University Bancorp Closes $25 Million Equity Investment & Secures a $12.5 Million Line of Credit Financing

Rhea-AI Summary

University Bancorp (OTCQB: UNIB) closed a $25 million equity investment from Castle Creek Fund and will close a $12.5 million one-year line of credit on Dec 2, 2025 with interest indexed to WSJ Prime (floor 5.00%, ceiling 25.00%).

The Series 6 preferred pays 6% annual dividends, stepping to 12% after year five, is convertible at $19.05 per share, includes redemption/conversion mechanics and board nomination and registration rights, and includes pro rata preemptive rights. Management targets SEC registration within five years and called an annual meeting for Dec 17, 2025. Common quarterly dividend is $0.10 (record Dec 1, payable Dec 8, 2025).

Positive

• $25M equity closed with institutional Castle Creek Fund
• $12.5M committed one-year line of credit
• Series 6 preferred convertible at $19.05 per share
• Castle Creek may nominate 1 board member at ≥4.9% ownership
• Management goal: SEC registration within 5 years

Negative

• Series 6 dividends noncumulative; missed payments block common dividends
• Series 6 rate steps from 6% to 12% after five years (redeem incentive)
• Line of credit interest capped at 25% ceiling and floored at 5%
• Conversion triggers and redemption require full preferred redemption only

Annual Shareholder Meeting Set for December 17, 2025

ANN ARBOR, MI / ACCESS Newswire / November 18, 2025 / University Bancorp, Inc. (OTCQB:UNIB) or ("UNIB") announced that it has closed on a material financing, a $25 Million equity investment.

In addition, the Company has scheduled a closing on December 2, 2025 of a $12.5 million line of credit, which is a one-year agreement, with interest at The Wall Street Journal Prime Rate, as such Index may vary from time to time. The Effective Interest Rate under this line of credit has a floor of 5.00% and a ceiling of 25.00%, and is secured by a first lien on the Company's ownership of 100% of University Bank, in favor of the lender, which is a bankers' bank.

The $25 million equity investment was made by Castle Creek Capital Partners IX, LP, a Delaware limited partnership (the "Castle Creek Fund"), a newly organized fund managed by Castle Creek Capital, a major institutional investor in community banks nationwide. The fund is expected to have a life of at least 8 years, and this is the second investment by the Castle Creek Fund. The new equity investment will assist the Company with closing four small acquisitions, pending regulatory approvals, which will expand our core banking, insurance and wealth management businesses. The Company currently anticipates that its return on investment from these investments collectively exceeds a 20% annual rate of return.

Key Terms of the Equity Investment by the Castle Creek Fund are as follows:

Equity Investment:

• A fund managed by Castle Creek has purchased $25 million of a new class of Series 6 convertible perpetual noncumulative preferred stock of UNIB.

Dividends:

• Series 6 Preferred pays a quarterly dividend of 6% annual rate, increasing to a 12% annual rate after the fifth anniversary.

• Dividends are noncumulative, meaning that a quarterly dividend that is not declared and not paid does not carry forward, the investor loses it.

• However, if UNIB misses a quarterly dividend on the Series 6 preferred stock then no dividends may be paid on common until Series 6 dividends resume.

Conversion:

• Convertible into common stock at the Castle Creek Fund's option at any time, in whole or in part, at $19.05 per share (subject to adjustment in certain circumstances). There are special mechanics for converting into Series 7 preferred or nonvoting common stock if conversion would result in the Castle Creek Fund owning more than 9.9% of total common stock.

• The conversion price adjusts downward or at the option of the Company an extra cash dividend must be paid on the preferred for any acquisition in the first year after closing that dilutes tangible book value per share by more than a set minimum amount, if the tangible book value falls under an amount targeted quarter by quarter.

• The conversion price also adjusts, or an extra cash dividend must be paid on the preferred, if common stock dividends are paid in excess of 2% of Tangible Book Value per share per year on common stock.

• UNIB cannot force the Castle Creek Fund to convert to common stock, except via redemption.

