UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
----------------------
FORM 10-Q
(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, 2005
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.
X Yes No
-- --
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
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 November 11, 2005 4,148,878
shares
Page 1 of 30 pages
FORM 10-Q
TABLE OF CONTENTS
PART I - Financial Information
Item 1. Unaudited Financial Statements PAGE
----
Consolidated Balance Sheets 3
Consolidated Statements of Operations 5
Consolidated Statement of Comprehensive Income (loss) 7
Consolidated Statements of Cash Flows 8
Notes to Unaudited Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Summary 12
Results of Operations 13
Capital Resources 19
Liquidity 19
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 20
Item 4. Controls and Procedures 23
PART II - Other Information
Item 1. Legal Proceedings 23
Item 4. Submission of Matters to a vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits 24
Signatures 25
Exhibit Index 26
- ------------------------------------------------------------
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.
Part I. - Financial Information
Item 1.- Financial Statements
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 2005 (Unaudited) and December 31, 2004
September 30, December 31,
ASSETS 2005 2004
-------------------- --------------------
Cash and due from banks $ 4,557,738 $ 1,731,569
Securities available for sale, at market 892,304 1,106,607
Federal Home Loan Bank Stock 941,200 921,700
Loans held for sale, at the lower of cost or market 426,600 846,400
Loans 45,090,881 42,999,800
Allowance for loan losses (349,006) (353,124)
---------------- ----------------
Loans, net 44,741,875 42,646,676
Premises and equipment, net 2,504,193 946,704
Mortgage servicing rights, net 1,296,555 1,097,786
Real estate owned, net 210,437 534,043
Accounts receivable 55,692 30,949
Accrued interest receivable 195,499 148,344
Prepaid expenses 344,811 250,249
Goodwill, net 103,914 103,914
Other assets 425,072 420,757
---------------- ----------------
TOTAL ASSETS $ 56,695,890 $ 50,785,698
================ =================
-Continued-
3
UNIVERSITY BANCORP, INC.
Consolidated Balance Sheets (continued)
September 30, 2005 (Unaudited) and December 31, 2004
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2005 2004
-------------------- --------------------
Liabilities:
Deposits:
Demand - non interest bearing $ 3,263,843 $ 3,047,397
Demand - interest bearing 31,458,371 28,600,355
Savings 474,077 499,865
Time 16,718,835 12,440,182
---------------- ----------------
Total Deposits 51,915,126 44,587,799
Short term borrowings 0 2,416,000
Long term borrowings 0 34,000
Accounts payable 595,398 115,230
Accrued interest payable 65,614 50,296
Other liabilities 222,967 140,629
---------------- ----------------
Total Liabilities 52,799,105 47,343,954
Minority Interest 473,526 440,118
Stockholders' equity:
Preferred stock, $0.001 par value;
$1,000 liquidation value;
Authorized - 500,000 shares;
Issued - 27,591 shares in 2005 275,910 0
Common stock, $0.01 par value;
Authorized - 5,000,000 shares;
Issued - 4,264,062 shares in 2005 and 42,641 42,406
4,240,641 shares in 2004 5,866,095 5,841,331
Accumulated deficit (2,387,653) (2,490,224)
Treasury stock - 115,184 shares at September 30, 2005
and December 31,2004 (340,530) (340,530)
Accumulated other comprehensive loss,
unrealized losses on securities available
for sale, net (33,204) (51,357)
---------------- ----------------
Total Stockholders' Equity 3,423,259 3,001,626
---------------- ----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 56,695,890 $ 50,785,698
================ ================
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, 2005 and 2004
(Unaudited)
For the Three Month For the Nine month
Period Ended Period Ended
2005 2004 2005 2004
--------------- --------------- ------------------- ---------------
Interest income:
Interest and fees on loans $ 801,930 $ 698,834 $ 2,375,776 $ 1,909,805
Interest on securities:
U.S. Government agencies 3,710 10,514 12,455 39,620
Other securities 9,904 9,972 29,760 46,993
Interest on federal funds and other 13,810 267 26,457 1,383
--------------- --------------- ------------------- ---------------
Total interest income 829,354 719,587 2,444,448 1,997,801
--------------- --------------- ------------------- ---------------
Interest expense:
Interest on deposits:
Demand deposits 121,446 105,105 356,963 310,379
Savings deposits 1,110 1,153 3,508 3,591
Time deposits 126,333 83,207 339,007 238,294
Short term borrowings 28,789 6,830 36,983 11,995
Long term borrowings 0 1,260 332 4,294
--------------- --------------- ------------------- ---------------
Total interest expense 277,678 197,555 736,793 568,553
--------------- --------------- ------------------- ----------------
Net interest income 551,676 522,032 1,707,655 1,429,248
(Credit) provision for loan losses 0 (27,500) 17,209 17,500
--------------- --------------- ------------------- ----------------
Net interest income after
provision for loan losses 551,676 549,532 1,690,446 1,411,748
--------------- --------------- ------------------- ---------------
Other income:
Loan servicing and sub-servicing 441,360 357,322 1,254,941 1,039,170
Fees
Initial loan set up and other fees 391,105 310,951 1,135,728 1,201,677
Gain on sale of mortgage loans 92,345 64,982 288,790 223,369
Insurance and investment fee income 50,062 52,611 151,238 165,337
Deposit service charges and fees 27,951 32,231 77,930 86,650
Net security gains/(losses) 0 36 0 1,347
(Loss)/Gain on the sale of other real estate
Owned 0 (22,667) 0 (35,014)
Other 51,193 57,118 190,852 206,020
--------------- --------------- ------------------- ---------------
Total other income 1,054,016 852,584 3,099,479 2,888,556
--------------- --------------- ------------------- ---------------
