1
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 March 31, 1997
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)
209 East Portage Avenue,
Sault Ste. Marie, Michigan 49783
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (906) 635-9794
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, $0.010 par value Outstanding at May 12, 1996
1,268,824 shares
page 1 of 31 pages
Exhibit index on sequentially numbered page 28
2
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 Cash Flows 7
Notes to the Consolidated Financial
Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Summary 9
Results of Operations 10
Liquidity and Capital Resources 20
PART II - Other Information
- ---------------------------
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 24
Item 5. Other Information
Parent Company Condensed
Financial Information 24
Item 6. Exhibits & Reports on Form 8-K 28
Signature 28
- ---------
Exhibit Index 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.
3
Part 1 - Financial Information 3
Item 1. - Financial Statements
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
(Unaudited)
March 31 December 31
1997 1996
ASSETS ----------- -------------
Cash and due from banks $ 1,695,071 $ 1,866,917
Federal funds sold 2,818,791 10,683,895
----------- -------------
Total cash and cash equivalents 4,513,862 12,550,812
Securities available for sale at market (note 2) 7,120,338 7,346,856
Loans held for sale 28,745,885 30,534,574
Loans, net 23,101,515 20,668,507
Premises and equipment 2,010,781 1,955,294
Mortgage servicing rights 2,408,238 2,312,436
Investment in and advances to
Michigan BIDCO 820,324 815,790
Other real estate owned 636,987 266,079
Other assets 2,862,547 1,910,331
----------- -------------
Total other assets 8,738,877 7,259,930
----------- -------------
TOTAL ASSETS $72,220,477 $ 78,360,679
=========== =============
The accompanying notes are an integral part of the consolidated financial
statements.
4
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES 4
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
(Unaudited)
March 31 December 31
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY ------------ --------------
Deposits:
Demand - non interest bearing $ 7,114,824 $ 6,814,000
Demand - interest bearing 17,017,058 15,786,832
Savings 793,786 976,479
Time 24,326,908 29,529,050
------------ -------------
Total Deposits 49,252,576 53,106,361
FHLB advances 6,000,000 6,000,000
Mortgage escrow 373,523 1,064,650
Short term borrowings 11,144,746 12,941,266
Deferred noncompete income 93,325 102,076
Other liabilities 965,494 1,032,130
------------ -------------
Total Liabilities 67,829,664 74,246,483
------------ -------------
Minority Interest 213,550 201,427
Stockholders' equity:
Preferred Stock, $0.001 par value;
Authorized - 500,000 shares;
issued 0 shares in both 1997 and 1996 - -
Common stock, $0.01 par value;
Authorized - 2,500,000 shares;
issued 1,315,366 shares in 1997
and 1,295,366 shares in 1996 13,154 12,954
Treasury Stock - 68,765 shares in 1997
and 1996 (300,883) (300,883)
Additional Paid-in-Capital 3,041,188 2,906,389
Retained earnings 1,424,107 1,299,473
Net unrealized (loss) on securities
available for sale, net of tax
of ($156) in 1997, and
($2,659) in 1996. (303) (5,164)
------------ -------------
Total Stockholders' equity 4,177,263 3,912,769
------------ -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 72,220,477 $ 78,360,679
============ =============
The accompanying notes are an integral part of the consolidated financial
statements.
5
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES 5
Consolidated Statements of Income
(Unaudited)
For the Three Month
Periods Ended
March 31, March 31,
1997 1996
------------- ---------
Interest income:
Interest and fees on loans $ 960,169 $ 403,971
Interest on securities:
U.S. Treasury Securities - 4,611
U.S. Government agencies 94,594 174,054
Other securities 20,569 13,349
Interest on bank deposits 7,607 13,065
Interest on federal funds 64,147 56,044
----------- --------
Total interest income 1,147,086 665,094
----------- --------
Interest expense:
Interest on deposits:
Demand deposits 229,563 45,203
Savings deposits 6,437 23,774
Time certificates of deposit 387,926 302,762
Bank borrowings 86,215 146,231
Interest on other short term borrowings 75,271 26,259
----------- --------
Total interest expense 785,412 544,229
----------- --------
Net interest income 361,674 120,865
Provision for loan losses 22,500 12,000
----------- --------
Net interest income after
provision for loan losses 339,174 108,865
----------- --------
Other income:
Net security gains (losses) (22,351) 86,521
Decrease in market value of
loans held for sale (3,739) (89,691)
Service charges and fees 4,384 596
Foreign exchange income 7,260 18,488
Mortgage banking income 1,446,358 294,059
Profit from equity investment in
Michigan BIDCO 4,818 20,000
Other 73,876 43,767
----------- --------
Total other income 1,510,606 373,740
----------- --------
The accompanying notes are an integral part of the consolidated financial
statements.