Redemption:

• Redemption option #1: following the fifth anniversary, UNIB can redeem at $1,000 per share par if UNIB is both (a) SEC registered, and (b) its common stock price is trading above 150% of then current conversion price.

• Redemption option #2: following the fifth anniversary, UNIB has the right to redeem the preferred stock at $2,000 per share (double what the Castle Creek Fund paid) if UNIB is not SEC registered.

• UNIB can redeem the preferred stock only if it has Federal Reserve approval to do the redemption.

• The Castle Creek Fund has the opportunity to choose to convert the preferred stock to common stock if it receives a notice of redemption before any redemption occurs.

• UNIB will have the right to redeem the preferred at $1,000 par per preferred share only if trading price of the Company's common stock for a certain number of trading days exceeds $28.58 (150% of $19.05). The amount of $28.58 is a 73% premium to the current stock price of around $16.50.

• Any redemption must be for all of the outstanding shares of preferred stock.

Other Terms/Considerations:

• UNIB does not expect that the Series 6 would qualify as Additional Tier 1 Capital. That is because the FRB regulations for Tier 1 Capital, specifically Regulation Y 217.20 states that to qualify as Tier 1 the instrument "does not contain any term or feature that creates an incentive to redeem". The step up in interest rate from 6% to 12% at the five-year mark likely creates an incentive to redeem in the eyes of the FRB. UNIB is not required to comply with any Tier 1 Capital Ratio requirements, and will continue to be exempt from those requirements, unless its consolidated assets increase to more than $3 billion. This limit may also be raised in the future by Congress, where there is a bill already being discussed, or by regulation by the Federal Reserve.

• The Castle Creek Fund has a right to nominate a director to the board of UNIB as long as it owns 4.9%+ on an as converted basis, and two directors if the UNIB board has 8 or more directors. UNIB currently has six directors.

• A side letter agreement gives the Castle Creek Fund extensive ongoing rights to obtain routine information from UNIB.

• The Castle Creek Fund has certain preemptive rights to participate pro rata if UNIB issues additional equity in a future equity capital raise.

• Registration Rights: The Castle Creek Fund has the right, beginning on the fifth anniversary, to force UNIB to become an SEC reporting public company. There are penalties for failure to comply with a request to become an SEC reporting company.

It is the goal of Management and the Board to obtain SEC registration within five years, once UNIB's common stock qualifies for inclusion in the Russell 2000 Index. We believe that a substantial benefit will accrue to the shareholders of UNIB upon inclusion in the Russell 2000 Index, and have set this as a key corporate goal for the next few years.

Annual Shareholder Meeting
UNIB has called for a meeting of its shareholders for December 17, 2025, at Noon Eastern Time, at the headquarters of University Bank, 2015 Washtenaw Ave., Ann Arbor, Michigan 48104, for the purpose of considering and voting upon:

• The election of seven individuals to the UNIB Board of Directors. The existing six directors of UNIB have indicated their willingness to stand for re-election and a director representing the Castle Creek Fund is also expected to be nominated;

• The approval and adoption of the Amendment to change the authorized shares from 6,000,000 shares of common stock and 500,000 shares of preferred stock to 15,000,000 shares of voting common stock, 3,000,000 shares of non-voting common stock, both with a par value of $0.01 per share, and 2,000,000 shares of preferred stock with a par value of $0.001, and to transact such other business as may properly come before the annual Shareholders Meeting. The board seeks an increase in the number of authorized shares to satisfy the terms of the Castle Creek Fund's investment transaction documents, and to support future needs. None of the four pending small acquisitions entail the issuance of additional shares of common stock or preferred stock, however flexibility to support future initiatives is prudent.

The close of business on December 3, 2025, has been fixed as the record date for determining stockholders entitled to notice of, and to vote at, the Shareholders Meeting and any adjournments or postponements thereof. The resolutions for the annual meeting will be posted on the Company's website prior to the record date.

Shareholders and investors are encouraged to refer to the financial information including the investor presentations, audited financial statements, strategic plan and prior press releases, available on our investor relations web page at: http://www.university-bank.com/bancorp/.

