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, 2005
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, 2005 4,148,878 shares
Page 1 of 30 pages
FORM 10-Q
TABLE OF CONTENTS
PART I - Financial Information
Item 1. Unaudited 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 Unaudited Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Summary 12
Results of Operations 13
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 5. Other Information 24
Item 6. Exhibits 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.
2
Part I. - Financial Information
Item 1.- Financial Statements
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2005 (Unaudited) and December 31, 2004
June 30, 2005 December 31, 2004
-------------- --------------
ASSETS
Cash and due from banks $ 1,950,651 $ 1,731,569
Securities available for sale, at market 977,307 1,106,607
Federal Home Loan Bank Stock 941,200 921,700
Loans held for sale, at the lower of cost or market 1,226,106 846,400
Loans 43,812,714 42,999,800
Allowance for loan losses (358,234) (353,124)
-------------- --------------
Loans, net 43,454,480 42,646,676
Premises and equipment, net 2,546,765 946,704
Mortgage servicing rights, net 1,113,074 1,097,786
Real estate owned, net 110,437 534,043
Accounts receivable 28,854 30,949
Accrued interest receivable 181,236 148,344
Prepaid expenses 276,885 250,249
Goodwill, net 103,914 103,914
Other assets 460,191 420,757
-------------- --------------
TOTAL ASSETS $ 53,371,100 $ 50,785,698
============== ==============
-Continued-
3
UNIVERSITY BANCORP, INC.
Consolidated Balance Sheets (continued)
June 30, 2005 (Unaudited) and December 31, 2004
June 30, 2005 December 31, 2004
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand - non interest bearing $ 2,796,925 $ 3,047,397
Demand - interest bearing 29,386,937 28,600,355
Savings 473,764 499,865
Time 14,565,617 12,440,182
-------------- --------------
Total Deposits 47,223,243 44,587,799
Short term borrowings 1,832,845 2,416,000
Long term borrowings 0 34,000
Accounts payable 207,384 115,230
Accrued interest payable 90,975 50,296
Other liabilities 179,076 140,629
-------------- --------------
Total Liabilities 49,533,523 47,343,954
Minority Interest 450,484 440,118
Stockholders' equity:
Preferred stock, $0.001 par value;
$1,000 liquidation value;
Authorized - 500,000 shares;
Issued - 22,750 shares in 2005 227 500 0
Common stock, $0.01 par value;
Authorized - 5,000,000 shares;
Issued - 4,264,062 shares in 2005 and 42,641 42,406
4,240,641 shares in 2004 5,876,096 5,841,331
Accumulated deficit (2,389,521) (2,490,224)
Treasury stock - 115,184 shares at June 31, 2005 and
December 31, 2004 (340,530) (340,530)
Accumulated other comprehensive loss,
unrealized losses on securities available
for sale, net (29,093) (51,357)
-------------- --------------
Total Stockholders' Equity 3,387,093 3,001,626
-------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 53,371,100 $ 50,785,698
============== ==============
The accompanying notes are an integral part of the consolidated financial
statements.
4
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Periods Ended June 30, 2005 and 2004
(Unaudited)
For the Three Month For the Six Month
Period Ended Period Ended
2005 2004 2005 2004
--------------- -------------- ------------------- ----------------
Interest income:
Interest and fees on loans $ 788,452 $ 615,561 $ 1,573,846 $ 1,210,971
Interest on securities:
U.S. Government agencies 6,998 8,659 8,745 29,106
Other securities 9,934 18,020 19,856 37,021
Interest on federal funds and other 8,067 933 12,647 1,116
---------- ---------- ------------ -----------
Total interest income 813,451 643,173 1,615,094 1,278,214
---------- ---------- ------------ -----------
Interest expense:
Interest on deposits:
Demand deposits 118,961 99,173 235,519 205,275
Savings deposits 1,153 1,264 2,397 2,438
Time deposits 113,807 80,360 212,673 155,086
Short term borrowings 5,427 2,407 8,194 5,165
Long term borrowings 0 1,177 332 3,034
---------- ---------- ------------ -----------
Total interest expense 239,348 184,381 459,115 370,998
