University Bancorp finalizes internal restructuring
ANN ARBOR, MI – University Bancorp, Inc. (OTCQB:UNIB) has completed an internal corporate restructuring with the acquisition of Hyrex Servicing, LLC through its wholly owned subsidiary, Hyrex Servicing Holding Company, LLC, for $5.5 million. This transaction is expected to increase University Bank’s Tier 1 Capital by over $3.14 million and release $550,000 in additional Tier 1 Capital, totaling $3.69 million of capital.
Hyrex Servicing, a Primary Servicer approved by Fannie Mae and Freddie Mac, is able to own mortgage servicing rights (MSR) in 42 states plus the District of Columbia, with intentions to expand to the remaining eight states. They also possess the capability to own whole loans in all 50 states. The company plans to generate revenue by partnering with third-party investment advisors and institutional investors to manage mortgage-related assets, which should enhance its enterprise value as the assets on its balance sheet grow.
The acquisition also indicates a strategic move for University Bank, as some MSRs will be sourced from the bank and its affiliates, potentially freeing up an additional $7 million in Tier 1 Capital over time. Hyrex Servicing uses University Bank as its primary depository and Midwest Loan Services as its primary subservicer.
University Bancorp reported a net income of $2,129,852, or $0.43 per share, for the first quarter of 2024, a significant increase from the $855,818, or $0.17 per share, recorded 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 based on the 5,169,518 shares of UNIB common stock outstanding.
University Bank, a subsidiary of University Bancorp, is now licensed to originate both forward and reverse mortgage loans in all 50 states and the District of Columbia, positioning the company for further growth. The bank, along with its subsidiaries, manages over $40 billion in financial assets for more than 198,000 customers, making it the 5th largest bank based in Michigan.
InvestingPro Insights
As University Bancorp, Inc. (UNIB) embarks on its strategic acquisition of Hyrex Servicing, LLC, the financial metrics and market performance of the company offer insights into its current valuation and future prospects. According to InvestingPro data, University Bancorp is trading at a P/E ratio of 14.92, which is relatively low given its near-term earnings growth. This is complemented by a PEG ratio of 0.32, suggesting that the company’s stock may be undervalued relative to its earnings growth potential.
The company’s revenue for the last twelve months as of Q4 2023 stood at $88.1 million, despite experiencing a slight revenue decline of 4.39%. Nonetheless, University Bancorp has managed to maintain a robust operating income margin of 11.03%, underlining efficient management of its operations. The company also upholds its commitment to shareholders by offering a significant dividend, with the last ex-date recorded on May 27, 2022.
One InvestingPro Tip for potential investors is the company’s position as a prominent player in the Banks industry, which could be a key factor in its ability to navigate market conditions and capitalize on growth opportunities. Moreover, University Bancorp has been profitable over the last twelve months, which is a reassuring signal for investors looking for stable returns.
Investors seeking a more comprehensive analysis of University Bancorp can find additional InvestingPro Tips, including insights on the company’s cash flow and gross profit margins, on the InvestingPro platform. There are currently six more tips listed for University Bancorp at https://www.investing.com/pro/UNIB, which could further inform investment decisions.
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