<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(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, 2000
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.
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 August 3, 2000:
2,027,801 shares
page 1 of 28 pages
Exhibit index on sequentially numbered page 27
<PAGE> 2
2
FORM 10-Q
TABLE OF CONTENTS
PART I - Financial Information
Item 1. Financial Statements PAGE
Consolidated Balance Sheets 3
Consolidated Statements of Operations 5
Consolidated Statements of Cash Flows 7
Notes to the Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Summary 9
Results of Operations 10
Liquidity and Capital Resources 18
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 20
PART II - Other Information
Item 1. Legal Proceedings 22
Item 5. Other Information:
Parent Company Condensed Financial
Information 22
Item 6. Exhibits & Reports on Form 8-K 26
Signatures 26
Exhibit Index 27
-------------------------------------------------------------------------------
The information furnished in these interim statements reflects all
adjustments and accruals that 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.
<PAGE> 3
3
Part I. - Financial Information
Item 1.- Financial Statements
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2000 (Unaudited) and December 31,1999
<TABLE>
<CAPTION>
UNAUDITED
June 30, December 31,
ASSETS 2000 1999
------------------- -------------------
<S> <C> <C>
Cash and due from banks $ 1,356,225 $ 1,542,567
Short term investments 9,011 8,753
------------------- -------------------
Total cash and cash equivalents 1,365,236 1,551,320
Securities available for sale at market 2,664,027 2,626,415
Federal Home Loan Bank Stock 848,400 848,400
Equity investments of Michigan BIDCO 0 892,965
Loans held for sale 259,075 305,049
Loans 32,190,277 31,112,496
Allowance for loan losses (589,850) (532,585)
------------------- -------------------
Loans, net 31,600,427 30,579,911
Premises and equipment 1,315,034 1,405,210
Mortgage servicing rights 673,135 704,164
Other real estate owned 519,015 683,784
Accounts receivable 473,070 159,584
Accrued interest receivable 245,410 234,252
Investment in Michigan BIDCO, Inc. 1,277,383 0
Investment in Michigan Capital Fund LP I 606,904 656,904
Other assets 428,853 174,580
------------------- -------------------
TOTAL ASSETS $ 42,275,969 $ 40,822,538
=================== ===================
</TABLE>
-Continued-
<PAGE> 4
4
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
June 30, 2000 (Unaudited) and December 31,1999
<TABLE>
<CAPTION>
UNAUDITED
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
------------------- -------------------
<S> <C> <C>
Liabilities
Deposits:
Demand - non interest bearing $ 2,976,154 $ 2,126,157
Demand - interest bearing 15,423,210 13,840,469
Savings 454,639 294,487
Time 16,826,042 15,789,866
------------------- -------------------
Total Deposits 35,680,045 32,050,979
Mortgage escrow 3,980 3,058
Short term borrowings 3,097,171 3,113,860
Long term borrowings 1,559,116 2,627,116
Accounts payable 91,448 230,802
Accrued interest payable 238,252 240,106
Other liabilities 86,960 100,442
------------------- -------------------
Total Liabilities 40,756,972 38,366,363
Minority Interest 137,822 505,795
Stockholders' equity:
Preferred stock, $0.001 par value;
Authorized - 500,000 shares;
Issued - 0 shares in 2000 and 1999 - -
Common stock, $0.01 par value;
Authorized - 5,000,000 shares;
Issued - 2,142,985 shares in 2000 and
2,127,985 shares in 1999 21,430 21,280
Treasury stock - 115,184 shares in 2000
and 1999. (340,530) (340,530)
Additional paid-in-capital 3,817,608 3,786,508
Retained deficit (1,478,350) (931,980)
Accumulated other comprehensive loss (638,983) (584,898)
------------------- -------------------
Total Stockholders' Equity 1,381,175 1,950,380
------------------- -------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 42,275,969 $ 40,822,538
=================== ===================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
<PAGE> 5
5
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Periods Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month For the Six Month
Period Ended Period Ended
2000 1999 2000 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 764,318 $ 738,621 $ 1,484,173 $ 1,383,334
Interest on securities:
U.S. Government agencies 36,819 23,073 72,096 56,812
Other securities 16,876 15,122 33,751 33,657
Interest on bank deposits 343 584 611 1,089
Interest on federal funds sold 134 3,776 254 52,025
----------- ----------- ----------- -----------
Total interest income 818,490 781,176 1,590,885 1,526,917
----------- ----------- ----------- -----------
Interest expense:
Interest on deposits:
Demand deposits 158,126 139,181 304,932 303,565
Savings deposits 1,437 1,103 2,878 2,225
Time certificates of deposit 234,339 252,714 452,943 567,977
Bank and other short term borrowings 54,728 34,797 101,083 42,513
Long Term Notes Payable 32,097 47,320 80,892 59,185
----------- ----------- ----------- -----------
Total interest expense 480,727 475,115 942,728 975,465
----------- ----------- ----------- -----------
Net interest income 337,763 306,061 648,157 551,452
Provision for loan losses 65,000 22,500 66,000 45,000
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 272,763 283,561 582,157 506,452
----------- ----------- ----------- -----------
Other income:
Loan origination and other fees 173,456 139,766 305,194 238,873
Loan servicing and subservicing fees 235,092 143,915 391,145 259,945
Gain on sale of mortgage loans 12,459 13,715 19,265 48,127
Merchant banking/ BIDCO income 24,928 202,189 234,739 204,879
Insurance and investment fee income 18,523 28,476 42,077 47,863
Deposit service charges and fees 18,202 16,426 32,787 29,945
Net security gains (losses) 0 7,531 3,501 (15,477)
Other 15,693 33,907 22,031 55,587
----------- ----------- ----------- -----------
Total other income 498,353 585,925 1,050,739 869,742
----------- ----------- ----------- -----------
</TABLE>
-Continued-
<PAGE> 6
6
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Periods Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month For the Six Month
Period Ended Period Ended
Other expenses: 2000 1999 2000 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Salaries and wages $ 384,930 $ 363,018 $ 776,597 $ 678,294