---------- ---------- ------------ -----------
Net interest income 574,103 458,792 1,155,979 907,216
Provision for loan losses 2,000 22,500 17,209 45,000
---------- ---------- ------------ -----------
Net interest income after
provision for loan losses 572,103 436,292 1,138,770 862,216
---------- ---------- ------------ -----------
Other income:
Loan servicing and sub-servicing
fees 444,554 347,923 813,580 681,848
Initial loan set up and other fees 346,430 508,175 744,623 890,726
Gain on sale of mortgage loans 92,900 69,036 196,444 158,388
Insurance and investment fee income 50,054 56,177 101,176 112,726
Deposit service charges and fees 26,393 28,869 49,979 54,419
Other 61,900 61,901 139,660 137,865
---------- ---------- ------------ -----------
Total other income 1,022,231 1,072,082 2,045,462 2,035,972
---------- ---------- ------------ -----------
-Continued-
5
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Periods Ended June 30, 2005 and 2004
(Unaudited)
For the Three Month For the Six Month
Period Ended Period Ended
2005 2004 2005 2004
------------------ ---------------- -------------- -----------------
Other expenses:
Salaries and benefits $ 738,443 $ 715,916 $ 1,480,330 $ 1,440,059
Occupancy, net 105,303 100,476 231,332 213,739
Data processing and equipment
Expense 141,193 138,835 279,625 262,920
Legal and audit expense 51,122 47,537 88,809 84,230
Consulting fees 37,439 43,031 71,330 78,054
Mortgage banking expense 68,217 70,298 120,540 134,829
Servicing rights amortization 227,045 49,411 226,190 259,868
Advertising 35,440 32,747 69,826 63,645
Memberships and training 35,937 41,640 62,453 67,039
Travel and entertainment 34,013 43,208 66,015 68,694
Supplies and postage 62,194 55,898 111,186 101,126
Insurance 35,985 34,093 70,643 66,444
Other operating expenses 81,765 221,315 201,850 328,100
---------- ---------- ------------ ------------
Total other expenses 1,654,096 1,594,405 3,080,129 3,168,747
---------- ---------- ------------ ------------
Income (loss) before income taxes (59,762) (86,032) 104,103 (270,559)
---------- ---------- ------------ -----------
Income tax expense (benefit) 0 0 0 0
---------- ---------- ------------ -----------
Net Income (loss) $ (59,762) $ (86,032) $ 104,103 $ (270,559)
Preferred stock dividends 3,400 0 3,400 0
---------- ---------- ------------ -----------
Net income (loss) available to $ (63,162) $ (86,032) $ 100,703 $ (270,559)
common shareholders
Basic earning/loss per common share $ (0.02) $ (0.02) $ 0.02 $ (0.07)
=========== ========== ============= =============
Diluted earnings/loss per common share $ (0.02) $ (0.02) $ 0.02 $ (0.07)
=========== ========== ============= =============
Weighted average shares outstanding - Basic 4,148,878 4,090,548 4,143,891 4,074,328
=========== ========== ============= =============
Weighted average shares outstanding - Diluted 4,148,878 4,090,548 4,183,536 4,074,328
=========== ========== ============= =============
The accompanying notes are an integral part of the
consolidated financial statements.
6
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the Periods Ended June 30, 2005 and 2004
(Unaudited)
For the Three Month For the Six Month
Period Ended Period Ended
2005 2004 2005 2004
--------------------------------------------------------------
Net (loss)/income $(59,762) $ (86,032) $104,103 $(270,559)
Other comprehensive(loss)income:
Unrealized (losses)gains on securities
Available for sale 15,396 (59,269) 22,264 (34,346)
Less: reclassification adjustment
for accumulated gains
included in net loss - - - 1,311
--------------------------------------------------------------
Other comprehensive (loss)income, before
tax effect 15,396 (59,269) 22,264 (35,657)
Income tax expense (benefit) - - - -
Other comprehensive (loss)income, net
Of tax 15,396 (59,269) 22,264 (35,657)
--------------------------------------------------------------
Comprehensive (loss)income $(44,366) $(145,301) $126,367 $(306,216)
==============================================================
The accompanying notes are an integral part of the consolidated financial
statements.
