the time between interest rate adjustments
or maturities on interest-bearing liabilities. Such difference is commonly
referred to as a financial institution's "gap position." In periods when
interest rates are increasing, a negative gap position will result in generally
lower earnings as long-term assets are re-pricing upward slower than short-term
liabilities. However during a declining rate environment, the opposite effect on
earnings is true, with earnings rising due to long-term assets re-pricing
downward slower than short-term liabilities.
Rising long term and short term interest rates tend to increase the
value of Midwest Loan Services' investment in mortgage servicing rights and
improve Midwest Loan Services' current return on such rights by lowering
required amortization rates on the rights. Rising interest rates tends to
decrease new mortgage origination activity, negatively impacting current income
from the retail mortgage banking operations of the Bank and Midwest Loan
Services. Rising interest rates also slow Midwest Loan Services' rate of growth,
but increases the duration of its existing sub-servicing contracts.
Falling long term and short term interest rates tend to decrease the
value of Midwest Loan Services' investment in mortgage servicing rights and
decrease Midwest Loan Services' current return on such rights by increasing
prepayments, by increasing amortization rates on the rights, and in some cases,
by impairment of the rights. Falling interest rates tends to increase new
mortgage origination activity, positively impacting current income from the
retail mortgage banking operations of the Bank and Midwest Loan Services.
Falling interest rates also increases Midwest Loan Services' rate of growth of
new subservicing contracts, but decreases the duration of its existing
sub-servicing contracts.
The Bank performs a static gap analysis that has limited value as a
simulation because of competitive and other influences that are beyond the
control of the Bank. The table on the following page details the Bank's interest
sensitivity gap between interest-earning assets and interest-bearing liabilities
at September 30, 2001. The table is based upon various assumptions of management
that may not necessarily reflect future experience. As a result, certain assets
and liabilities indicated in the table as maturing or re-pricing within a stated
period may, in fact, mature or re-price in other periods or at different
volumes. The one-year static gap position at September 30, 2001 was estimated to
be ($18,039,000) or (38.02)%.
23
UNIVERSITY BANK
Asset/Liability Position Analysis as of September 30, 2001
(Dollar amount in Thousand's)
Maturing or Re-pricing in
3 Months 91 Days to 1 - 3 3 - 5 Over 5 ALL
ASSETS or Less 1 Year Years Years Years Other Total
- ----- ------- ------ ----- ----- ----- ----- -----
Fed Funds - - - - - -
Loans - Net 9,990 4,309 9,334 9,150 4,836 (604) 37,015
Non-Accrual Loans - - - - 174 174
Securities - - - - 3,173 - 3,173
Other Assets - 753 - - - 3,963 4,716
Cash and Due from Banks 69 - - - - 2,303 2,372
--------------------------------------------------------------------------------------------
TOTAL ASSETS 10,059 5,062 9,334 9,150 8,009 5,836 47,450
--------------------------------------------------------------------------------------------
LIABILITIES
- -----------
CD's under $100,000 6,979 7,563 1,253 126 261 - 16,182
CD's over $100,000 1,339 2,864 538 113 - 4,854
MMDA 5,447 5,447 - - - - 10,893
NOW - - 3,534 - - - 3,534
Demand and Escrow - - - - 3,763 3,763
Savings - - 373 - - - 373
Other Borrowings 3,387 135 93 - - - 3,615
Other Liabilities - - - 1,366 1,366
Equity - - - - - 2,870 2,870
--------------------------------------------------------------------------------------------
TOTAL LIABILITIES 17,152 16,009 5,791 126 374 7,999 47,450
--------------------------------------------------------------------------------------------
GAP (7,093) (10,947) 3,543 9,024 7,635 (2,163) -
============================================================================================
CUMULATIVE
GAP (7,093) (18,039) (14,496) (5,472) 2,163 -
====================================================================================
GAP
PERCENTAGE -14.95% -38.02% -30.55% -11.53% 4.56% 0.00%
====================================================================================
24
PART II OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the Company or
any of its subsidiaries is party or to which any of their properties
are subject.