Employee benefits 74,776 66,481 150,833 126,918
Legal and audit expense 115,860 67,904 250,631 134,693
Occupancy, net 87,486 50,909 157,857 115,123
Data processing and equipment expense 77,413 53,857 161,310 119,098
Consulting fees 62,780 23,927 77,487 46,727
Advertising 27,060 26,040 48,322 67,889
Supplies and postage 50,773 12,660 88,092 67,378
Servicing rights amortization 8,909 78,576 58,940 107,136
Mortgage banking expense 70,973 18,458 93,828 60,174
Travel and entertainment 23,398 13,228 41,043 29,383
Insurance 11,494 16,486 22,934 24,283
Other operating expenses 150,569 222,694 246,346 280,231
----------- ----------- ----------- -----------
Total other expenses 1,146,421 1,014,238 2,174,220 1,857,327
----------- ----------- ----------- -----------
Loss from continuing operations
before income taxes (375,305) (144,752) (541,324) (481,133)
----------- ----------- ----------- -----------
Income tax expense (benefit) (4,327) (300) 5,046 (11,500)
----------- ----------- ----------- -----------
Net loss from continuing operations (370,978) (144,452) (546,370) (469,633)
Discontinued operations:
Loss from Varsity Mortgage
and Varsity Funding (210,850) (108,727)
----------- ----------- ----------- -----------
Net loss $ (370,978) $ (355,302) $ (546,370) $ (578,360)
=========== =========== =========== ===========
Comprehensive loss $ (472,867) $ (540,361) $ (600,455) $ (883,225)
=========== =========== =========== ===========
Basic and diluted loss from continuing
operations per common share $ (0.18) $ (0.07) $ (0.27) $ (0.24)
=========== =========== =========== ===========
Basic and diluted loss per common share $ (0.18) $ (0.18) $ (0.27) $ (0.29)
=========== =========== =========== ===========
Weighted average shares outstanding 2,027,801 1,989,139 2,025,658 1,989,139
=========== =========== =========== ===========
</TABLE>
<PAGE> 7
7
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
Consolidated
Statements of Cash Flows
For the six month
periods ended June 30,
2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
--------------------- ---------------------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (546,370) $ (578,360)
Adjustments to reconcile net loss to net cash from Operating Activities:
Depreciation and amortization 230,764 222,802
Provision for loan loss 66,000 45,000
Mortgage loans originated for sale and securitization (2,505,700) (176,817,187)
Proceeds from sale of mortgage loans 2,570,939 176,090,856
Net loss/(gain) on loan sales and securitization (19,265) (696,258)
Net (accretion)/amortization on securities (57,102) 32,806
Net loss/(gain) on sale of securities (3,501) 15,477
Change in:
Investment in Michigan BIDCO, Inc. 0 725,733
Mortgage servicing rights 0 119,019
Other real estate 152,456 141,708
Other assets (599,774) (215,041)
Other liabilities 201,543 (254,259)
------------------- --------------------
Net cash from operating activities (510,010) (1,167,704)
------------------- --------------------
Cash flow from investing activities:
Purchase of securities available for sale (37,500) (494,101)
Proceeds from sales of securities 103,501 504,098
Proceeds from maturities and paydowns of securities available for sale 2,905 428,509
Net change in Michigan BIDCO investment 197,302 0
Capitalized mortgage servicing rights (76,107) 0
Loans granted net of repayments (1,605,083) (4,072,755)
Premises and equipment expenditures (84,175) (131,257)
------------------- --------------------
Net cash from investing activities (1,499,157) (3,765,506)
------------------- --------------------
Cash flow used in financing activities:
Change in deposits 1,882,600 (7,742,286)
Change in mortgage escrow accounts 922 (22)
Change in short term borrowings (16,689) 4,711,181
Issuance of long term notes 60,000 343,000
Principal payments on long term notes (135,000) (132,000)
Issuance of common stock 31,250 0
Conversion of BIDCO bonds and buyout of minority interests 0 170,872
------------------- --------------------
Net cash from financing activities 1,823,083 (2,649,255)
------------------- --------------------
Net change in cash and cash equivalents (186,084) (7,582,465)
Cash and cash equivalents:
Beginning of period 1,551,320 9,246,015
------------------- --------------------
End of period $ 1,365,236 $ 1,663,550
=================== ====================
Supplemental disclosure of cash flow information:
Cash paid for interest $ 907,344 $ 1,022,681
Supplemental disclosure of non-cash transactions:
BIDCO conversion of bonds to common stock $ 26,117
De-consolidation of Michigan BIDCO, Inc.:
Cash (deposits at University Bank) $ (1,746,466)
Equity Investments of Michigan BIDCO, Inc. (595,663)
Loans (518,567)
Premises & Equipment (50,723)
Other Real Estate (12,313)
Other Assets (70,857)
Long Term Borrowings 993,000
Accrued Interest Payable 37,238
Other Liabilities 369,765
Minority Interest 317,203
Investment in Michigan BIDCO, Inc. 1,277,383
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
<PAGE> 8
8
UNIVERSITY BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(1) General
See note 1 of Notes to Financial Statements incorporated by reference
in the Company's 1999 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 1999 Annual Report on Form 10-K.
Effective May 31, 2000, Michigan BIDCO, Inc. (`the BIDCO') converted
all outstanding bonds into common stock thus diluting the Company's ownership of
the BIDCO. This transaction required the removal of the BIDCO from the
consolidated results of the Company. Income has been consolidated through May
31, 2000, however assets and liabilities have been removed as of May 31, 2000.
Earnings per share are calculated based on the weighted average number
of common shares outstanding during each period as follows: 2,027,801 and
1,989,139 for the three months ended June 30, 2000 and 1999, respectively;
2,025,658 and 1,989,139 shares for the six months ended June 30, 2000 and 1999,
respectively. Stock options are considered not dilutive for the 2000 period and,
therefore, are not included in earnings per share calculations.
(2) Available-for-sale Securities
The Bank's available-for-sale securities portfolio at June 30, 2000 had
a net unrealized loss of approximately $639,000 as compared with a net
unrealized loss of approximately $585,000 at December 31, 1999, an increase of
$54,000.