6
6
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income (continued)
(Unaudited)
For the Three Month
Periods Ended
March 31, March 31,
1997 1996
----------------------- ----------------
Other expenses:
Salaries and wages $ 853,622 $ 370,827
Employee benefits 113,998 58,020
Occupancy, net 103,799 71,246
Taxes other than income 6,813 4,798
Data processing and equipment expense 95,573 72,734
Correspondent bank service charges 9,350 4,179
Advertising 36,073 26,052
Net expense of other real estate owned (3,790) 414
FDIC insurance 1,998 500
Legal and audit expense 68,128 57,044
Other operating expenses 385,664 181,666
----------- -----------
Total other expenses 1,671,228 847,480
----------- -----------
Income (Loss) before income taxes 178,552 (364,875)
----------- -----------
Income taxes (benefit) 53,918 (127,642)
----------- -----------
Net Income (Loss) $ 124,634 $ (237,233)
=========== -----------
Earnings (loss) per common share (Note 1)
Primary $0.10 ($0.19)
=========== ===========
Fully diluted $0.09 ($0.19)
=========== ===========
Weighted average shares outstanding (Note 1)
Primary 1,226,824 1,248,206
=========== ===========
Fully diluted 1,360,489 1,248,206
=========== ===========
Dividends declared per share $ --- $ ---
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
7
UNIVERSITY BANCORP, INC. AND SUBSIDIARY 7
Consolidated Statements of Cash Flows
(Unaudited)
For the Three-Month
Periods Ended
March 31,
1997 1996
---------- ----------
Cash flow from operating activities:
Net income (loss) $ 124,634 $ (237,233)
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 173,518 114,044
Provision for loan loss 22,500 12,000
Mortgage loans originated for sale (70,790,128) (39,050,115)
Proceeds from sale of loans and mortgage backed
trading securities 74,457,898 35,974,746
Net loss/(gain) on loan sales and securitization (986,552) (116,188)
Market adjustment on loans held for sale 3,739 89,691
Net amortization/accretion on securities 7,249 (1,852)
Gain on sale of securities available for sale 22,351 (86,521)
Change in:
Investment in Northern Michigan BIDCO (4,534) (19,160)
Purchased mortgage servicing rights (190,755) (70,614)
Other real estate (370,908) -
Increase in other assets (955,268) (295,609)
Increase/(Decrease) in other liabilities (62,718) 225,544
------------ -------------
Net cash from (used in)
operating activities 1,451,026 (3,461,267)
------------ -------------
Cash flow from investing activities:
Purchase of securities available for sale (885,795) (6,251,453)
Proceeds from sales of securities available
for sale 927,262 5,890,857
Loans granted net of repayments (3,351,776) (1,441,212)
Premises and equipment expenditures (134,052) (344,713)
Principal paydowns on securities available
for sale 162,817 815,274
------------ -------------
Net cash from (used in)
investing activities (3,281,544) (1,331,247)
------------ -------------
Cash flow from financing activities:
Net increase (decrease) in deposits (3,853,785) 8,680,706
Net increase(decrease) in mortgage
escrow accounts (691,127) 430,202
Principal payment on notes payable (12,500) (12,500)
Net decrease in other short term borrowings (1,784,020) -
Issuance of common stock 135,000 66,750
------------ -------------
Net cash from
financing activities (6,206,432) 9,165,158
------------ -------------
Net change in cash and
cash equivalents (8,036,950) 4,372,644
Cash and cash equivalents:
Beginning of period 12,550,812 1,937,631
------------ -------------
End of period $ 4,513,862 $ 6,310,275
============ =============
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 800,071 $ 484,759
Cash paid (received) for income taxes (189,807) -
The accompanying notes are an integral part of the financial statements.
8
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(1) General
See note 1 of Notes to Financial Statements incorporated by reference in
the Company's 1996 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 1996 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: 1,226,824 and
1,248,206 for the three months ended March 31, 1997 and 1996, respectively.
Fully diluted average shares outstanding for the 1997 period is calculated to
be 1,360,489. Stock options are considered not dilutive for the 1996 period
and therefore, not included in earnings per share calculations.
(2) Available-for-sale Securities
The Bank's available-for-sale securities portfolio at March 31, 1997 had a
net unrealized gain of approximately $1,000 as compared with a net unrealized
loss of approximately $8,000 at December 31, 1996, an increase of $7,000. The
securities portfolio continues to shrink to provide for increased loan demand.
Securities available for sale
March 31, 1997
--------------------------------------------------
Gross Estimated
Amortized Unrealized Fair
(in thousands) Cost Gains Losses Value
- -----------------------------------------------------------------------------
U.S. agency mortgage-backed 5,194 40 (10) 5,224
Other agency mortgage-backed 652 - (45) 607
Other mortgage-backed 330 - (7) 323
U.S. agency equity 848 - - 848
Other equity 97 21 - 118
- -----------------------------------------------------------------------------
Total investment securities
available for sale $7,121 $61 $(62) $7,120
====== === ==== ======
9
Securities available-for-sale (continued) 9
December 31, 1996
----------------------------------------
Gross
Amortized Unrealized Fair
(in thousands) Cost Gains Losses Value
- ------------------------------------------------------------------
U.S. agency mortgage-backed $5,367 $38 $(30) $5,375
Other agency mortgage-backed 681 - (35) 646
Other mortgage-backed 367 - (3) 364
U.S. agency equity 848 - - 848
Other equity 92 22 - 114
- ------------------------------------------------------------------
Total securities
available for sale $7,355 $60 $(68) $7,347
====== === ===== ======
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SUMMARY
For the three months ended March 31, 1997, a net income of $124,634 was
realized versus a net loss of $237,233 in the same period in 1996. Net
interest income increased to $361,674 in the 1997 period from $120,865 in the
1996 period, and other income was $1,510,606 in the 1997 period versus $373,740
in the 1996 period. Operating expenses continued to expand to $1,671,228 in
the 1997 period from $847,480 in the 1996 period. Primary and fully diluted
net income per share in the three months ended March 31, 1997 was $0.10 and
$0.09, compared to a net loss of ($0.19) for the three months ended March 31,
1996.
The profit in 1997 versus the losses in 1996 were principally due to
increased fee based income and increased net interest income as a result of the
improvements in the underlying operating results of the Bank's mortgage banking
subsidiaries and gains from the sale of loans from the Bank's own mortgage
banking wholesale operations. In the 1997 period the Bank realized an initial
$395,356 gain on the sale of Participation Certificates in sub-performing home
equity loans which the Bank had purchased in mid-March 1995. The 1996 period
incurred initial start-up losses of the Ann Arbor main office, which opened
February 6, 1996.