7
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows For the six month
periods ended June 30, 2005 and 2004
(Unaudited)
2005 2004
------------ -------------
Cash flow from operating activities:
Net (loss) income $ 104,103 $ (270,559)
Adjustments to reconcile net (loss)income to net cash from Operating Activities:
Dividend payable (3,400) 0
Depreciation 167,035 148,841
Amortization 226,190 309,868
Provision for loan losses 17,209 45,000
Net (gain) on mortgage loan sales (196,444) (158,388)
Net (accretion) on investment securities 2,794 (7,859)
Net (gain)loss on sale of securities 0 (1,311)
Gain on the sale of fixed assets (57,074) (126,051)
Gain on the sale of other real estate owned (9,294) 0
Originations of mortgage loans (24,855,110) (24,441,360)
Proceeds from mortgage loan sales 24,671,848 23,615,766
Change in:
Real estate owned 11,316 14,349
Other assets (328,906) (293,240)
Other liabilities 209,781 (130,466)
------------ ------------
Net cash used in operating activities (39,952) (1,295,410)
------------ ------------
Cash flow from investing activities:
Purchase of investment securities 0 (8,008)
Proceeds from maturities and pay downs of securities
available for sale 148,770 284,710
Net (increase)repayments of loans (1,117,039) (2,872,311)
Proceeds from sale of other real estate 713,610 584,534
Proceeds from sales of investment securities 0 7,006
Premises and equipment expenditures (1,767,096) (288,153)
------------ -------------
Net cash used in investing activities (2,021,755) (2,292,222)
------------ -------------
-Continued-
8
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows For the six month
periods ended June 30, 2005 and 2004
(Unaudited)
2005 2004
------------ -----------
Cash flow used in financing activities:
Net increase in deposits 2,635,444 1,653,012
Net increase in short term borrowings (583,155) 1,060,842
Principal payments on long term borrowings (34,000) (66,000)
Issuance of preferred stock 227,500 -
Issuance of common stock 35,000 123,000
------------ -----------
Net cash provided by financing activities 2,280,789 2,770,854
------------ -----------
219,082 (816,778)
Net change in cash and cash equivalents Cash and cash equivalents:
Beginning of period 1,731,569 2,171,189
------------ -----------
End of period $ 1,950,651 $ 1,354,411
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 418,436 $ 368,432
Supplemental disclosure of non-cash transactions:
Mortgage loans converted to other real estate owned $ 292,026 $ 716,491
Michigan BIDCO Preferred stock exchanged for a 7.5%
promissory note $ 0 $ 600,000
See accompanying notes to consolidated financial statements (unaudited).
9
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 2004 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 2004 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.
Basic earnings per share represents income available to common
stockholders divided by the weighted average number of common shares outstanding
during the period. Diluted earnings per share reflects additional common shares
that would have been outstanding if dilutive potential common shares had been
issued, as well as any adjustment to income that would result from the assumed
issuance. Potential common shares that may be issued by the Corporation relate
solely to outstanding stock options, and are determined using the treasury stock
method. Earnings per common share have been computed based on the following:
For the Three Month For the Six Month
Period Ended June 30, Period Ended June 30,
2005 2004 2005 2004
----------------- ------------- ---------------- --------------
Net Income ($59,762) ($86,032) $104,103 ($270,559)
Less: Preferred stock dividends payable 3,400 0 3,400 0
----------------- ------------- ---------------- --------------
Net income applicable to common stock ($63,162) ($86,032) $100,703 ($270,559)
================= ============= ================ ==============
Average Number of common shares outstanding 4,148,878 4,090,548 4,143,891 4,074,328
Effect of dilutive options 0 0 39,645 0
----------------- ------------- ---------------- --------------
Average Number of common shares outstanding used to calculate
diluted earnings per common share 4,148,878 4,090,548 4,183,536 4,074,328
================= ============= ================ ==============
(2) Investment Securities
The Bank's available-for-sale securities portfolio at June 30, 2005 had
a net unrealized loss of approximately $29,093 as compared with a net unrealized
loss of approximately $51,357 at December 31, 2004.