-Continued-
5
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Periods Ended September 30, 2005 and 2004
(Unaudited)
For the Three Month For the Nine month
Period Ended Period Ended
2005 2004 2005 2004
--------------- --------------- ------------------- ----------------
Other expenses:
Salaries and benefits $ 736,177 $ 735,678 $ 2,216,507 $ 2,175,737
Occupancy, net 140,816 98,726 372,148 312,464
Data processing and equipment
Expense 144,240 151,438 423,864 414,358
Legal and audit expense 95,639 49,896 184,448 134,125
Consulting fees 53,281 32,192 124,612 110,245
Mortgage banking expense 90,953 51,835 211,493 186,664
Servicing rights amortization (35,007) 126,002 191,183 385,870
Advertising 49,148 27,832 118,974 91,477
Memberships and training 32,290 36,730 94,743 103,770
Travel and entertainment 39,337 17,852 105,353 86,546
Supplies and postage 51,020 52,928 162,206 154,054
Insurance 44,605 30,649 115,248 97,093
Other operating expenses 155,233 126,647 357,083 454,746
--------------- --------------- ------------------- ---------------
Total other expenses 1,597,732 1,538,405 4,677,862 4,707,149
--------------- --------------- ------------------- -----------------
Income (loss) before income taxes 7,960 (136,288) 112,063 (406,847)
--------------- --------------- ------------------- ---------------
Income tax expense (benefit) 0 80,000 0 80,000
--------------- --------------- ------------------- ---------------
Net Income (loss) $ 7,960 $ (216,288) $ 112,063 $ (486,847)
Preferred stock dividends 6,081 9,491
--------------- --------------- ------------------- ---------------
Net income (loss) available to
common shareholders $ 1,879 $ (216,288) $ 102,572 $ (486,847)
=============== =============== =================== ===============
Basic earning/loss per common share $ 0.00 $ (0.05) $ 0.02 $ (0.12)
=============== =============== =================== ===============
Diluted earnings/loss per common share $ 0.00 $ (0.05) $ 0.02 $ (0.12)
Weighted average shares outstanding - Basic 4,148,878 4,090,548 4,145,572 4,079,774
=============== =============== =================== ===============
Weighted average shares outstanding - Diluted 4,184,430 4,090,548 4,184,719 4,079,774
=============== =============== =================== ===============
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, 2005 and 2004
(Unaudited)
For the Three Month For the Nine month
Period Ended Period Ended
2005 2004 2005 2004
--------------------------------------------------------------
Net (loss)/income $7,960 $(216,288) $112,603 $(486,847)
Other comprehensive(loss)income:
Unrealized (losses)gains on securities
Available for sale (4,111) (27,416) 18,153 (6,930)
Less: reclassification adjustment
for accumulated gains
included in net loss - 36 - 1,347
------------ ------------ ---------- -----------
Other comprehensive (loss)income, before
tax effect (4,111) (27,452) 18,153 (8,277)
Income tax expense (benefit) - -
Other comprehensive (loss)income, net
Of tax (4,111) (27,452) 18,153 (8,277)
------------ ------------ ---------- -----------
Comprehensive (loss)income $3,849 $(243,740) $130,756 $(495,124)
============ ============ ========== ===========
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 nine month periods ended September 30, 2005 and 2004
(Unaudited)
2005 2004
--------------------- --------------------
Cash flow from operating activities:
Net (loss) income $ 112,063 $ (486,847)
Adjustments to reconcile net (loss)income to net cash from Operating Activities:
Dividend payable (9,492) 0
Depreciation 249,154 231,751
Amortization 191,183 460,870
Provision for loan losses 17,209 17,500
Net (gain) on mortgage loan sales (288,790) (223,369)
Net (accretion) on investment securities 5,425 (6,776)
Net (gain)on sale of securities 0 (1,347)
Gain on the sale of fixed assets (57,074) (170,385)
Gain on the sale of other real estate owned (9,294) 35,014
Originations of mortgage loans (43,360,244) (35,092,513)
Proceeds from mortgage loan sales 44,068,834 34,905,290
Change in:
Real estate owned 11,316
Other assets (551,289) (359,966)
Other liabilities 639,367 179,571
------------- -------------
Net cash provided by (used in) operating activities 1,018.368 (511,207)
------------- -------------
Cash flow from investing activities:
Purchase of investment securities 0 (8,008)
Proceeds from maturities and pay downs of securities 227,031 418,757
available for sale
Loans granted, net of repayments (2,504,434) (6,353,558)
Proceeds from sale of other real estate 713,610 594,170
Proceeds from sales of investment securities 0 19,504
Premises and equipment expenditures (1,806,643) (401,850)
------------- -------------
Net cash used in investing activities (3,370,436) (5,730,985)
------------- -------------
-Continued-
8
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine month periods ended September 30, 2005 and 2004
(Unaudited)
2005 2004
------------------ -------------------
Cash flow used in financing activities:
Net increase in deposits 7,327,327 4,053,761
Net increase in short term borrowings (2,416,000) 1,908,151
Principal payments on long term borrowings (34,000) (99,000)
Issuance of preferred stock 265,910 -
Issuance of common stock 35,000 123,000
------------- -------------
Net cash provided by financing activities 5,178,237 5,985,912
------------- -------------
2,826,169 (256,280)
Net change in cash and cash equivalents Cash and cash equivalents:
Beginning of period 1,731,569 2,171,189
------------- --------------
End of period $ 4,557,738 $ 1,914,909
============= ==============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 721,475 $ 569,677
Supplemental disclosure of non-cash transactions:
Mortgage loans converted to other real estate owned $ 392,026 $ 755,022
Michigan BIDCO Preferred stock exchanged for a 7.5% $ 0 $ 600,000
promissory note
See accompanying notes to consolidated financial statements (Unaudited).