The following table summarizes the pre-tax income (loss) of each profit
center of the Company for the three months ended March 31, 1997 and 1996 (in
thousands):
THREE MONTHS ENDED MARCH 31, 1997 PRE-TAX INCOME (LOSS) SUMMARY
Banking
Community & mortgage banking $(45)
Midwest Loan Services 48
Varsity Mortgage & Varsity Funding 213
Equity in the earnings of Michigan BIDCO 5
Corporate Office (42)
-----
Total $179
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10
THREE MONTHS ENDED MARCH 31, 1996 PRE-TAX INCOME (LOSS) SUMMARY
Banking
Community & mortgage banking $(265)
Midwest Loan Services (2)
Varsity Mortgage & Varsity Funding (70)
Equity in earnings of Michigan BIDCO 20
Corporate Office (48)
------
Total $(365)
The net income of the Company for the three months ended March 31, 1997
was principally a result of increased profits from the Bank's mortgage
subsidiaries Varsity Mortgage, Varsity Funding and Midwest Loan Services. The
Bank had a narrowed loss as its wholesale mortgage banking operations had a
strong result, partially offset by losses in community banking as operating
expenses exceeded increased net interest income.
The loss from operations for the three months ended March 31, 1996 was due
to the start-up of new activities at the Bank in Ann Arbor and at Varsity
Funding, the commencement of operations at Varsity Mortgage, and an unusual
expense at Michigan BIDCO associated with the start-up of the BIDCO's
affiliate, Northern Michigan Foundation.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income increased to $361,674 for the three months ended March
31, 1997 from $120,865 for the three months ended March 31, 1996. Net interest
income rose from the year ago period because of an increase in loans and other
interest earning assets and a decrease in the cost of interest bearing
liabilities. The yield on interest earning assets increased from 7.21% in the
1996 period to 8.59% in the 1997 period. The cost of interest bearing
liabilities decreased from 6.12% in the 1996 period to 5.76% in the 1997
period. Net interest income as a percentage of total earning assets increased
from 1.31% to 2.71%, because of the increase in interest spread and a 44.8%
larger base of interest earning assets.
Interest income
Interest income increased from $665,094 in the quarter ended March 31,
1996 to $1,147,086 in the quarter ended March 31, 1997. The average volume of
interest earning assets increased from $36,896,668 in the 1996 period to
$53,423,189 in the 1997 period, an increase of 44.8%. The increased volume of
earning assets was due to an increase in loans supported by increases in
deposits derived from the new Ann Arbor main office. Interest income also
increased because of an increase in the yield on earning assets. The overall
yield on the loan portfolio increased from 9.18% to 9.44%.
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The average volume of investment securities in the three months ended
March 31, 1997 decreased 48.2% over the same periods in 1996, as the Bank's
portfolio, which consists of adjustable rate agency backed mortgage securities,
was liquidated and the funds repositioned into loans from the new Ann Arbor
main office. The yield on the securities portfolio increased from 5.53% in the
three month period ended March 31, 1996 to 6.40% in the 1997 period. The
increase in yields was the result of repricing adjustments as the adjustable
rate securities seasoned to fully indexed yields.
Interest Expense
Interest expense increased from $544,229 in the three months ended March
31, 1996 to $785,412 in the 1997 period. The increase was due to an increase
in interest bearing liabilities as a result of increased deposits, only
partially offset by a decrease in rates paid on deposits. The decrease in
rates was due to increased retail deposits and decreased wholesale deposits.
The cost of funds decreased from 6.12% in the 1996 period to 5.76% in the 1997
period. The average volume of interest bearing liabilities increased 53.3% in
the 1997 period versus the 1996 period.
MONTHLY AVERAGE BALANCE SHEET AND
INTEREST MARGIN ANALYSIS
The following tables summarize monthly 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 months ended
March 31, 1997 and 1996.
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12
Three Months Ended March 31,
-------------------------------------------------------------------------------
1997 1996
------------------------------------- --------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
ASSETS
Interest Earning Assets:
Short Term Investments:
Interest Bearing Deposits $ 600,905 $ 7,607 5.06% $ 1,058,526 $ 13,065 4.94%
Federal Funds Sold 4,938,916 64,147 5.20% 4,344,644 56,044 5.16%
Securities:
Non-taxable (1) - - - - - -
Taxable 7,194,166 115,163 6.40% 13,882,675 192,014 5.53%
---------------- ---------- ---------- --------------- ---------- ----------
Total Securities 12,733,987 186,917 5.87% 19,285,845 261,123 5.42%
---------------- ---------- ---------- --------------- ---------- ----------
Loans:
Commercial 10,215,593 263,164 10.30% 3,402,917 84,650 9.95%
Real Estate Mortgage 26,652,650 603,179 9.05% 12,960,293 287,208 8.86%
Installment/Consumer 3,820,959 93,826 9.82% 1,247,613 32,113 10.30%
---------------- ---------- ---------- --------------- ---------- ----------
Total Loans 40,689,202 960,169 9.44% 17,610,823 403,971 9.18%
---------------- ---------- ---------- --------------- ---------- ----------
Total Interest Bearing Assets 53,423,189 1,147,086 8.59% 36,896,668 665,094 7.21%
---------------- ---------- ---------- --------------- ---------- ----------
Less allowance for possible
loan losses & deferred fees (309,873) (342,177)
---------------- ---------------
53,113,316 36,554,491
Mortgage servicing rights 2,374,613 2,929,352
Non earning assets 6,696,449 5,392,698
---------------- ---------------
Total Assets $ 62,184,378 $ 44,876,541
================ ===============
LIABILITIES
Interest Bearing Liabilities:
Deposit Accounts:
Now/S-Now $ 3,161,083 $ 32,476 4.11% $ 321,981 $ 4,039 5.02%
Savings 112,461 694 2.47% 29,189 183 2.51%
Canadian Dollar Savings 689,666 5,743 3.33% 1,589,275 23,591 5.94%
Time 25,329,296 387,926 6.13% 19,632,778 302,762 6.17%
Borrowed Funds 9,133,833 138,078 6.05% 10,000,000 150,340 6.01%
Money Market Accounts 15,138,760 197,087 5.21% 3,004,332 41,164 5.48%
Holding Company Debt 956,250 23,408 9.79% 984,000 22,150 9.00%
---------------- ------------ ---------- --------------- ------------ ----------
Total interest bearing
liabilities $ 54,521,349 785,412 5.76% $ 35,561,555 544,229 6.12%
================ ------------ ---------- =============== ------------ ----------
Net interest income $ 361,674 $ 120,865
============ ============
Weighted average rate spread 2.83% 1.09%
========== ==========
Net yield on average earning
assets 2.71% 1.31%
(1) Actual yields; not adjusted for tax-equivalent yields
(2) For purposes of computing average yields on the loan portfolio as
presented in the above analysis, loans on non-accrual status are included
in the average loan balances.