Securities available for sale at June 30, 2005:
Amortized Unrealized Fair
Cost Gains Losses Value
U.S. agency mortgage-backed
securities $1,006,400 $ - $(29,093) $977,307
========= ===== ======== ========
10
Securities available for sale at December 31, 2004
Amortized Unrealized Fair
Cost Gains Losses Value
U.S. agency mortgage-backed
securities $1,157,964 $ - $(51,357) $1,106,607
========= ===== ========= =========
(3) Stock options
At June 30, 2005, 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 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 0 and 47,000 during the quarters
ended June 30, 2005 and 2004, the effect on net income (loss) and earnings
(loss) per share if the Corporation had applied the fair value recognition
provisions of FASB Statement No. 123(R), Accounting for Share-Based Compensation
to stock-based employee compensation was less than $.01 per share in each of the
periods presented. In December 2002, SFAS No. 148, "Stock-Based Compensation,"
was issued, which requires that the Company illustrate the effect on net income
and earnings per share if it had applied the fair value principles included in
SFAS No. 123 for both annual and interim financial statements. Accordingly, if
the Company had elected to recognize compensation cost based on the fair value
of the options at grant date, the Company's earnings and earnings per share from
continuing operations, assuming dilution, for the six month periods ended June
30, 2005 and 2004 would have been the pro forma amounts indicated below:
Six months ended June 30,
2005 2004
-------- --------
Net earnings:
As reported: $100,703 ($270,559)
Compensation expense 2,989 2,739
-------- ----------
Pro forma $ 97,714 ($273,298)
======== ==========
Net earnings per share:
As reported:
Basic $0.02 ($0.07)
Diluted $0.02 ($0.07)
Pro forma:
Basic $0.02 ($0.07)
Diluted $0.02 ($0.07)
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
11
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, 2005 was
$59,762 as compared to a net loss of $86,032 for the same period last year.
Community Banking reported net income of $43,000 during the current year's
second quarter as opposed to a net loss of $156,000 from the year before. In
2005, Community Banking benefited from an increase in the net interest margin
and lower expenses related to non performing assets. The Bank's subsidiary,
Midwest Loan Services reported a net loss of $74,000 for the second quarter of
2005 as compared to net income of $98,000 for the same period in 2004. Income at
Midwest was negatively impacted in the second quarter of 2005 by an $186,000
impairment charge against the mortgage servicing rights portfolio. At the end of
the quarter, the mortgage rates dropped, thus affecting the value of the
portfolio.
The Company's net income for the first half of 2005 was $104,103,
versus a net loss of $270,559 for the same period last year. Community Banking
reported a net income of $43,000 during the current year's first half as opposed
to a loss of $209,000 in the prior year. Community Banking benefited from an
increase in the net interest margin and lower expenses related to non performing
assets. Midwest Loan Services had net income of $76,000 in the first half of
2005 compared to net loss of $176,000 in the same period last year. Income at
Midwest was negatively impacted in the first half of 2005 by $91,000 of net
impairment charges against the mortgage servicing rights portfolio. Income at
Midwest was negatively impacted in the first half of 2004 by approximately
$180,000 in overhead expenses incurred 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, 2005 and 2004 (in
thousands):
12
Pre-tax (loss) income summary for the three and six months ended June 30, 2005
Three Months Six Months
Community Banking $ 43 $ 43
Midwest Loan Services (74) 76
Corporate Office (29) (15)
------ -----
Total $(60) $104
====== =====
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)
====== ======
RESULTS OF OPERATIONS
Net Interest Income
Net interest income increased to $574,103 for the three months ended
June 30, 2005 from $458,792 for the three months ended June 30, 2004. Net
interest income rose from last year primarily as a result of an increase in net
earning assets. Overall, the yield on earning assets increased to 6.88% from
6.38% while the cost of earning liabilities increased to 2.12% from 1.95%.
Overall, the net interest income as a percentage of total average earning assets
increased from 4.86% from 4.55.
Net interest income increased to $1,155,979 for the six months ended
June 30, 2005 from $907,216 for the six months ended June 30, 2004. Net interest
income increased from a year ago as a result of a higher net interest margin and
a net increase in earning assets. The yield on interest earning assets increased
to 6.92% in the 2005 period from 6.47% in the 2004 period. The cost of interest
bearing liabilities increased to 2.04% for the 2005 period from 1.97% for the
period ended June 30, 2004. Net interest income as a percentage of total average
earning assets increased to 4.95% from 4.59%.
Interest income
Interest income increased to $813,451 in the quarter ended June 30,
2005 from $643,173 in the quarter ended June 30, 2004. The increase resulted
from an increase in the yield on and volume of earning assets. The yield on
interest bearing assets increased to 6.88% in 2005 from 6.38% in 2004. The
increase in yield resulted primarily from an increase in rate on prime rate
based loans. The prime rate increased from the prior year. The average volume of
interest earning assets increased to $47,394,906 in the 2005 period from
$40,435,894 in the 2004 period.
