University Bancorp, Inc. (NASDAQ: UNIB)
reported unaudited net income of $7,960 for the third quarter of 2005,
versus a net loss of $216,288 for the same period in 2004. Basic and
diluted earnings (loss) per share for the 2005 and 2004 periods were $0.00
and $(0.05), respectively. The Company's net income for the first nine
months of 2005 was $112,063, versus a net loss of $486,847 for the same
period last year. Basic and diluted (loss) earnings per share for the
first nine months of 2005 and 2004 were $0.02 and $(0.12), respectively.

Community Banking reported a net loss of $101,000 during 3Q2005 as opposed
to a net loss of $41,000 in 3Q2004 and a profit of $43,000 in the second
quarter of 2005. During the quarter, we incurred $70,000 in extra costs
associated with the acquisition of the Company's new headquarters. Net
interest margin increased by just $29,644 on the quarter from the prior
year as a 14.3% increase in the average balance of loans was largely offset
by margin compression caused by the rapid rise in short term interest
rates. Total non-performing assets dropped 82.2% to $276,937 in 2005 from
$1,553,172 at year-end 2004. Included in non-performing assets, other real
estate owned ("ORE") dropped from $534,043 at December 31, 2004 to
$210,437. The remaining ORE on the books has a market value that exceeds
the carrying value by about $50,000.

Midwest Loan Services reported net income of $145,000 for the third quarter
of 2005 as compared to a net loss of $83,000 for the same period in 2004.
Income at Midwest was positively impacted in the third quarter of 2005 by a
$99,000 partial reversal of the mortgage servicing right impairment reserve
against the mortgage servicing rights portfolio. At the end of the
quarter, the mortgage rates increased, thus affecting the value of the
portfolio. Also subservicing and loan origination income were higher.
Midwest's portfolio of mortgage subservicing grew 9.1% in the third quarter
of 2005 to 22,519 loans from 20,646, and is now 23.5% higher than at the
end of 2004, when 18,233 loans were subserviced. Management anticipates
based on current contractual arrangements to have over 24,000 loans
subserviced at the end of December.

The three and nine month results are not necessarily indicative of future
results. University Bank net income in the final quarter of 2005 is likely
to include a projected gain of $750,000 anticipated from the relocation of
its headquarters building on December 10th.

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At September 30, 2005, the Bank's Tier 1 leverage capital ratio was 6.30%,
down from 6.64% at June 30, 2005. The gain from the relocation of the
bank's headquarters and related regulatory accounting issues is anticipated
to increase the bank's Tier 1 leverage capital ratio by 1.8%, a 28.6%
increase.

The Company's net income for the first nine months of 2005 was $112,063,
versus a net loss of $486,847 for the same period last year. Community
Banking reported a net loss of $58,000 during the current year's first nine
months as opposed to a loss of $249,346 in the prior year. Community
Banking benefited from an increase in the net interest margin and lower
expenses related to non performing assets. Midwest Loan Services had net
income of $221,000 in the first nine months of 2005 compared to a net loss
of $100,920 in the same period last year. Net income at Midwest was
positively impacted in the first nine months of 2005 by an increase in loan
origination and subservicing fees and lower servicing rights amortization
expense. Income at Midwest was negatively impacted in the first nine
months of 2004 by approximately $30,000 a month in overhead expenses
incurred to grow Midwest's jumbo and non-standard originations through a
secondary market conduit established with Lehman Brothers.

For the For the
Quarter Ended Nine Months Ended
September 30, September 30,
(in 000s) (in 000s)
2005 2004 2005 2004
Net interest income $ 552 $ 522 $ 1,708 $ 1,429
Provision for loan losses 0 (27) 17 17
Total securities gains 22 0 22 1
Total other income 1,032 853 3,078 2,887
Total other expense 1,598 1,538 4,678 4,707
Income tax 0 80 0 80
Net income (loss) $ 8 $ (216) $ 112 $ (487)
Basic and diluted income
(loss) per common share $ 0.00 $ (0.05) $ 0.02 $ (0.12)
Average shares outstanding
Basic 4,149 4,091 4,146 4,080
Diluted 4,149 4,091 4,184 4,080
Net interest margin 4.47% 4.98% 4.79% 4.73%
Period-end: September 30, December 31,
2005 2004 2004
Loans & Loans Held for Sale $45,517 $41,727 $43,846
Allowance for loan losses 349 454 353
Deposits 51,915 42,861 44,588
Assets 56,696 49,049 50,786
Equity 3,423 3,063 3,002
Book value per share $ 0.83 $ 0.75 $ 0.73

The following table summarizes the pre-tax (loss) income of each profit
center of the Company for the three months ended September 30, 2005 and
2004 (in thousands):

2005 Three Months Nine months
Community Banking $ (101) $ (58)
Midwest Loan Services 145 221
Corporate Office (36) (51)
-------- --------
Total $ 8 $ 112
======== ========
2004 Three Months Nine months
Community Banking $ (41) $ (249)
Midwest Loan Services (83) (101)
Corporate Office (12) (57)
-------- --------
Total $ (136) $ (407)
======== ========

Ann Arbor-based University Bancorp owns 100% of University Bank which
manages a total of $2.95 billion in assets. University Bank is an
FDIC-insured, locally owned and managed Community Bank primarily serving
the cities of Ann Arbor and Ypsilanti of Washtenaw County. The Community
Banking operation focuses on financing home loans, local businesses,
minorities and the non-profit communities. University Bank is the only
financial institution headquartered in Washtenaw County to be rated
"Outstanding" by the FDIC for Community Service and Community Reinvestment.
Other Community Banking specialties include highly competitive deposit
products for business owners, residential mortgages, commercial real estate
lending and insurance, investments and money management through its wholly
owned subsidiary University Insurance & Investments, Inc. In addition to
its Community Banking operations, University Bancorp specializes in
mortgage subservicing and mortgage origination primarily serving over 180
credit unions (representing 1.9% of all credit unions nationwide) through
the Bank's Houghton-based 80%-owned subsidiary, Midwest Loan Services.

Any prediction of the future is inherently not assured. Investors should
read the risk factors listed on pages 21 and 22 in the Company's report on
Form 10K for the year ended December 31, 2004 and any prediction in this
release is intended to be covered by the Safe Harbor provisions of Section
21E of the Securities Exchange Act of 1934.

Contact:
Stephen Lange Ranzini
President and CEO
Phone: 734-741-5858, Ext. 226
Email: Email Contact
SOURCE: University Bancorp