29
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
----------------------
FORM 10-QSB
(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, 2006
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)
2015 Washtenaw, Ann Arbor, Michigan 48104
----------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (734) 741-5858
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 a shell company(as defined in
Rule 12b-2 of the Exchange Act)
Yes X No
-
State 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 November 14, 2006: 4,248,378
shares
Page 1 of 30 pages
2
FORM 10-QSB
TABLE OF CONTENTS
PART I - Financial Information
Item 1. Unaudited Consolidated Financial Statements PAGE
----
Consolidated Balance Sheets 3
Consolidated Statements of Operations 5
Consolidated Statements of Comprehensive Income 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 12
Summary 12
Results of Operations 13
Capital Resources 20
Liquidity 21
Item 3. Controls and Procedures 20
PART II - Other Information
Item 1. Legal Proceedings 23
Item 2. Unregistered Sales of Equity 23
Securities and Use of Proceeds 23
Item 3. Defaults upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 24
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.
Part I. - Financial Information
Item 1.- Unaudited Consolidated Financial Statements
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 2006 and December 31, 2005
(Unaudited)
September 30, December 31,
ASSETS 2006 2005
--------------------- -------------------
Cash and due from banks $ 8,690,556 $ 7,746,666
Securities available for sale, at market 709,553 833,762
Federal Home Loan Bank Stock 791,200 941,200
Loans and financings held for sale, at the 2,101,919 1,446,575
lower of cost or market
Loans and financings 48,061,066 45,652,326
Allowance for loan and financing losses (457,511) (349,416)
--------------------- -------------------
Loans, net 47,603,555 45,302,910
Premises and equipment, net 2,738,557 2,802,816
Mortgage servicing rights, net 1,525,282 1,471,808
Real estate owned, net 496,290 276,987
Accounts receivable 63,987 2,585,524
Accrued interest and profit receivable 241,370 205,069
Prepaid expenses 278,561 285,015
Goodwill 103,914 103,914
Other assets 497,607 537,666
--------------------- -------------------
TOTAL ASSETS $ 65,842,351 $ 64,539,912
===================== ===================
-Continued-
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
September 30, 2006 and December 31, 2005
(Unaudited)
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2006 2005
--------------------- -------------------
Liabilities:
Deposits:
Demand - non interest bearing $ 4,688,782 $ 2,919,887
Demand - interest bearing and profit sharing 40,042,329 34,485,047
Savings 277,973 418,308
Time 12,006,387 18,197,803
--------------------- -------------------
Total Deposits 57,015,471 56,021,045
Accounts payable 694,988 395,604
Accrued interest and profit sharing payable 72,961 110,619
Other liabilities 154,542 210,190
--------------------- -------------------
Total Liabilities 57,937,962 56,737,458
Minority Interest 2,603,975 2,501,873
Stockholders' equity:
Preferred stock, $0.001 par value;
$1,000 liquidation value;
Authorized - 500,000 shares;
Issued - 37,672 shares in 2006 and
27,791 shares in 2005 28 38
Common stock, $0.01 par value;
Authorized - 5,000,000 shares;
Issued - 4,363,562 shares in 2006 and
4,263,062 shares in 2005 43,636 42,630
Additional paid-in-capital 6,508,601 6,149,990
Accumulated deficit (887,032) (516,816)
Treasury stock - 115,184 shares in 2006
and 2005 (340,530) (340,530)
Accumulated other comprehensive loss,
unrealized losses on securities
available for sale, net (24,299) (34,721)
--------------------- -------------------
Total Stockholders' Equity 5,300,414 5,300,581
--------------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 65,842,351 $ 64,539,912
===================== ===================
See accompanying notes to consolidated financial statements (unaudited).