Interest income increased to $1,615,094 in the six months ended June
30, 2005 from $1,278,214 in the six months ended June 30, 2004. This increase
resulted from an increase in the yield on and volume of average earning assets.
The overall yield on earning assets rose to 6.92% from 6.47% in the six month
period ended in 2004. As noted above, the increase in yield resulted primarily
from an increase in rate on prime rate based loans. The prime rate increased
from the prior year. The average volume of interest earning assets increased to
$47,098,149 in the 2005 period from $39,835,428 in the 2004 period.
13
Interest Expense
Interest expense increased to $239,348 in the three months ended June 30,
2005 from $184,381 in the 2004 period. The rise in interest expense was due to
an increase in the yield on and volume of average interest bearing liabilities.
The yield increased to 2.12% in 2005 from 1.95% in 2003. In 2004, the rates on
deposits were higher than in the three month period in 2004. The average volume
of interest bearing liabilities increased to $45,386,260 in 2005 from
$38,001,931 in 2004.
Interest expense increased to $459,115 in the six months ended June 30,
2005 from $370,998 in the 2004 period. The rise in interest expense was due to
an increase in the yield on and volume of average interest bearing liabilities.
The yield increased to 2.04% in 2005 from 1.97% in 2004. In 2004, the rates on
deposits were higher than in the six month period in 2004. The average volume of
interest bearing liabilities increased to $45,351,064 in 2005 from $37,903,162
in 2004.
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, 2005 and 2004.
14
Three Months Ended Three Months Ended
-----------------------------------------------------------------------------------------
June 30, 2005 June 30, 2004
-----------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Inc / Exp Yield (1) Balance Inc / Exp Yield (1)
Interest Earning Assets:
Commercial Loans $17,093,411 $358,984 8.42% $16,997,343 $256,590 6.05%
Real Estate Loans 25,305,250 393,913 6.24% 18,348,309 305,302 6.67%
Installment/Consumer Loans 1,621,534 35,555 8.79% 2,445,269 53,669 8.80%
---------------------------------- ----------------------------------
Total Loans 44,020,195 788,452 7.18% 37,790,921 615,561 6.53%
Investment Securities 1,953,303 16,932 3.48% 2,347,453 26,679 4.56%
Fed. Funds & Bank Deposits 1,421,408 8,067 2.28% 297,520 933 1.26%
---------------------------------- ----------------------------------
Total Interest Bearing Assets 47,394,906 813,451 6.88% 40,435,894 643,173 6.38%
---------------------------------- ----------------------------------
Interest Bearing Liabilities:
Deposit Accounts:
Demand 9,250,713 23,063 1.00% 6,295,288 11,925 0.76%
Savings 486,012 1,153 0.95% 466,759 1,264 1.09%
Time 14,524,035 113,807 3.14% 11,662,586 80,360 2.76%
Money Market 20,456,489 95,898 1.88% 18,802,931 87,248 1.86%
Short-term Borrowings 669,011 5,427 3.25% 674,367 2,407 1.43%
Long-term Borrowings 0 0 0.00% 100,000 1,177 4.72%
---------------------------------- ----------------------------------
Total Interest Bearing 45,386,260 239,348 2.12% 38,001,931 184,381 1.95%
Liabilities
---------------------------------- ----------------------------------
Net Earning Assets, net
interest income, and
interest rate spread 2,008,646 574,103 4.77% 2,433,963 458,792 4.44%
================================== ==================================
Net Interest Margin 4.86% 4.55%
(1) Yield is annualized.