9
UNIVERSITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(1) General
See Note 1 of the Financial Statements incorporated by reference in the
Company's 2004 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 2004 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.
Basic earnings per share represents income available to common
stockholders divided by the weighted average number of common shares outstanding
during the period. Diluted earnings per share reflects additional common shares
that would have been outstanding if dilutive potential common shares had been
issued, as well as any adjustment to income that would result from the assumed
issuance. Potential common shares that may be issued by the Corporation relate
solely to outstanding stock options, and are determined using the treasury stock
method. Earnings per common share have been computed based on the following:
For the Three Month For the Nine month
Period Ended September 30, Period Ended September 30,
2005 2004 2005 2004
---------------------------------------------------------------
Net Income (loss) $7,960 $(216,288) $112,063 ($486,847)
Less: Preferred stock dividends payable 6,081 9,491
----------- ----------- ---------- -----------
Net income applicable to common stock $1,879 $(216,288) $102,572 ($486,847)
=========== =========== ========== ===========
Average Number of common shares outstanding 4,148,878 4,090,548 4,145,572 4,079,774
Effect of dilutive options 38,858 0 39,147 0
----------- ----------- ---------- -----------
Average Number of common shares outstanding used to calculate
diluted earnings per common share 4,184,430 4,090,548 4,184,719 4,079,774
=========== =========== ========== ===========
(2) Investment Securities
The Bank's available-for-sale securities portfolio at September 30,
2005 had a net unrealized loss of approximately $33,204 as compared with a net
unrealized loss of approximately $51,357 at December 31, 2004.
Securities available for sale at September 30, 2005:
Amortized Unrealized Fair
Cost Gains Losses Value
--------- ------------------ -------
U.S. agency mortgage-backed
securities $925,508 $ - $(33,204) $892,304
======== ======== ========= ========
10
Securities available for sale at December 31, 2004
Amortized Unrealized Fair
Cost Gains Losses Value
--------- ------------------ -------
U.S. agency mortgage-backed
securities $1,157,964 $ - $(51,357) $1,106,607
========== ======== ========= ==========
(3) Stock options
At September 30, 2005, the Company has a stock-based employee compensation plan.
The Company accounts for those plans under the recognition and measurement
principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and
related Interpretations. No stock-based employee compensation cost is reflected
in net income, as all options granted under those plans had an exercise price
greater than or equal to the market value of the underlying common stock on the
date of grant. As new options granted were only 0 and 47,000 during the quarters
ended September 30, 2005 and 2004, the effect on net income (loss) and earnings
(loss) per share if the Corporation had applied the fair value recognition
provisions of FASB Statement No. 123(R), Accounting for Share-Based Compensation
to stock-based employee compensation was less than $.01 per share in each of the
periods presented. In December 2002, SFAS No. 148, "Stock-Based Compensation,"
was issued, which requires that the Company illustrate the effect on net income
and earnings per share if it had applied the fair value principles included in
SFAS No. 123 for both annual and interim financial statements. Accordingly, if
the Company had elected to recognize compensation cost based on the fair value
of the options at grant date, the Company's earnings and earnings per share from
continuing operations, assuming dilution, for the nine month periods ended
September 30, 2005 and 2004 would have been the pro forma amounts indicated
below:
Nine months ended September 30,
2005 2004
---------------------------------
Net Income (Loss) applicable to Common
Stock:
As reported: $102,572 ($486,847)
Compensation expense 2,989 4,109
---------- ----------
Pro forma $99,583 ($490,956)
========== ==========
Net earnings per share:
As reported:
Basic $0.02 ($0.12)
Diluted $0.02 ($0.12)
Pro forma:
Basic $0.02 ($0.12)
Diluted $0.02 ($0.12)
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
.