Securities available for sale at June 30, 2000 (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury $ 493 $ 0 $ (86) $ 407
U.S. agency note 491 0 (22) 469
U.S. agency mortgage-backed 1,761 0 (521) 1,240
Municipal bonds 521 0 (40) 481
Other equity securities 37 30 0 67
------- ---- ------- -------
Total securities
available-for-sale $ 3,303 $ 30 $ (669) $ 2,664
======= ==== ======= =======
</TABLE>
<PAGE> 9
9
Securities available-for-sale at December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury $ 480 $ 0 $ (138) $ 342
U.S. agency note 490 0 (29) 461
U.S. agency mortgage-backed 1,738 0 (368) 1,370
Municipal bonds 503 0 (50) 453
------- --- ------- -------
Total securities
available-for-sale $ 3,211 $ 0 $ (585) $ 2,626
======= === ======= =======
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains certain forward looking statements which reflect
the Company's expectation or belief concerning future events that involve risks
and uncertainties. Among others, certain forward looking statements relate to
the continued growth of various aspects of the Company's community banking,
merchant banking, mortgage banking and investment activities, and the nature and
adequacy of allowances for loan losses. The Company can give no assurance that
the expectations reflected in forward looking statements will prove correct.
Various factors could cause results to differ materially from the Company's
expectations. Among these factors are those referred to in the introduction to
the Company's Management Discussion and Analysis of Financial Condition and
Results of Operations which appears at Item 7. of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, which should be read in
conjunction with this Report.
The above cautionary statement is for the purpose of qualifying for the
"safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934.
SUBSEQUENT EVENT
During July 2000, University Bank posted a profit from operations of
$32,002 as a result of continued improved results and business volume growth at
Midwest Loan Services and ongoing cost control efforts at University Bank.
SUMMARY
For the six months ended June 30, 2000, a net loss of $546,370 was
realized versus a net loss of $578,360 in the same period in 1999. Net interest
income from continuing operations increased to $648,157 in the 2000 period from
$551,452 in the 1999 period, and other income from continuing operations was
$1,050,739 in the 2000 period versus $869,742 in the 1999 period. Operating
expenses from continuing operations increased to $2,174,220 in the 2000 period
from $1,857,327 in the 1999 period. Basic and diluted net loss per share in the
six months ended June 30, 2000 was ($0.27), compared to a net loss of ($0.29)
for the six months ended June 30, 1999 (and a loss of ($0.24) from continuing
operations in the 1999 period).
<PAGE> 10
10
The decreased loss in 2000 versus 1999 was due to improved results at Midwest
Loan Services that offset the decrease in income from the results of University
Bank and Michigan BIDCO. Discontinued operations at Varsity Mortgage were
unprofitable during the 1999 period.
For the three months ended June 30, 2000, a net loss of $370,978 was
realized versus a net loss of $355,302 in the same period in 1999. Net interest
income from continuing operations increased to $337,763 in the 2000 period from
$306,061 in the 1999 period, and other income from continuing operations was
$498,354 in the 2000 period versus $585,925 in the 1999 period. Operating
expenses from continuing operations increased to $1,146,421 in the 2000 period
from $1,014,238 in the 1999 period. Basic and diluted net loss per share in the
three months ended June 30, 2000 was ($0.18), compared to a net loss of ($0.18)
for the three months ended June 30, 1999 (and a loss of ($0.07) from continuing
operations in the 1999 period).
The following table summarizes the net income (loss) of each profit
center of the Company for the six months ended June 30, 2000 and 1999 (in
thousands):
<TABLE>
Six months ended June 30, 2000 Net Income (Loss) Summary:
<S> <C>
Community Banking $ (678)
Midwest Loan Services 86
Merchant Banking (Michigan BIDCO) 114
Corporate Office (68)
-------
Net Loss $ (546)
=======
Six months ended June 30, 1999 Net Income (Loss) Summary:
Community Banking $ (519)
Midwest Loan Services (17)
Merchant Banking (Michigan BIDCO) 146
Corporate Office (79)
-------
Loss from continuing operations (469)
Loss from discontinued
operations (Varsity Mortgage
and Varsity Funding) (109)
-------
Net Loss $ (578)
=======
</TABLE>
RESULTS OF OPERATIONS
Net Interest Income
Net interest income from continuing operations increased to $337,762
for the three months ended June 30, 2000 from $306,061 for the three months
ended June 30, 1999. Net interest income rose from the year ago period primarily
because of a higher interest rate spread. The yield on interest earning assets
increased from 8.51% in the 1999 period to 9.04% in the 2000 period. The cost of
interest bearing liabilities increased from 5.02% in the 1999 period to 5.17% in
the 2000 period. Net interest income as a percentage of total average earning
assets increased from 3.33% to 3.73%.
<PAGE> 11
11
Net interest income from continuing operations increased to $648,156
for the six months ended June 30, 2000 from $551,452 for the six months ended
June 30, 1999. Net interest income rose from the year ago period primarily
because of a higher interest rate spread. The yield on interest earning assets
increased from 8.55% in the 1999 period to 8.99% in the 2000 period. The cost of
interest bearing liabilities increased from 5.07% for the 1999 period to 5.18%
for the June 30, 2000. Net interest income as a percentage of total average
earning assets increased from 3.09% to 3.66%.
Interest income
Interest income increased to $818,490 in the quarter ended June 30,
2000 from $781,176 in the quarter ended June 30, 1999. The average volume of
interest earning assets decreased to $36,311,151 in the 2000 period from
$36,837,051 in the 1999 period, a decrease of 1.4%. The decreased volume of
earning assets was due to a decrease in loans made to Varsity Mortgage, which
more than offset an increase in portfolio loans. The overall yield on the loan
portfolio increased to 9.35% from 9.01%.
The average volume of investment securities in the three months ended
June 30, 2000 decreased 2.6% over the same period in 1999. The yield on the
securities portfolio increased from 4.29% in the three month period ended June
30, 1999 to 6.19% in the 2000 period.
