Ann Arbor, Michigan, November 18, 2021, — University Bancorp, Inc. (OTCQB: UNIB) announced that it had an unaudited net income attributable to University Bancorp, Inc. common stock shareholders in 3Q2021 of $7,163,914, $1.47 per share on average shares outstanding of 4,863,496 for the third quarter, versus an unaudited net income of $11,483,780,106, $2.20 per share on average shares outstanding of 5,206,899 for 3Q2020. For the 12 months ended September 30, 2021, net income was $29,814,947, $6.17 per share on average shares outstanding of 4,835,673 for the period.
Shareholders’ equity attributable to University Bancorp, Inc. common stock shareholders was $71,956,682 or $14.80 per share, based on shares outstanding at September 30, 2021 of 4,863,496.
President Stephen Lange Ranzini noted, “Our core businesses continue to perform well. Mortgage origination margins dropped slightly during the quarter though they remain at median cycle levels. Our subservicing, mortgage originations, investment in Mortgage Servicing Rights (MSRs), Insurance and Community Bank operations are performing at high levels, and our loan portfolios, from a risk standpoint are also in excellent shape. Also, our business development efforts continue at a rapid pace. For example, through 10/31/2021 our first mortgage HELOC loan program has received $77.9 million in applications and had $52.7 million in closings over the past 12 months, and we recently launched a mortgage origination joint venture with Realty Executives, the second largest Realtor™ firm in Macomb County, Michigan, the third-most populous county in the state. After quarter-end we also successfully completed the conversion of our mortgage subservicing core to BlackKnight MSP™.”
At Midwest Loan Services, the increase in internally serviced originations and organic growth of our sub-servicing clients led the number of mortgages serviced to grow to 190,941, an annualized growth rate of 18.6% for 3Q2021. Excluding the benefit from its $608.8 million of non-interest-bearing escrow deposits, Midwest Loan Services contributed $6.4 million in pre-tax income in 9M2021, or an annualized pre-tax income run rate of $8.5 million.
Results in 3Q2021 were positively impacted by median cycle average margins on mortgage originations sold to the secondary market. The following graph is the best index that we are aware of for the overall industry-wide margins on standard FNMA and FHLMC loans sold in the secondary market.
Margins began to rise in mid-February 2020 and rose to record levels, as the industry struggled with capacity constraints caused by the surge in applications caused by record low interest rates, and financial and operational dislocations caused by the global pandemic. Margins have since moderated to mid-cycle levels.
Earnings in 3Q 2021, were assisted by three factors that with a net positive impact of $2,133,108 before taxes as follows:
- Mortgage Servicing Rights Valuation adjustment:
With the rise in long term mortgage interest rates during the quarter the valuation of our MSRs increased $2,651,087;
- Mortgage Origination Pipeline valuation adjustment:
The fair market value of the hedged mortgage origination pipeline (FMV) fell $917,979 as the amount of locked loans fell over the level at 1Q 2021.
- Allowance for Loan Losses for Economic Factors adjustment:
The Allowance for Loan Losses for general economic conditions and not tied to specific loans was decreased by $400,000.
Earnings in 3Q2020 were assisted by both an increase in the size of the hedged mortgage pipeline and a small increase in the Mortgage Servicing Rights quarterly valuation, which was partially offset by a change in the Allowance for Loan Losses for general economic conditions, which had an overall positive cumulative impact of $1,463,415, before tax:
- Mortgage Origination Pipeline valuation adjustment:
The fair market value of the hedged mortgage origination pipeline (FMV) rose $1,396,622 as the amount of locked loans rose due to higher home purchase transactions and refinancing driven by record low mortgage interest rates;
- Mortgage Servicing Rights Valuation adjustment:
With the stability in long term mortgage interest rates during the quarter the valuation of our Mortgage Servicing Rights (MSRs) increased $122,912;
- Allowance for Loan Losses for Economic Factors adjustment:
The Allowance for Loan Losses for general economic conditions and not tied to specific loans was increased by $56,119.