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Provision for Loan Losses
The monthly loan loss provision remained at a rate of $7,500 in the first
quarter of 1997. In the 1996 period, the monthly provision was increased in
February 1996 from $400 to $6,000. The increased monthly provision for loan
losses is the result of management's desire to build reserves, as new loans are
originated in Ann Arbor. The actual loan losses were $1,041 in the three month
period ended March 31, 1997 versus $2,172 in the three month period ended March
31, 1996.
Three Months Ended
March 31
1997 1996
---------------------------------
Provision for loan losses 22,500 12,000
Loan charge-offs (1,041) (2,172)
Recoveries 3,618 3,185
-------------- -----------------
Net increase (decrease)
in allowance 25,077 13,013
At At
March 31, 1997 December 31, 1996
---------------------------------
Total loans (1) 23,424,375 20,966,290
Reserve for loan losses 322,860 297,783
Reserve/Loans (1), % 1.38% 1.42%
(1) Excludes loans held for sale.
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The following schedule summarizes the Company's nonperforming loans for
the periods indicated:
At At
March 31, 1997 December 31, 1996
---------------------------------
Past due 90 days and over
and still accruing:
Real estate 234,352 226,144
Installment 45,044 34,096
Commercial 64,717 29,479
--------- ---------
Subtotal 344,113 289,719
Nonaccrual loans:
Real estate 506,376 336,468
Installment 1,840 1,968
Commercial 83,277 125,761
--------- ---------
Subtotal 591,493 464,197
Other real estate owned 636,987 266,079
--------- ---------
Total 1,572,593 1,019,995
As % of loans (1) 6.71% 4.86%
Ratio of reserve for loan
losses to all loans
90 days and over 34.5% 39.5%
(1) Excluding loans held for sale.
Other real estate owned at March 31, 1997 and December 31, 1996 includes a
commercial development site in Sault Ste. Marie, Michigan. Based upon its
assessment of current market conditions, management believes the 16-acre site
where a former loan office is located has a fair market value substantially
more than its carrying cost as of December 31, 1996 of $266,079. This property
is carried as other real estate owned in the Company's financial statements
since it is surplus to the Bank's requirements. While it is management's goal
to sell this site in 1997, and the Bank is in negotiations at this time to sell
a significant portion of the property, there is no assurance that a sale will
be consummated.
The increases in non-performing assets mainly relate to loans originated
for the secondary market which have become delinquent and are either under
modification agreements to bring the loans current or in the process of
foreclosure. With the exception of one $42,470 commercial real estate
building, the other real estate owned, other than the property mentioned above,
is residential single family properties. Based upon management's review of
appraisal information and current broker price opinions, management believes
that for the most part, the Bank is well secured with respect to these loans
and the other real estate owned which is carried at cost. The Bank's greatest
loan credit risks relate to the commercial and installment loan
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15
portfolios, and these levels were similar at both March 31, 1997 and December
31, 1996, although non-accrual commercial loans (perhaps the highest credit
risk category of loans) decreased 33.8% during the period.
Economic conditions in the Bank's primary market area in Ann Arbor were
strong in the period. The Sault Ste. Marie area appears not to be growing.
The Newberry area appears to be rapidly growing because of the establishment of
a major prison complex in the town by the State Department of Corrections. A
new expansion of the prison is now occurring.
Management believes that the current reserve level and the ongoing reserve
for loan losses is adequate to absorb losses inherent in the loan portfolio,
although the ultimate adequacy of the reserve 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 increased from $373,740 for the three months
ended March 31, 1996 to $1,510,606 for the three months ended March 31, 1997.
The increase was principally a result of a $1,152,299 increase in the Bank's
mortgage banking income.
Securities. During the three months ended March 31, 1997, securities
totalling $927,262 were sold from the Bank's available-for-sale securities
portfolio with a gross realized loss of $22,351 and no gains. During the
quarter, the Bank sold half of its COFI-index linked adjustable rate
mortgage-backed securities. Taking into account realized and unrealized gains
and losses on the securities portfolio, during the first quarter of 1997, the
yield on the Company's investment securities portfolio was 5.57%.
Mortgage Banking. Mortgage banking income increased to $1,446,358 in the
three months ended March 31, 1997 from $294,059 in the three months ended March
31, 1996. Sharply increased loan purchase and origination volumes during the
1997 period as well as the gain on sale of participation certificates in
sub-performing home equity loans (see the discussion of the "RTC Loan Pool"
below) were offset by a decrease in return from the Bank's investment in FHLMC
single family mortgage loans serviced for others, as a result of amortization
of servicing right assets due to mortgage payoffs. There was also a lower of
cost or market adjustment of $3,739 charged against income in the 1997 period
to mark the mortgages held for sale to the lower of cost or market, versus a
charge of $89,691 in the 1996 period. The result for the 1997 period was also
dissimilar from the 1996 period in that it also included a full quarter of
revenue from Varsity Mortgage, which commenced operations in March 1996.