15
Six Months Ended Six Months Ended
June 30, June 30,
------------------------------------------------------------------------------------------
2005 2004
------------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Inc (Exp) Yield (1) Balance Inc (Exp) Yield (1)
Interest Earning Assets:
Loans:
Commercial $17,141,924 $720,628 8.48% $16,978,726 $548,878 6.52%
Real Estate 25,295,195 780,689 6.22% 17,744,523 595,891 6.77%
Installment/Consumer 1,616,001 72,530 9.05% 2,173,032 66,202 6.14%
---------------------------------- -----------------------------------
Total Loans 44,053,120 1,573,847 7.20% 36,896,281 1,210,971 6.62%
Investment Securities 1,972,960 28,601 2.92% 2,717,697 66,127 4.91%
Federal Funds & Bank
Deposits 1,072,069 12,646 2.38% 221,450 1,116 1.02%
---------------------------------- -----------------------------------
Total Interest Bearing Assets 47,098,149 1,615,094 6.92% 39,835,428 1,278,214 6.47%
---------------------------------- -----------------------------------
Interest Bearing Liabilities:
Deposit Accounts:
Demand 9,148,294 45,365 1.00% 6,398,573 26,223 0.83%
Savings 490,265 2,397 0.99% 434,479 2,438 1.13%
Time 14,195,470 212,673 3.02% 11,000,662 155,086 2.84%
Money Market 20,437,492 190,154 1.88% 19,201,590 179,052 1.88%
Short-term borrowings 1,066,791 8,194 1.55% 751,358 5,165 1.39%
Long-term borrowings 12,752 332 5.25% 116,500 3,034 5.25%
---------------------------------- -----------------------------------
Total Interest Bearing
Liabilities 45,351,064 459,115 2.04% 37,903,162 370,998 1.97%
---------------------------------- -----------------------------------
Net Earning Assets, net interest
income, and interest rate
spread 1,747,085 1,155,979 4.87% 1,932,266 907,216 4.50%
================================== ===================================
Net Interest Margin 4.95% 4.59%
(1) Yield is annualized.
16
Allowance for Loan Losses
The provision to the allowance for loan losses was $17,209 for the
six-month period ended June 30, 2005 and $45,000 for the same period in 2004.
The provision decreased due to adequate funding of the Allowance for Loan
Losses. Net charge-offs totaled $12,099 for the six-month period ended June 30,
2005 as compared to $27,865 for the same period in 2004. Illustrated below is
the activity within the allowance for the six-month period ended June 30, 2005
and 2004, respectively.
2005 2004
---- ----
Balance, January 1 $353,124 $454,118
Provision for loan losses 17,209 45,000
Loan charge-offs (20,399) (94,452)
Recoveries 8,300 66,587
--------- --------
Balance, June 30 $358,234 $471,253
========= ========
At June 30, 2005 At December 31, 2004
---------------- --------------------
Total loans (1) $43,812,714 $42,999,800
Reserve for loan losses $358,234 $ 353,124
Reserve/Loans % (1) 0.82% 0.82%
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, 2005 At December 31, 2004
---------------- --------------------
Past due 90 days and over and still accruing (1):
Real estate $ - $ -
Installment - 36,226
Commercial - 334,883
--------- ----------
Subtotal - 371,109
Nonaccrual loans (1):
Real estate (including
commercial real estate) 277,506 591,791
Installment - 16,739
Commercial - 39,490
--------- ----------
Subtotal 277,506 648,020
--------- ----------
Other real estate owned 110,437 534,043
--------- ----------
Total non-performing assets $387,943 $1,553,172
========= ==========
At June 30, 2005 At December 31, 2004
---------------- --------------------
Ratio of non-performing
assets to total loans (1) 0.89% 4.40%
========= ==========
Ratio of loans past due
over 90 days and nonaccrual
loans to loan loss reserve 77% 289%
========= ==========
17
(1) Excludes loans held for sale which are valued at the lower of cost or fair
market value.
Non-accrual loans at June 30, 2005 include one real estate loan
totaling $100,000 that is expected to pay off in the third quarter. The home
supporting the loan was severely damaged in a fire. Insurance proceeds will be
used to pay off the loan.
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 slightly to $1,022,231 for the
three months ended June 30, 2005 from $1,072,082 for the three months ended June
30, 2004. Within this category, in 2005, there was a decline in initial loan set
up and other fees and in increase in loan servicing and subservicing fees and
gains on the sale of mortgages as compared with the same three month period in
2004. Much of this activity occurs at Midwest.
Total non-interest income increased to $2,045,463 for the six months ended
June 30, 2005 from $2,035,972 for the six months ended June 30, 2004. As
compared with the six month period in 2004, Midwest has increased its
subservicing operations and income generated in this area is offsetting a
decline in the initial loan set up and other fees due to a decrease in loan
originations. At June 30, 2005, Midwest was subservicing 20,646 mortgages, an
increase of 13.2% from 18,233 mortgages subserviced at December 31, 2004.
Midwest anticipates having 23,000 mortgages in its subservicing portfolio at
Spetember 30, 2005 based on current contractual arrangements.