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Periods Ended September 30, 2006 and 2005
(Unaudited)
For the Three-Month For the Nine-Month
Period Ended Period Ended
2006 2005 2006 2005
--------------- ---------------- ------------------- ---------------
Interest and financing income:
Interest and fees on loans and financing income $ 826,648 $ 801,930 $ 2,583,733 $ 2,375,776
Interest on securities:
U.S. Government agencies 2,673 3,710 7,267 12,455
Other securities 6,688 9,904 33,088 29,760
Interest on federal funds and other 86,474 13,810 209,995 26,457
--------------- ---------------- ------------------- ---------------
Total interest income and financing income 922,483 829,354 2,834,083 2,444,448
Interest and profit sharing expense:
Interest and profit sharing on deposits:
Demand deposits 164,436 121,446 429,632 356,963
Savings deposits 713 1,110 2,584 3,508
Time deposits 147,590 126,333 482,125 339,007
Short term borrowings - 28,789 1,947 36,983
Long term borrowings - - - 332
--------------- ---------------- ------------------- ---------------
Total interest and profit sharing expense 312,739 277,678 916,288 736,793
--------------- ------------------- ---------------
Net interest and financing income 609,744 551,676 1,917,795 1,707,655
Provision for loan losses 57,411 - 106,395 17,209
Net interest and financing income after
provision for loan losses 552,333 551,676 1,811,400 1,690,446
--------------- ---------------- ------------------- ---------------
Other income:
Loan servicing and sub-servicing fees 619,158 441,360 1,757,069 1,254,941
Initial loan set up and other fees 422,779 391,105 1,056,351 1,135,728
Gain(loss) on sale of mortgage loans (1,474) 92,345 37,418 288,790
Insurance and investment fee income 43,151 50,062 144,853 151,238
Deposit service charges and fees 21,762 27,951 76,766 77,930
Other 92,057 51,193 211,965 190,852
--------------- ---------------- ------------------- ---------------
Total other income 1,197,433 1,054,016 3,284,422 3,099,479
--------------- ---------------- ------------------- ---------------
-Continued-
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Periods Ended September 30, 2006 and 2005
(Unaudited)
For the Three-Month For the Nine-Month
Period Ended Period Ended
2006 2005 2006 2005
------------------ ----------------- ---------------- ----------------
Other expenses:
Salaries and benefits $ 851,672 $ 736,177 $ 2,522,115 $ 2,216,507
Occupancy, net 128,688 140,816 390,545 372,148
Data processing and equipment expense 160,042 144,240 457,115 423,864
Legal and audit expense 81,133 95,639 201,541 184,448
Consulting fees 44,259 53,281 140,565 124,612
Mortgage banking expense 61,176 90,953 167,640 211,493
Servicing rights amortization 193,610 (35,007) 159,582 191,183
Advertising 51,886 49,148 158,283 118,974
Memberships and training 21,235 32,290 83,301 94,743
Travel and entertainment 35,336 39,337 126,051 105,353
Supplies and postage 75,796 51,020 215,519 162,206
Insurance 35,816 44,605 114,512 115,248
Other operating expenses 142,088 155,233 706,290 357,083
------------------ ----------------- ---------------- ----------------
Total other expenses 1,882,737 1,597,732 5,443,059 4,677,862
------------------ ----------------- ---------------- ----------------
Income (loss) before income taxes (132,971) 7,960 (347,237) 112,063
Income tax expense - - - -
------------------ ----------------- ---------------- ----------------
Net Income (loss) $ (132,971) $ 7,960 $ (347,237) $ 112,063
Preferred stock dividends 8,585 6,081 22,979 9,491
------------------ ----------------- ---------------- ----------------
Net income (loss) available to $ (141,556) $ 1,879 $ (370,216) $ 102,572
common shareholders
$ (0.03) $ 0.00 $ (0.09) $ 0.02
Basic earnings/(loss) per common share
================== ================= ================ ================
Diluted earnings/(loss) per common share $ (0.03) $ 0.00 $ (0.09) $ 0.02
================== ================= ================ ================
Weighted average shares outstanding - Basic 4,248,378 4,148,878 4,214,142 4,145,572
================== ================= ================ ================
Weighted average shares outstanding - Diluted 4,248,378 4,184,430 4,214,142 4,184,719
================== ================= ================ ================
See accompanying notes to consolidated financial
statements (unaudited).
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the Periods Ended September 30, 2006 and 2005
(Unaudited)
For the Three-Month For the Nine-Month
Period Ended Period Ended
2006 2005 2006 2005
---------------------------------------------------------------
Net income(loss) $(132,971) $7,960 $(347,237) $112,063
---------------------------------------------------------------
Other comprehensive income(loss):
Unrealized gains(losses) on securities
available for sale 16,997 (4,111) 10,422 18,153
Less: reclassification adjustment
for accumulated gains(losses)
included in net gains(losses) - - - -
---------------------------------------------------------------
Other comprehensive income(loss), before
tax effect 16,997 (4,111) 10,422 18,153
Income tax expense - - - -
---------------------------------------------------------------
Other comprehensive income(loss), net
of tax 16,997 (4,111) 10,422 18,153
---------------------------------------------------------------
Comprehensive income(loss) $(115,974) $3,849 $(336,815) $130,216
===============================================================
See accompanying notes to consolidated financial statements (unaudited).