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At March 31, 1997, the Bank and its subsidiaries owned the right to
service $208,104,343 of FHLMC mortgages for others, of which approximately 40%
was owned by Midwest Loan Services, and the remainder by the Bank. The
following table summarizes the portfolio by type and mortgage note rate:
Interest Rate Stratification of the Company's Servicing
($ in 000s) FIXED RATE - BY MATURITY
----------------------------------------
MORTGAGE RATE (%) ARMs UNDER 10 10-25 OVER 25
9.00 and up 706 41 329 3,955
8.50 - 8.99 7,300 481 1,263 12,919
8.00 - 8.49 5,461 509 2,986 28,272
7.50 - 7.99 1,079 789 8,340 64,018
7.00 - 7.49 - 1,155 17,887 24,042
6.50 - 6.99 - 742 10,341 8,683
6.00 - 6.49 234 317 1,910 1,250
under 6.00 3,076 19 - -
------ -------- ------ -------
17,856 4,053 43,056 143,139
Current market
interest rates 6.375 7.88% 8.25% 8.75%
Average annual
servicing fee 0.39% 0.29% 0.27% 0.26%
Interest rates have been very stable for nearly fourteen months. If
interest rates were to decline to levels briefly seen during the Summer of
1993, the portfolio would experience significant refinancings and payoffs,
which would hurt income. 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 exceeds cost by
approximately $96,000 to $322,000. 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.
At March 31, 1997, the Bank had outstanding purchase commitments to buy
single family FHLMC qualifying mortgage loans of $24,447,000 and outstanding
forward commitments to deliver FHLMC mortgage-backed securities of $32,000,000,
substantially all of which commitments were for delivery within three months or
less.
17
17
Servicing Rights Held by the Company
(amounts in $000s) March 31, December 31,
1997 1996
--------------------------------------
Total servicing (1) 208,104 214,046
Book value of servicing 2,408 2,312
Estimated market value
of servicing:
Management estimate (2) 2,504 2,371
Discounted cash flow (3) 2,730 2,466
Estimated excess of market
over book value (4) 322- 96 154- 59
(1) Excludes servicing related to FHLMC and FNMA qualified loans held for
delivery, and excludes servicing held by Midwest Loan Services
(2) Assumes a price based upon market transactions at March 31, 1997 and
December 31, 1996 of 4.9x (4.9 times the servicing fee) for 30-year
servicing, 3.75x for 15-year servicing, 2.3x for Balloon servicing and
2.1x for ARM servicing. Excess servicing is discounted from these amounts
at a multiple of one times the servicing fee.
(3) Uses net present value analysis of future cash flows, discounted back at
13.14%.
(4) Range based upon the two methods used in (2) and (3), above.
During the period ended March 31, 1997 purchases and sales of mortgage
servicing rights by third-parties evidenced a stable trend in price which
mirrored the generally stable interest rates throughout the period.
RTC Loan Pool. In mid-March 1995, the Bank purchased four Participation
Certificates in sub-performing home equity loans with approximately $6,600,000
in unpaid principal balance and $1,000,000 of unpaid accrued interest from a
private investor group (which had purchased them from the Resolution Trust
Corporation (RTC)) for approximately $1,903,000 (the "RTC Loan Pool"). In
September 1996 an additional $700,000 in home equity loans purchased from a
home equity loan originator were added to the RTC Loan Pool as a fifth
Participation Certificate at a cost of $115,000.
Substantially all of the remaining loans underlying the first four
Participation Certificates were sold as of March 28, 1997 for $1,725,000. As a
result the Bank's investment in the RTC Loan Pool was reduced to zero, and the
balance of the proceeds from the sale, per the terms of the RTC Loan Pool
acquisition agreement, was split 50/50 with the servicer of the RTC Loan Pool.
The Bank's gain on this transaction was $395,356.
In mid-1996, the servicer submitted a request to the RTC for a $650,000
refund of loans that had previously been paid off, but were included in the RTC
Loan Pool, pursuant to the original purchase agreement. If received, this
amount would be split 50/50 with the RTC
18
18
servicer of the RTC Loan Pool. In April 1997, the servicer was notified that
the RTC had accepted the refund request in the amount of $300,000 with a
request for additional information regarding the remaining $350,000. No monies
will be paid by the RTC however, until the entire refund request is finalized.
The Bank has not yet booked any of this receivable as income. Additional
proceeds are anticipated from residential real estate related assets owned and
the loans underlying the Fifth Participation Certificate, all with a carrying
value of $215,000. If realized, any of the amounts received would also be
split 50/50 with the servicer of the RTC Loan Pool.
Foreign Exchange. Foreign exchange revenues decreased to $7,260 for the
three months ended March 31, 1997 from $18,488 in the 1996 period. During the
period, the management agreement whereby the Bank managed the foreign exchange
program of the bank which purchased the Bank's former Upper Peninsula community
banking offices was terminated. The Bank's foreign exchange revenue is likely
to remain at lower levels going forward.
Michigan BIDCO. Michigan BIDCO (the "BIDCO") invests in businesses in
Michigan with the objective of fostering job growth and economic development.
As of March 31, 1997, the BIDCO had made nineteen such investments, amounting
to a total of $12,342,000 at original cost (before repayments or participations
sold). At March 31, 1997, the BIDCO had total unaudited assets of $6,084,522.
For the three months ended March 31, 1997 and 1996, the Bank's 44.1% equity
share in the earnings of the BIDCO's reported net income was $4,818 and
$20,000, respectively. Income for the 1997 first quarter was negatively
impacted by market value adjustments in the investment portfolio of the BIDCO.