Interest income increased to $1,590,885 in the six months ended June
30, 2000 from $1,526,917 in the six months ended June 30, 1999. The average
volume of interest earning assets decreased to $35,686,673 in the 2000 period
from $36,029,183 in the 1999 period, a decrease of 1.0%. The overall yield on
the loan portfolio increased to 9.30% from 9.17%.
The average volume of investment securities in the six months ended
June 30, 2000 increased 5.4% over the same period in 1999. The yield on the
securities portfolio increased from 5.54% in the six month period ended June 30,
1999 to 6.15% in the 2000 period.
Interest Expense
Interest expense increased to $480,728 in the three months ended June
30, 2000 from $475,115 in the 1999 period. The increase was due to an increase
in rate paid that more than offset a decrease in interest bearing liabilities as
a result of decreased brokered time deposits. Interest expense was increased
during the period by inclusion of the BIDCO's term debt and increased holding
company debt. The cost of funds increased to 5.17% in the 2000 period from 5.02%
in the 1999 period. The average volume of interest bearing liabilities decreased
1.6% in the 2000 period versus the 1999 period.
Interest expense decreased to $942,728 in the six months ended June 30,
2000 from $975,465 in the 1999 period. The decrease was due to a decrease in
interest bearing liabilities as a result of decreased brokered time deposits.
Interest expense was increased during the period by inclusion of the BIDCO's
term debt and increased holding company debt. The cost of funds increased to
5.18% in the 2000 period from 5.07% in the 1999 period. The average volume of
interest bearing liabilities decreased 5.4% in the 2000 period versus the 1999
period.
<PAGE> 12
12
UNIVERSITY BANCORP
Net Interest Income Table
<TABLE>
<CAPTION>
Three Months Ended June 30, Three Months Ended June 30,
---------------------------------------- --------------------------------------
2000 1999
---------------------------------------- --------------------------------------
Average Interest Average Average Interest Average
Balance Inc(Exp) Yield (1) Balance Inc(Exp) Yield (1)
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Loans:
Commercial $ 12,988,281 $ 331,002 10.22% $ 12,729,689 $ 325,196 10.25%
Real Estate (2) 18,743,899 404,741 8.66% 19,069,401 382,770 8.05%
Installment/Consumer 1,051,286 28,575 10.90% 1,086,710 30,655 11.31%
------------ ------------ ------------ ------------
Total Loans 32,783,466 764,318 9.35% 32,885,800 738,621 9.01%
Investment Securities (3) 3,479,185 53,695 6.19% 3,570,868 38,195 4.29%
Federal Funds & Bank Deposits 48,500 477 3.94% 380,383 4,360 4.60%
------------ ------------ ------------ ------------
Total Interest Bearing Assets $ 36,311,151 $ 818,490 9.04% $ 36,837,051 $ 781,176 8.51%
Interest Bearing Liabilities:
Deposit Accounts:
Now/Super-Now $ 2,907,452 $ 21,046 2.90% $ 3,225,075 $ 25,207 3.13%
Savings 290,465 1,437 1.98% 206,300 1,103 2.14%
Time 15,388,978 234,340 6.11% 18,147,998 252,714 5.59%
Borrowed Funds 3,604,525 54,728 6.09% 2,759,555 34,797 5.06%
Money Market Accts 13,327,101 137,079 4.13% 11,561,539 113,974 3.95%
------------ ------------ ------------ ------------
Total 35,518,521 448,630 5.07% 35,900,467 427,795 4.78%
Convertible Bonds - BIDCO (4) 752,780 16,362 8.72% 1,123,000 25,275 9.03%
Long Term Notes - Bancorp 1,039,649 15,736 6.07% 905,644 22,045 9.76%
------------ ------------ ------------ ------------
Total Interest Bearing
Liabilities $ 37,310,950 $ 480,728 5.17% $ 37,929,111 $ 475,115 5.02%
------------ ------------ ------------ ------------
Net Earning Assets, net interest
income, and interest rate spread $ (999,799) $ 337,762 3.87% $ (1,092,060) $ 306,061 3.48%
Net yield on interest-earning assets 3.73% 3.33%
</TABLE>
(1) Yield is annualized.
(2) The amounts for 1999 were adjusted to eliminate loans and income from
discontinued operations.
(3) Actual yields; not adjusted to take into account tax-equivalent yields
resulting from tax-free municipal income and includes bank deposits.
(4) The converitble bonds at Michigan BIDCO were converted on May 31,2000.
<PAGE> 13
13
UNIVERSITY BANCORP
Net Interest Income Table
<TABLE>
<CAPTION>
Six Months Ended June 30, Six Months Ended June 30,
------------------------------------------- ----------------------------------------
2000 1999
------------------------------------------- ----------------------------------------
Average Interest Average Average Interest Average
Balance Inc(Exp) Yield (1) Balance Inc(Exp) Yield (1)
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Loans:
Commercial $ 13,089,733 $ 645,353 9.94% $ 11,264,617 $ 557,775 9.99%
Real Estate (2) 18,024,575 776,591 8.69% 18,019,043 763,099 8.54%
Installment/Consumer 1,055,757 62,229 11.89% 1,149,336 62,460 10.96%
------------ ------------ ------------ ------------
Total Loans 32,170,065 1,484,173 9.30% 30,432,996 1,383,334 9.17%
Investment Securities (3) 3,470,750 105,847 6.15% 3,294,234 90,469 5.54%
Federal Funds & Bank Deposits 45,858 865 3.80% 2,301,953 53,114 4.65%
------------ ------------ ------------ ------------
Total Interest Bearing Assets $ 35,686,673 $ 1,590,885 8.99% $ 36,029,183 $ 1,526,917 8.55%
Interest Bearing Liabilities:
Deposit Accounts:
Now/Super-Now $ 2,952,898 $ 41,483 2.83% $ 3,256,987 $ 50,666 3.14%
Savings 288,500 2,878 2.01% 194,967 2,225 2.30%
Time 15,076,851 452,944 6.06% 20,089,364 567,977 5.70%
Borrowed Funds 3,383,157 101,083 6.03% 1,591,686 42,513 5.39%
Money Market Accts 13,051,709 263,449 4.07% 12,338,221 252,899 4.13%
------------ ------------ ------------ ------------
Total 34,753,115 861,837 5.00% 37,471,225 916,280 4.93%
Convertible Bonds - BIDCO (4) 936,867 41,624 8.96% 561,500 25,275 9.08%
Long Term Notes - Bancorp 1,032,641 39,268 7.67% 792,635 33,910 8.63%
------------ ------------ ------------ ------------
Total Interest Bearing
Liabilities $ 36,722,623 $ 942,729 5.18% $ 38,825,360 $ 975,465 5.07%
------------ ------------ ------------ ------------
Net Earning Assets, net interest
income, and interest rate spread $ (1,035,950) $ 648,156 3.81% $ (2,796,177) $ 551,452 3.48%
Net yield on interest-earning assets 3.66% 3.09%
</TABLE>
(1) Yield is annualized.