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Nine-Month Periods Ended September 30, 2006 and 2005
(Unaudited)
2006 2005
--------------------- -------------------
Operating activities:
Net income (loss) $ (347,237)$ 112,063
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation 296,645 249,154
Amortization 159,582 191,183
Provision for loan losses 106,395 17,209
Net gain on mortgage loan sales (37,418) (288,790)
Net accretion on investment securities 5,998 5,425
Gain on the sale of fixed assets - (57,074)
Gain on the sale of other real estate owned (36,783) (9,294)
Originations of mortgage loans (28,254,910) (43,360,244)
Proceeds from mortgage loan sales 27,636,984 44,068,834
Non-employee stock awards 260,845 -
Change in:
Real estate owned - 11,316
Other assets 2,318,693 (551,289)
Other liabilities 308,180 639,367
--------------------- -------------------
Net cash provided by operating activities 2,416,974 1,027,860
--------------------- -------------------
Investing activities:
Proceeds from maturities and pay downs of securities
available for sale 128,633 227,031
Redemption of FHLB Stock 150,000 -
Loans granted, net of repayments (2,713,184) (2,504,434)
Proceeds from sale of other real estate 123,624 713,610
Premises and equipment expenditures (232,386) (1,806,643)
--------------------- -------------------
Net cash used in investing activities (2,543,313) (3,370,436)
--------------------- -------------------
-Continued-
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Nine-Month Periods Ended September 30, 2006 and 2005
(Unaudited)
2006 2005
------------------- -------------------
Financing activities:
Net increase in deposits 994,426 7,327,327
Net decrease in short-term borrowings - (2,416,000)
Principal payments on long-term borrowings - (34,000)
Issuance of preferred stock 98,782 265,910
Issuance of common stock - 35,000
Dividends on preferred stock (22,979) (9,492)
------------------- -------------------
Net cash provided by financing activities 1,070,229 5,168,745
------------------- -------------------
943,890 2,826,169
Net change in cash and cash equivalents Cash and cash equivalents:
Beginning of period 7,746,666 1,731,569
------------------- -------------------
End of period $ 8,690,556$ 4,557,738
=================== ===================
Supplemental disclosure of cash flow information:
Cash paid for interest $ 953,946 $ 721,475
Supplemental disclosure of non-cash transactions:
Mortgage loans converted to other real estate owned $ 306,144$ 392,026
See accompanying notes to consolidated financial statements (unaudited).
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited)
(1) General
See Note 1 of the Financial Statements incorporated by reference in the
Company's 2005 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,
of a normal recurring nature and 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 2005 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 Nine-Month
Period Ended September 30, Period Ended September 30,
----------------------------------- ----------------------------------
2006 2005 2006 2005
--------------------- ----------------- ----------------- -----------
Net Income (loss) $(132,971) $7,960 $(347,237) $112,063
Less: Preferred stock dividends 8,585 6,081 22,979 9,491
--------------------- ----------------- ----------------- -----------
Net income(loss) applicable to common stock $(141,556) $1,879 $(370,216) $102,572
--------------------- ----------------- ----------------- -----------
Weighted average number of common shares outstanding 4,248,378 4,148,878 4,214,142 4,145,572
Effect of dilutive options - 35,552 - 39,147
--------------------- ----------------- ----------------- -----------
Average number of common shares outstanding used to 4,248,378 4,184,430 4,214,142 4,184,719
calculate diluted earnings per common share
(2) Investment Securities
The Bank's available-for-sale securities portfolio at September 30,
2006 had a net unrealized loss of approximately $24,299 as compared with a net
unrealized loss of approximately $34,721 at December 31, 2005.
Securities available for sale at September 30, 2006:
Amortized Unrealized Fair
Cost Gains Losses Value
U.S. agency mortgage-backed
securities $733,852 $ - $(24,299) $709,553
======= ======= ======== =======
Securities available for sale at December 31, 2005:
Amortized Unrealized Fair
Cost Gains Losses Value
U.S. agency mortgage-backed
securities $868,483 $ - $(34,721) $833,762
======= ===== ======== =======
(3) Stock options
The Company has adopted SFAS No. 123(R), "Share-Based Payment", which is a
revision of SFAS No. 123, "Accounting for Stock Based Compensation", and
supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees", and
was issued in December 2004. The revisions require that the compensation cost
relating to share-based payment transactions be recognized in the financial
statements. That cost will be measured based on the fair value of the equity or
liability instruments issued. For the nine-months ended September 30, 2006, the
Company recorded $19,644 of compensation expense related to stock options.