As a result of a lending relationship with i2 Telecom International
(OTCBB : ITUI), the bank received a 3 year option to purchase 250,000 shares of
common stock of ITUI at $0.40 per shares.
University Bank purchased a 17,000 square foot building in Ann Arbor,
MI just prior to quarter end and applied to the FDIC and State of Michigan
Office of Financial and Insurance Services to relocate its headquarters to the
new location. University Bank purchased the building for $1.7 mm and estimates
that the cost of relocation and minor refurbishment required will cost under
$150,000. If the relocation is completed prior to October 15, 2005 University
Bank will receive cash incentive payments of $1,000,000 from its current
landlord to move out early.
Non-Interest Expense
Non-interest expense increased to $1,654,097 in the three months ended
June 30, 2005 from $1,594,405 for the three months ended June 30, 2004,
primarily as a result of an increase in the valuation reserve for Midwest is
mortgage servicing rights.
18
Non-interest expense decreased to $3,080,129 in the six months ended
June 30, 2005 from $3,168,747 for the six months ended June 30, 2004.
Following is an analysis of the change the Company's mortgage servicing
rights for the periods ended June 30, 2005 and 2004
2005 2004
---- ----
Balance, January 1 $1,097,786 $1,031,575
Additions - originated 241,381 323,106
Amortization expense (135,092) (316,868)
Adjustment for asset impairment
change (91,000) 57,000
----------- -----------
Balance, December 31 $1,113,075 $1,094,813
=========== ===========
At June 30, 2005, 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 $133 million. The carrying
value of these servicing rights was $1,113,075 at June 30, 2005. 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,
2005 and 2004 are $607,000 and $391,500, respectively.
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, 2005, the Bank was
considered "adequately capitalized".
June 30, 2005
TIER 1 CAPITAL (in thousands)
Total Equity Capital $3,193
Less: Unrealized losses on available-for-Sale
Securities (29)
Plus: Minority Interest 453
Less: Other identifiable Intangible Assets 216
------
Total Tier 1 Capital 3,459
TIER 2 CAPITAL
Allowance for loans & Lease losses 358
Less: Excess Allowance -
------
Total Tier 2 Capital 358
------
Total Tier 1 & Tier 2 Capital $3,817
======
CAPITAL RATIOS
Tier 1/Total Average Assets of $51,961 6.66%
Tier 1/Total Risk-Weighted Assets of $38,472 8.99%
Tier 1 & 2/Total Risk-Weighted Assets of $38,472 9.92%
19
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,
2005, the Bank had cash and cash equivalents of $1,950,651. 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, 2005, the Bank had $1,832,845 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, 2005, the Bank had $5.2 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 2005. Management
expects Bancorp's working capital to be increased as a result of the issuance of
additional shares of common and preferred stock.
At June 30, 2005, $0 was payable to another financial institution as
compared to $100,000 at June 30, 2004. At June 30, 2005, Bancorp had $6,000 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
20
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, 2005. 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
($12,793,000) or -23.97%.
In addition, management prepares an estimate of sensitivity to immediate changes
in short term interest rates. At June 30, 2005, the following impact was
estimated on net interest margin and mortgage operations in the 12 months
following an immediate movement of short term or long term interest rates:
Effect on Net Interest Effect on Mortgage Banking
Rate Change Margin from Short Term Activity from Long Term
Interest Rate Change Interest Rate Change
(% Change) ($ Change) ($ Change)
-1.00% 2.63% $61,000 $590,000
-3.00% 7.89% $182,000 $1,798,000
+1.00% -1.83% ($42,000) $268,000
+3.00% -5.50% ($127,000) $607,000
21
UNIVERSITY BANK
Asset/Liability Position Analysis as of June 30, 2005
(Dollar amounts in thousand's)
Maturing or Repricing in
3 91 Days to 1 - 3 3 - 5 Over 5 ALL
ASSETS or Less 1 Year Years Years Years Other Total
------ ------- ------ ----- ----- ----- ----- -----
Loans - Net $12,227 $1,724 $9,130 $19,189 $2,492 ($358) $44,404
Non-Accrual Loans - - - - 277 277
Securities 100 500 - - 377 - 977
Other Assets 941 - - - - 4,821 5,762
Cash and Due from Banks 729 - - - - 1,222 1,951
-------------------------------------------------------------------------------------------
TOTAL ASSETS 13,997 2,224 9,130 19,189 2,869 5,962 53,371
-------------------------------------------------------------------------------------------
LIABILITIES
-----------
Time deposits 6,408 4,108 3,182 602 266 - 14,566
Demand -interest bearing 8,333 8,332 9,266 3,456 - - 29,387
Demand - non interest - - - - 2,797 2,797
Savings - - 474 - - - 474
Other borrowings 1,833 - - - - - 1,833
Other Liabilities - - - - - 927 927
Equity - - - - - 3,387 3,3871
-------------------------------------------------------------------------------------------
TOTAL LIABILITIES 16,574 12,440 12,922 4,058 266 7,111 53,371
-------------------------------------------------------------------------------------------
