ANN ARBOR, MI - University Bancorp, Inc. (OTCQB:UNIB) has announced the issuance of $15 million in Senior Unsecured Notes with a 9.25% annual interest rate, maturing on January 31, 2030. The offering was facilitated by Piper Sandler & Co. as the placement agent.
The company detailed that the Notes were sold at 100% of their principal value and allow for redemption at the company's discretion on or after the Interest Payment Date of January 31, 2028. This redemption is subject to the terms that the price will be equivalent to the principal amount plus any accrued and unpaid interest up to the redemption date.
In addition to the newly issued Notes, University Bancorp also reported holding $28 million in Subordinated Notes, which are set to mature on January 31, 2033. These notes have a two-phase interest structure: a fixed 8.25% for the first five years, followed by a variable rate for the next five years, which has been effectively fixed at 8.08% due to an interest rate swap agreement.
The company also confirmed the existence of a $10 million Line of Credit, which was fully repaid with the proceeds from the Senior Unsecured Bonds. As of September 30, 2024, the Line of Credit has no outstanding balance and is set to mature in October 2025 with an interest capped at 6.25%.
The press release also highlighted a milestone achievement for University Bank, a wholly-owned subsidiary of University Bancorp, which saw its shareholders' equity surpass the $100 million mark for the first time as of August 31, 2024. Despite a subsequent dividend payment reducing the equity below this threshold, the company anticipates reaching and maintaining this benchmark in the future.
University Bancorp's cash and equity investment securities were reported to be $19.7 million as of September 30, 2024, with $6.5 million drawn on the Line of Credit.
This financial activity comes from the backdrop of University Bancorp's broader corporate structure, which includes multiple subsidiaries across the banking, insurance, and mortgage servicing sectors, with over $40 billion in managed financial assets.
The Senior Unsecured Notes have not been registered under the United States Securities Act of 1933 or any state securities laws, and thus cannot be offered or sold without registration or an exemption from registration requirements.
This report is based on a press release statement from University Bancorp, Inc.
In other recent news, University Bancorp finalized its internal restructuring through the acquisition of Hyrex Servicing, LLC for $5.5 million. This strategic move is anticipated to bolster University Bank's Tier 1 Capital by over $3.14 million and release an additional $550,000 in Tier 1 Capital, amounting to a total of $3.69 million. The acquisition also signifies a shift in strategy for University Bank, potentially freeing up an additional $7 million in Tier 1 Capital over time.
Hyrex Servicing, now a part of University Bancorp, is a Primary Servicer approved by Fannie Mae and Freddie Mac, with the ability to own mortgage servicing rights in 42 states plus the District of Columbia. The company aims to generate revenue by managing mortgage-related assets in collaboration with third-party investment advisors and institutional investors.
In terms of financial performance, University Bancorp reported a substantial increase in net income for the first quarter of 2024, amounting to $2,129,852, or $0.43 per share, up from $855,818, or $0.17 per share, in the same period last year. The shareholders' equity as of March 31, 2024, rose to $86,348,746, which corresponds to $16.70 per share. These recent developments underscore the company's ongoing efforts to strengthen its financial position and expand its operations.
InvestingPro Insights
University Bancorp's recent financial moves, including the issuance of $15 million in Senior Unsecured Notes, can be better understood in light of some key financial metrics and insights from InvestingPro.
According to InvestingPro data, University Bancorp's revenue for the last twelve months as of Q4 2023 stood at $88.1 million, with an operating income of $9.72 million, resulting in an operating income margin of 11.03%. These figures provide context to the company's financial position and its ability to service the new debt.
An InvestingPro Tip indicates that University Bancorp is "trading at a low P/E ratio relative to near-term earnings growth." This is supported by the company's P/E ratio of 14.81 and a notably low PEG ratio of 0.32, suggesting that the stock may be undervalued relative to its earnings growth potential. This could be particularly relevant for investors considering the company's recent debt issuance and its potential impact on future earnings.
Another InvestingPro Tip notes that the company "pays a significant dividend to shareholders," which aligns with the article's mention of dividend payments affecting the bank's equity. This dividend policy, combined with the new debt issuance, reflects the company's approach to balancing shareholder returns with capital management.
For readers interested in a more comprehensive analysis, InvestingPro offers 8 additional tips for University Bancorp, providing a deeper understanding of the company's financial health and market position.
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