The Bank owns 280 shares of common stock in the BIDCO, currently
representing a 44.1% equity interest. The Company's consolidated fully diluted
ownership in the BIDCO is 15.6%, after considering the impact of convertible
bonds.
Michigan BIDCO makes its investments in the form of loans or direct equity
investments, or a combination thereof. The BIDCO's limit on its investment in
one borrower is currently $500,000, and the BIDCO arranges participations for
investments in excess of this amount. By management policy, the Bank is
restricted from investing or lending to a business that the BIDCO finances.
The BIDCO typically receives warrants or participation rights in the companies
in which it invests. To date, investments (at original investment cost) have
been made in the following types of businesses:
19
19
Michigan BIDCO, investments:
----------------------------------
Total Equity
Industry Investment Participation?
#1 ABC-TV affiliate $1,472,000 yes
#2 Adult foster care 40,000 no
#3 Cable TV 545,000 yes
#4 Children's clothing manufacturer200,000 repurchased
#5 Commercial laundry 180,000 no
#6 Environmental engineering 100,000 repurchased
#7 Home health care 20,000 no
#8 Injection mold equip. manufacture25,000 no
#9 Janitorial supplies 85,000 no
#10 Limited service hotels 738,600 yes
#11 Metal manufacturing 80,000 no
#12 Paper converting 2,762,000 yes
#13 Plastic injection molding 2,000,000 repurchased
#14 Railcar parts manufacturing 125,000 yes
#15 Railroad boxcar leasing 1,500,000 no
#16 Recycled paper pulp mill 780,000 yes
#17 Residential mortgage servicing 450,000 repurchased
#18 Specialty financial services 540,000 yes
#19 Tissue paper mill 700,000 yes
-----------
Total $12,342,600
===========
The loans associated with investments #2, 4, 5, 7, 13, and 17 have been
repaid in full. Loan participations have been sold in loans associated with
investments #1, 3, 5, 7, 9, 12, 13, 15, 16 and 19. At March 31, 1997, the
BIDCO had one outstanding conditional commitment to lend in the amount of
$200,000 in conjunction with Northern Michigan Foundation (see below).
Northern Michigan Foundation. In December 1995, the BIDCO donated
$225,000 to capitalize Northern Michigan Foundation (the "Foundation"), and, in
early 1996, donated an additional $75,000 to the Foundation. These donations
negatively impacted the BIDCO's and the Company's earnings in the 1996 first
quarter. The BIDCO anticipates that on an ongoing basis a portion of its
overhead will be borne by the Foundation. The BIDCO and the Foundation share
administrative staffs and offices, with the Foundation reimbursing the BIDCO
for these services. The monthly management fee paid by the Foundation to the
BIDCO is currently approximately $8,000. As a result of its capitalization by
the BIDCO, the Foundation was able to borrow a total of $2,000,000 from the
U.S. Rural Economic Community Development Service Agency ("U.S. RECDS") at 1%
interest with a 30 year term. As of March 31, 1997, the Foundation had lent
$1,300,000 of its available funds to seven borrowers, with $1,000,000 undrawn
and available for lending from the U.S. RECDS loan.
20
20
Non-Interest Expense
Non-interest expense increased to $1,671,228 in the three months ended
March 31, 1997 from $847,480 for the three months ended March 31, 1996. The
increase was primarily of ongoing expansion of business at the Bank, Varsity
Mortgage and Varsity Funding. Also, comparisons of the first quarter of 1997
versus the first quarter of 1996 should take into account that fact that the
Bank started-up the Ann Arbor main office in February 1996, and Varsity
Mortgage started operations in March 1996, so the first quarter of 1997
reflects a full quarter of expenses as well as business expansion since the
start-up. Operations at the Bank in Ann Arbor in the first quarter of 1996
reflect a full quarter of personnel and other expenses, although the revenue
from the new main office did not begin to increase until after the new office
opened in early February 1996.
Non-interest operating expense for the parent company only increased to
$36,091 for the three month 1997 period from $33,193 for the 1996 period.
Public listing expenses and other miscellaneous expenses were higher.
Liquidity and Capital Resources
Capital Resources. The table on the following page sets forth the Bank's
risk based assets, and the capital ratios and risk based capital ratios of the
Bank and Company. At March 31, 1997, the Bank was adequately capitalized (the
required ratio for "adequately capitalized" was 8% of risk-based assets).
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, the sale of loans held for
sale, borrowings from correspondent lenders secured by securities and/or
residential mortgage loans. In addition, the Bank invests in overnight Federal
Funds. At March 31, 1997, the bank had cash and due from banks and fed funds
on hand of $4,513,862. The Bank has an unused $3,000,000 line of credit
secured by investment securities and two lines of credit from correspondents
secured by mortgage loans for sale to the secondary market. In order to
bolster liquidity, the Bank has also sold brokered CDs from time to time.
The decline in time deposits during the three month period ended March 31,
1997 from $29,529,050 to $24,326,908 was the result of a decrease of approx.
$6,500,000 in brokered time deposits. Management is de-emphasizing brokered
time deposits as retail deposit levels increase as a result of the expansion of
the Bank's Ann Arbor main office deposit base.
Parent Company Liquidity. At year-end 1996, University Bancorp, Inc. held
cash and marketable equity securities of $155,183. This increased by $125,208
to $280,391 at March 31, 1997. The increase in cash and marketable equity
securities was due to the sale of shares of the Company's common stock in a
private placement. Subsequent to March
21
21
31, 1997 an additional $50,000 in common stock was sold in a private placement.
