29
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 June 30, 2004
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 July 31, 2004 4,090,548 shares
Page 1 of 29 pages
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 Statement of Comprehensive Income (loss) 7
Consolidated Statements of Cash Flows 8
Notes to the Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Summary 11
Recent Events 12
Results of Operations 12
Capital Resources 18
Liquidity 19
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 19
Item 4. Controls and Procedures 22
PART II - Other Information
Item 1. Legal Proceedings 22
Item 4. Submission of Matters to a vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits & Reports on Form 8-K 23
Signatures 24
Exhibit Index 25
------------------------------------------------------------
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
June 30, 2004 (Unaudited) and December 31, 2003
June 30, December 31,
ASSETS 2004 2003
-------------- --------------
Cash and due from banks $ 1,354,411 $ 2,171,189
Securities available for sale, at market 1,338,974 1,649,169
Federal Home Loan Bank Stock 902,000 881,100
Loans held for sale, at the lower of cost or market 1,189,990 206,008
Loans 37,656,541 34,928,586
Allowance for loan losses (471,253) (454,118)
-------------- --------------
Loans, net 37,185,288 34,474,468
Premises and equipment, net 969,119 829,807
Investment in Michigan BIDCO Inc. 29,258 629,258
Investment in Michigan Capital Fund LPI 206,244 256,244
Mortgage servicing rights, net 1,094,813 1,031,575
Real estate owned, net 547,108 429,500
Accounts receivable 33,326 122,067
Accrued interest receivable 119,642 129,808
Prepaid expenses 199,528 183,143
Goodwill, net 103,914 103,914
Other assets 483,046 451,290
-------------- --------------
TOTAL ASSETS $ 45,756,661 $ 43,548,540
============== ==============
-Continued-
UNIVERSITY BANCORP, INC.
Consolidated Balance Sheets (continued)
June 30, 2004 (Unaudited) and December 31, 2003
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2004 2003
-------------- --------------
Liabilities:
Deposits:
Demand - non interest bearing $ 4,178,798 $ 3,146,688
Demand - interest bearing 23,771,610 25,827,337
Savings 428,543 377,545
Time 12,081,613 9,455,982
-------------- --------------
Total Deposits 40,460,564 38,807,552
Short term borrowings 1,060,842
Long term borrowings 100,000 166,000
Accounts payable 201,405 289,150
Accrued interest payable 54,179 51,613
Other liabilities 185,417 354,273
--------------- --------------
Total Liabilities 42,062,407 39,668,588
Minority Interest 442,842 445,324
Stockholders' equity:
Common stock, $0.01 par value;
Authorized - 5,000,000 shares;
Issued - 4,205,732 shares at June 30, 2004
And 4,141,732 shares at December 31, 2003 42,057 41,417
Additional paid-in-capital 5,800,300 5,677,940
Accumulated deficit (2,175,963) (1,905,404)
Treasury stock - 115,184 shares in 2003 and
2002 (340,530) (340,530)
Accumulated other comprehensive loss,
unrealized losses on securities available
for sale, net (74,452) (38,795)
-------------- --------------
Total Stockholders' Equity 3,251,412 3,434,628
-------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 45,756,661 $ 43,548,540
============== ===============
The accompanying notes are an integral part of the consolidated financial
statements.
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Periods Ended June 30, 2004 and 2003
(Unaudited)
For the Three Month For the Six Month
Period Ended Period Ended
2004 2003 2004 2003
---------------- -------------- ------------------- ----------------
Interest income:
Interest and fees on loans $ 615,561 $ 628,429 $ 1,210,971 $ 1,259,768
Interest on securities:
U.S. Government agencies 8,659 28,047 29,106 63,331
Other securities 18,020 21,267 37,021 44,517
Interest on federal funds and other 933 3,168 1,116 8,155
---------------- -------------- ------------------- ----------------
Total interest income 643,173 680,911 1,278,214 1,375,771
---------------- -------------- ------------------- ----------------
Interest expense:
Interest on deposits:
Demand deposits 99,173 97,214 205,275 188,720
Savings deposits 1,264 1,152 2,438 2,433
Time deposits 80,360 115,393 155,086 246,460
Short term borrowings 2,407 1,391 5,165 1,391
Long term borrowings 1,177 3,294 3,034 6,852
---------------- -------------- ------------------- ----------------
Total interest expense 184,381 218,444 370,998 445,856
---------------- -------------- ------------------- ----------------
Net interest income 458,792 462,467 907,216 929,915
Provision for loan losses 22,500 38,500 45,000 144,400
---------------- -------------- ------------------- ----------------
Net interest income after
provision for loan losses 436,292 423,967 862,216 785,515
---------------- -------------- ------------------- ----------------
Other income:
Loan servicing and sub-servicing
fees 347,923 232,682 681,848 433,393
Initial loan set up and other fees 508,175 1,068,109 890,726 1,890,194
Gain on sale of mortgage loans 69,036 304,808 158,388 488,513
Insurance and investment fee income 56,177 33,490 112,726 81,538
Deposit service charges and fees 28,869 29,314 54,419 57,441
Other 61,901 27,451 137,865 66,751
---------------- -------------- ------------------- ----------------
Total other income 1,072,082 1,695,854 2,035,972 3,017,830
---------------- -------------- ------------------- ----------------
-Continued-
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Periods Ended June 30, 2004 and 2003
(Unaudited)
For the Three Month For the Six Month
Period Ended Period Ended
2004 2003 2004 2003
------------------ ---------------- -------------- -----------------
Other expenses:
Salaries and benefits $ 715,916 $ 826,760 $ 1,440,059 $ 1,612,068
Occupancy, net 100,476 89,438 213,739 178,335
Data processing and equipment
Expense 138,835 115,642 262,920 223,868
Legal and audit expense 47,537 40,597 84,230 78,371
Consulting fees 43,031 33,319 78,054 66,757
Mortgage banking expense 70,298 219,198 134,829 388,761
Servicing rights amortization 49,411 451,842 259,868 554,015
Advertising 32,747 33,990 63,645 59,953
Memberships and training 41,640 26,046 67,039 47,164
Travel and entertainment 43,208 33,001 68,694 60,179
Supplies and postage 55,898 58,290 101,126 104,236
Insurance 34,093 24,080 66,444 45,654
Other operating expenses 125,074 150,234 195,258 282,767
Other real estate expenses 96,240 2,912 135,519 13,494
Total other expenses 1,594,405 2,105,349 3,168,747 3,715,622
------------------ ---------------- -------------- -----------------
Income (loss) before income taxes (86,032) 14,472 (270,559) 87,723
------------------ ---------------- -------------- -----------------
Income tax expense (benefit) - - - -
------------------ ---------------- -------------- -----------------
Net Income (loss) $ (86,032) $ 14,472 $ (270,559) $ 87,723
================== ================ ============== =================
Preferred stock dividends - -
------------------ ---------------- ---------------------------------
Net income (loss) available to $ (86,032) $ 14,472 $ (270,559) $ 87,723
common shareholders
================== ================ ============== =================
Basic and diluted loss per common
share $ (0.02) $ 0.00 $ (0.07) $ 0.02
================== ================ ============== =================
Weighted average shares outstanding - Basic 4,090,548 3,899,548 4,074,328 3,899,548
================== ================ ============== =================
Weighted average shares outstanding - Diluted 4,090,548 3,899,548 4,074,328 3,899,548
================== ================ ============== =================
The accompanying notes are an integral part of the consolidated financial statements.
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the Periods Ended June 30, 2003 and 2002
(Unaudited)
For the Three Month For the Six Month
Period Ended Period Ended
2004 2003 2004 2003
--------------------------------------------------------------
Net (loss)/income $ (86,032) $14,472 $(270,559) $87,723
Other comprehensive(loss)income:
Unrealized (losses)gains on securities
Available for sale (59,269) 42,134 (34,346) 59,048
Less: reclassification adjustment
for accumulated gains
included in net loss - - 1,311 -
--------------------------------------------------------------
Other comprehensive (loss)income, before
tax effect (59,269) 42,134 (35,657) 59,048
Income tax expense (benefit) - - - -
Other comprehensive (loss)income, net
Of tax (59,269) 42,134 (35,657) 59,048
--------------------------------------------------------------
Comprehensive (loss)income $(145,301) $56,606 $(306,216) $146,771
==============================================================
The accompanying notes are an integral part of the consolidated financial statements.
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six month periods ended June 30, 2004 and 2003
(Unaudited)
2004 2003
--------------------- -------------------
Cash flow from operating activities:
Net (loss) income $ (270,559) $ 87,723
Adjustments to reconcile net (loss)income to net cash from Operating Activities:
Depreciation 148,841 148,395
Amortization 309,868 604,015
Provision for loan losses 45,000 144,400
Net (gain) on mortgage loan sales (158,388) (488,513)
Net (accretion) on investment securities (7,859) (20,897)
Net (gain)loss on sale of securities (1,311) 28,599
Gain on the sale of fixed assets (126,051)
Originations of mortgage loans (24,441,360) (77,817,882)
Proceeds from mortgage loan sales 23,615,766 78,319,219
Change in:
Real estate owned 14,349 30,648
Other assets (293,240) (592,554)
Other liabilities (130,466) (6,724)
--------------------- -------------------
Net cash (used in) provided by operating activities (1,295,410) 436,929
--------------------- -------------------
Cash flow from investing activities:
Purchase of investment securities (8,008) (92,567)
Proceeds from maturities and pay downs of securities
available for sale 284,710 892,802
Net (increase)repayments of loans (2,872,311) 576,292
Proceeds from sale of other real estate 584,534 142,332
Proceeds from sales of investment securities 7,006 53,690
Premises and equipment expenditures (288,153) (73,488)
Proceeds from sale of premises 1,173,833
--------------------- -------------------
Net cash (used in) provided by investing activities (2,292,222) 2,530,562
--------------------- -------------------
-Continued-
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six month periods ended June 30, 2004 and 2003
(Unaudited)
2004 2003
------------------- -------------------
Cash flow used in financing activities:
Net increase(decrease)in deposits 1,653,012 (4,687,724)
Net increase in short term borrowings 1,060,842 991,000
Principal payments on long term borrowings (66,000) (66,000)
Issuance of long term borrowings - -
Issuance of common stock 123,000 -
------------------- -------------------
Net cash used in (provided by) financing activities 2,770,854 (3,762,724)
------------------- -------------------
(816,778) (652,901)
Net change in cash and cash equivalents Cash and cash equivalents:
Beginning of period 2,171,189 2,569,469
------------------- -------------------
End of period $ 1,354,411 $ 1,916,568
=================== ===================
Supplemental disclosure of cash flow information:
Cash paid for interest $ 368,432 $ 482,460
Supplemental disclosure of non-cash transactions:
Mortgage loans converted to other real estate owned $ 716,491 $ -
Michigan BIDCO Preferred stock exchanged for a 7.5%
promissory note $ 600,000 $ -
See accompanying notes to consolidated financial statements (unaudited).
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 2003 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 2003 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: 4,090,548 and
3,899,548 for the three months ended June 30, 2004 and 2003, respectively;
4,074,328 and 3,899,548 shares for the six months ended June 30, 2004 and 2003,
respectively.
(2) Investment Securities
The Bank's available-for-sale securities portfolio at June 30, 2004 had
a net unrealized loss of approximately $80,000 as compared with a net unrealized
loss of approximately $39,000 at December 31, 2003.
Securities available for sale at June 30, 2004(in thousands):
Gross Gross
Amortized Realized Unrealized Fair
Cost Gains Losses Value
---------------- ---------------- ---------------- ----------------
Stocks and other securities $ 13 $ 7 $ (1) $ 19
U.S. agency mortgage-backed 1,399 - (79) 1,320
---------------- ---------------- ---------------- ----------------
Total $ 1,412 $ 7 $ (80) $ 1,339
================ ================ ================ ================
Securities available for sale at December 31, 2003
Gross Gross
Amortized Realized Unrealized Fair
Cost Gains Losses Value
---------------- ---------------- ---------------- ----------------
Stocks and other securities $ 12 $ - $ - $ 12
U.S. agency mortgage-backed 1,676 - (39) 1,637
---------------- ---------------- ---------------- ----------------
Total $ 1,688 $ - $ (39) $ 1,649
================ ================ ================ ================
(3) Stock options
At June 30, 2004, 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 (loss) 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 47,000 and 10,000 during
the six month period ended June 30,
2004 and 2003, the effect on net (loss) income and (loss)earnings per share if
the Corporation had applied the fair value recognition provisions of FASB
Statement No. 123, Accounting for Stock-Based Compensation, as amended by FASB
Statement No. 148, to stock-based employee compensation was less than $.01 in
each of the periods presented.
(4) Michigan BIDCO
At December 31, 2003 University Bancorp owned 6.10% of the BIDCO. The Bank also
held $600,000 of 7.5% cumulative preferred stock of the BIDCO. On March 24,
2004, the Bank exchanged its preferred stock in BIDCO for a note from a company
in which Stephen Lange Ranzini, the Bank's President, is a shareholder. The note
is collateralized by all assets of the company. The note bears interest at 7.5%
and is due no later than December 31, 2004.
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 loss for the Company for the three month period ended June 30, 2004 was
$86,032 as compared to net income of $14,472 for the same period last year.
Community Banking incurred a loss of $156,000 during the current year's second
quarter as opposed to net income of $10,000 from the year before. Operations at
Community Banking were negatively impacted during the second quarter by expenses
and loss of income related to the resolution of non performing assets and by
investments made to grow the Community Bank's Islamic banking program. The
Bank's subsidiary, Midwest Loan Services reported net income of $98,000 for the
second quarter of 2004 as compared to net income of $36,000 for the same period
in 2003. Income at Midwest was negatively impacted in the second quarter of 2004
by approximately $30,000 a month in overhead expenses made to grow Midwest's
jumbo and non-standard originations through a conduit established with Lehman
Brothers.
The Company's net loss for the first half of 2004 was $270,559, versus
net income of $87,723 for the same period last year. Community Banking incurred
a loss of $209,000 during the current year's first half as opposed to a loss of
$127,000 from the year before. Community Banking incurred approximately $170,000
in expense related to the resolution of other real estate owned in 2004,
including lost interest income and legal fees. The expenses in this category
were substantially less in 2003. Community Banking has also incurred
approximately $10,000 a month in expenses to grow the Islamic banking program.
Midwest Loan Services had a net loss of $17,000 in the first half of 2004
compared to net income of $276,000 in the same period last year. In 2003,
Midwest benefited from a significant volume of income derived from the high
level of mortgage refinancing due to lower rates. In 2004, this income was
substantially less. Income at Midwest was negatively impacted in the first half
of 2004 by approximately $30,000 a month in overhead expenses made to grow
Midwest's jumbo and non-standard originations through a secondary market conduit
established with Lehman Brothers.
The following table summarizes the pre-tax (loss) income of each profit
center of the Company for the three months ended June 30, 2004 and 2003 (in
thousands):
Pre-tax (loss) income summary for the three and six months ended June 30, 2004
Three Months Six Months
Community Banking $( 156) $(209)
Midwest Loan Services 98 ( 17)
Corporate Office (28) (45)
---------- ----------
Total $ ( 86) $(271)
========== ===========
Pre-tax income (loss) summary for the three and six months ended June 30, 2003
Three Months Six Months
Community Banking $ 10 $(127)
Midwest Loan Services 36 276
Corporate Office (31) (61)
---------- ----------
Total $ 15 $ 88
========== ===========
RESULTS OF OPERATIONS
Net Interest Income
Net interest income decreased to 458,792 for the three months ended
June 30, 2004 from $462,467 for the three months ended June 30, 2003. Net
interest income declined from last year primarily as a result of a lower
interest income from commercial loans. Overall, the yield on earning assets
decreased from 6.99% to 6.38% while the cost of earning liabilities declined
from 2.30% to 1.84%. Overall, the net interest income as a percentage of total
average earning assets decreased from 4.74% to 4.55
Net interest income decreased to $907,557 for the six months ended June
30, 2004 from $929,915 for the six months ended June 30, 2003. Net interest
income declined from a year ago primarily as a result of a lower interest income
from commercial loans. The yield on interest earning assets decreased from 6.97%
in the 2003 period
to 6.47% in the 2004 period. The cost of interest bearing liabilities decreased
from 2.30% for the 2003 period to 1.97% for the period ended June 30, 2004. Net
interest income as a percentage of total average earning assets decreased from
4.71% to 4.59%.
Interest income
Interest income decreased to $643,173 in the quarter ended June 30,
2004 from $680,911 in the quarter ended June 30, 2003. The decline resulted from
a lower average yield on average earning assets. The yield on interest bearing
assets declined from 6.99% in 2003 to 6.38% in 2004. This decline resulted
primarily from lower interest income from commercial loans. The volume of
average commercial loans declined from $18,589,768 in the 2003 period to
$16,997,343 in the 2004 period. The decline resulted from commercial real estate
being foreclosed and reclassified as other real estate owned. In addition, the
demand for commercial loans particularly commercial mortgages was lower in the
2004 period than in the 2003. The average volume of interest earning assets
increased to $40,435,894 in the 2004 period from $39,095,202 in the 2003 period.
Interest income decreased to $1,278,215 in the six months ended June
30, 2004 from $1,375,771 in the six months ended June 30, 2003. This decrease
resulted from a decline in the yield on average earning assets. The overall
yield on earning assets declined to 6.47% from 6.97% in the six month period
ended in 2003. As noted above, a decline in interest income from the commercial
loan portfolio was the primary cause of this decline.
Interest Expense
Interest expense decreased to $184,381 in the three months ended June 30,
2004 from $218,444 in the 2003 period. The decrease was due to a drop in the
yield in 2004 to 1.95% from 2.30% in 2003. The drop in yield resulted from a
favorable shift in the mix of deposits. Money market accounts increased to an
average balance of $18,802,931 from $15,813,101 in the three month period ended
June 30, 2003. In contrast, higher cost average time deposits declined to
$11,662,586 in the three month period ended June 30, 2004 from $15,187,310 in
the same period last year. The average volume of interest bearing liabilities
slightly declined to $38,001,931 in 2004 from $38,047,180 in 2003.
Interest expense decreased to $370,998 in the six months ended June 30,
2004 from $445,856 in the 2003 period. The decrease was due to a lower average
rate on the interest bearing liabilities, a decrease in volume, and a favorable
shift in the mix of deposits. The average rate dropped to 1.97% in 2004 from
2.30% in 2003. The volume of interest bearing liabilities decreased to
$37,903,162 in 2004 from $39,027,977 in 2003. The decrease in volume primarily
occurred in time deposits, particularly brokered deposits. The decline in these
liabilities was offset by a rise in other interest bearing liabilities and
non-interest bearing demand deposits. These liabilities typically have lower
rates than brokered deposits.
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 six months
ended June 30, 2004 and 2003.
Three Months Ended Three Months Ended
June 30, 2004 June 30, 2003
-----------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Inc / Exp Yield (1) Balance Inc / Exp Yield (1)
Interest Earning Assets:
Commercial Loans $16,997,343 $ 256,590 6.05% $18,589,768 $ 366,056 7.90%
Real Estate Loans 18,348,309 333,302 7.29% 13,259,140 220,402 6.67%
Installment/Consumer Loans 2,445,269 25,669 4.21% 2,307,156 41,971 7.30%
---------------------------------- -----------------
Total Loans 37,790,291 615,561 6.53% 34,156,064 628,429 7.38%
Investment Securities 2,347,453 26,679 4.56% 3,970,355 49,314 4.98%
Fed. Funds & Bank Deposits 297,520 933 1.26% 968,783 3,168 1.31%
---------------------------------- ----------------------------------
- - - -
Total Interest Bearing Assets 40,435,894 643,173 6.38% 39,095,202 680,911 6.99%
---------------------------------- ----------------------------------
Interest Bearing Liabilities:
Deposit Accounts:
Demand 6,295,288 11,925 0.76% 5,947,844 14,166 0.96%
Savings 466,759 1,264 1.09% 404,971 1,152 1.14%
Time 11,662,586 80.360 2.76% 15,187,310 115,393 3.05%
Money Market 18,802,931 87,248 1.86% 15,813,101 83,048 2.11%
Short-term Borrowings 674,367 2,407 1.43% 445,454 1,391 1.25%
Long-term Borrowings 100,000 1,177 4.72% 248,500 3,294 5.32%
---------------------------------- ----------------------------------
Total Interest Bearing 38,001,931 184,381 1.95% 38,047,180 218,444 2.30%
Liabilities
---------------------------------- ----------------------------------
Net Earning Assets, net
interest income, and
interest rate spread $ 2,433,963 $ 458,792 4.44% $ 1,048,022 $ 462,467 4.69%
================================== ==================================
Net Interest Margin 4.55% 4.74%
(1) Yield is annualized.
