-- Common shareholders' equity grew +21.5% (+43.0% annualized) to $1.39
per share
-- Loans and financings +9.6% (+19.1% annualized)
-- Islamic profit sharing deposits +41.3% (+82.5% annualized)
-- Islamic financings +25.1% (+50.3% annualized)
-- Tier 1 Capital +17.8% to $9,059,000
-- Real estate owned, net (foreclosed real estate) -25.5%
Also, net interest and financing income grew 29.0% over the same period of
2006.
The Bank's subsidiary, Midwest Loan Services Inc., reported net income of
$1,170,000 for the second quarter of 2007 as compared to net income of
$184,000 for the same period in 2006. Income at Midwest was positively
impacted in 2007 by a one-time termination fee related to a subservicing
contract severed in a previous period. The revenue was recognized in the
current period as various uncertainties over the termination fee have been
lifted. Community Banking reported a pre-tax net loss of $224,000 during
the current year's second quarter, an increase over a pre-tax net loss of
$130,000 for the same period in 2006. Net interest and profit sharing
income decreased from the pace in the first quarter of 2007 and certain
expenses were higher including a $20,000 one-time legal expense at the
Islamic subsidiary related to the finalization of commercial financing
documents in Michigan, a $17,000 one-time expense related to the
restructuring of the Islamic trust administrative system to reduce costs
going forward, and additional research & development and legal expenses
related to legal work required for completing the work to offer residential
financings in the first few states outside of Michigan. There were also
several un-budgeted non-recurring expenses at the Community Banking
operation in the second quarter totaling $20,000.
At June 30, 2007, Midwest was subservicing 31,203 mortgages, a decrease
of 3.8% from 32,461 mortgages subserviced at December 31, 2006 and a
decrease of 13.4% from 36,012 mortgages subserviced at March 31, 2007. In
April 2007 Midwest lost 7,000 mortgages from its subservicing portfolio
related to one Credit Union Service Organization that terminated the
subservicing relationship to pull the work in-house. As a result of the
ongoing growth of new clients, management projects that Midwest will have
about 36,650 mortgages subserviced by September 1, 2007, which would mean
that Midwest will more than replace the 7,000 mortgages it lost from its
subservicing portfolio by then. The loss of subservicing also had a
negative impact in higher costs related to the process of transferring the
7,000 mortgage portfolios out from Midwest. As escrow deposits decreased,
the result was a lower net interest margin during the second quarter of
2007 versus the first quarter of 2007. However, the 2007 results did
represent an improvement over 2006
results, because the overall level of mortgages subserviced, escrow and
Islamic deposits, net interest margin, and loans outstanding all increased
versus the 2006 results.
For the For the
Quarter Ended Six-Months Ended
June 30, June 30,
(in 000s) (in 000s)
2007 2006 2007 2006
Net interest and financing
income $ 814 $ 670 $1,688 $1,308
Provision for loan losses 54 29 76 49
Total securities gains 0 0 0 0
Total other income 2,431 1,036 3,693 2,087
Total other expense 2,064 1,856 3,944 3,483
Income tax 20 0 20 0
Minority Interest 203 50 276 77
Net income (loss) 905 (229) 1,065 (214)
Preferred stock dividends 10 8 18 14
Net income (loss) available to
common shareholders $ 895 $ (237) $1,047 $ (229)
Basic earnings (loss) per
common share $ 0.21 $(0.06) $ 0.25 $(0.05)
Diluted earnings (loss) per
common share $ 0.21 $(0.06) $ 0.24 $(0.05)
Weighted average shares
outstanding
Basic 4,248 4,245 4,248 4,197
Diluted 4,287 4,245 4,287 4,197
Net interest & profit margin 4.61% 5.09% 4.79% 4.86%
Period-end (in 000s except Book Value per share):
June 30, December 31,
2007 2006 2006
Financings & Financings
Held for Sale $57,468 $48,548 $52,879
Allowance for loan losses 520 402 466
Deposits 77,156 59,005 78,882
Assets 86,841 67,742 87,272
Equity 6,395 5,409 5,251
Book value per share $1.39 $1.19 $1.15
At June 30, 2007 University Bank's Tier 1 Capital Ratio was 10.89%, an
increase from 9.80% at December 31, 2006. Tier 1 Capital increased to
$9,039,000 from $7,676,000 over this period. Over the past 20 months, the
bank's Tier 1 capital has risen dramatically, from $3,159,000 to nearly
three times that level through a combination of earnings and strategic
management decisions. President Stephen Lange Ranzini noted, "With our
current capital levels, University Bank could grow its balance sheet by 49%
and still remain well capitalized at our long-term capital to asset goal of
7% Tier 1 Capital to Assets."