During the three months ended March 31, 1997 no dividends were paid from the
Bank, as a result of low profitability at the Bank. Dividends from the
Company's bank subsidiary together with earnings from the cash and marketable
equity securities held by the parent company are the principal sources of cash
used to fund the parent company's indebtedness owing to North Country Bank &
Trust ("NCB&T"), which amounted to $950,000 and $962,500 at March 31, 1997 and
at December 31, 1996, respectively. The NCB&T note matures November 1, 1997,
and the Company intends to seek a renewal at that time. Management believes
that the cash and securities on hand, federal tax refunds receivable and the
available unrestricted retained earnings that University Bank is able to pay
the Company in the form of dividends, with permission of the Company's secured
debt lender, is currently sufficient to cover expected required principal
reductions during 1997 on the holding company's loan, assuming its renewal.
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.
Rising long term and short term interest rates tend to increase the value
of the Bank's and Midwest Loan Services' investment in mortgage servicing
rights and improve the Bank's and Midwest Loan Services' current return on such
rights by lowering required amortization rates on the rights. Rising long and
short term interest rates also increases origination activity at Varsity
Funding as more residential borrowers need alternative sources of funding
outside of traditional secondary market loans. However, rising interest rates
tends to decrease new mortgage origination activity, negatively impacting
current income from the Bank's retail mortgage banking operations and Varsity
Mortgage's operations. Rising interest rates also slow Midwest Loan Services'
rate of growth, but increases the duration of its existing subservicing
contracts. The table on page 23 details the Bank's asset/liability sensitivity
as of March 31, 1997.
22
22
UNIVERSITY BANK
Risk Adjusted Assets & Risk Adjusted Capital Ratio at March 31, 1997
($ in 000's)
- --------------------------------------------------------------------------------------------------------------------------------
Risk Adj.
Value Risk Asset
Asset (000's) Weight Value
- ------------------------------------------------------------------------- --------- ----------- ----------
Cash and Federal Reserve Deposits 294 0% 0
U.S. Gov't Agency Securities 652 0% 0
U.S. Treasury Securities 0 0% 0
U.S. Gov't Guaranteed Loans 188 20% 38
Balances at Domestic and Canadian Banks 1,395 20% 279
Fed Funds Sold 2,819 20% 564
U.S. Gov't Agency Mortgage-backed Securities 5,194 20% 1,039
U.S. Gov't Equity Securities 848 20% 170
Other Mortgage-backed Securities 304 50% 152
1-4 Family Mortgage Loans 36,536 50% 18,268
Junior Liens 2,573 100% 2,573
All Other Loans 12,873 100% 12,873
All Other Securities 26 100% 26
Real Estate Owned 637 100% 637
Premises & Equipment 2,011 100% 2,011
Mortgage Servicing Rights 2,408 100% 2,408
Other Assets 2,982 100% 2,982
- ------------------------------------------------------------------------- ---------
TOTAL ASSETS 71,740
Off Balance Sheet Items:
Letters of Credit and Committments > 1 Year 0 100.00% 0
Foreign Exchange Contracts 800 1.00% 8
Home Equity Lines of Credit 477 25.00% 119
Interest Rate Contracts 0 0.00%(1) 0
FHLMC/FNMA Loan Purchase Committments 24,447 50.00% 12,224
MBS FHLMC/FNMA Forward Sell Committments 32,000 0.00%(1) 174
Agency Guaranteed Commercial Loans Sold 203 20.00% 41
--------- ----------- ----------
TOTAL RISK-ADJUSTED ASSETS 56,584
==========
CAPITAL RESOURCES
Shareholders Equity 4,403
Net Unrealized Loss on AFS Securities 14
Minority interest in consolidated subsidiary 214
Mortgage Servicing Rights Limitation (93)
-----
Total Equity (Tier 1) 4,538
Qualifying Loan Loss Reserve (Tier 2) 323
-----
Regulatory Capital (Tier 1 & Tier 2) 4,861
=====
Primary and Total Capital Ratio (Leverage) 6.78%
=====
Risk-adjusted Capital Ratio (Tier 1) 8.02%
=====
Risk-adjusted Capital Ratio (Tier 1 & Tier 2) 8.59%
=====
University Bancorp Consolidated
Total Capital Ratio (Leverage Ratio) 5.78%
=====
(1) Plus market value, or replacement cost valuation, as required.
23
UNIVERSITY BANK 23
Asset/Liability Position Analysis 3-31-97
($ in 000'S)
Maturing or Repricing in
3 Mos 91 Days to 1 - 5 Over 5 ALL
ASSETS or Less 1 Year Years Years OTHERS TOTAL
------ ------- ---------- ----- ------ ------ -----
Fed Funds 2,819 2,819
Loans (1) 733 758 3,559 6,167 11,217
Foreign Investments 45 45
Securities 4,774 1,921 4 304 7,003
Loans held for sale 28,746 28,746
Matured loans 1,239 1,239
Variable rate loans 9,049 1,151 10,200
Other assets 7,757 7,757
Cash & due from banks 1,644 1,644
Overdrafts 177 177
Non-accrual loans 591 591
Valuation adjustment (21) (21)
------ ------ ----- ---- ------ ------
TOTAL ASSETS 47,582 3,830 3,563 6,471 9,971 71,417
LIABILITIES
-----------
Large C.D.'s 10,586 4,692 850 16,128
Regular C.D.'s 1,642 3,885 2,672 8,199
MMDA 16,611 16,611
NOW 2,830 2,830
Demand and escrow 5,226 5,226
Savings 127 127
Canadian $ savings 667 667
Other liabilities 13,695 2,500 1,031 17,226
Equity 4,403 4,403
------ ------ ----- ---- ------ ------
TOTAL LIABILITIES 46,158 11,077 3,522 - 10,660 71,417
GAP 1,424 (7,247) 41 6,471 (689)
CUMULATIVE GAP 1,424 (5,823) (5,782) 689
GAP PERCENTAGE 1.99% -8.15% -8.10% 0.96%
NOTES:
(1) Net of bad debt reserve
24
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 2. Changes in Securities
(c) The Company sold in a private placement the following shares of common
stock, par value $0.01 per share, at a price of $6.75: 34,815 shares for total
aggregate proceeds of $235,000 on March 31, 1997; 7,408 shares for total
aggregate proceeds of $50,000 on May 2, 1997. The common stock was sold to
four private investors, not otherwise affiliated with the Company, which the
Company believes met accredited investor criteria of Regulation D. The Company
claimed exemption under the Securities Act of 1933 based on Section 4(2) of
said Act. Such claim was based on certain representations and covenants set
forth in subscription agreements of the investors indicating, among other
matters, their status as accredited investors under Regulation D under said Act
and on such investors' agreement to the placement of restrictive legends on the
certificates for the shares issued to them. This private placement did not
entail the use of an underwriter and there were no underwriting commissions or
discounts.