Prior to the 2006 year, the Company adopted the disclosure-only
provisions of SFAS No. 123. 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 nine-month period ended September 30, 2005 would have been the
pro forma amounts indicated below:
Nine-months ended September
30, 2005
Net Income (Loss) applicable to Common
Stock:
As reported: $102,572
Compensation expense 2,989
------------------------ -------------
------------------------ -------------
Pro forma $99,583
======================== =============
======================== =============
Net earnings per share:
As reported:
Basic $0.02
Diluted $0.02
Pro forma:
Basic $0.02
Diluted $0.02
(4) Issuance of Stock
In April, 2006, the Company agreed to modify a relationship with a company that
assisted in the development of the Islamic Banking subsidiary and products.
Under the original agreement, University Islamic Financial Corporation was to
pay a share of revenue earned from all future mortgage alternative products sold
in the secondary market. University Islamic Financial Corporation agreed to pay
this company $100,000 in cash and the Company paid 100,500 shares of University
Bancorp, Inc. common stock and fully vested stock options totaling 48,563 with a
strike price starting at $2.50 and increasing to $3.50 through June 30, 2015
to eliminate this provision in the agreement, as well as to acquire the firm
providing trustee services for some of the Islamic financings. By modifying the
agreement, management believes University Islamic Financial will materially
reduce future expenses related to the agreement. The value of the shares
expensed in the second quarter totaled $241,822.
(5) Income Taxes
Income tax expense was $0 for the nine-months ended September 30, 2006 and
2005. The effective tax rate was 0% for both nine-month periods ended September
30, 2006 and 2005 due to existence of loss carry forwards resulting from prior
years' net operating losses. At September 30, 2006, the Company had a $120,000
deferred tax asset. This asset represents a loss carry forward that is expected
to be realized. At December 31, 2005, the Company had a tax deferred asset of
$100,000 based on expected realization of loss carry forwards.
(6) Recently Enacted Accounting Pronouncements
Financial Accounting Standards Board's Final Interpretation No.
48,"Accounting for Uncertainty in Income Taxes" ("FIN 48"). This interpretation
was issued on July 13, 2006. FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in the financial statements in accordance with SFAS No.
109, "Accounting for Income Taxes." This interpretation provides guidance on the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. Further, FIN 48 provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosures and transition. This interpretation is effective for fiscal
years beginning after December 15, 2006. The cumulative effects, if any, of
applying FIN 48 will be recorded as an adjustment to retained earnings as of the
beginning of the period of adoption.
Financial Accounting Standards Board Statement No. 156 - Accounting for
Servicing of Financial Assets. This Statement amends FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, with respect to the accounting for separately recognized
servicing assets and servicing liabilities. This standard requires all
separately recognized servicing assets and liabilities to be initially measured
at fair value and either amortized over the period of estimated servicing income
and assessed for impairment each reporting period, or measured at fair value
each reporting period with changes in fair value reported in earnings the period
in which changes occur. This standard is effective for fiscal years beginning
after September 15, 2006.
The Company is in the process of evaluating the expected effect of
these pronouncements and is currently unable to determine the impact, if any,
that they may have on its results of operations, financial position and cash
flows.
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
Third quarter 2006 compared to third quarter 2005
The net loss for the Company for the third quarter of 2006 was $132,971 versus
net income of $7,960 for the same period last year.
Community Banking reported a net loss of $95,000 during the current year's third
quarter as opposed to a net loss of $101,000 from the year before. The Bank's
subsidiary, Midwest Loan Services reported a net loss of $11,000 for the third
quarter
of 2006 as compared to net income of $145,000 for the same period in 2005.
Income at Midwest was negatively impacted in the third quarter of 2006 by a
$150,000 impairment charge against the mortgage servicing rights portfolio. At
the end of the quarter, the mortgage rates decreased, thus affecting the value
of the portfolio.
Nine-months ended September 30, 2006 compared to nine-months ended
September 30, 2005
--------------------------------------------------------------------------------
The Company's net loss for the nine-months of 2006 was $347,237 versus
a net income of $112,063 for the same period last year.
Earnings during 2006 were restrained by start-up expenses at University
Islamic Financial Corporation and a settlement agreement with a company that
assisted in the development of the Islamic subsidiary and products. Community
Banking reported a loss of $261,000 during the nine-months ended September 30,
2006 compared to a net loss of $58,000 during the same period in 2005. Within
the Corporate Office a large contract modification expense increased the year to
date loss in 2006 to $324,000 from a net loss of $51,000 in 2005, as in April
2006, the Company agreed to modify a relationship with a company that assisted
in the development of the Islamic Banking subsidiary and products. Under the
original agreement, University Islamic Financial Corporation was to pay a share
of revenue earned from all future mortgage alternative products sold in the
secondary market. University Islamic Financial Corporation agreed to pay this
company $100,000 in cash and the Company paid 100,500 shares of University
Bancorp, Inc. common stock and stock options totaling 48,563 with a strike price
starting at $2.50 and increasing to $3.50 through June 30, 2015 to eliminate
this provision in the agreement, as well as to acquire the firm providing
trustee services for some of the Islamic financings. By modifying the agreement,
the Company will materially reduce future expenses related to the agreement.