President Stephen Lange Ranzini noted, "Although University Bank is an
active participant in the residential mortgage industry, it has never
originated many types of riskier mortgage loans that are currently causing
severe losses among our competitors. We've never originated any
'interest-only,' 'optional payment,' 'negatively amortizing' or 'no income
verification' loans. We have originated and then sold to the secondary
market a few hundred ALT-A and sub-prime loans, however, remarkably, this
portfolio of loan servicing as of June 30, 2007 had zero delinquencies.
Moreover, the bank owns no mortgage securities other than those guaranteed
by GNMA, FNMA or FHLMC."
At June 30, 2007, University Bank's single family residential delinquencies
over 30 days were 2.23% while press reports indicate that 7.4% of all
Michigan residential mortgages are currently delinquent. President Stephen
Lange Ranzini commented, "Despite the seventh year of a recession in
Michigan, the bank's overall portfolio delinquencies were among the best in
the 19 years that I've been with the bank."
Pre-tax income (loss) summary for the three and six-months ended
June 30, 2007 (in thousands):
Three-Months Six-Months
Community Banking $ (224) $ (243)
Midwest Loan Services 1,170 1,364
Corporate Office (21) (36)
--------- ---------
Total $ 925 $ 1,085
========= =========
Pre-tax income (loss) summary for the three and six-months ended
June 30, 2006 (in thousands):
Three-Months Six-Months
Community Banking $ (130) $ (166)
Midwest Loan Services 184 249
Corporate Office (283) (297)
--------- ---------
Total $ (229) $ (214)
========= =========
Ann Arbor-based University Bancorp owns 100% of University Bank which
services a total of over $4 billion in loans. University Bank is an
FDIC-insured, locally owned and managed community bank, and is the only
financial institution headquartered in Washtenaw County rated "Outstanding"
by the FDIC for Community Service and Community Reinvestment. University
Bank focuses on local businesses, minorities and the non-profit communities
primarily serving the cities of Ann Arbor and Ypsilanti of Washtenaw
County. Other University Bank specialties include highly competitive
deposit products for business owners, residential mortgages, commercial
real estate lending and insurance, investments and money management through
its wholly owned subsidiary University Insurance & Investments, Inc.
University Bank also engages in Islamic Banking through 80%-owned
University Islamic Financial Corporation, the first and only Islamic
Banking subsidiary of mortgage alternative financing, the only FDIC-insured
Islamic deposits a bank in the U.S. University Islamic Financial
Corporation offers (offered through University Bank) and Islamic equity
mutual funds (offered through University Insurance & Investments, Inc.).
University Bank also specializes in mortgage subservicing and mortgage
origination primarily serving over 230 credit unions (representing 2.4% of
all credit unions nationwide) through its Houghton-based 80%-owned
subsidiary, Midwest Loan Services, Inc.
Any prediction of the future is inherently not assured. Investors should
read the risk factors listed on pages 21 through 22 in the Company's report
on Form 10KSB for the year ended December 31, 2006 and any prediction in
this release is intended to be covered by the Safe Harbor provisions of
Section 21E of the Securities Exchange Act of 1934.
Contact Information: Contact: Stephen Lange Ranzini President and CEO Phone: 734-741-5858, Ext. 226 Email: