30
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, 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 000-16023
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.
Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes No X
---
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 October 31, 2004 4,090,548
shares
Page 1 of 28 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
Results of Operations 12
Capital Resources 19
Liquidity 20
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 23
Item 6. Exhibits & Reports on Form 8-K 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, 2004 (Unaudited) and December 31, 2003
September 30, December 31,
ASSETS 2004 2003
Cash and due from banks $ 1,914,909 $ 2,171,189
Securities available for sale, at market 1,218,762 1,649,169
Federal Home Loan Bank Stock 912,000 881,100
Loans held for sale, at the lower of cost or market 616,600 206,008
Loans 41,109,934 34,928,586
Allowance for loan losses (454,430) (454,118)
--------------------- ---------------------
Loans, net 40,655,504 34,474,468
Premises and equipment, net 999,906 829,807
Investment in Michigan BIDCO Inc. 29,258 629,258
Investment in Michigan Capital Fund LPI 181,244 256,244
Mortgage servicing rights, net 1,025,997 1,031,575
Real estate owned, net 555,338 429,500
Accounts receivable 37,125 122,067
Accrued interest receivable 177,871 129,808
Prepaid expenses 183,857 183,143
Goodwill, net 103,914 103,914
Other assets 436,229 451,290
--------------------- ---------------------
TOTAL ASSETS $ 49,048,514 $ 43,548,540
===================== =====================
-Continued-
UNIVERSITY BANCORP, INC.
Consolidated Balance Sheets (continued)
September 30, 2004 (Unaudited) and December 31, 2003
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2004 2003
--------------------- ---------------------
Liabilities:
Deposits:
Demand - non interest bearing $ 3,467,934 $ 3,146,688
Demand - interest bearing 26,484,402 25,827,337
Savings 461,261 377,545
Time 12,447,716 9,455,982
--------------------- ---------------------
Total Deposits 42,861,313 38,807,552
Short term borrowings 1,908,151 -
Long term borrowings 67,000 166,000
Accounts payable 478,870 289,150
Accrued interest payable 50,489 51,613
Other liabilities 193,044 354,273
--------------------- ---------------------
Total Liabilities 45,558,867 39,668,588
Minority Interest 427,143 445,324
Stockholders' equity:
Common stock, $0.01 par value;
Authorized - 5,000,000 shares;
Issued - 4,205,732 shares at September 30 in 2004 and 4,141,732
shares at December 2003 42,057 41,417
Additional paid-in-capital 5,800,300 5,677,940
Accumulated deficit (2,392,251) (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 (47,072) (38,795)
--------------------- ---------------------
Total Stockholders' Equity 3,062,504 3,434,628
--------------------- ---------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 49,048,514 $ 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 September 30, 2004 and 2003
(Unaudited)
For the Three Month For the Nine Month
Period Ended Period Ended
2004 2003 2004 2003
----------------- -------------- ----------------- ----------------
Interest income:
Interest and fees on loans $ 698,834 $ 642,732 $ 1,909,805 $ 1,902,500
Interest on securities:
U.S. Government agencies 10,514 8,178 39,620 71,509
Other securities 9,972 19,004 46,993 63,521
Interest on federal funds and other 267 817 1,383 8,972
----------------- -------------- ----------------- ----------------
Total interest income 719,587 670,731 1,997,801 2,046,502
----------------- -------------- ----------------- ----------------
Interest expense:
Interest on deposits:
Demand deposits 105,105 98,850 310,379 287,570
Savings deposits 1,153 1,116 3,591 3,549
Time deposits 83,207 91,812 238,294 338,272
Short term borrowings 6,830 563 11,995 1,954
Long term borrowings 1,260 2,227 4,294 9,079
----------------- -------------- ----------------- ----------------
Total interest expense 197,555 194,568 568,553 640,424
----------------- -------------- ----------------- ----------------
Net interest income 522,032 476,163 1,429,248 1,406,078
(Credit)Provision for loan losses (27,500) 22,500 17,500 166,900
----------------- -------------- ----------------- ----------------
Net interest income after
provision for loan losses 549,532 453,663 1,411,748 1,239,178
----------------- -------------- ----------------- ----------------
Other income:
Loan servicing and sub-servicing
Fees 357,322 280,014 1,039,170 713,407
Initial loan set up and other fees 310,951 964,637 1,201,677 2,854,831
Gain on sale of mortgage loans 64,982 180,492 223,369 669,005
Insurance and investment fee income 52,611 45,772 165,337 127,310
Deposit service charges and fees 32,231 28,851 86,650 86,292
Net security gains/(losses) 36 (27,623) 1,347 (27,623)
(Loss)/Gain on the sale of other real estate
owned (22,667) 130,771 (35,014) 130,771
Other 57,118 98,984 206,020 165,735
----------------- -------------- ----------------- ----------------
Total other income 852,584 1,701,898 2,888,556 4,719,728
----------------- -------------- ----------------- ----------------
-Continued-
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (continued)
For the Periods Ended September 30, 2004 and 2003
(Unaudited)
For the Three Month For the Nine Month
Period Ended Period Ended
2004 2003 2004 2003
------------------- ----------------- --------------- -----------------
Other expenses:
Salaries and benefits $ 735,678 $ 897,429 $ 2,175,737 $ 2,509,497
Occupancy, net 98,726 128,151 312,464 306,486
Data processing and equipment
Expense 151,438 139,293 414,358 363,161
Legal and audit expense 49,896 45,768 134,125 124,139
Consulting fees 32,192 48,987 110,245 115,744
Mortgage banking expense 51,835 217,021 186,664 605,782
Servicing rights amortization 126,002 210,937 385,870 764,952
Advertising 27,832 39,176 91,477 99,129
Memberships and training 36,730 34,283 103,770 81,447
Travel and entertainment 17,852 22,716 86,546 82,895
Supplies and postage 52,928 70,195 154,054 174,431
Insurance 30,649 24,026 97,093 69,680
Other operating expenses 126,647 246,140 454,746 542,401
------------------- ----------------- --------------- -----------------
Total other expenses 1,538,405 2,124,122 4,707,149 5,839,744
------------------- ----------------- --------------- -----------------
(Loss) income before income taxes (136,288) 31,439 (406,847) 119,162
------------------- ----------------- --------------- -----------------
Income tax expense/(benefit) 80,000 80,000 (80,249)
(80,249)
------------------- ----------------- --------------- -----------------
Net (Loss) income $ (216,288) $ 111,688 $ (486,847) $ 199,411
=================== ================= =============== =================
Net (Loss)income) available to $ (216,288) $ 111,688 $ (486,847) $ 199,411
common shareholders
=================== ================= =============== =================
Basic and diluted (loss) earnings per
share $ (0.05) $ 0.03 $ (0.12) $ 0.05
=================== ================= =============== =================
Weighted average shares outstanding - Basic and diluted 4,090,548 3,951,994 4,079,774 3,917,222
=================== ================= =============== =================
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 September 30, 2004 and 2003
(Unaudited)
For the Three Month For the Nine Month
Period Ended Period Ended
2004 2003 2004 2003
--------------------------------------------------------------
Net (loss)income $(216,288) $111,688 $(486,847) $199,411
Other comprehensive income(loss):
Unrealized (losses)gains on securities
available for sale (27,416) (115) (6,930) 30,334
Less: reclassification adjustment
for accumulated gains (losses)
included in net income (loss) 36 (976) 1,347 (27,623)
--------------------------------------------------------------
Other comprehensive (loss) income, before
tax effect 27,380 (1,091) (8,277) 57,957
Other comprehensive (loss) income, net
of tax 27,380 (1,091) (8,277) 57,957
--------------------------------------------------------------
Comprehensive income(loss) $(188,908) $110,597 $(495,124) $257,368
==============================================================
The accompanying notes are an integral part of the consolidated financial statements.