Mortgage origination volumes increased in 3Q2021, with closings of $1.62 billion versus $1.56 billion in 3Q2020, an increase of 4%. Our mortgage origination subsidiaries experienced strong volumes:
ULG: $916.3 million, unchanged, and purchase loans were up 21.9%;
UIF: $704.1 million, up 9.6%, and purchase loans were up 57.9%;
For 3Q2021, the Company had an annualized return on equity attributable to common stock shareholders of 43.5% on initial common stockholders’ equity of $65,881,649. Return on equity over the trailing twelve months was 61.3% on equity attributable to common stock shareholders of $48,602,848.
Total Assets at 9/30/21 $686,709,770 versus $696,925,621 at 6/30/2021, $653,014,241 at 3/31/21, $557,676,836 at 12/31/2020, $612,755,757 at 9/30/2020, $538,958,851 at 6/30/2020, $390,463,093 at 3/31/2020 and $361,956,924 at 12/31/2019.
The Tier 1 Leverage Capital Ratio at 9/30/21 declined to 10.64% on average net assets of $535,580,000 from 11.12% at 6/30/21 on net average assets of $514,448,000, from 12.34% at 3/31/21 on net average assets of $464 million, 11.27% at 12/31/2020 on net average assets of $464.1 million, 11.17% at 9/30/2020 on net average assets of $424.5 million, 10.44% at 6/30/2020 on net average assets of $387.3 million, 10.59% at 3/31/2020 on net average assets of $283.8 million and 8.15% at 12/31/2019 on net average assets of $299.1 million.
Basel 3 Common Equity Tier 1 Capital at 9/30/2021 was $56,987,000, at
12/31/2020 was $47,759,000, at 9/30/2020 was $43,108,000, at 6/30/2020 was
$36,756,000, at 3/31/2020 was $27,308,000, and at 12/31/2019 was $23,179,000.
At 9/30/2021, the Company had no debt and one class of preferred stock outstanding convertible at $10 per share with a liquidation preference of $2,400,000. Cash & equity investment securities at the Company, available to meet working capital needs and to support investment opportunities at University Bancorp were $8,182,368.
Treasury shares as of 9/30/2021 were 317,381 shares. During 3Q2021, the Company paid a total of $3,900,00, or the equivalent of $15.00 per share to acquire and retire convertible preferred stock convertible into 260,000 shares of the Company’s common stock, or 4.8% of the fully diluted shares of common stock at 6/30/2021.
Michigan and the Ann Arbor Metropolitan Statistical Area saw modest growth in employment in 3Q2021 amid continuing high levels of unemployment. Despite this, the performance of our portfolio loans and our overall asset quality continues to perform well, with lower loan delinquencies and lower loans classified as substandard. We had no foreclosed other real estate owned property at quarter-end, and substandard assets declined 25.3% during 3Q2021 to $3,005,685 5.27% of Tier 1 Capital at 9/30/2021. The allowance for loan losses stood at $3,649,260 or 2.14% of the amount of portfolio loans, excluding the loans held for sale.
At 9/30/2021, we had the following with respect to delinquent loans (including both delinquent portfolio loans and delinquent loans held for sale):
Delinquent 30 Days to 59 Days, $1,009,328
Delinquent 60 Days to 89 Days, $121,190
Delinquent Over 90 Days & on Non-Accrual, $577,151*
*This balance consisted of two residential loans, and excludes GNMA loans that are 100% guaranteed. In addition, we own $722 million of MSR’s related to GNMA originated residential mortgage pool loans, of which $11,883,958 have reached a 90-day delinquency status and are therefore included on our balance sheet per GAAP, and $1,351,247 in GNMA loans that we have repurchased from GNMA pools that are delinquent over 90 days. Most of these loans are 100% principal guaranteed by FHA, others have smaller percentage guarantees.