Six Months Ended Six Months Ended
June 30, June 30,
2004 2003
------------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Inc (Exp) Yield (1) Balance Inc (Exp) Yield (1)
Interest Earning Assets:
Loans:
Commercial $16,978,726 $ 548,878 6.52% $18,792,771 $ 724,043 7.77%
Real Estate 17,744,523 595,891 6.77% 13,201,950 438,339 6.70%
Installment/Consumer 2,173,032 66,202 6.14% 2,243,975 97,386 8.75%
---------------------------------- -----------------------------------
Total Loans 36,896,281 1,210,971 6.62% 34,238,696 1,259,768 7.42%
Investment Securities 2,717,697 66,127 4.91% 4,157,432 107,848 5.23%
Federal Funds & Bank
Deposits 221,450 1,116 1.02% 1,387,636 8,155 1.19%
---------------------------------- -----------------------------------
Total Interest Bearing Assets 39,835,428 1,278,214 6.47% 39,783,764 1,375,771 6.97%
Interest Bearing Liabilities:
Deposit Accounts:
Demand 6,398,573 223 0.83% 6,251,254 26,060 0.84%
Savings 434,479 2,438 1.13% 432,052 2,433 1.14%
Time 11,000,662 155,086 2.84% 16,336,457 246,460 3.04%
Money Market 19,201,590 179,052 1.88% 15,512,628 162,660 2.11%
Short-term borrowings 751,358 5,165 1.39% 230,586 1,391 1.22%
Long-term borrowings 116,500 3,034 5.25% 265,000 6,852 5.21%
---------------------------------- -----------------------------------
Total Interest Bearing
Liabilities 37,903,162 370,998 1.97% 39,027,977 445,856 2.30%
---------------------------------- -----------------------------------
Net Earning Assets, net interest
income, and interest rate
spread $ 1,932,266 $ 907,216 4.50% $ 755,787 $ 929,915 4.67%
================================== ===================================
Net yield on interest-earning assets 4.59% 4.71%
(1) Yield is annualized.
Allowance for Loan Losses
The provision to the allowance for loan losses was $45,000 for the
six-month period ended June 30, 2004 and $144,400 for the same period in 2003.
The provision decreased due to adequate funding of the Allowance for Loan
Losses. Net charge-offs totaled $27,865 for the six-month period ended June 30,
2004 as compared to $92,454 for the same period in 2003. Illustrated below is
the activity within the allowance for the six-month period ended June 30 2004
and 2003, respectively.
2004 2003
---- ----
Balance, January 1 $ 454,118 $ 408,219
Provision for loan losses 45,000 144,400
Loan charge-offs (94,452) (129,969)
Recoveries 66,587 37,515
---------- -----------
Balance, June 30 $ 471,253 $ 460,165
========== ===========
At June 30, 2004 At December 31, 2003
Total loans (1) $37,656,541 $34,928,586
Reserve for loan losses $471,253 $ 454,118
Reserve/Loans % (1) 1.25% 1.30%
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 June 30, 2004 At December 31, 2003
Past due 90 days and over
and still accruing (1):
Real estate $ - $ -
Installment - -
Commercial - -
------------ ------------
Subtotal - -
Nonaccrual loans (1):
Real estate (including
commercial real estate) 432,647 907,599
Installment - 5,128
Commercial 218,219 204,400
Subtotal 650,866 1,117,127
------------ ------------
Other real estate owned 547,108 429,500
------------ ------------
Total non-performing assets $1,197,974 $1,546,627
============ ============
At June 30, 2004 At December 31, 2003
Ratio of non-performing assets to total
loans (1) 3.18% 4.43%
============ ============
Ratio of loans past due over 90 days and
nonaccrual loans to loan loss reserve 138% 246%
============ ============
(1) Excludes loans held for sale which are valued at the lower of cost or fair
market value.
Non-accrual loans at June 30, 2004 include two real estate secured loan
relationships in the amount of $311,326 that are in process of foreclosure. An
adequate reserve has been allocated to these loans at June 30, 2004.
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 decreased to $1,072,082 for the three months
ended June 30, 2004 from $1,695,854 for the three months ended June 30, 2003.
The decrease was primarily due to lower mortgage loan origination activity. In
2003, the rates on mortgages were historically low and this spurred an increase
in the re-financing market. Management at the Bank and Midwest aggressively
pursued this activity and was able to increase income from initial loan set up
and other fess and gain on the sale of mortgage loans. During the three month
period in 2004, mortgage rates were considerably higher.