This report includes "forward-looking statements" as that term is used in the
securities laws. All statements regarding our expected financial position,
business and strategies are forward-looking statements. In addition, the words
"anticipates," "believes," "estimates," "seeks," "expects," "plans," "intends,"
and similar expressions, as they relate to us or our management, are intended to
identify forward-looking statements. The presentation and discussion of the
provision and allowance for loan losses and statements concerning future
profitability or future growth or increases, are examples of inherently forward
looking statements in that they involve judgments and statements of belief as to
the outcome of future events. Our ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which
could have a material adverse affect on our operations and our future prospects
include, but are not limited to, changes in: interest rates, general economic
conditions, legislative/regulatory changes, monetary and fiscal policies of the
U.S. Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
our market area and accounting principles, policies and guidelines. These risks
and uncertainties should be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements. Further information
concerning us and our business, including additional factors that could
materially affect our financial results, is included in our other filings with
the Securities and Exchange Commission.
SUMMARY
Net income for the Company for the three month period ended September 30,
2005 was $7,960 as compared to a net loss of $216,288 for the same period last
year. Community Banking reported net loss of $101,000 during the current year's
third quarter as opposed to a net loss of $41,000 from the year before. The
increase was primarily a result of expenses associated with the acquisition of
the Company's future headquarters ("Hoover Mansion"). In 2005, Community Banking
benefited from an increase in the net interest margin and lower expenses related
to non performing assets. The Bank's subsidiary, Midwest Loan Services reported
a net income of $143,000 for the third quarter of 2005 as compared to net loss
of $83,000 for the same period in 2004. Income at Midwest was positively
impacted in the third quarter of 2005 by a $99,000 partial reversal of the
mortgage servicing right impairment reserve against the mortgage servicing
rights portfolio. At the end of the quarter, the mortgage rates increased, thus
affecting the value of the portfolio. Also servicing income and loan origination
income were higher.
The Company's net income for the first nine months of 2005 was
$112,063, versus a net loss of $486,847 for the same period last year. Community
Banking reported a net loss of $58,000 during the current year's first nine
months as opposed to a loss of $249,346 in the prior year. Community Banking
benefited from an increase in the net interest margin and lower expenses related
to non performing assets. Midwest Loan Services had net income of $221,000 in
the first nine months of 2005 compared to net loss of $100,920 in the same
period last year. Net Income at Midwest was positively impacted in the third
quarter of 2005 by an increase in loan servicing and sub servicing fees and
lower servicing rights amortization expense. Income at Midwest was negatively
impacted in the first nine months of 2004 by approximately $30,000 a month in
overhead expenses incurred to grow Midwest's jumbo and non-standard originations
through a secondary market conduit established with Lehman Brothers.
12
The following table summarizes the pre-tax (loss) income of each profit
center of the Company for the three months ended September 30, 2005 and 2004 (in
thousands):
Pre-tax (loss) income summary for the three and nine months ended September 30,
2005
Three Months Nine months
Community Banking $(101) $ (58)
Midwest Loan Services 145 221
Corporate Office (36) (51)
------- ------
Total $ 8 $ 112
======= ======
Pre-tax (loss) income summary for the three and nine months ended September 30,
2004
Three Months Nine months
Community Banking $ ( 41) $(249)
Midwest Loan Services (83) (101)
Corporate Office (12) (57)
------- ------
Total $( 136) $(407)
======= ======
RESULTS OF OPERATIONS
Net Interest Income
Net interest income increased to $551,676 for the three months ended
September 30, 2005 from $522,032 for the three months ended September 30, 2004.
Net interest income rose from last year primarily as a result of an increase in
total interest bearing assets. Overall, the yield on net earning assets
decreased to 6.72% from 6.86% while the cost of earning liabilities increased to
2.34% from 1.99%. Overall, the net interest income as a percentage of total
average earning assets decreased to 4.47% from 4.98%.
Net interest income increased to $1,707,655 for the nine months ended
September 30, 2005 from $1,429,248 for the nine months ended September 30, 2004.
Net interest income increased from a year ago as a result of a higher net
interest margin and a net increase in earning assets. The yield on interest
earning assets increased to 6.85% in the 2005 period from 6.61% in the 2004
period. The cost of interest bearing liabilities increased to 2.15% for the 2005
period from 1.97% for the period ended September 30, 2004. Net interest income
as a percentage of total average earning assets increased to 4.77% from 4.73%.
Interest income
Interest income increased to $829,354 in the quarter ended September
30, 2005 from $719,587 in the quarter ended September 30, 2004. The increase
resulted from an increase in the volume of earning assets. The yield on interest
bearing assets decreased to 6.72% in 2005 from 6.86% in 2004. The decrease in
yield resulted primarily from an increase in real estate loans that have a lower
yield from other loan products. The prime rate increased from the prior year.