Other Key statistics as of 9/30/2021:
| · 10-year annual average revenue growth*, | 21.20% |
| · 5-year annual average revenue growth*, | 25.70% |
| · 2Q2021 vs. 2Q2020 revenue growth*, | 1.43% |
*Using 3Q2021, 3Q2020, 2020, 2019, 2018, 2017, 2016, 2015 and 2010 revenue which were $104,600,160, $102,638,260, $136,991,511, $69,112,502, $55,988,570, $54,493,179, $50,948,149, $43,644,425 and $20,437,724, respectively.
| · TTM Revenue | $138,953,411 | ||||
| · 10 Year Average ROE | 22.7% | ||||
| · 5 Year Average ROE | 41.8% | ||||
| · LLR/NPAs>90 % | 189.2% | ||||
| · Debt to equity ratio, | 0.0% | ||||
| · Current Ratio, # | 125.9x | ||||
| · Efficiency Ratio, %+ | 70.40% | ||||
| · Total Assets, | $686,709,770 | ||||
| · Loans Held for Sale, before Reserves, | $131,841,160 | ||||
| · NPAs >90 days | $1,928,398 | ||||
| · TTM ROA % | 6.03% | ||||
| · TCE/TA % | 9.12% | ||||
| · Total Capital Ratio % | 13.79% | ||||
| · NPAs/Assets % | 0.44% | ||||
| · Texas Ratio % | 4.53% | ||||
| · NIM % | 2.27% | ||||
| · NCOs/Loans % | -0.012% | ||||
| · Trailing 12 Months P-E Ratio | 3.3x | ||||
#Parent company only current assets divided by 12-month projected cash expenses.
+Calculated as: (non-interest expense/ (net interest income + non-interest income))
xBased on last sale of $20.45 per share.
Excluding goodwill & other intangibles related to the acquisition of Midwest Loan Services and Ann Arbor Insurance Center, net tangible shareholders’ equity attributable to University Bancorp, Inc. common stock shareholders was $71,011,286 or $14.60 per share at 9/30/2021. Please note that we view the current market values of our insurance agency and Midwest Loan Services as substantially in excess of their carrying value including this goodwill.
Shareholders and investors are encouraged to refer to the financial information including the investor presentations, audited financial statements, strategic plan and prior press releases, available on our investor relations web page at: www.university-bank.com/bancorp. A detailed income statement and balance sheet for University Bank as of 9/30/2021 are available here: University Bank Income Statement & Balance Sheet.
Ann Arbor-based University Bancorp owns 100% of University Bank which, together with its Michigan-based subsidiaries, holds and manages a total of over $38 billion in financial assets for over 194,000 customers, and our 557 employees make us the 5th largest bank based in Michigan. University Bank is an FDIC-insured, locally owned and managed community bank, and meets the financial needs of its community through its creative and innovative services. Founded in 1890, University Bank® is the 15th oldest bank headquartered in Michigan. We are proud to have been selected as the “Community Bankers of the Year” by American Banker magazine and as the recipient of the American Bankers Association’s Community Bank Award. University Bank is a Member FDIC. The members
of University Bank’s corporate family, ranked by their size of revenues are:
- University Lending Group, a retail residential mortgage originator based in Clinton Township, MI;
- Midwest Loan Services, a residential mortgage subservicer based in Houghton, MI;
- UIF, a faith-based banking firm based in Southfield, MI;
- Community Banking, based in Ann Arbor, MI, which provides traditional community banking services in the Ann Arbor area;
- Midwest Loan Solutions, a reverse residential mortgage lender and warehouse lender based in Southfield, MI;
- Ann Arbor Insurance Centre, an independent insurance agency based in Ann Arbor.
CAUTIONARY STATEMENT: This press release contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning future growth in assets, pre-tax income and net income, budgeted income levels, the sustainability of past results, mortgage origination levels and margins, valuations, and other expectations and/or goals. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting our operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We undertake no obligation to update any information or forward-looking statement.
Contact: Stephen Lange Ranzini, President and CEO
Phone: 734-741-5858, Ext. 9226
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