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine month periods ended September 30, 2004 and 2003
2004 2003
Cash flow from operating activities:
Net (loss) income $ (486,847) $ 199,411
Adjustments to reconcile net (loss)income to net cash from Operating Activities:
Depreciation 231,751 233,323
Amortization 460,870 839,952
Provision for loan losses 17,500 166,900
Net gain on mortgage loan sales (223,369) (669,005)
Gain on sale of fixed assets (170,385) (154,030)
Loss on the sale of other real estate owned 35,014 -
Net accretion on investment securities (6,776) (4,734)
Net (gain)loss on sale of securities (1,347) 27,623
Originations of mortgage loans (35,092,513) (105,273,623)
Proceeds from mortgage loan sales 34,905,290 106,899,323
Change in:
Other assets (359,966) (942,115)
Other liabilities 179,571 143,124
--------------------- -------------------
Net cash provided by operating activities (511,207) 1,466,149
--------------------- -------------------
Cash flow from investing activities:
Purchase of investment securities (8,008) (98,326)
Proceeds from maturities and pay downs of securities
Available for sale 418,757 59,450
Loans granted, net of repayments (6,353,558) (568,981)
Proceeds from sales of investment securities 19,504 1,235,182
Proceeds from the sale of other real estate owned 594,170
Premises and equipment expenditures (401,850) (155,192)
--------------------- -------------------
Net cash (used in) provided by investing activities (5,730,985) 1,645,966
--------------------- -------------------
-Continued-
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows(continued)
For the nine month periods ended September 30, 2004 and 2003
2004 2003
------------------- -------------------
Cash flow used in financing activities:
Net increase (decrease) in deposits 4,053,761 (1,950,321)
Net increase (decrease) in short term borrowings 1,908,151 -
Principal payments on long term borrowings (99,000) (99,000)
Issuance of common stock 123,000 96,250
------------------- -------------------
Net cash provided by(used in) financing activities 5,985,912 (1,953,071)
------------------- -------------------
(256,280) 1,159,044
Net change in cash and cash equivalents Cash and cash equivalents:
Beginning of period 2,171,189 2,569,469
------------------- -------------------
End of period $ 1,914,909$ 3,728,513
=================== ===================
Supplemental disclosure of cash flow information:
Cash paid for interest $ 569,677 $ 684,933
Supplemental disclosure of non-cash transactions:
Mortgage loans converted to other real estate owned $ 755,022$ -
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.
(2) Investment Securities
The Bank's available-for-sale securities portfolio at September 30,
2004 had a net unrealized loss of approximately $47,000 as compared with a net
unrealized loss of approximately $39,000 at December 31, 2003. Securities are
classified as available for sale when they might be sold before maturity.
Securities available for sale are carried at fair value, with unrealized holding
gains and losses reported in other comprehensive income or loss. Realized gains
are based on specific identification of amortized cost. Securities are written
down to fair value when a decline in fair value is not temporary.
Securities available for sale at September 30, 2004:
(in Thousands) Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------- ---------------- ---------------- ----------------
U.S. agency mortgage-backed $ 1,265 $ _ $ (47) $ 1,218
================ ================ ================ ================
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 September 30, 2004, the Company had a stock-based employee
compensation plan. The Company accounts for this plan 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 this plan
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 54,000 during the nine month period ended September 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 that company. The note
bears interest at 7.5% and is due no later than December 31, 2004. During
October, 2004 the outstanding balance was reduced to $323,000.
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
For the three months ended September 30, 2004, the Company had a net loss
of $216,288 compared to net income of $111,688 for the three months ended
September 30, 2003. In 2003 Community Banking and Midwest Loan Services were
both positively impacted by income generated from the high volume of mortgage
refinancing stimulated by 45-year low mortgage rates. Community Banking incurred
a pretax loss of $41,000 in the third quarter of 2004 as compared with a pretax
loss of $8,000 for the same period in 2003. Operations at Community Banking were
negatively impacted during the third quarter of 2004 by approximately $97,000 in
expenses and loss of income related to the resolution of non performing
residential loans and real estate owned. The Bank's subsidiary, Midwest Loan
Services reported a net loss of $83,000 for the third quarter of 2004 as
compared to net income of $89,000 for the same period in 2003. Operations at
Midwest was negatively impacted in the third quarter of 2004 by an $115,000
impairment write down of the mortgage servicing rights. The valuation of
mortgage servicing rights is greatly impacted by changes in long term mortgage
interest rates.
During the third quarter of 2004, the Company recorded an $80,000 tax
expense. This resulted from a reduction in a deferred tax asset which is no
longer expected to be realized in future periods. Net income in 2003 included an
income tax benefit of $80,249.
The Company incurred a net loss for the first nine months of 2004 of
$486,847, versus net income of $199,411 for the same period last year. Community
Banking incurred a pretax loss of $249,346 during the current year's first nine
months as opposed to a loss of $135,000 from the year before. Community Banking
incurred approximately $255,000 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 pretax loss of $100,920 in the
first half of 2004 compared to pretax income of $365,000 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 investments of about $30,000 a month in overhead intended
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 September 30, 2004 and 2003 (in
thousands):
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)
======================================
Pre-tax (loss)income) summary for the three and nine months ended September 30, 2003
Three Months Nine Months
Community Banking (8) $ (135)
Midwest Loan Services 89 365
Corporate Office (50) (111)
------------------------------------
Total $ 31 $ 119
====================================
RESULTS OF OPERATIONS
Net Interest Income
Net interest income increased to $522,032 for the three months ended
September 30, 2004 from $476,163 for the three months ended September 30, 2003.
The yield on interest earning assets decreased from 6.93% in the 2003 period to
6.86% in the 2004 period. The cost of interest bearing liabilities decreased
from 2.14% in the 2003 period to 1.99% in the 2004 period. The net yield on
interest earning assets increased from 4.92% to 4.98%.
Net interest income increased to $1,429,248 for the nine months ended
September 30, 2004 from $1,406,078 for the nine months ended September 30, 2003.
The yield on average earning assets dropped from 6.93% in 2003 to 6.61% in 2004.
The cost of interest bearing liabilities decreased from 2.25% for the 2003
period to 1.97% for the nine months ended September 30, 2004. The net yield on
interest earning assets decreased from 4.76% to 4.73%.
Interest income
Interest income increased to $719,588 in the quarter ended September
30, 2004 from $670,731 in the quarter ended September 30, 2003. The average
volume of interest earning assets increased to $42,067,645 in the 2004 period
from $38,838,345 in the 2003 period. The real estate category accounted for most
of the increase in interest earning assets as the average balance increased by
over $6,000,000 between the periods. Within that category, the mortgage
alternative loan transactions (MALTs) experienced the largest growth. In late
2003, the Community Banking began offering MALTs. These transactions are
tailored to meet the religious needs of the large Muslim population in southeast
Michigan. The MALTs are typically 5 year adjustable rate instruments. The yield
on interest bearing assets declined from 6.93% in 2003 to 6.86% in 2004. The
slight decrease was due to an increase in MALTs, which have a lower rate than
other loans. The rate on real estate loans decreased to 5.95% for the three
month period in 2004 from 6.44% in the third quarter of 2003. In contrast, the
rate on commercial loans increased as the prime rate was increased during the
quarter.
Interest income decreased to $1,997,801 in the nine months ended
September 30, 2004 from $2,046,502 in the nine months ended September 30, 2003.
The average volume of interest earning assets increased slightly to $40,234,604
in the 2004 period from $39,472,132 in the 2003 period. The overall yield on
interest earning assets decreased to 6.61% from 6.93%. The cause of this decline
resulted from the loss of interest on commercial real estate which was
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. As noted above the demand in the real estate area,
which has a lower rate than on other loans, was higher in 2004 than in 2003.