Item 5. Other information
Parent Company Financial Information
Certain condensed financial information with respect to University
Bancorp, Inc. follows:
25
UNIVERSITY BANCORP, INC. (The Parent) 25
Condensed Balance Sheet (Unaudited)
March 31, December 31,
1997 1996
--------- ------------
ASSETS
Cash and due from banks $ 162,621 $ 41,113
----------- -----------
Investment in subsidiary 4,683,117 4,529,503
----------- -----------
Due from ESOP 1,000 1,000
Securities available for sale (Note 2) 117,770 114,070
Investment in Michigan BIDCO 202,417 202,702
Federal income tax receivable 182,172 173,372
Deferred taxes 8,537 8,537
Prepaid expenses and other assets 29,433 34,040
----------- -----------
Total other assets 541,329 533,721
TOTAL ASSETS 5,387,067 5,104,337
=========== ===========
March 31, December 31,
1997 1996
--------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable 950,000 962,500
Accrued interest payable 15,180 10,284
Accounts payable 164,282 138,443
Due to subsidiary 80,342 80,342
----------- -----------
Total Liabilities 1,209,804 1,191,569
Stockholders' equity:
Capital stock and paid in capital 2,753,459 2,618,459
Retained earnings 1,424,107 1,299,473
Net unrealized loss on
available-for-sale securities (303) (5,164)
----------- -----------
Total Stockholders' equity 4,177,263 3,912,768
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 5,387,067 $ 5,104,337
=========== ===========
26
UNIVERSITY BANCORP, INC. (The Parent) 26
Condensed Statement of Operations
(Unaudited)
For the Three-Month
Periods Ended
March 31,
1997 1996
---- ----
Net income (loss) from bank subsidiary $ 147,695 $ (188,762)
Gain on sale of investments 23,066 -
Interest income 4,483 4,400
Other income 89 2,472
---------- ----------
Total income (loss) 175,333 (181,890)
---------- ----------
Interest expense 23,408 22,150
Legal and Audit Expense 15,678 19,205
Public listing expense 2,453 -
Other expenses 17,960 13,988
---------- ----------
Total expenses 59,499 55,343
---------- ----------
Income (loss) before income taxes 115,834 (237,233)
---------- ----------
Income taxes (benefit) (8,800) -
---------- ----------
Net income (loss) 124,634 (237,233)
========== ==========
Primary Net income (loss) per common share
Primary $0.10 ($0.19)
========== ==========
Fully diluted $ 0.09 ($0.19)
========== ==========
Dividends declared per share $ --- $ ---
========== ==========
27
UNIVERSITY BANCORP, INC. (The Parent) 27
Condensed Statement of Cash Flows
(Unaudited)
For the Three Month
Periods Ended
March 31,
1997 1996
Reconciliation of net income (loss)
to net cash used in
operating activities:
Net Income (Loss) $ 124,634 $ (237,233)
Depreciation - 751
Amortization of Premium on Securities 285 (120)
Gain on sale of investments (23,066) -
Decrease in receivable from affiliate - (66,750)
Increase in Other Assets (4,191) (905)
Increase(Decrease) in interest payable 4,896 (9,233)
Increase in Other Liabilities 26,385 7,737
Subsidiary (income) loss (147,696) 188,763
--------- ---------
Net cash provided by (used in)
operating activities (18,753) (116,990)
--------- ---------
Cash flow from investing activities:
Purchase of available for sale securities (53,309) (49,438)
Proceeds from sale of available for sale securities 71,070 -
--------- ---------
Net cash provided by (used in)
investing activities: 17,761 (49,438)
--------- ---------
Cash flow from financing activities:
Proceeds from bank financing
Principal payment on notes payable (12,500) (12,500)
Proceeds from sale of common stock 135,000 66,750
--------- ---------
Net cash provided by (used in)
financing activities: 122,500 54,250
--------- ---------
Net changes in cash and cash equivalents 121,508 (112,178)
Cash:
Beginning of year 41,113 239,868
--------- ---------
End of period $ 162,621 $ 127,690
========= =========
Supplemental disclosure of cash flow information:
Cash paid (received) during the year for:
Interest $ 9,331 $ 20,047
Income tax $ - $ -
28
28
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Loan Modification Agreement, dated November 21,
1996, between the Registrant and North Country Bank & Trust
(f/k/a First Northern Bank & Trust) (incorporated by reference
to Exhibit 10.1 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
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: May 14, 1997 /s/ Thomas J. Vandermus
-----------------------
Thomas J. Vandermus
Chief Financial Officer
(On behalf of the registrant
and as
Principal Financial Officer)
29
29
Exhibit Index
------------- Sequentially
Numbered
Page
------------
10.1 Loan Modification Agreement, dated November 21,
1996, between the Registrant and North Country Bank
& Trust (f/k/a First Northern Bank & Trust)
(incorporated by reference to Exhibit 10.1 to the
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1996.
11. Computation of per share earnings 30
27. Financial Data Schedule 31