1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                    FORM 10-K
                    [X] ANNUAL REPORT PURSUANT TO SECTION 13
                       OR 15(d) OF THE SECURITIES EXCHANGE
                      ACT OF 1934 for the fiscal year ended
                                December 31, 2002
                                       OR
    [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
           For the transition period from ____________ to ___________

                         Commission file number 0-16023

                            UNIVERSITY BANCORP, INC.
             (Exact name of registrant as specified in its charter)
         Delaware                                             38-2929531
------------------------------------                 ---------------------------
(State or other jurisdiction of     (I.R.S. Employer incorporation)
         Identification No.

959 Maiden Lane, Ann Arbor, Michigan                    48105
------------------------------------                 ---------
(Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code (734) 741-5858
                                                   --------------

Securities registered pursuant to section 12(b) of the Act: NONE Securities
registered pursuant to section 12(g) of the Act:
         Common Stock, par value $.010 per share

         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
         Yes   X     No
              ---       ---
         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of registrant's  knowledge, in definitive proxy or other information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [X]

         The number of shares outstanding of the Registrant's Common Stock as of
March 27 2003: 3,899,548 shares. The aggregate market value of the voting stock
held by non-affiliates of the Registrant based on $0.975 per share, the average
bid and asked price for the Registrant's Common Stock on March 27, 2003, as
reported by NASDAQ, was approximately $976,089.

* For purposes of this calculation shares of the Registrant held by directors
and officers of the Registrant and by other affiliates have been excluded.

                               Page 1 of 87 pages
                 Exhibit index on sequentially numbered page 81


<PAGE>



PART I.

Item 1. - Business

General

         University Bancorp, Inc.  The Company is a Delaware corporation which
operates as a bank holding company for its wholly-owned  subsidiary,  University
Bank. The Company changed its name to `University Bancorp,  Inc.' from `Newberry
Bancorp, Inc.' in 1996, in order to better identify itself with the Bank.

         University Bank. The Bank is a state chartered community bank. The Bank
was chartered by the state of Michigan in 1908 and began business in 1890. In
1994, we sold the bank's offices in Newberry, Michigan and Sault Ste. Marie,
Michigan. As part of a non-compete agreement with the purchaser of the bank's
offices, we relocated the Bank's main office to the former offices of its
mortgage operation in Sault Ste. Marie, Michigan. In 1995, the Bank changed its
name from `The Newberry State Bank' to `University Bank' to more closely
identify with its current place of business, Ann Arbor, Michigan. Ann Arbor is a
university town, home to the University of Michigan and is the largest city in
Washtenaw County, just west of the Detroit Metropolitan Statistical Area. The
Bank's primary market area is defined as the City of Ann Arbor and surrounding
areas in greater Washtenaw County.

         Midwest Loan Services. In 1995, University Bank acquired 80% of the
common stock of Midwest Loan Services. Midwest specializes in the origination,
servicing and subservicing of mortgage loans for various credit unions,
financial institutions and mortgage brokers. Most of their servicing and
subservicing portfolio is comprised of residential mortgage loans sold to Fannie
Mae, Freddie Mac and other private residential mortgage conduits.

         University Insurance & Investment Services. In 1996, University Bank
established an insurance and investment products sales agency. This subsidiary
of the Bank, called "University Insurance & Investment Services, Inc." (the
Agency) is based in the Bank's Ann Arbor office. The Agency is licensed by the
State of Michigan to sell insurance as agent for licensed insurance companies. A
d/b/a of the Agency, University Insurance Center, commenced business in 1999,
adding a full service property and casualty insurance agency offering insurance
for homes, autos, apartments and businesses in addition to the original products
which included life and health care insurance, annuities and mutual fund sales.
Employees of the Agency are also licensed to sell investment products such as
annuities and mutual funds, and the President of the Bank, who is also Chairman
of the Agency, also offers broker-dealer investment services including money
management through a clearing arrangement with Equitas America LLC and Pershing.

         Michigan BIDCO. In 1993, Stephen Lange Ranzini and Joseph
Louis Ranzini founded a BIDCO, which is a Business and Industrial Development
Company, called Michigan BIDCO, Inc. The BIDCO is licensed by the Michigan
Office of Financial and Insurance Services under the State of Michigan BIDCO
program. Michigan BIDCO (formerly known as Northern Michigan BIDCO) invests in
businesses in Michigan with the objective of fostering job growth and economic
development. As a result of the recent buyout of the Bank's interest in the
BIDCO, University Bancorp currently owns 6.10% of the BIDCO. The Bank also holds
$600,000 of 7.5% cumulative preferred stock of the BIDCO.
<PAGE>

         Northern Michigan Foundation. In 1995, Michigan BIDCO donated $225,000
to capitalize Northern Michigan Foundation, and in 1996, donated an additional
$75,000 to the Foundation. The Foundation is an IRS-approved 501c(3) non-profit
which is an intermediary lender to rural small businesses under the U.S.
Department of Agriculture's Rural Economic Community Development Division's
Intermediary Re-lending Program. The Foundation borrowed a total of $2 million
from the Intermediary Re-lending Program at 1% interest with a 30-year term
because of a $300,000 donation received from Michigan BIDCO. Pursuant to a
management services agreement with the BIDCO, the BIDCO and the Foundation share
administrative staffs and offices, with the Foundation reimbursing the BIDCO for
these management services.


