University Bancorp in Ann Arbor, Mich., agreed to acquire the 20% stake in Midwest Loan Services that it doesn't already own for about $3.1 million in stock, cash and other considerations.
The $113 million-asset University Bancorp plans to seek shareholder approval to issue a new series of convertible stock to fund the purchase, because the company currently lacks enough common stock to complete the deal, it said in a Tuesday news release.
The purchase price will consist of about $2.1 million of the newly issued stock, about $521,000 in cash, and an additional amount in potential interest earn-out from University Bancorp's interest in zero interest rate cost mortgage subservicing escrow deposits.
University Bancorp expects to close the deal by the end of the year. The company said it does not believe it needs regulatory approval for the deal, because Midwest Loan will be 100% owned by its University Bank subsidiary. However, it is in discussions with its regulators to confirm that approval isn't needed.
University Bancorp will acquire the remaining stake in Midwest Loan from Ed Burger, who recently retired as Midwest Loan's chief executive. The Houghton, Mich., company is a mortgage subservicer that manages more than 100,000 residential loans for about 360 financial institutions. Midwest Loan also controls about $190 million in zero interest escrow deposits.