Interest Expense
Interest expense increased to $197,556 in the three months ended September
30, 2004 from $194,568 in the 2003 period. The increase was due to a higher
volume of interest bearing liabilities in 2004 than in 2003. The average volume
of interest bearing liabilities increased to $39,731,811 in 2004 from
$36,391,376 in 2003. The overall rate on interest bearing liabilities declined
in 2004 to 1.99% from 2.14% in 2003. The drop in yield resulted from a favorable
shift in funding to lower costs liabilities as well as lower rates on time
deposits. The decline in the yield on interest rate liabilities resulted despite
a rise in the Federal Reserves overnight lending rate.
Interest expense decreased to $568,553 in the nine months ended September
30, 2004 from $640,424 in the 2003 period. The decrease was due to a lower rate
on the interest bearing liabilities offset slightly by an increase in the volume
of interest bearing liabilities. The yield dropped to 1.97% in 2004 from 2.25%
in 2003. After rates dropped in 2003, the liabilities re-priced at lower rates.
The volume of interest bearing liabilities increased to $38,506,833 in 2004 from
$38,139,634 in 2003.
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, 2004 and 2003.
Three Months Ended Three Months Ended
-----------------------------------------------------------------------------------------
September 30, 2004 September 30, 2003
-----------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Inc / Exp Yield (1) Balance Inc / Exp Yield (1)
Interest Earning Assets:
Loans:
Commercial 16,739,978 332,061 7.96% $17,767,173 $360,362 8.14%
Real Estate 21,084,891 312,583 5.95% 15,073,193 241,836 6.44%
Installment/Consumer 2,010,253 54,190 10.81% 1,873,423 40,534 8.68%
---------------------------------- ----------------------------------
Total Loans 39,835,122 698,834 7.04% 34,713,789 642,732 7.43%
Investment Securities 2,170,566 20,486 3.79% 3,600,717 27,182 3.03%
Federal Funds & Bank
Deposits 61,957 267 1.73% 523,839 817 0.63%
---------------------------------- ----------------------------------
Total Interest Bearing Assets 42,067,645 719,587 6.86% 38,838,345 670,731 6.93%
---------------------------------- ----------------------------------
Interest Bearing Liabilities:
Deposit Accounts:
Demand 6,107,198 15,294 1.00% 6,645,560 15,775 0.95%
Savings 463,411 1,153 1.00% 387,111 1,116 1.16%
Time 12,451,278 83,207 2.68% 11,670,506 91,812 3.16%
Money Market 18,872,936 89,811 1.91% 17,123,064 83,075 1.95%
Short-term Borrowings 1,751,988 6,830 1.56% 349,635 563 0.65%
Long-term Borrowings 85,000 1,260 5.95% 215,500 2,227 4.14%
---------------------------------- ----------------------------------
Total Interest Bearing Liabilities 39,731,811 197,555 1.99% 36,391,376 194,568 2.14%
---------------------------------- ----------------------------------
Net Earning Assets, net
interest income, and
interest rate spread 2,335,834 522,032 4.87% $2,446,969 $476,163 4.78%
================================== ==================================
Net Interest Margin 4.98% 4.92%
(1) Yield is annualized.
Nine Months Ended Nine Months Ended
September 30, September 30,
-----------------------------------------------------------------------------------------
2004 2003
-----------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Inc (Exp) Yield (1) Balance Inc (Exp) Yield (1)
Interest Earning Assets:
Loans:
Commercial 16,908,602 880,939 6.94% 18,447,150 1,084,405 7.86%
Real Estate 18,750,487 908,474 6.45% 13,839,520 680,175 6.57%
Installment/Consumer 1,907,149 120,392 8.41% 2,119,100 137,920 8.70%
---------------------------------- -----------------------------------
Total Loans 37,566,238 1,909,805 6.77% 34,405,770 1,902,500 7.39%
Investment Securities 2,514,208 86,613 4.59% 3,969,823 135,030 4.55%
Federal Funds & Bank
Deposits 154,158 1,383 1.20% 1,096,539 8,972 1.09%
---------------------------------- -----------------------------------
Total Interest Bearing 40,234,604 1,997,801 6.61% 39,472,132 2,046,502 6.93%
Assets
---------------------------------- -----------------------------------
Interest Bearing Liabilities:
Deposit Accounts:
Demand 6,296,058 41,517 0.88% 6,384,134 41,835 0.88%
Savings 444,165 3,591 1.08% 416,907 3,549 1.14%
Time 11,487,242 238,294 2.76% 14,764,049 338,272 3.06%
Money Market 19,090,437 268,862 1.88% 16,055,339 245,735 2.05%
Short-term borrowings 1,087,431 11,995 1.47% 270,705 1,954 0.97%
Long-term borrowings 101,500 4,294 5.64% 248,500 9,079 4.88%
---------------------------------- -----------------------------------
Total Interest Bearing
Liabilities 38,506,833 568,553 1.97% 38,139,634 640,424 2.25%
---------------------------------- -----------------------------------
Net Earning Assets, net interest
income, and interest rate
spread 1,727,771 1,429,248 4.64% 1,332,498 1,406,078 4.69%
Net yield on interest-earning assets 4.73% 4.76%
(1) Yield is annualized.
Allowance for Loan Losses
The provision to the allowance for loan losses was $17,500 for the
nine-month period ended September 30, 2004 and $166,900 for the same period in
2003. The provision decreased due to recoveries and payoffs of classified loans
and an overall improvement in credit quality. Net charge-offs totaled $17,188
for the nine-month period ended September 30, 2004 as compared to $172,430 for
the same period in 2003. Illustrated below is the activity within the allowance
for the nine-month period ended September 30 2004 and 2003, respectively.
2004 2003
---- ----
Balance, January 1 $ 454,118 $ 408,219
Provision for loan losses 17,500 166,900
Loan charge-offs (99,006) (237,811)
Recoveries 81,818 65,380
-------------------------------------
Balance, September 30 $ 454,430 $ 402,690
=====================================
At September 30, 2004 At December 31, 2003
Total loans (1) $41,107,029 $34,928,586
Reserve for loan losses $454,430 $ 454,118
Reserve/Loans % (1) 1.10% 1.30%
The Bank's overall loan portfolio is geographically concentrated in Ann
Arbor, Michigan and the future performance of these loans is dependent upon the
performance of this relatively limited geographical area. The growth in the loan
portfolio for the nine month period ended September 30, 2004 is primarily in the
single family residential area.
The following schedule summarizes the Company's non-performing assets:
At September 30, 2004 At December 31, 2003
--------------------- --------------------
Past due 90 days and over
-------------------------
and still accruing (1):
----------------------
Real estate $ - $ -
Installment - -
Commercial 183,000(2) -
---------------------------------------------
Subtotal 183,000 -
Nonaccrual loans (1):
--------------------
Real estate (including
commercial real estate) 552,421 907,599
Installment _ 5,128
Commercial 2,899 204,400
---------------------------------------------
Subtotal 555,320 1,117,127
---------------------------------------------
Other real estate owned 555,338 429,500
-----------------------
---------------------------------------------
Total non-performing assets $1,293,658 $1,546,627
=============================================
At September 30, 2004 At December 31, 2003
--------------------- --------------------
Ratio of non-performing assets to total
loans (1) 3.15% 4.43%
==============================================
Ratio of loans past due over
90 days and nonaccrual
loans to loan loss reserve 162% 246%
================================================
(1) Excludes loans held for sale which are valued at the lower of cost or fair
market value. (2) This loan was paid in full in October 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.
Two residential properties, with a carrying value of $435,100 are
expected to sell by the end of the year. The carrying values approximate fair
market value. A third property currently in other real estate owned is carried
at $86,841 and was recently appraised at $179,000 and is listed for sale with a
real estate agent at $169,900. The fourth property in other real estate owned is
carried at $33,398. No gain can be realized on other real estate owned that has
a value in excess of the carrying cost until the property is sold, however any
expected losses are recognized immediately.
