University Bancorp 2Q2017 Net Income $908,956, $0.175 per Share; First Half Revenue Rises 52.6% Over Prior Year

ANN ARBOR, MI--(Marketwired - August 14, 2017) - University Bancorp, Inc. (OTCQB: UNIB) announced that it had an unaudited net income attributable to University Bancorp, Inc. common stock shareholders in 2Q2017 of $908,956, $0.175 per share on average shares outstanding of 5,200,899 for the second quarter, versus unaudited net income of $991,934, $0.194 per share on average shares outstanding of 5,100,899 for 2Q2016.

For the six months ended June 30, 2017, net income was $1,808,979 $0.35 per share on average shares outstanding of 5,173,538 for the period versus $767,037 $0.15 per share for the six months ended June 30, 2016 on average shares outstanding of 5,100,899 for the period. For the first three and six months of 2017 minority interest of $33,191 and $100,358, respectively, was incurred.

For the 12 months ended June 30, 2017, net income was $4,848,139, $0.94 per share on average shares outstanding of 5,137,218 for the period.

Results in 1H2017 were restrained by large non-recurring, unusual expenses only partially offset by a seasonal gain, which had an overall negative cumulative impact of $(171,780), before tax:

Unusual expense:

1. With the fall in long term mortgage interest rates during the quarter the valuation of mortgage servicing rights (MSRs) decreased $491,571;
2. A litigation was settled at an early stage for $75,000;
3. Our board awarded compensation in lieu of board fees in the form of five year stock options and a ten year annually vesting retention stock option to the CEO, a total expense of $213,667 on the 170,000 shares, at a strike price of $7 per share.

Unusual gain:

4. The value of the hedged mortgage origination pipeline rose $608,458 as the amount of locked loans rose over the level at year-end.

Results in 1H2016 were restrained by a single large non-recurring, unusual expense only partially offset by an unusual gain, which had an overall negative cumulative impact of $(1,898,547), before tax:

Unusual expense:

1. With the fall in long term mortgage interest rates the valuation of mortgage servicing rights (MSRs) decreased $2,720,870;

Unusual gain:

2. The value of the hedged mortgage origination pipeline rose $822,323 as the amount of locked loans rose over the level at year-end;

For 1H2017, the Company had an annualized return on equity attributable to common stock shareholders of 20.0% on initial equity of $18,075,835. Return on equity over the trailing twelve months was 32.2% on initial equity of $15,053,221.

Management currently projects budgeted annual net income in 2017 of at least $4,850,000 or $0.93 per share. This forecast takes our actual results for 1H2017, plus our original budget for the final two quarters of 2017, adjusted for all known major changes.

President Stephen Lange Ranzini noted, "The 1H2017 result for profitability was very good, despite elevated expenses flowing from origination process improvement projects that are expected to complete later this year. In addition to strong profitability at our subservicing division we had strong year over year growth in purchase related mortgage originations and first half revenue grew 52.6% over the first half of 2016."

During the quarter a real estate subsidiary of the bank agreed to sell a small building and buy a larger building down the street. The sale transaction will result in a $600,000 gain in the third quarter. The building being purchased is a modern three story office building in Ann Arbor near the Ann Arbor freeway ring with 24,000 ft² of office space for $2,370,000 or $99 per ft² which will be used to support the bank's back office and insurance agency operations.

Under the Basel 3 Capital Rules, the Tier 1 Leverage Capital Ratio rose to 9.17% on net average assets of $185.1 million, from 9.02% at 3/31/2017 on net average assets of $161.9 million, and was 8.64% at 12/31/2016 on net average assets of $183.3 million, 8.94% at 9/30/2016 on net average assets of $171.6 million, 8.75% at 3/31/2016 on net average assets of $141.2 million, and 8.93% at 12/31/2015 on net average assets of $135.4 million. The Tier 1 Leverage Capital Ratio is projected to be 11.48% at 12/31/2017, if we achieve our 2017 re-forecasted budget projection, which assumes that mortgage originations will revert to lower budgeted levels for the rest of the year and we receive all the proceeds from an MSR sale we recently closed, which will raise our regulatory capital by about $1.3 million, but does not reflect payment of stock dividends or stock buybacks during 2017, both of which are likely.