This affected other
13
loan categories. The average volume of interest earning assets increased to
$48,981,460 in the 2005 period from $42,067,645 in the 2004 period.
Interest income increased to $2,444,448 in the nine months ended
September 30, 2005 from $1,997,801 in the nine months ended September 30, 2004.
This increase resulted from an increase in the yield on and volume of average
earning assets. The overall yield on earning assets rose to 6.85% from 6.61% in
the nine month period ended in 2004. As noted above, the increase in yield
resulted primarily from an increase in rate on prime rate based loans. The prime
rate increased from the prior year. This affected other loan categories. The
average volume of interest earning assets increased to $47,696,573 in the 2005
period from $40,234,604 in the 2004 period.
Interest Expense
Interest expense increased to $277,678 in the three months ended September
30, 2005 from $197,555 in the 2004 period. The rise in interest expense was due
to an increase in the yield on and volume of average interest bearing
liabilities. The yield increased to 2.34% in 2005 from 1.99% in 2004. In 2004,
the rates on deposits were higher than in the three month period in 2004. The
average volume of interest bearing liabilities increased to $47,116,919 in 2005
from $39,731,811 in 2004.
Interest expense increased to $736,793 in the nine months ended September
30, 2005 from $568,553 in the 2004 period. The rise in interest expense was due
to an increase in the yield on and volume of average interest bearing
liabilities. The yield increased to 2.15% in 2005 from 1.97% in 2004. In 2004,
the rates on deposits were higher than in the nine month period in 2004. The
average volume of interest bearing liabilities increased to $45,772,523 in 2005
from $38,506,833 in 2004.
MONTHLY AVERAGE BALANCE SHEET AND INTEREST MARGIN ANALYSIS
The following table summarizes 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 and nine
months ended September 30, 2005 and 2004.
14
Three Months Ended Three Months Ended
-----------------------------------------------------------------------------------------
September 30, 2005 September 30, 2004
-----------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Inc / Exp Yield (1) Balance Inc / Exp Yield (1)
Interest Earning Assets:
Commercial Loans $17,131,615 $345,223 7.99% $16,739,978 $342,762 8.21%
Real Estate Loans 26,459,497 412,515 6.19% 21,084,891 312,583 5.95%
Installment/Consumer Loans 1,937,665 44,192 9.05% 2,010,253 43,489 8.68%
---------------------------------- ----------------------------------
Total Loans 45,525,777 801,930 6.99% 39,835,122 698,834 7.04%
Investment Securities 1,886,781 13,613 2.86% 2,170,566 20,486 3.79%
Fed. Funds & Bank Deposits 1,565,902 13,811 3.50% 61,957 267 1.73%
---------------------------------- ----------------------------------
Total Interest Bearing Assets 48,981,460 829,354 6.72% 42,067,645 719,587 6.86%
---------------------------------- ----------------------------------
Interest Bearing Liabilities:
Deposit Accounts:
Demand 10,463,458 26,831 1.02% 6,107,198 15,294 1.00%
Savings 444,486 1,111 .99% 463,411 1,153 1.00%
Time 14,542,400 126,334 3.45% 12,451,278 83,207 2.68%
Money Market 18,714,211 94,613 2.01% 18,872,936 89,811 1.91%
Short-term Borrowings 2,952,364 28,789 3.87% 1,751,988 6,830 1.56%
Long-term Borrowings 0 0 0.00% 85,000 1,260 5.95%
---------------------------------- ----------------------------------
Total Interest Bearing 47,116,919 277,678 2.34% 39,731,811 197,555 1.99%
Liabilities
Net Earning Assets, net
interest income, and
interest rate spread $ 1,864,541 $551,676 4.38% $ 2,335,834 $522,032 4.87%
================================== ==================================
Net Interest Margin 4.47% 4.98%
(1) Yield is annualized.
15
Nine months Ended Nine months Ended
-----------------------------------------------------------------------------------------
September 30, 2005 September 30, 2004
----------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Inc (Exp) Yield (1) Balance Inc (Exp) Yield (1)
Interest Earning Assets:
Loans:
Commercial $17,071,636 $1,065,851 8.35% $16,908,602 $ 880,939 6.94%
Real Estate 25,429,900 1,193,204 6.27% 18,750,487 908,474 6.45%
Installment/Consumer 1,972,837 116,721 7.91% 1,907,149 120,392 8.41%
---------------------------------- -----------------------------------
Total Loans 44,474,373 2,375,776 7.14% 37,566,238 1,909,805 6.77%
Investment Securities 1,951,740 42,215 2.89% 2,514,208 86,613 4.59%
Federal Funds & Bank 1,270,460 26,457 2.78% 154,158 1,383 1.20%
Deposits
---------------------------------- ------------------------------------
Total Interest Bearing Asset s 47,696,573 2,444,448 6.85% 40,234,604 1,997,801 6.61%
---------------------------------- ------------------------------------
Interest Bearing Liabilities:
Deposit Accounts:
Demand 9,554,303 72,196 1.01% 6,296,058 41,517 0.88%
Savings 479,289 3,508 0.98% 444,165 3,591 1.08%
Time 14,294,018 339,007 3.17% 11,487,242 238,294 2.76%
Money Market 20,003,131 284,767 1.90% 19,090,437 268,862 1.88%
Short-term borrowings 1,433,332 36,983 3.45% 1,087,431 11,995 1.47%
Long-term borrowings 8,450 332 5.25% 101,500 4,294 5.64%
Total Interest Bearing
---------------------------------- ------------------------------------
Liabilities 45,772,523 736,793 2.15% 38,506,833 568,553 1.97%
---------------------------------- ------------------------------------
Net Earning Assets, net interest
income, and interest rate
spread $ 1,924,050 $1,707,655 4.70% $ 1,727,771 $1,429,248 4.64%
================================== ==================================
Net Interest Margin 4.79% 4.73%
(1) Yield is annualized.