(2) The amounts for 1999 were adjusted to eliminate loans and income from
discontinued operations.
(3) Actual yields; not adjusted to take into account tax-equivalent yields
resulting from tax-free municipal income and includes bank deposits.
(4) The converitble bonds at Michigan BIDCO were converted on May 31,2000.
<PAGE> 14
14
MONTHLY AVERAGE BALANCE SHEET AND INTEREST MARGIN ANALYSIS
The preceding tables on pages 12 and 13 summarize 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, 2000 and 1999.
Allowance for Loan Losses
The provision for loan loss was increased to $65,000 during the second
quarter of 2000 as a result of management's assessment of overall loan quality.
The actual loan losses were $56,536 in the six month period ended June 30, 2000
versus $28,904 in the six month period ended June 30, 1999.
<TABLE>
<CAPTION>
Six months ended: June 30, 2000 June 30, 1999
----------------- ------------- -------------
<S> <C> <C>
Provision for loan losses $ 66,000 $ 45,000
Loan charge-offs (56,536) (28,904)
Recoveries 47,801 25,014
-------- --------
Net increase in allowance $ 57,265 $ 41,110
As of: June 30, 2000 December 31, 1999
----- ------------- -----------------
<S> <C> <C>
Total loans (1) $ 32,190,277 $ 31,112,496
Allowance for loan losses $ 589,850 $ 532,585
Allowance/Loans % (1) 1.83% 1.71%
</TABLE>
(1) Excludes loans held for sale which are valued at fair market value.
<PAGE> 15
15
The following schedule summarizes the Company's non-performing loans
for the periods indicated (1):
<TABLE>
<CAPTION>
At At
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Past due 90 days and over
-------------------------
and still accruing (1):
-------------------------
Real estate $ 10,426 $ 93,883
Installment 1,114 0
Commercial 260,230 123,688
--------- -----------
Subtotal 271,770 217,571
Non-accrual loans (1):
---------------------
Real estate 72,375 144,739
Installment 0 0
Commercial 87,500 0
--------- -----------
Subtotal 159,875 144,739
Other real estate owned 519,015 683,784
----------------------- --------- -----------
Total non-performing $ 950,660 $ 1,046,094
Ratio of non-performing to total loans (1) 2.95% 3.36%
Ratio of loans past due over 90 days and 73.2% 68.0%
non-accrual loans to loan loss reserve
</TABLE>
(1) Excludes loans held for sale which are valued at fair market value.
Subsequent to June 30, 2000, one parcel of other real estate owned was
sold and another parcel was under contract to be sold. These parcels have a
total carrying value of $252,936 and no gain or loss is expected. Other real
estate owned at June 30, 2000 and December 31, 1999 includes a commercial
development site in Sault Ste. Marie, Michigan. Based upon an appraisal,
management believes the 16-acre site where a former loan office is located has a
fair market value substantially more than its carrying value of $266,079 at June
30, 2000. The Bank no longer intends to utilize it for a branch location and
accordingly has classified it as other real estate owned. There is no assurance
that a sale of the Sault Ste Marie property will be consummated.
Economic conditions in the Bank's primary market area in Ann Arbor were
strong in the period. 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 could
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.
<PAGE> 16
16
Non-Interest Income
Total non-interest income decreased to $498,354 for the three months
ended June 30, 2000 from $585,925 for the three months ended June 30, 1999. The
decrease was principally a result of a decrease in the Bank's merchant banking
income. Loan origination and loan subservicing fee income increased during the
period primarily as a result of an increase in volume at Midwest Loan Services.
Total non-interest income increased to $1,050,740 for the six months
ended June 30, 2000 from $869,742 for the six months ended June 30, 1999. The
increase was principally a result of increases in loan origination and loan
subservicing fee income primarily as a result of an increase in volume at
Midwest Loan Services.
Securities. During the three months ended June 30, 2000, there were no
securities sales from the available-for-sale securities portfolio. During the
first quarter of 2000, the BIDCO realized a $3,501 gain on the sale of a common
stock investment. Gross proceeds from this sale were $103,501.
Mortgage Banking. Mortgage banking income (including loan origination,
gain on sale of mortgage loans, servicing and subservicing fee income) increased
to $421,007 in the three months ended June 30, 2000 from $297,396 in the three
months ended June 30, 1999 and increased to $715,604 in the six months ended
June 30, 2000 from $546,945 in the six months ended June 30, 1999. Increased
loan origination and subservicing activity at Midwest Loan Services was
responsible for the increase.
Subsequent to quarter-end, Midwest Loan Services again increased its
mortgage subservicing contracts by nearly 50% in a single month (from $750
million to $1,100 million) as a result of continued increases in business with
the mortgage banking subsidiary of a major Wall Street firm. Although there is
no assurance that further increases will occur, management of Midwest has been
told by this firm to expect additional increases as this firm shifts additional
existing business to Midwest from its former primary subservicing firm. Midwest
currently is receiving between 5% and 10% of the monthly volume of this firm's
subservicing business.