The following table summarizes the pre-tax income (loss) of each profit
center of the Company for the three and nine-months ended September 30, 2006 and
2005 (in thousands):
Pre-tax income (loss) summary for the three and nine-months ended September 30,
2006:
Three-Months Nine-Months
Community Banking $(95) $ (261)
Midwest Loan Services (11) 238
Corporate Office (27) (324)
--------------------------------------
Total $ (133) $ (347)
======================================
Pre-tax income (loss) summary for the three and nine months ended September 30,
2005:
Three-Months Nine-Months
Community Banking $(101) $ (58)
Midwest Loan Services 145 221
Corporate Office (36) (51)
------------------------------------
Total $ 8 $ 112
====================================
RESULTS OF OPERATIONS
Net interest and financing income
Net interest and financing income increased 10.5% to $609,744 for the
three-months ended September 30, 2006 from $551,676 for the three-months ended
September 30, 2005. Net interest and profit income rose because of an increase
in earning assets and an increase in the net interest margin.
Net interest and financing income increased 12.3% to $1,917,795 for the
nine-months ended September 30, 2006 from $1,707,655 for the nine-months ended
September 30, 2005. Net interest and financing income increased from a year ago
as a result of an increase in earning assets.
Interest and financing income
Interest and financing income increased 11.2% to $922,483 for the
quarter ended September 30, 2006 from $829,354 for the quarter ended September
30, 2005. An increase in the average balance of earning assets of $7,427,605 was
a major factor in the increase in interest income. The average volume of
interest and profit earning assets increased to $56,409,065 for the quarter
ended September 30, 2006 from $48,981,460 for the same 2005 period. The growth
in earning assets occurred in real estate loan and financings and federal funds
and bank deposit categories. The overall yield on total interest and profit
bearing assets decreased to 6.49% for the quarter ended September 30, 2006 as
compared to 6.72% for the same 2005 period. This decrease occurred despite an
increase in the prime and general federal lending rate throughout the period
after September 30, 2005. This This decrease resulted primarily due to liquid
funds being invested overnight in accounts earning rates lower than competing
assets such as loans.
Interest and financing income increased 15.9% to $2,834,083 for the
nine-months ended September 30, 2006 from $2,444,448 for the nine-months ended
September 30, 2005. This increase resulted from an increase in the volume of
average earning assets. The average volume of interest earning assets increased
to $56,646,689 for the nine-months ended September 30, 2006 from $47,696,573 for
the same 2005 period. The overall yield on total interest and profit bearing
assets decreased to 6.69% for the nine-month period ended September 30, 2006 as
compared to 6.85% for the same 2005 period. The decrease occurred despite an
increase in the prime and general federal lending rate throughout the period
after September 30, 2005. This decrease resulted primarily due to liquid funds
being invested overnight in accounts earning rates lower than competing assets
such as loans.
Interest and Profit Sharing Expense
Interest and profit sharing expense increased 12.6% to $312,739 for the
three-months ended September 30, 2006 from $277,678 for the same 2005 period.
The increase was due principally to an increase in interest and profit bearing
liabilities and a slight increase in the rates paid on those liabilities. The
average volume of interest and profit bearing liabilities increased to
$52,598,462 from $47,116,919 in the same period in 2005. The cost of funds
increased to 2.36% for the three-months ended September 30, 2006 from 2.34% for
the same 2005 period.
Interest and profit sharing expense increased 24.4% to $916,288 for the
nine-months ended September 30, 2006 from $736,793 for the same 2005 period. The
rise in interest expense was due to an increase in the rate on and volume of
average interest bearing liabilities. The rate increased to 2.37% for the
nine-months ended September 30, 2006 from 2.15% for the same 2005 period. In
2006, the rates on deposits
were higher than in the nine-month period in 2005.
The average volume of interest and profit bearing liabilities increased to
$51,585,502 for the nine-months ended September 30, 2006 from $45,772,523 for
the same 2005 period.
MONTHLY AVERAGE BALANCE SHEET AND INTEREST MARGIN ANALYSIS
The following tables summarizes monthly average balances, revenues from
earning assets, expenses of interest bearing and profit sharing liabilities,
their associated yield or cost and the net return on earning assets for the
three-months and nine-months ended September 30, 2006 and 2005.