Total non-interest income decreased to $2,035,972 for the six months ended
June 30, 2004 from $3,017,830 for the six months ended June 30, 2003. The
decrease was principally a result of decreases in loan origination and gain on
the sale of mortgage loans at Midwest Loan Services. In 2003, the rates on
mortgages were historically low and this spurred an increase in the re-financing
market.
At June 30, 2004 , Midwest was subservicing 17,116 mortgages, an
increase of 13.9 % from 15,033 mortgages at December 31,
2003.
Non-Interest Expense
Non-interest expense decreased to $1,594,405 in the three months ended June 30,
2004 from $2,105,349 for the three months ended June 30, 2003. The decrease was
due principally to decreases salaries and benefits, mortgage banking expense,
and amortization of servicing rights. The higher mortgage interest rates in 2004
resulted in lower income from mortgage origination as well as lower expenses.
The higher mortgage interest rates in 2004 also resulted in a partial reversal
of the serving rights impairment reserve. . The adjustment for servicing rights
impairment was $57,000 for the six month period ended June 3, 2004 and
$(260,500) for the same period in 2003.
Following is an analysis of the change the Company's mortgage servicing
rights for the periods ended June 30, 2004 and 2003
2004 2003
---- ----
Balance, January 1 $1,031,575 $1,014,939
Additions - originated 323,106 496,455
Amortization expense (316,868) (293,515)
Adjustment for asset impairment
change 57,000 (260,500)
------------ -----------
Balance, December 31 $ 1,094,813 $ 957,379
============ ===========
At June 30, 2004, 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 $111 million. The carrying
value of these servicing rights was $1,094,813 at June 30, 2004 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 June 30,
2004 and 2003 are $391,000 and $309,500, respectively.
Non-interest expense increased to $3,168,747 in the six months ended
June 30, 2004 from $3,715,622 for the six months ended June 30, 2004. The
decrease was primarily the result of decreased operating expenses at Midwest
Loan Services resulting from low mortgage origination activity.
Capital Resources
The table below sets forth the Bank's risk based assets, capital ratios
and risk-based capital ratios of the Bank. At June 30, 2004, the Bank was
considered "well-capitalized".
June 30, 2004
TIER 1 CAPITAL (in thousands)
Total Equity Capital $3,292
Less: Unrealized losses on available-for-Sale
Securities (79)
Plus: Minority Interest 443
Less: Other identifiable Intangible Assets 293
--------
Total Tier 1 Capital 3,521
TIER 2 CAPITAL
Allowance for loans & Lease losses 434
Less: Excess Allowance -
--------
Total Tier 2 Capital 434
--------
Total Tier 1 & Tier 2 Capital $3,955
========
CAPITAL RATIOS
Tier 1/Total Average Assets of $44,531 7.91%
Tier 1/Total Risk-Weighted Assets of $34,702 10.15%
Tier 1 & 2/Total Risk-Weighted Assets of $34,702 11.40%
Liquidity
Bank Liquidity. The Bank's primary sources of liquidity are customer
deposits, scheduled payments and prepayments of loan principal, cash flow from
operations, 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 June 30,
2004, the Bank had cash and cash equivalents of $1,354,411. The Bank's lines of
credit include the following:
o $4.0 million from the Federal Home Loan Bank of Indianapolis secured
by investment securities and residential mortgage loans, and
o $5.2 million from the Federal Reserve Bank of Chicago secured by
commercial loans.
At June 30, 2004, the Bank had $1,060,842 outstanding on the Federal Home Loan
Bank line of credit.
In order to bolster liquidity from time to time, the Bank also sells brokered
time deposits. At June 30, 2004, the Bank had $3.0 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 2004. Management
expects Bancorp's working capital to be increased as a result of exercises of
maturing stock options, the sale of investment securities, and the issuance of
additional shares of common stock.
At June 30, 2004, $100,000 was payable to another financial institution
as compared to $232,000 at June 30, 2003. At June 30, 2004, Bancorp had $54,000
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 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 June 30, 2004. 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 June 30, 2003 was estimated to be
($15,726,000) or -34.37%.
In addition, management prepares an estimate of sensitivity to immediate changes
in short term interest rates. At June 30, 2004, the following impact was
estimated on net interest margin in the 12 months following an immediate
movement of interest rates:
Effect on Net
Rate Change Interest Margin
(% Change) ($ Change)
-1.00% 3.87% $70,000
+1.00% -3.15% ($57,000)
+3.00% -9.45% ($171,000)
A negative 3% change in short-term interest rates is not possible, because the
current Fed Funds target rate is set at 1.5%.