Gap (2,577) (10,216) (3,792) 15,131 2,603 (1,149) -
===========================================================================================
Cumulative gap ($2,577) ($12,793) ($16,585) ($1,454) $1,149 -
================================================================================
Gap percentage -4.83% -23.97% -31.07% -2.72% -2.15% 0.00%
================================================================================
22
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
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 June 30, 2005. 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
We own, through Hoover, LLC, a subsidiary of University Bank, a 17,000 ft2
building into which we plan to relocate the Bank's headquarters. Hoover,
LLC is a defendant in a lawsuit filed by planitff Dean Solden. The
complaint, case No. 5-777-CH, filed in the Circuit Court of Washtenaw
County alleges that Hoover, LLC breached a contract to sell the real estate
property that it owns to the plaintiff and that Hoover, LLC interfered with
the plaintiffs plans to develop the property. Hoover, LLC asserts that the
plaintiff did not comply with certain terms of the sales contract before
the expiration date of the contract. In the event that the court rules
against Hoover, LLC, it will sell the property to Solden for $1,760,000.
University Bank purchased Hoover, LLC for $1,700,000.
23
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. 2005
(b) The following seven director nominees were elected at
the meeting:
Name Votes For Votes Withheld
-------------------------------------------------------
Stephen L. Ranzini 3,569,642 1,225
Gary Baker 3,556,868 14,863
Robert Goldthorpe 3,556,868 14,863
Charles McDowell 3,569,717 1,150
Dr. Joseph L. Ranzini 3,568,042 2,825
Paul L. Ranzini 3,567,629 3,238
Michael Tally 3,568,117 2,750
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
6.1 Material definitve agreement, fourth, fifth and sixth Amendments
to Lowertown University Bank sale and lease agreement.
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.
24
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 15, 2005 /s/ Stephen Lange Ranzini
-------------------------
Stephen Lange Ranzini
President and Chief Executive Officer
/s/ Nicholas K. Fortson
-----------------------
Nicholas K. Fortson
Chief Financial Officer
25
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.
26
Exhibit 31.1
10-Q 302 CERTIFICATION
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 quarterly 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 quarterly 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 quarterly 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 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 quarterly 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;
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 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, to the registrant's auditors and the
audit committee of 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.
Date: August 15, 2005 /s/Stephen Lange Ranzini
----------------------------------
Stephen Lange Ranzini
President and Chief Executive Officer
27
Exhibit 31.2
10-Q 302 CERTIFICATION
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 quarterly 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 quarterly 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 quarterly 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 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 quarterly 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;
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 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, to the registrant's auditors and the
audit committee of 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.
Date: August 15, 2005 /s/Nicholas K. Fortson
----------------------
Nicholas K. Fortson
Chief Financial Officer
28
Exhibit 32.1
CERTIFICATION PURSUANT
TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of University Bancorp, Inc. (the
"Registrant") on Form 10-Q for the period ended June 30, 2005 as filed with the
Securities and Exchange Commission on August 15, 2005, hereof (the "Report"),
the undersigned officers 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 Report 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 Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
University Bancorp, Inc
Date: August 15, 2005 By: /s/ Stephen Lange Ranzini
------------------- --------------------------
Stephen Lange Ranzini
President and Chief Executive Officer
29
Exhibit 32.2
CERTIFICATION PURSUANT
TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of University Bancorp, Inc. (the
"Registrant") on Form 10-Q for the period ended June 30, 2005 as filed with the
Securities and Exchange Commission on August 15, 2005, hereof (the "Report"),
the undersigned officers 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 Report 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 Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
University Bancorp, Inc
Date: August 15, 2005 By: /s/Nicholas K. Fortson
----------------------
Nicholas K. Fortson
Chief Financial Officer
30