At June 30, 2000, the Bank and its subsidiaries owned the right to
service mortgages for FHLMC, FNMA and others, most of which was owned by Midwest
Loan Services, and the remainder by the Bank. The carrying value of mortgage
servicing rights at June 30, 2000 was $673,135. Based on recent comparable sales
and indications of market value from industry brokers, management believes that
the current market value of the Bank's portfolio of mortgage servicing rights
approximates cost. 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.
<PAGE> 17
17
Michigan BIDCO. In 1999 the Company received permission from the
Michigan Financial Institutions Bureau for the BIDCO to repurchase the shares
and convertible bonds held by certain minority shareholders of the BIDCO. The
shares were repurchased on March 31, 1999 and the bonds in mid-April. As a
result of the transaction, the Company's ownership of the BIDCO increased to
80.1% from 44.1%, and the BIDCO became part of the Company's tax filing group
for federal income tax purposes and the BIDCO's financial results began to be
consolidated in the Company's from March 31, 1999 forward.
On May 31, 2000, the BIDCO converted its outstanding convertible bonds
into common stock (a few convertible bonds were redeemed at that time). With the
conversion of these convertible bonds, the Company's consolidated ownership in
the BIDCO dropped to 28.8%. As a result, the Company's investment in the BIDCO
is now carried under the equity method of accounting, and the BIDCO was no
longer consolidated in the Company's financial results after May 31, 2000.
During the six months ended June 30, 2000, the BIDCO made no new
investments, although its equity interest in two investments were sold for an
amount approximately equal to the carrying value at December 31, 1999.
Management is considering a transaction where the Bank would sell its
interest in the BIDCO to the BIDCO itself. The Bank's board has now approved the
transaction and we are awaiting regulatory approval for the transaction. For
additional details, please see the Company's Report on Form 10-K for the period
ended December 31, 1999.
The BIDCO is pursuing development of a technology to send money
securely over the internet using e-mail file attachments under the web domain
name pay-it.net. The technology, for which a patent has been applied was
developed in connection with the National Center for Manufacturing Sciences,
based in Ann Arbor, and is based on patented technology of InterTrust
Technologies of Palo Alto, California. A pilot of the project has been agreed
for a business to business application in the auto industry and several
additional pilots are being discussed both domestically and internationally.
There is no assurance that the technology, if fully developed and deployed, will
be profitable for the BIDCO.
Non-Interest Expense
Non-interest expense increased to $1,146,421 in the three months ended
June 30, 2000 from $1,014,238 for the three months ended June 30, 1999. The
increase was primarily the result of increased operational expenses at Midwest
Loan Services, and also included increased audit and certain other expenses at
the Bank, which more than offset cost control efforts in other areas at the
Bank.
Non-interest expense increased to $2,174,220 in the six months ended
June 30, 2000 from $1,857,327 for the six months ended June 30, 1999. The
increase was primarily the result of increased operational expenses at Midwest
Loan Services, and also included increased audit and certain other expenses at
the Bank, which more than offset cost control efforts in other areas at the
Bank.
Management has put its audit contract out to bid and is evaluating
several alternatives which would decrease audit expenses going forward.
Non-interest operating expense for the parent company only increased to
$21,115 for the three month 2000 period from $19,307 for the 1999 period. The
increase was primarily the result of an increase in audit expenses.
Non-interest operating expense for the parent company only decreased to
$29,058 for the six month 2000 period from $31,600 for the 1999 period. The
decrease was primarily the result of ongoing efforts to keep holding company
expenses at a minimum.
<PAGE> 18
18
Internet Banking. The Bank anticipates rolling out an internet banking
product to its customers within the next two months. During the quarter, the
Bank's credit card account statements and transaction histories became available
through the Bank's web site to its customers. Also during the quarter, the Bank
became an affiliate reseller of Cybercash(TM) merchant internet credit card
services.
Liquidity and Capital Resources
Capital Resources. The table on page 19 sets forth the Bank's risk
based assets, and the capital ratios and risk based capital ratios of the Bank
and Company. At June 30, 2000, the Bank was "well-capitalized" (the required
ratio for "well-capitalized" was 10% of total risk-based assets).
Long term borrowings at 12/31/99 included $1,123,000 face amount of
Michigan BIDCO's 9% convertible bonds due January 15, 2002. On May 31, 2000, the
majority of the bonds were converted into common stock.
Long term borrowings at 6/30/00 include $425,000 of equity conversion
notes of the Company which are redeemable by the Company only in the context of
an offering of additional shares of common stock, have no set maturity date and
have interest payments deferred until maturity.
Bank Liquidity. The Bank's primary sources of liquidity are customer
deposits, scheduled amortization and prepayments of loan principal, cash flow
from operations, maturities of various investments, the sale of loans held for
sale, 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, 2000, the bank had cash and due from banks
and Federal Funds on hand of $1,365,236. The Bank has a $5,500,000 line of
credit secured by investment securities and portfolio mortgage loans and a
$3,000,000 line of credit secured by commercial loans. In order to bolster
liquidity, the Bank has also sold brokered CDs from time to time.
Parent Company Liquidity. At year-end 1999, University Bancorp, Inc.
held cash and marketable equity securities of $16,067 (excluding Michigan BIDCO
common stock). This increased by $52,247 to $68,314 at June 30, 2000. During the
six months ended June 30, 2000 no dividends were paid from the Bank, as a result
of low profitability at the Bank. In an effort to maintain the Bank's Tier 1
capital to assets ratio above 7% and to increase capital through retained
earnings, management does not expect that the Bank will pay dividends to the
Company during 2000 or 2001. Management intends that the cash and securities on
hand, other receivables, and cash from the sale of common stock and the exercise
of stock options to be sufficient to cover the required principal reductions
during 2000 on the parent company's indebtedness owing to North Country Bank &
Trust ("NCB&T"). The NCB&T loans amounted to $628,000 and $694,000 at June 30,
2000 and at December 31, 1999, respectively.