UNIVERSITY BANK
Asset/Liability Position Analysis as of June 30, 2004
(Dollar amounts in thousand's)
Maturing or Repricing in
3 Mos 91 Days to 1 - 3 3 - 5 Over 5 ALL
ASSETS or Less 1 Year Years Years Years Other Total
------ ------- ------ ----- ----- ----- ----- -----
Loans - Net $8,341 $3,104 $6,936 $15,959 $3,854 ($471) $37,723
Non-Accrual Loans - - - - 651 651
Securities 200 500 - - 639 - 1,339
Other Assets - - - - - 4,690 4,690
Cash and Due from Banks 15 - - - - 1,354 1,354
-------------------------------------------------------------------------------------------
TOTAL ASSETS 8,556 3,604 6,936 15,959 4,493 6,209 45,757
-------------------------------------------------------------------------------------------
LIABILITIES
-----------
Time deposits 4,179 3,771 3,409 295 428 - 12,082
Demand -interest bearing 9,388 9,388 4,997 - - - 23,772
Demand - non interest - - - - 4,179 4,179
Savings - - 429 - - - 429
Long term borrowings 1,094 67 - - - - 1,161
Other Liabilities - - - - - 883 883
Equity - - - - - 3,251 3,251
-------------------------------------------------------------------------------------------
TOTAL LIABILITIES 14,661 13,226 8,835 295 428 8,313 45,757
-------------------------------------------------------------------------------------------
Gap (6,105) (9,622) (1,899) 15,664 4,065 (2,104) -
===========================================================================================
Cumulative gap ($6,105) ($15,726) ($17,625) ($1,961) $2,104 -
================================================================================
Gap percentage -13.34% -34.37% -38.52% -4.29% -4.60% 0.00%
================================================================================
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures. The
Company's Chief Executive Officer and Chief Financial Officer,
after evaluating the effectiveness of the Company's disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of the end of the period covered
by this Form 10-Q Quarterly Report, have concluded that the
Company's disclosure controls and procedures were adequate and
effective to ensure that material information relating to the
Company would be made known to them by others within the
Company, particularly during the period in which this Form
10-Quarterly Report was being prepared.
(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
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 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of the registrant's shareholders was held on
June 22. 2004
(b) The following seven director nominees were elected at the meeting:
Name Votes For Votes Withheld
---------------------- ------------- --------------
Stephen L. Ranzini 3,874,511 45,285
Robert Goldthorpe 3,918,821 75
Charles McDowell 3,918,821 75
Dr. Joseph L. Ranzini 3,874,511 45,285
Paul L. Ranzini 3,874,511 45,285
Michael Tally 3,874,511 45,285
Item 5. Other information
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.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(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: August 16, 2004 /s/ Stephen Lange Ranzini
-------------------------
Stephen Lange Ranzini
President
Date: August 16, 2004 /s/Nicholas K. Fortson
---------------------------
Nicholas K. Fortson
Chief Financial Officer
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.
31.2 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.
Exhibit 31.1
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 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 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 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 we 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 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 based on such evaluation; and
(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 (the registrant's
fourth fiscal quarter in the case of an annual report) 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 of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
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;
Dated: August 16, 2004
Stephen Lange Ranzini
President and Chief Executive Officer
Exhibit 31.2
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 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 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 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 we 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 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 based on such evaluation; and
(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 (the registrant's
fourth fiscal quarter in the case of an annual report) 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 of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
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;
Dated: August 16, 2004
Nicholas K. Fortson
Chief Financial Officer
Exhibit 32.1
I, Stephen Lange Ranzini, 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:
(1) the Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2004 which this statement accompanies fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2) the information contained in the Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2004 fairly presents, in all material respects,
the financial condition and results of operations of University Bancorp, Inc.
Dated: August 16, 2004
Stephen Lange Ranzini
President and Chief Executive Officer
Exhibit 32.2
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:
(1) the Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2004 which this statement accompanies fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2) the information contained in the Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2004 fairly presents, in all material respects,
the financial condition and results of operations of University Bancorp, Inc.
Dated: August 16, 2004
Nicholas K. Fortson
Chief Financial Officer