Non-Interest Income
Total non-interest income decreased to $852,584 for the three months
ended September 30, 2004 from $1,701,858 for the three months ended September
30, 2003. The decrease was primarily due to lower mortgage loan origination
activity. In 2004, the rates on mortgages were historically low and this spurred
an increase in the refinancing 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 slightly higher however mortgage
refinancing activity was significantly lower.
Total non-interest income decreased to $2,888,556 for the nine months
ended September 30, 2004 from $4,719,728 for the nine months ended September 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. In 2004, the rates are still relatively low, but the
re-financing activity has decreased significantly.
At September 30, 2004, Midwest was subservicing 17,631 mortgages, an
annualized increase of 23% from the 15,033 mortgages subserviced at December 31,
2003.
Non-Interest Expense
Non-interest expense decreased to $1,538,404 in the three months ended
September 30, 2004 from $2,124,122 for the three months ended September 30,
2003. The decrease was due principally to decreases in 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.
Following is an analysis of the change the Company's mortgage servicing
rights for the periods ended September 30, 2004 and
2003
2004 2003
---- ----
Balance, January 1 $1,031,575 $1,014,939
Additions - originated 380,292 738,000
Amortization expense (317,870) (365,953)
Adjustment for asset impairment
change (68,000) (399,000)
-------------- --------------
Balance, September 30 $ 1,025,997 $987,986
============== ==============
At September 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 $117 million. The carrying
value of these servicing rights was $1,025,997 at September 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
September 30, 2004 and 2003 are $516,000 and $448,000, respectively.
Non-interest expense decreased to $4,707,149 in the nine months ended
September 30, 2004 from $5,839,744 for the nine months ended September 30, 2004.
The decrease was primarily the result of decreased operating expenses at Midwest
Loan Services resulting from low mortgage origination activity.
Capital Resources
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, 2004, the Bank was
considered "well-capitalized".
September 30, 2004
TIER 1 CAPITAL (in thousands)
Total Equity Capital $3,119
Less: Unrealized losses on available-for-Sale
Securities (46)
Other identifiable Intangible Assets (104)
Disallowed servicing assets (103)
Plus: Minority Interest 427
--------
Total Tier 1 Capital 3,388
TIER 2 CAPITAL
Allowance for loans & Lease losses 452
Less: Excess Allowance -
Total Tier 2 Capital 452
--------
Total Tier 1 & Tier 2 Capital $3,837
========
CAPITAL RATIOS
Tier 1/Total Average Assets of $46,744 7.24%
Tier 1/Total Risk-Weighted Assets of $36,456 9.29%
Tier 1 & 2/Total Risk-Weighted Assets of $36,456 10.53%
Liquidity
Bank Liquidity. The Bank's primary sources of liquidity are customer
deposits, scheduled amortization 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
September 30, 2004, the Bank had cash and cash equivalents of $1,914,909. 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,
o $5.6 million from the Federal Reserve Bank of Chicago secured by
commercial loans.
In order to bolster liquidity from time to time, the Bank also sells brokered
time deposits. At September 30, 2004, the Bank had $3.1 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
intends to increase Bancorp's working capital through the exercise of maturing
stock options, sale of investments. If deemed necessary, management will issue
additional shares of common stock.
At September 30, 2004, $67,000 was payable to another financial
institution as compared to $199,000 at September 30, 2003. At September 30,
2004, Bancorp had $30,558 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 tends 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 increases 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, 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 September 30, 2004 was estimated to
be ($15,514,000) or -31.64%.
In addition, management prepares an estimate of sensitivity to immediate changes
in short term interest rates. At September 30, 2004, the following impact was
estimated on net interest margin in the 12 months following an immediate
movement of interest rates:
Effect on Net
Rate Change Interest Margin
(% Change) ($ Change)
-1.00% 3.12% $59,000
+1.00% -2.41% ($46,000)
+3.00% -7.24% ($138,000)
A negative 3% change in short-term interest rates is not possible, because the
current Fed Funds target rate is set at 1.75%.