Three-Months Ended Three-Months Ended
-----------------------------------------------------------------------------------------
September 30, 2006 September 30, 2005
-----------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Inc / Exp Yield (1) Balance Inc / Exp Yield (1)
Interest and Profit Earning Assets:
Commercial Loans 17,258,545 318,208 7.31% 17,131,615 345,223 7.99%
Real Estate Loans 29,863,476 487,343 6.47% 26,459,497 412,515 6.19%
Installment/Consumer Loans 1,141,044 21,097 7.34% 1,937,665 44,192 9.05%
---------------------------------- ----------------------------------
Total Loans 48,263,065 826,648 6.80% 45,528,777 801,930 6.99%
Investment Securities 1,529,651 9,361 2.43% 1,886,781 13,614 2.86%
Fed. Funds & Bank Deposits 6,616,349 86,474 5.19% 1,565,902 13,810 3.50%
---------------------------------- ----------------------------------
Total Interest and
Profit Earning Assets 56,409,065 922,483 6.49% 48,981,460 829,354 6.72%
---------------------------------- ----------------------------------
Interest Bearing and Profit Sharing
Liabilities:
Deposit Accounts:
Demand 22,921,149 33,117 0.57% 10,463,458 26,833 1.02%
Savings 283,579 713 1.00% 444,486 1,110 .99%
Time 11,027,071 147,590 5.31% 14,542,400 126,333 3.45%
Money Market 18,366,663 131,319 2.84% 18,714,211 94,613 2.01%
Short-term Borrowings - - 0.00% 2,952,364 28,789 3.87%
Long-term Borrowings - - 0.00% - - 0.00%
---------------------------------- ----------------------------------
Total Interest and Profit Bearing 52,598,462 312,739 2.36% 47,116,919 277,678 2.34%
Liabilities
---------------------------------- ----------------------------------
Net Earning Assets, net interest and
profit income, and net spread 3,810,603 609,744 4.13% 1,864,541 551,676 4.38%
================================== ==================================
Net Interest and Profit Margin 4.29% 4.47%
(1) Yield is annualized.
Nine-Months Ended Nine-Months Ended
September 30, September 30,
-----------------------------------------------------------------------------------------
2006 2005
-----------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
Balance Inc (Exp) Yield (1) Balance Inc (Exp) Yield (1)
Interest and Profit Earning Assets:
Loans:
Commercial 7,614,754 1,083,598 8.22% 17,071,636 1,065,851 8.35%
Real Estate 30,516,440 1,416,992 6.21% 25,820,705 1,193,204 6.18%
Installment/Consumer 1,213,842 83,143 9.16% 1,582,032 116,721 9.86%
-----------------------------------------------------------------------------------------
Total Loans 49,345,036 2,583,733 7.00% 44,474,373 2,375,776 7.14%
Investment Securities 1,640,035 40,355 3.29% 1,951,740 42,215 2.89%
Federal Funds & Bank 5,661,618 209,995 4.96% 1,270,460 26,457 2.78%
Deposits
-----------------------------------------------------------------------------------------
Total Interest and 56,646,689 2,834,083 6.69% 47,696,573 2,444,448 6.85%
Profit Earning Assets
Interest Bearing and Profit Sharing Liabilities:
Deposit Accounts:
Demand 19,256,983 80,820 0.56% 9,554,303 72,196 1.01%
Savings 347,082 2,584 1.00% 479,289 3,508 0.98%
Time 14,201,336 482,125 4.54% 14,294,018 339,007 3.17%
Money Market 17,726,765 348,812 2.63% 20,003,131 284,767 1.90%
Short-term borrowings 53,336 1,947 4.88% 1,433,332 36,983 3.45%
Long-term borrowings - - 0.00% 8,450 332 5.25%
-----------------------------------------------------------------------------------------
Total Interest and Profit
Bearing Liabilities 51,585,502 916,288 2.37% 45,772,523 736,793 2.15%
-----------------------------------------------------------------------------------------
Net Earning Assets, net interest and 5,061,187 1,917,795 4.31% 1,924,050 1,707,655 4.70%
profit income, and net spread
-----------------------------------------------------------------------------------------
Net Interest and Profit Margin 4.53% 4.79%
(1) Yield is annualized.
Allowance for Loan Losses
The provision for the allowance for loan losses was $106,395 for the
nine-month period ended September 30, 2006 and $17,209 for the same period in
2005. The provision increased due to applying historical loss ratios to the
growth in the loan portfolio and weak economic conditions in the southeastern
Michigan area which increased management's estimates for future losses from
economic factors. Net (charge-offs)/recoveries totaled $1,700 for the nine-month
period ended September 30, 2006 as compared to $(21,327) for the same period in
2005. Illustrated below is the activity within the allowance for the nine-month
period ended September 30, 2006 and 2005, respectively.