Item 5. Other information
Parent Company Financial Information
Certain financial information with respect to University Bancorp, Inc.
is presented on pages 26, 27 and 28.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
25
UNIVERSITY BANCORP, INC. (PARENT ONLY)
Condensed Balance Sheets
September 30, 2001 December 31, 2000
(Unaudited)
September 30 December 31,
2001 2000
----------------------- -------------------------
ASSETS
Cash and cash equivalents $ 1,740 $ 15,860
Securities available for sale 233 233
Investment in University Bank 2,870,127 2,493,426
Investment in Michigan BIDCO 143,809 77,157
Goodwill, net 67,908 139,412
Receivable from University Bank 286,196 149,572
Prepaid expenses 136,126 57,602
Other assets 1,000 1,000
----------------------- -------------------------
Total Assets $ 3,507,139 $ 2,934,262
======================= =========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 647,082 $ 562,000
Accounts payable 159,784 318,601
Accrued interest payable 18,567 11,379
Other liabilities 46,134 0
----------------------- -------------------------
Total Liabilities 871,567 891,980
Stockholders Equity 2,635,572 2,042,282
----------------------- -------------------------
Total Liabilities and Stockholders Equity $ 3,507,139 $ 2,934,262
======================= =========================
26
UNIVERSITY BANCORP, INC. (PARENT ONLY)
Condensed Statements of Operations
For the Periods Ended September 30, 2001 and 2000
For the Three Month For the Nine Month
Period Ended Period Ended
2001 2000 2001 2000
Dividends from subsidiary $ - $ - $ - $ -
Interest & dividends on investments 4 4,187 277 4,348
Income from Michigan BIDCO - - 0 3,760
Gain (loss) on sale of securities - 20,625 0 20,625
---------------- --------------- ---------------- ---------------
Total Income 4 24,812 277 28,733
Expense:
Interest 13,436 25,177 47,303 64,445
Compensation 308 - 31,508
Goodwill amortization (61,477) - (47,536) -
Public listing 6,907 12,604 20,672 25,300
Legal, audit & consulting 3,796 4,654 26,524 19,455
Other miscellaneous 1,952 674 3,617 2,235
---------------- ---------------- ---------------- ---------------
Total Expense (35,078) 43,109 82,088 111,435
Income (loss) before federal income taxes
(benefit) and equity in undistributed
net income (loss) of subsidiaries 35,082 (18,297) (81,811) (82,702)
Federal income taxes (benefit) - - - -
---------------- ---------------- ---------------- ---------------
Income (loss) before equity in
undistributed net income of subsidiaries 35,082 (18,297) (81,811) (82,702)
Equity in undistributed net income (loss)
of subsidiaries. (239,532) (22,060) (40,856) (459,905)
---------------- ---------------- ---------------- ---------------
Net income (loss) $ (204,450) $ 3,763 $ (122,667) $ (542,607)
---------------- ---------------- ---------------- ---------------
Preferred stock dividends 17,950 - 45,201 -
---------------- ---------------- ---------------- ---------------
$ (222,400) $ 3,763 $ (167,868) $ (542,607)
================ ================ ================ ===============
Basic and diluted income (loss)
per common share $ (0.11) $ 0.00 $ (0.08) $ (0.27)
================ ================ ================ ================
27
UNIVERSITY BANCORP, INC. (PARENT ONLY)
Condensed Statement of Cash Flows
For the Nine month Periods Ended September 30, 2001 and 2000
2001 2000
----------------- ----------------
Cash flow from operating activities:
Net loss $ (122,667) $ (542,607)
Reconciliation of net income (loss) to net cash used
in operating activities:
Gain on sale of securities (20,625)
Amortization 71,504 -
Decrease/(Increase) in other assets (78,528) (6,984)
Increase(Decrease) in other liabilities (33,139) 24,504
Decrease(Increase) investment in Michigan BIDCO (66,652) (3,760)
Decrease(Increase) investment in University Bank (76,697) 459,905
---------------- ---------------
Net cash (used in) operating activities (306,179) (89,567)
---------------- ---------------
Cash flow from investing activities:
Contributions of capital to University Bank (300,000) -
Purchase of securities available for sale - (37,500)
Proceeds from sale of securities available for sale - 58,125
---------------- ---------------
Net cash provided by (used in) investing (300,000) (20,625)
activities
---------------- ---------------
Cash flow from financing activities:
Principal payment on notes payable (127,822) (99,000)
Issuance of equity conversion notes 76,280 121,000
Proceeds from sale of preferred stock 537,000 -
Proceeds from sale of common stock 106,601 31,250
---------------- ---------------
Net cash provided by financing activities 592,059 53,250
---------------- ---------------
Net change in cash and cash equivalents (14,120) (15,692)
Cash and cash equivalents at beginning of period 15,860 15,834
---------------- ---------------
Cash and cash equivalents at end of period $ 1,740 $ 142
================ ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for Interest $ 14,076 $ 49,370
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVERSITY BANCORP, INC.
Date: November 14, 2001 /s/ Stephen Lange Ranzini
-------------------------
Stephen Lange Ranzini
President
29