Basel 3 Common Equity Tier 1 Capital at 6/30/2017 was $16,161,000, at 3/31/2017 was $13,865,000, at 12/31/2016 was $14,215,000, at 9/30/2016 was $13,859,000, at 3/31/2016 was $10,900,000, and at 12/31/2015 was $10,584,000.

Basel 3 Total Risk Weighted Assets at 6/30/2017 were $132,889,000, at 3/31/2017 were $92,168,000, at 12/31/2016 were $96,908,000, at 9/30/2016 were $102,272,000, 3/31/2016 were $82,481,000 and at 12/31/2015 were $74,775,000.

The CET1 Risk Weighted Capital Ratio at 6/30/2017 was 12.16%, at 3/31/2017 was 15.04%, at 12/31/2016 was 14.67%, at 9/30/2016 was 13.55%, at 3/31/2016 was 13.22%, at and 12/31/2015 was 14.15%.

Shareholders' equity attributable to University Bancorp, Inc. common stock shareholders was $20,346,408 or $3.91 per share, based on shares outstanding at June 30, 2017 of 5,200,899.

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 $19,812,241 or $3.81 per share at 6/30/2017. Please note that we do not see this latter statistic as particularly meaningful because the value of the insurance agency and Midwest Loan Services materially exceed their carrying value including this goodwill, but we are asked for it. Treasury shares as of 6/30/2017 were zero.

Total Assets as of 6/30/2017 were $269,775,000 versus $235,232,000 at 3/31/2017, $190,940,176 at 12/31/2016, $246,524,231 at 9/30/2016, $216,976,000 at 6/30/2016, $194,934,000 at 3/31/2016 and $182,458,912 at 12/31/2015.

Michigan and the Ann Arbor MSA continue to increase employment and as a result, the performance of our portfolio loans and our overall asset quality continues to be excellent. We had no loans delinquent over 30 days at 6/30/2017. The allowance for loan losses stands at $419,868 or 0.60% of the amount of portfolio loans, excluding the loans held for sale. Substandard assets fell 25.9% during 2Q2017 to $597,555, 3.77% of Tier 1 Capital at 6/30/2017, including a single other real estate owned home of $97,743. This home's sale is expected to close shortly at an amount exceeding the carrying value.

In 1H2017, our residential mortgage origination groups originated $413.0 million of mortgages, of which $269.5 million were originated by our retail origination group, University Lending Group, LLC (ULG), $115.0 million were originated by our UIF unit, and the remainder originated by our credit union and community bank correspondent origination group. Home purchase transactions originated during 1H2017 rose 13.5% at ULG and 28.1% at UIF over the 1H2016 level and 91% of our retail originations at ULG and 86% of our UIF originations in 1H2017 financed purchase transactions.

Liquidity remains excellent. The bank is positioned to benefit from rising short term interest rates. We manage an average of over $100 million of deposits in an off-balance sheet sweep arrangement through a series of deposit accounts at the Federal Home Loan Bank of Indianapolis (FHLBI) on which we earn interest at the Fed Funds rate minus 15 basis points.

Other key statistics as of 6/30/2017:

*Using Trailing 12 month 1H2017 revenues which were $60,476,003, 2015 revenues which were $43,644,425 and 2011 revenues which were $21,280,296.
^#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 the last sale of $6.57 per share.

Shareholders and investors are encouraged to refer to the financial information including the audited financial statements, strategic plan and prior press releases, available on our investor relations web page at: http://www.university-bank.com/bancorp/.

Ann Arbor-based University Bancorp owns 100% of University Bank which, together with its Michigan-based subsidiaries, holds and manages a total of over $20 billion in financial assets for over 117,000 customers, and our 388 full-time equivalent employees make us the 5^th 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 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;
• 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, 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.