Quarterly Dividend
The Company is paying a regular quarterly cash dividend of $0.10 per share on its common stock. The Record Date is December 1, 2025 and the Payable Date is December 8, 2025.

About UNIB
When UNIB announced its 2024 financial results, we noted the following key accomplishments:

• Revenue in 2024 grew 18.65%. Our 10-year average revenue growth was 18.70%;

• Return on Equity (ROE) for 2024 was 12.5%. Our 10-year average ROE was 25.97%;

• Shareholders' equity at University Bank exceeded $100 million for the first time ever.

Shareholders' equity at UNIB at 9/31/2025 was $98,317,449.51 (excluding minority interest of $12,668,501), or $19.02 per share, based on common shares outstanding at September 30, 2024 of 5,169,518.

Shareholders and investors are encouraged to refer to the financial information including the investor presentations, audited financial statements, strategic plan and prior press releases, available on our investor relations web page at: http://www.university-bank.com/bancorp/.

Ann Arbor-based University Bancorp is a Federal Reserve regulated financial holding company that owns:

• 100% of University Bank, a bank based in Ann Arbor, Michigan;

• 100% of Crescent Assurance, PCC, a captive insurance company licensed in Washington DC; and

• 100% of Hyrex Servicing, a master mortgage servicing firm, based in Ann Arbor, Michigan.

University Bank together with its Michigan-based subsidiaries, holds and manages a total of over $35 billion in financial assets for over 183,000 customers, and our 533 employees make us the 5th largest bank based in Michigan. University Bank is an FDIC-insured, locally owned and managed community bank, and meets the financial needs of its community through its creative and innovative services. Founded in 1890, University Bank® is the 15th oldest bank headquartered in Michigan. We are proud to have been selected as the "Community Bankers of the Year" by American Banker magazine and as the recipient of the American Bankers Association's Community Bank Award. University Bank is a Member FDIC. The members of University Bank's corporate family, ranked by their size of revenues are:

• UIF, a faith-based banking firm based in Southfield, MI;

• University Lending Group, a retail residential mortgage originator based in Clinton Township, MI;

• Midwest Loan Services, a residential mortgage subservicer based in Houghton, MI;

• Community Banking, based in Ann Arbor, MI, which provides traditional community banking services in the Ann Arbor area;

• Ann Arbor Insurance Centre, an independent insurance agency based in Ann Arbor, MI.

• Mortgage Warehouse Lending, a mortgage warehouse lender based in Southfield, MI.

CAUTIONARY STATEMENT: This press release contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning future growth in assets, pre-tax income and net income, budgeted income levels, the sustainability of past results, mortgage origination levels and margins, valuations, and other expectations and/or goals. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting our operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We undertake no obligation to update any information or forward-looking statement.

Contact: Stephen Lange Ranzini, President and CEO
Phone: 734-741-5858, Ext. 9226
Email: ranzini@university-bank.com

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SOURCE: University Bancorp, Inc.

View the original press release on ACCESS Newswire

FAQ

What did University Bancorp (UNIB) announce on November 18, 2025 regarding new capital?

UNIB closed a $25 million equity investment from Castle Creek and will close a $12.5 million one-year line of credit on Dec 2, 2025.

What are the dividend and conversion terms of UNIB's Series 6 preferred sold to Castle Creek (UNIB)?

Series 6 pays 6% annual dividends, steps to 12% after five years, is noncumulative and convertible at $19.05 per share.

How could the Castle Creek investment affect UNIB's board and SEC status (UNIB)?

Castle Creek can nominate a director while owning ≥4.9% on an as-converted basis and has registration rights to force SEC reporting beginning year five.

When is University Bancorp's annual shareholder meeting and record date for voting (UNIB)?

The annual meeting is scheduled for Dec 17, 2025; the record date for voting is Dec 3, 2025.

Will UNIB continue paying a common dividend after the Castle Creek deal (UNIB)?

UNIB declared a common quarterly cash dividend of $0.10 per share (record Dec 1, payable Dec 8, 2025); however, unpaid Series 6 dividends block common dividends until resumed.