2006 2005
---- ----
Balance, January 1 $ 349,416 $ 353,124
Provision for loan losses 106,395 17,209
Loan charge-offs (4,930) (31,497)
Recoveries 6,630 10,170
----------------------------------
----------------------------------
Balance, September 30 $457,511 $349,006
==================================
At September 30,2006 At December 31, 2005
----------------- --------------------
Total loans (1) $48,061,066 $45,652,326
Reserve for loan losses $457,511 $ 349,416
Reserve/Loans % (1) 0.95% 0.76%
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 September 30, 2006 At December 31, 2005
--------------------- --------------------
Past due 90 days and over
and still accruing (1) $98,242 $ -
--------------------------- --------------------------------
Nonaccrual loans (1):
Real estate/construction loans 133,268 317,013
Installment - -
Commercial - 32,668
--------------------------- --------------------------------
Subtotal 133,268 349,681
--------------------------- --------------------------------
Other real estate owned 496,290 276,987
-----------------------
--------------------------- --------------------------------
Total nonperforming assets $727,800 $626,668
=========================== ================================
September 30, 2006 At December 31, 2005
--------------------- --------------------
Ratio of non-performing loans to
total loans(1) 0.48% 0.77%
=========================== =======================
Ratio of loans past due over
90 days and non-accrual loans
to loan loss reserve 51% 100
=========================== ========================
(1) Excludes loans held for sale which are valued at the lower of cost or fair
market value.
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 increased to $1,197,433 for the three-months
ended September 30, 2006 from $1,054,016 for the three-months ended September
30, 2005.
Total non-interest income increased to $3,284,422 for the nine-months
ended September 30, 2006 from $3,099,479 for the nine-months ended September 30,
2005. As compared with the nine-month period in 2005, Midwest has increased its
subservicing operations and income generated in this area, offsetting a decline
in the initial loan set up and other fees due to a decrease in loan
originations. At September 30, 2006, Midwest was subservicing 31,519 mortgages,
an increase of 20.6% from 26,144 mortgages subserviced at December 31, 2005.
Non-Interest Expense
Non-interest expense increased to $1,882,737 for the three-months ended
September 30, 2006 from $1,597,732 for the three-months ended September 30, 2005
primarily due to an impairment charge related to mortgage servicing rights.
During the third quarter of 2006, the Company reported an impairment charge of
$150,000. In 2005, the Company reversed $149,000 of a previously recorded
mortgage serving rights impairment.
Non-interest expense increased to $5,443,059 for the nine-months ended
September 30, 2006 from $4,677,862 for the nine-months ended September 30, 2005.
In general the increase was due to start up expenses related to the Islamic
banking subsidiary and a contract modification agreement where, in April 2006,
the Company agreed to modify a relationship with a company that assisted in the
development of the Islamic Banking subsidiary and products. The cost of this
agreement in the second quarter of 2006 totaled $241,822. This amount is
included in other expense.
At September 30, 2006 the Bank and Midwest owned the rights to
service mortgages for other institutions, most of which were owned by Midwest.
The balance of
mortgages serviced for these institutions was approximately $148 million. The
carrying value of these servicing rights was $1,525,282 at September 30, 2006.
The servicing rights are recorded at the lower of cost or market. The impairment
reserves at September 30, 2006 and 2005 are $389,000 and $509,000, respectively.
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.
During 2006, Mortgage rates rose during the first six months of the year and
then declined during the third quarter. As a result, impairment reserve remained
unchanged from December 31, 2005. During the nine-months ended September 30,
2005, management recorded a $7,000 impairment charge due to a decrease in the
mortgage rates during 2005.
Following is an analysis of the change in the Company's mortgage
servicing rights for the nine-months ended September 30, 2006 and 2005
2006 2005
---- ----
Balance, January 1 $1,471,808 $1,097,786
Additions - originated 220,590 389,952
Amortization expense (167,116) (198,183)
Adjustment for asset impairment
change - 7,000
----------------- -----------------
Balance, September 30 $1,525,282 $1,296,555
================= ===================
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, 2006 and December
31, 2005, the Bank was considered "well-capitalized" and exceeded the regulatory
guidelines.