16
Allowance for Loan Losses
The provision to the allowance for loan losses was $17,209 for the
nine-month period ended September 30, 2005 and $17,500 for the same period in
2004. The provision decreased due to adequate funding of the Allowance for Loan
Losses. Net charge-offs totaled $21,327 for the nine-month period ended
September 30, 2005 as compared to $17,188 for the same period in 2004.
Illustrated below is the activity within the allowance for the nine-month period
ended September 30, 2005 and 2004, respectively.
2005 2004
---- ----
Balance, January 1 $ 353,124 $ 454,118
Provision for loan losses 17,209 17,500
Loan charge-offs (31,497) (99,006)
Recoveries 10,170 81,818
--------- ---------
Balance, September 30 $ 349,006 $ 454,430
========= =========
At September 30, 2005 At December 31, 2004
--------------------- --------------------
Total loans (1) $45,090,881 $42,999,800
Reserve for loan losses $349,006 $ 353,124
Reserve/Loans % (1) 0.77% 0.82%
The Bank's overall loan portfolio is geographically concentrated in Ann
Arbor and surrounding Washtenaw County Michigan and the future performance of
these loans is dependent upon the performance of this relatively limited
geographical area.
The following schedule summarizes the Company's non-performing assets:
At September 30, 2005 At December 31, 2004
--------------------- --------------------
Past due 90 days and over
and still accruing (1):
- -------------------------
Real estate $ - $ -
Installment - 36,226
Commercial - 334,883
-------- ----------
Subtotal - 371,109
-------- ----------
Nonaccrual loans (1):
- ----------------------
Real estate (including
commercial real estate) - 591,791
Installment - 16,739
Commercial 66,500 39,490
-------- --------
Subtotal 66,500 648,020
-------- ----------
Other real estate owned 210,437 534,043
- ----------------------- -------- ----------
Total non-performing assets $276,937 $1,553,172
======== ===========
At September 30, 2005 At December 31, 2004
--------------------- --------------------
Ratio of non-performing assets to total
loans (1) 0.61% 4.40%
======== ==========
Ratio of loans past due over 90
days and nonaccrual loans to loan
loss reserve 19% 289%
======== ==========
(1) Excludes loans held for sale which are valued at the lower of cost or fair
market value.
17
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 increased to $1,054,016 for the three months
ended September 30, 2005 from $852,584 for the three months ended September 30,
2004. Within this category, in 2005, there was an increase in initial loan set
up and other fees and an increase in loan servicing and subservicing fees and
gains on the sale of mortgages as compared with the same three month period in
2004. Much of this increase in activity occurred at Midwest.
Total non-interest income increased to $3,099,479 for the nine months ended
September 30, 2005 from $2,888,556 for the nine months ended September 30, 2004.
As compared with the nine month period in 2004, Midwest has increased its
subservicing operations and income generated in this area is offsetting a
decline in the initial loan set up and other fees due to a decrease in loan
originations. At September 30, 2005, Midwest was subservicing 22,519 mortgages,
an increase of 19% from 18,233 mortgages subserviced at December 31, 2004. Based
on current contractual arrangements Management currently projects that Midwest
will be subservicing over 24,000 mortgages at December 31, 2005.
University Bank purchased a 17,000 square foot building in Ann Arbor, MI in
June, 2005 and was granted approval by the FDIC and State of Michigan Office of
Financial and Insurance Services to relocate its headquarters to the new
location. University Bank purchased the building for $1.8 mm and estimates that
the cost of relocation and the capital expenditures related to minor
refurbishment required for the bank's use of the building will cost under
$300,000. If the relocation, currently scheduled for December 10, 2005, is
completed prior to December 15, 2005 University Bank will receive on December
31, 2005 cash incentive payments of $1,000,000 from its current landlord to move
out early.
Non-Interest Expense
Non-interest expense increased slightly to $1,597,732 in the three months
ended September 30, 2005 from $1,538,405 for the three months ended September
30, 2004 as a decrease in the valuation reserve for Midwest's mortgage
servicing rights more than offset modest rises in other costs.
Non-interest expense decreased slightly to $4,677,862 in the nine months
ended September 30, 2005 from $4,707,149 for the nine months ended September 30,
2004, as modest rises in costs in several areas were offset by cost control
measures in other areas.