Subsequent to June 30, 2000, University Bancorp sold its shares of
common stock in Cereus Technology Partners (Symbol CEUS) for a capital gain of
$20,625 for net proceeds of $58,125. We continue to hold 7,500 warrants to buy
Cereus common stock at $10 per share.
<PAGE> 19
19
UNIVERSITY BANK
Risk Adjusted Assets & Risk Adjusted Capital Ratio
June 30, 2000
<TABLE>
<CAPTION>
Balance Risk Weighted
(000s) (000s)
<S> <C> <C>
0% RISK CATEGORY
Currency & Coin $289 $0
U.S. Treasury Strip 493 -
Federal Reserve Balance 26 -
----------------------------------
TOTAL 808 -
20% RISK CATEGORY
Interest Bearing Balances 29 6
Fed Funds Sold 9 2
U.S. Gov't sponsored Agency Sec 2,252 450
Other Mortgage Backed Securities - -
Cash Items 398 80
FHLB Stock 848 170
Balances Due From Depository Institution 640 128
----------------------------------
TOTAL 4,176 835
50% RISK CATEGORY
Municipal Revenue Obligation Securities 521 261
Qualifying 1st Liens on 1-4 Family Mortgage Loans 12,878 6,439
----------------------------------
TOTAL 13,399 6,700
100% RISK CATEGORY
ALL OTHER ASSETS 26,540 26,540
ON BALANCE SHEET ITEMS EXCLUDED FROM CALCULATION
10% of Mortgage Servicing Rights 67
Valuation Adjustment for Government Bonds - AFS (699)
----------------------------------
TOTAL ASSETS $44,291 $34,075
==================================
<CAPTION>
TIER 1 CAPITAL Balance
--------
<S> <C>
Common Stock $200
Surplus 4,432
Undivided Profits & Capital Reserves (1,644)
Minority Interest - Midwest Loan Services 215
Other Identifiable Intangible Assets (67)
-----------------
TOTAL TIER 1 CAPITAL $3,136
TIER 2 CAPITAL
Allowance For Loans & Lease Losses 590
Excess Loan Loan Loss Reserve (limited to 1.25%
gross risk-weighted assets) (164)
-----------------
TOTAL TIER 2 CAPITAL $426
-----------------
TOTAL TIER 1 & TIER 2 CAPITAL $3,562
=================
TIER 1/TOTAL ASSETS 7.08%
TIER 1 & 2/TOTAL ASSETS 8.04%
TIER 1/TOTAL RISK-WEIGHTED ASSETS 9.20%
TIER 1 & 2/TOTAL RISK-WEIGHTED ASSETS 10.45%
</TABLE>
<PAGE> 20
20
Impact of Inflation
The primary impact of inflation on the Company's operations is
reflected in increased operating costs. Since the assets and liabilities of the
Company are primarily monetary in nature, changes in interest rates have a more
significant impact on the Company's performance than the general effects of
inflation. However, to the extent that inflation affects interest rates, it also
affects the net income of the Company.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
All financial institutions are significantly affected by fluctuations in
interest rates commonly referred to as "interest rate risk." The principal
exposure of a financial institution's earnings to interest rate risk is the
difference in time between interest rate adjustments or maturities on
interest-earning assets compared to the time between interest rate adjustments
or maturities on interest-bearing liabilities. Such difference is commonly
referred to as a financial institution's "gap position." In periods when
interest rates are increasing, a negative gap position will result in generally
lower earnings as long-term assets are repricing upward slower than short-term
liabilities. However during a declining rate environment, the opposite effect on
earnings is true, with earnings rising due to long-term assets repricing
downward slower than short-term liabilities.
Rising long term and short term interest rates tend to increase the
value of Midwest Loan Services' investment in mortgage servicing rights and
improve Midwest Loan Services' current return on such rights by lowering
required amortization rates on the rights. Rising interest rates tends to
decrease new mortgage origination activity, negatively impacting current income
from the retail mortgage banking operations of the Bank and Midwest Loan
Services. Rising interest rates also slows Midwest Loan Services' rate of
growth, but increases the duration of its existing subservicing contracts.
The Bank performs a static gap analysis that has limited value as a
simulation because of competitive and other influences that are beyond the
control of the Bank. The table on page 21 details the Bank's interest
sensitivity gap between interest-earning assets and interest-bearing liabilities
at June 30, 2000 using a static gap analysis. 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,
2000 was estimated to be ($20,909,000) or -47.85%.
<PAGE> 21
21
UNIVERSITY BANK
Asset/Liability Position Analysis
($ in 000's)
June 30, 2000
<TABLE>
<CAPTION>
Maturing or Repricing in
3 Mos 91 Days to 1 - 3 3 - 5 Over 5 ALL
ASSETS or Less 1 Year Years Years Years OTHERS TOTAL
------ ------- ------ ----- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Fed Funds 9 - - - - - 9
Loans - Net 4,251 4,172 10,019 4,116 9,819 - 32,377
Non-Accrual Loans - - - - 72 72
Securities - - - - 3,445 - 3,445
Other Assets - - - - - 6,470 6,479
Cash and Due from Banks - - - - - 1,328 1,328
---------------------------------------------------------------------------------------
TOTAL ASSETS 4,260 4,172 10,019 4,116 13,264 7,870 43,701
---------------------------------------------------------------------------------------
LIABILITIES
CD's under $100,000 4,609 3,842 1,384 716 - - 10,551
CD's over $100,000 3,357 1,832 981 105 - - 6,275
MMDA 6,161 6,161 - - - - 12,322
NOW - - 3,102 - - - 3,102
Demand and Escrow - - - - 2,981 2,981
Savings - - 454 - - - 454
Other Borrowings 3,239 140 224 - - - 3,603
Other Liabilities - - - - - 2,093 2,093
Equity - - - - - 2,320 2,320
---------------------------------------------------------------------------------------
TOTAL LIABILITIES 17,366 11,975 6,145 821 - 7,394 43,701
---------------------------------------------------------------------------------------
GAP (13,106) (7,803) 3,874 3,295 13,264 476
=======================================================================================
CUMULATIVE
GAP (13,106) (20,909) (17,035) (13,740) (476) -0-
========================================================================
GAP
PERCENTAGE -29.99% -47.85% -38.98% -31.44% -1.09% 0.00%
========================================================================
</TABLE>
<PAGE> 22
22
PART II OTHER INFORMATION
Item 1. Legal Proceedings
In November 1999, the Bank sold its shares in Varsity Mortgage, LLC to
Paramount Bank of Farmington Hills, Michigan. Subsequent to the sale, Varsity
experienced management problems and a further drop in its business. Paramount
Bank also discovered some accounting errors of approximately $30,000, not
previously uncovered by an internal audit and certain due diligence procedures
performed by an external accounting firm shortly after the sale. Management of
Paramount initiated a lawsuit against the University Bank alleging various
theories of damages as a result of the sale of Varsity to Paramount and seeking
total damages of $750,000. Paramount purchased Varsity for $10 and assumed all
assets and liabilities of Varsity at the time of sale. University Bank intends
to vigorously defend itself, denies Paramount's various allegations (other than
the accounting error dispute), and believes that the suit will ultimately not
have any material financial impact on University Bank.