Actual To Be Adequately To Be Well
Capitalized Under Prompt Corrective Capitalized Under Prompt
Action Provisions Corrective Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of September 30, 2006:
Total capital (to risk weighted assets) 8,127,000 19.3% $3,370,000 8.0 % $4,212,000 10.0 %
Tier I capital (to risk weighted assets) 7,654,000 18.2% 1,685,000 4.0 % 2,527,000 6.0 %
Tier I capital (to average assets) 7,654,000 12.2% 2,511,000 4.0 % 3,139,000 5.0 %
As of December 31, 2005:
Total capital (to risk weighted assets) $7,947,000 18.4% $3,448,000 8.0 % $4,310,000 10.0 %
Tier I capital (to risk weighted assets 7,598,000 17.6% 1,724,000 4.0 % 2,586,000 6.0 %
Tier I capital (to average assets) 7,598,000 14.0% 2,171,000 4.0 % 2,714,000 5.0 %
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 September
30, 2006, the Bank had cash and cash equivalents of $8,690,556. The Bank's lines
of credit include the following:
o $3.5 million from the Federal Home Loan Bank of Indianapolis secured by
investment securities and residential mortgage loans, and
o $6.9 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, 2006, the Bank had zero brokered
deposits outstanding.
Bancorp Liquidity. Management does not expect that the Bank will pay dividends
to the Company during 2006. At September 30, 2006, Bancorp had $4,970 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. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
Disclosure controls are procedures that are designed with an objective of
ensuring that information required to be disclosed in our periodic reports filed
with the SEC, such as this report on Form 10-QSB, is recorded, processed,
summarized, and reported within the time periods specified by the SEC.
Disclosure controls also are designed with an objective of ensuring that such
information is accumulated and communicated to our management, including our
chief executive officer and chief financial officer, in order to allow timely
consideration regarding required disclosures.
During the nine-months ended September 30, 2006, the Company did not file on a
timely basis, certain of its quarterly Forms 10-Q and its 2005 annual Form 10-K
with the Securities Exchange Commission (SEC) within the required due dates. The
Company's auditor advised the Company's management and its Board of Directors
that this is an identified significant deficiency which is designated as a
"reportable condition" and constitutes a material weakness in the Company's
internal controls over financial reporting under Section 404 of the Sarbanes
Oxley Act.
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-15(e) under the Securities Exchange Act of
1934). Based upon that evaluation the Chief Executive Officer and Chief
Financial Officer concluded that the design and operation of these disclosure
controls and procedures were effective. 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.
The filing of the 2005 annual Form 10-K was delayed because the Company was
working with their prior auditors to get their consent to include their audit
opinions for 2004 and 2003 in the Form 10K. For the first quarter of 2006, the
Company delayed its filing of the Form 10QSB because additional time was
required to consider the financial implications of the buyout of a consulting
agreement.
(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
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
31.1 Certification 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 Certification 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 Certification 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 Certification 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 14, 2006 /s/ Stephen Lange Ranzini
-------------------------
Stephen Lange Ranzini
President and Chief Executive Officer
/s/ Nicholas K. Fortson
Nicholas K. Fortson
Chief Financial Officer
EXHIBIT INDEX
Exhibit Description
31.1 Certification 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 Certification 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 Certification 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 Certification 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
10-QSB 302 CERTIFICATION
I, Stephen Lange Ranzini, certify that:
1) I have reviewed this quarterly report on Form 10-QSB 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 officer 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 officer 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: November 14, 2006 /s/Stephen Lange Ranzini
----------------------------------
Stephen Lange Ranzini
President and Chief Executive Officer
Exhibit 31.2
10-QSB 302 CERTIFICATION
I, Nicholas K. Fortson, certify that:
1) I have reviewed this quarterly report on Form 10-QSB 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 officer 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 officer 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: November 14, 2006 /s/Nicholas K. Fortson
----------------------
Nicholas K. Fortson
Chief Financial Officer
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
I, Stephen Lange Ranzini, the 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 the
Quarterly Report of University Bancorp, Inc. on Form 10-QSB for the quarter
ended Septemeber 30, 2006 fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 and that information contained
in such report on Form 10-QSB fairly presents in all material respects the
financial condition and results of operations of University Bancorp, Inc.
University Bancorp, Inc
Date: November 14, 2006 By: /s/ Stephen Lange Ranzini
--- --------------------------
Stephen Lange Ranzini
President and Chief Executive Officer
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
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 the Quarterly Report of University
Bancorp, Inc. on Form 10-QSB for the quarter ended September 30, 2006 fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that information contained in such report on Form
10-QSB fairly presents in all material respects the financial condition and
results of operations of University Bancorp, Inc.
University Bancorp, Inc
Date: November 14, 2006
By: /s/ Nicholas K. Fortson
Nicholas K. Fortson
Chief Financial Officer