Following is an analysis of the change the Company's mortgage servicing
rights for the periods ended September 30, 2005 and
2004
2005 2004
---- ----
Balance, January 1 $1,097,786 $1,031,575
Additions - originated 389,952 323,106
Amortization expense (198,183) (316,868)
Adjustment for asset impairment
change 7,000 57,000
---------- ----------
Balance, December 31 $1,296,555 $1,094,813
========== ===========
At September 30, 2005, the Bank and Midwest owned the rights to service
mortgages for Fannie Mae, Freddie Mac and other institutions, most of which were
owned by Midwest, an 80% owned subsidiary of the Bank. The balance of mortgages
serviced for these institutions was approximately $140 million. The carrying
value of these servicing rights was $1,296,554 at September 30, 2005. 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 and expected prepayments of the mortgage loans. The servicing
rights are recorded at the lower of cost or market. The impairment reserves at
September 30, 2005 and 2004 are $509,000 and $516,000, respectively.
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, 2005, the Bank was
considered "well capitalized".
September 30, 2005
TIER 1 CAPITAL (in thousands)
Total Equity Capital $3,222
Less: Unrealized losses on available-for-Sale
Securities (33)
Plus: Minority Interest 474
Less: Other identifiable Intangible Assets 233
----------
Total Tier 1 Capital 3,496
TIER 2 CAPITAL
Allowance for loans & Lease losses 349
Less: Excess Allowance -
----------
Total Tier 2 Capital 349
----------
Total Tier 1 & Tier 2 Capital $3,845
==========
CAPITAL RATIOS
Tier 1/Total Average Assets of $55,500 6.30%
Tier 1/Total Risk-Weighted Assets of $38,147 9.16%
Tier 1 & 2/Total Risk-Weighted Assets of $38,147 10.08%
Liquidity
Bank Liquidity. The Bank's primary sources of liquidity are customer
deposits, scheduled payments and prepayments of loan principal, cash flow from
operations,
19
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, 2005, the Bank had
cash and cash equivalents of $4,557,738. The Bank's lines
of credit include the following:
o $3.5 million from the Federal Home Loan Bank of Indianapolis secured
by investment securities and residential mortgage loans, and
o $6.9 million from the Federal Reserve Bank of Chicago secured by
commercial loans.
At September 30, 2005, the Bank had $0 outstanding on the Federal Home Loan
Bank and Federal Reserve Bank lines of credit.
In order to bolster liquidity from time to time, the Bank also sells
brokered time deposits. At September 30, 2005, the Bank had $6.5 million of
these deposits outstanding.
Bancorp Liquidity. In an effort to increase the Bank's Tier 1 capital
to assets ratio through retained earnings, management does not expect that the
Bank will pay dividends to the Company during the balance of 2005. Management
expects Bancorp's working capital to be increased as a result of the issuance of
additional shares of common and preferred stock or through a small line of
credit currently being negotiated.
At September 30, 2005, $0 was payable to another financial institution
as compared to $67,000 at September 30, 2004. At September 30, 2005, Bancorp had
$9,000 in cash and investments on hand to meet its working capital needs.
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.
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 repricing 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 repricing
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 tend to
decrease new mortgage origination
20
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 tends to increase the duration
of its existing subservicing 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, 2005. 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, 2005 was estimated to
be ($11,966,000) or -21.11%.
In addition, management prepares an estimate of sensitivity to immediate changes
in short term interest rates. At September 30, 2005, the following impact was
estimated on net interest margin and mortgage operations in the 12 months
following an immediate movement of short term or long term interest rates:
Effect on Net Interest Effect on Mortgage Banking
Rate Change Margin from Short Term Activity from Long Term
Interest Rate Change Interest Rate Change
(% Change) ($ Change) ($ Change)
-1.00% 1.09% $25,000 $599,000
-3.00% 3.26% $74,000 $1,798,000
+1.00% -0.163% ($4,000) $268,000
+3.00% -0.47% ($10,720) $508,000
21
UNIVERSITY BANK
Asset/Liability Position Analysis as of September 30, 2005
(Dollar amounts in thousand's)
Maturing or Repricing in
3 months 91 Days to 1 - 3 3 - 5 Over 5 All
ASSETS or Less 1 Year Years Years Years Other Total
- ------ ------- ------ ----- ----- ----- ----- -----
Loans - Net $11,103 $2,788 $9,870 $18,971 $2,719 ($349) $45,102
Non-Accrual Loans - - - - - 67 67
Securities 100 500 - - 292 - 892
Other Assets 941 - - - - 5,136 6,077
Cash and Due from Banks 3,500 - - - - 1,058 4,558
------------------------------------------------------------------------------------------------
TOTAL ASSETS 15,644 3,288 9,870 18,971 3,011 5,912 56,696
------------------------------------------------------------------------------------------------
LIABILITIES
- -----------
Time deposits 3,902 8,385 3,356 1,076 266 - 16,985
Demand -interest bearing 10,805 7,806 10,347 2,500 - - 31,458
Demand - non interest - - - - 3,264 3,264
Savings - - 474 - - - 474
Other borrowings - - - - - - -
Other Liabilities - - - - - 1,092 1,092
Equity - - - - - 3,423 3,423
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 14,707 16,191 14,177 3,576 266 7,779 $56,696
------------------------------------------------------------------------------------------------
Gap 937 (12,903) (4,307) 15,395 2,745 (1,867) -
Cumulative gap $937 ($11,966) ($16,273) ($878) $1,867 $ -
Gap percentage 1.65% -21.11% -28.70% -1.55% -3.29% 0.00%
22
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
Disclosure controls are procedures that are designed with an objective of
ensuring that information required to be disclosed in our periodic reports filed
with the SEC, such as this report on Form 10-QSB, is recorded, processed,
summarized, and reported within the time periods specified by the SEC.
Disclosure controls also are designed with an objective of ensuring that such
information is accumulated and communicated to our management, including our
chief executive officer and chief financial officer, in order to allow timely
consideration regarding required disclosures.
As of the end of the period covered by this report, an evaluation was carried
out under the supervision and with the participation of the Company's
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of
1934). Based upon that evaluation the Chief Executive Officer and Chief
Financial Officer concluded that the design and operation of these disclosure
controls and procedures were effective. No significant changes were made in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.
(b) Changes in Internal Controls.
During the period covered by this report, there have been no changes in the
Company's internal control over financial reporting that have materially
affected or are reasonably likely to materially affect the Company's internal
control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
We own, through Hoover, LLC, a subsidiary of University Bank,
a 14,000 ft2 building into which we plan to relocate the
Bank's headquarters. Hoover, LLC was a defendant in a lawsuit
filed by plaintiff Dean Solden. The complaint filed in the
Circuit Court of Wayne County was resolved in October 2005.
23
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
6.1 Material definitive agreement, fourth, fifth and sixth Amendments
to Lowertown University Bank sale and lease agreement.
31.1 Certificate of the President and Chief Executive Officer of
University Bancorp, Inc. pursuant to 15 U.S.C. Section 7241,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certificate of the Chief Financial Officer of University
Bancorp, Inc. pursuant to 15 U.S.C. Section 7241, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certificate of the Chief Executive Officer of University
Bancorp, Inc. pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certificate of the Chief Financial Officer of University
Bancorp, Inc. pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
24
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, 2005 /s/ Stephen Lange Ranzini
-------------------------
Stephen Lange Ranzini
President and Chief Executive Officer
/s/ Nicholas K. Fortson
-----------------------
Nicholas K. Fortson
Chief Financial Officer
25
EXHIBIT INDEX
Exhibit Description
- ------- -----------
31.1 Certificate of the President and Chief Executive Officer of
University Bancorp, Inc. pursuant to 15 U.S.C. Section 7241,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certificate of the Chief Financial Officer of University
Bancorp, Inc. pursuant to 15 U.S.C. Section 7241, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certificate of the President and Chief Executive Officer of
University Bancorp, Inc. pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
32.2 Certificate of the Chief Financial Officer of University
Bancorp, Inc. pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
26
Exhibit 31.1
10-Q 302 CERTIFICATION
I, Stephen Lange Ranzini certify that:
1) I have reviewed this quarterly report on Form 10-Q of University
Bancorp, Inc.;
2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report;
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and;
5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: November 14, 2005 /s/Stephen Lange Ranzini
----------------------------------
Stephen Lange Ranzini
President and Chief Executive Officer
27
Exhibit 31.2
10-Q 302 CERTIFICATION
I, Nicholas K. Fortson certify that:
1) I have reviewed this quarterly report on Form 10-Q of University
Bancorp, Inc.;
2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report;
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and;
5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: November 14, 2005 /s/Nicholas K. Fortson
----------------------
Nicholas K. Fortson
Chief Financial Officer
28
Exhibit 32.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE
OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT
TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Stephen Lange Ranzini, the President and Chief Executive Officer of
University Bancorp, Inc., certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Quarterly Report of University Bancorp, Inc.on Form 10-QSB for the quarter ended
September 30, 2005 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 and that information contained in
such report on Form 10-QSB fairly presents in all material respects the
financial condition and results of operations of University Bancorp, Inc.
Date: November 14, 2005 /s/ Stephen Lange Ranzini
--------------------------
Stephen Lange Ranzini
President and Chief Executive Officer
29
Exhibit 32.2
CERTIFICATION OF THE PRINCIPAL EXECUTIVE
OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT
TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Nicholas K. Fortson, Chief Financial Officer of University Bancorp, Inc.,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of University
Bancorp, Inc.on Form 10-QSB for the quarter ended September 30, 2005 fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that information contained in such report on Form
10-QSB fairly presents in all material respects the financial condition and
results of operations of University Bancorp, Inc.
Date: November 14, 2005 /s/ Nicholas K. Fortson
---------------------------
Nicholas K. Fortson
Chief Financial Officer
30