UNIVERSITY BANK
Asset/Liability Position Analysis as of September 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 $10,345 $2,466 $7,069 $17,873 $3,231 ($454) $40,530
Non-Accrual Loans - - - - 742 742
Securities 200 500 - - 518 - 1,218
Other Assets - - - - - 4,644 4,644
Cash and Due from Banks 1 - - - - 1,914 1,915
-------------------------------------------------------------------------------------------
TOTAL ASSETS 10,546 2,966 7,069 17,873 3,749 6,846 49,049
-------------------------------------------------------------------------------------------
LIABILITIES
-----------
Time deposits 3,273 4,740 3,685 357 432 - 12,487
Demand -interest bearing 9,519 9,519 7,415 - - - 26,453
Demand - non interest - - - - 3,460 3,460
Savings - - 461 - - - 461
Other borrowings 1,975 - - - - 1,975
Other Liabilities - - - - - 1,150 1,150
Equity - - - - - 3,063 3,063
-------------------------------------------------------------------------------------------
TOTAL LIABILITIES 14,767 14,259 11,561 357 432 7,673 49,049
-------------------------------------------------------------------------------------------
Gap (4,221) (11,293) (4,492) 17,516 3,317 (827) -
===========================================================================================
Cumulative gap ($4,221) ($15,514) ($20,006) ($2,490) $827 -
================================================================================
Gap percentage -8.61% -31.64% -40.80% -5.08% 1.69% 0.00%
================================================================================
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
The following three significant deficiencies were identified pursuant to
standards established by the Public Company Accounting
Oversight Board (PCAOB):
1. The Company lacked formalized accounting policies and procedures,
including written procedures for the quarterly preparation of form 10Q in
accordance with applicable SEC guidelines;
2. The Company uses spreadsheets to perform consolidations, without
appropriate monitoring controls, which could result in errors in the financial
statements
3. The Company has insufficient staff in the accounting and financial
reporting departments.
The Company's independent registered public accounting firm, Grant Thornton LLP,
has indicated that the above significant deficiencies, in the aggregate,
constitutes a material weakness in our internal controls pursuant to standards
established by the PCAOB.
As part of the Company's effort to ensure compliance with provisions of
Sarbanes-Oxley Section 404, the Company has devised a plan and committed the
required resources to address and remediate these material weaknesses prior to
our attestation of control effectiveness as of June 30, 2005.
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-14(c) under the Securities Exchange Act of
1934). Based upon that evaluation, which considered the material weaknesses
mentioned above, the Chief Executive Officer and Chief Financial Officer
concluded that the operation of these disclosure controls and procedures were
effective for gathering, analyzing and disclosing information required to be
disclosed in connection with the Company's filing of its Quarterly Report on
Form 10-Q for the quarter ended September 30, 2004. 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
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 Lange Ranzini 3,874,511 45,285
Gary Baker 3,918,896 0
Robert Goldthorpe 3,918,821 75
Charles McDowell 3,918,821 75
Dr. Joseph Lange Ranzini 3,874,511 45,285
Paul Lange Ranzini 3,874,511 45,285
Michael Talley 3,874,511 45,285
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
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.
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 15, 2004 /s/ Stephen Lange Ranzini
-------------------------
Stephen Lange Ranzini
President and Chief Executive Officer
Date: November 15, 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.
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.
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: November 15, 2004
/s/ Stephen Lange Ranzini
------------------------------
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: November 15, 2004
/s/Nicholas K. Fortson
----------------------------
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 September
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 September 30, 2004 fairly presents, in all material
respects, the financial condition and results of operations of University
Bancorp, Inc.
Dated: November 15, 2004
/s/ Stephen Lange Ranzini
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 September
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 September 30, 2004 fairly presents, in all material
respects, the financial condition and results of operations of University
Bancorp, Inc.
Dated: November 15, 2004
/s/Nicholas K. Fortson
Nicholas K. Fortson
Chief Financial Officer