There are no other material pending legal proceedings to which the
Company or any of its subsidiaries is party or to which any of their properties
are subject.
Item 5. Other information
Parent Company Condensed Financial Information
Certain condensed financial information with respect to
University Bancorp, Inc. is presented on pages 23, 24, and 25.
<PAGE> 23
23
UNIVERSITY BANCORP, INC. (PARENT ONLY)
Condensed Balance Sheets
June 30, 2000 and December 31,1999
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 581 $ 15,834
Securities available for sale 67,733 233
Investment in University Bank 2,329,874 2,885,704
Investment in Michigan BIDCO 77,157 73,397
Other assets 8,450 3,584
----------------- -----------------
Total Assets $ 2,483,795 $ 2,978,752
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 628,000 $ 694,000
Equity conversion bonds 425,000 304,000
Accounts payable 7,811 5,293
Accrued interest payable 31,510 25,000
Tax liabilities 10,299 79
----------------- -----------------
Total Liabilities 1,102,620 1,028,372
Stockholders Equity 1,381,175 1,950,380
----------------- -----------------
Total Liabilities and Stockholders Equity $ 2,483,795 $ 2,978,752
================= =================
</TABLE>
<PAGE> 24
24
UNIVERSITY BANCORP, INC. (PARENT ONLY)
Condensed Statements of Operations
For the Periods Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
For Three Month For Six Month
Period Ended Period Ended
2000 1999 2000 1999
-------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Income:
Dividends from subsidiary $ 0 $ 0 $ 0 $ 0
Interest & dividends on investments 26 425 161 2,462
Income (loss) from Michigan BIDCO (578) 0 3,760 0
Gain (loss) on sale of securities 0 6,906 0 (16,102)
-------------- --------------- --------------- ----------------
Total Income (552) 7,331 3,921 (13,640)
Expense:
Interest 15,736 16,810 39,268 33,910
Salaries & benefits 0 (2) 0 1,082
Public listing 9,295 10,623 12,696 13,003
Audit & legal 10,552 7,658 14,801 14,718
Other taxes 6 716 6 1,986
Occupancy & other miscellaneous 1,262 312 1,555 811
-------------- --------------- --------------- ----------------
Total Expense 36,851 36,117 68,326 65,510
Income (loss) before federal income taxes
(benefit) and equity in undistributed
net income (loss) of subsidiaries (37,403) (28,786) (64,405) (79,150)
Federal income taxes (benefit) 0 0 0 0
-------------- --------------- --------------- ----------------
Income (loss) before equity in
undistributed net income of subsidiaries (37,403) (28,786) (64,405) (79,150)
Equity in undistributed net income (loss)
of subsidiaries. (333,575) (326,517) (481,965) (499,210)
-------------- --------------- --------------- ----------------
Net loss $ (370,978) $ (355,303) $ (546,370) $ (578,360)
============== =============== =============== ================
Basic and diluted net loss per common share $ (0.18) $ (0.18) $ (0.27) $ (0.29)
============== =============== =============== ================
Weighted average shares outstanding 2,027,801 1,989,139 2,025,658 1,989,139
============== =============== =============== ================
</TABLE>
<PAGE> 25
25
UNIVERSITY BANCORP, INC. (PARENT ONLY)
Condensed Statement of Cash Flows
For the Six Months Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
------------------- -------------------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (546,370) $ (578,360)
Reconciliation of net loss to net cash from
operating activities:
Loss (gain) on sale of securities 0 16,102
Net amortization/accretion on securities 0 (883)
Change in other assets (4,866) 27,238
Change in other liabilities 9,028 24,876
Change in investment in Michigan BIDCO (3,760) 0
Change in investment in University Bank 481,965 323,117
------------------- -------------------
Net cash from operating activities (64,003) (187,910)
------------------- -------------------
Cash flow from investing activities:
Advances to Michigan BIDCO 0 (20,896)
Purchase of securities available for sale (37,500) 0
Proceeds from sale of securities available for sale 0 75,432
------------------- -------------------
Net cash from investing activities (37,500) 54,536
------------------- -------------------
Cash flow from financing activities:
Principal payment on notes payable (66,000) (66,000)
BIDCO conversion of bonds to common stock 170,872
Issuance of equity conversion bonds 121,000 0
Proceeds from sale of common stock 31,250 0
------------------- -------------------
Net cash from financing activities 86,250 104,872
------------------- -------------------
Net changes in cash and cash equivalents (15,253) (28,502)
Cash and cash equivalents:
Beginning of period 15,834 33,702
------------------- -------------------
End of period $ 581 $ 5,200
=================== ===================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 32,758 $ 35,151
BIDCO conversion of bonds to common stock 26,117
</TABLE>
<PAGE> 26
26
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVERSITY BANCORP, INC.
Date: August 11, 2000
/s/ Stephen Lange Ranzini
-------------------------
Stephen Lange Ranzini
President & CEO
<PAGE> 27
27
Exhibit Index Sequentially
Numbered Page
27. Financial Data Schedule 28