Employees

         The Company employed 68 full-time equivalents as of March 27, 2003:

                  University Bank, Ann Arbor                26
                  Midwest Loan Services                     40
                  University Insurance & Investment          2

Properties

         The Bank owns a building in Ann Arbor, Michigan that is the Bank's main
office.

         The Bank leases a site that includes a registered historic building in
Ann Arbor, at the corner of Washtenaw Avenue and Stadium Boulevard as a ATM
drive-through location, a BIDCO office and an off-site storage facility. The
minimum lease period ends May 2006 with two optional five-year extensions.

         The Bank leases an ATM location in Ann Arbor at the corner of State and
Liberty near the University of Michigan Campus. The minimum period of this lease
ends December 2005.

         The Bank owns a former loan office in Sault Ste. Marie and such space
is leased to an unrelated third-party. Management is in negotiations to sell
this property.

         Midwest Loan Services leases an office in Houghton, Michigan under a
year-to-year lease.

         The Company believes that the office facilities are adequate to support
the anticipated level of future expansion of business.


Lines of Business

Deposit Products & Services

              University Bank offers traditional retail savings products and
services to its customers. These include demand deposit and NOW interest-bearing
checking accounts, money market deposit accounts, regular savings accounts and
term deposit certificates ranging in maturity from three to
<PAGE>
three hundred months.  The Bank also offers free access to 24-Hour ATM machines,
telephone  banking,  internet banking,  VISA debit cards and Gold VISA accounts.
The Bank is also a  member  of  MasterCard,  but  currently  is not  offering  a
MasterCard  product.  From time to time to raise  liquidity,  the Bank relies on
brokers to sell CDs. At  December  31,  2002,  the Bank had  approximately  $7.9
million in CDs issued through
brokers.

Lending Products

              University Bank offers a range of traditional lending products,
including commercial small business loans, residential real estate mortgage
loans, home equity loans, commercial real estate mortgage loans, consumer
installment loans, and land development and construction loans.

Classifications of the loan portfolio as of December 31, 2002 are as follows:

                                        Amount Outstanding(1)        % of Total
       Commercial, Real Estate & Other            $16,550,318            49.86%
       Residential Construction                     2,113,747             6.37%
       Residential Real estate                      9,758,403            29.40%
       Residential Home equity                      4,299,329            12.95%
       Consumer                                       374,825             1.13%
       Credit Card                                     95,412             0.29%
                                                 ------------           -------
         Gross Loans                              $33,192,034            100.00%
                                                 ============           =======

(1) - Excludes loans held for sale.

              The Bank's loan portfolio is geographically concentrated in Ann
Arbor and Washtenaw County, Michigan. The ability of individual loan customers
to honor their debts is partially dependent on the local economy. The Ann Arbor
area is primarily dependent on the education, healthcare, services, and
manufacturing (automotive and other) industries.

              Most of the Bank's commercial loans are secured by commercial real
estate. Commercial real estate loans have a loan to value ratio typically less
than 80% at the time the loan is originated. In no cases is the loan to value
ratio for commercial real estate loans greater than 85%. The primary risk of
commercial loans is that the area's economy declines and rents decrease while
vacancy increases, thereby decreasing the value of the building. If the
guarantor suffers a financial reverse, the Bank is then exposed to a loss.

              Residential loans typically have a loan to value ratio less than
80% at the time the loan is originated, unless the borrower's financial position
is very strong, in which case a loan to value ratio of up to 90% is considered.
To meet the Bank's goals for first time homebuyers, the Bank has originated 97%
loan to value residential loans totaling about $3 million, although real estate
prices in Washtenaw County where these loans were originated have been rising at
10-12% per year for two years in a row, and most of these loans were originated
in 1998 and 1999. Home equity secured residential loans have loan to value
ratios of less than 90% at time of origination in the case of fixed rate
fully-amortizing loans and 80% for home equity lines of credit, with a few
exceptions with higher ratios for borrowers with strong credit. The primary risk
of residential lending is that home prices drop (typically this occurs during
recessions) and borrowers walk away from their home or file for bankruptcy. All
of the Bank's
<PAGE>
construction loans, are secured by residential properties with a
loan to value ratio of 80% or less. The Bank controls the risk of construction
lending by performing inspections prior to disbursing interim construction funds
to avoid cost overruns.

              The Bank makes very few unsecured loans, typically for borrowers
who are multi-millionaires, but even in these cases, the Bank typically takes
collateral out of an abundance of caution. Most of the Bank's credit card loans
are secured by residential properties. Consumer loans are generally secured by
vehicles (primarily cars or trucks). The primary risk of these loans is that the
value of the car depreciates faster than the loan balance amortizes, and the
borrower loses their job or has a severe medical problem in their family. In
these circumstances, the collateral could be insufficient to repay the loan if
the borrower files for bankruptcy. In addition, if the economy is soft, used
vehicle prices tend to deteriorate creating additional risk of insufficient
collateral in the event of a default.

              The Bank makes very few business loans that are not secured by
real estate. Business Lines of Credit are typically made up to a 50% ratio of
inventory and other equipment at current market value, and 70% of current
receivables. Business Manager Loans are also structured as Lines of Credit and
are secured by individual receivables up to 90% of face value individually
purchased with recourse to the borrower and additional insurance to protect the
bank against fraud and bankruptcy of the issuer of the account that is
receivable to the borrower. The primary risk of this type of lending backed by
non-real estate business assets is that if the business suffers a financial
reverse, an unscrupulous borrower can easily dissipate the collateral, causing
the Bank a loss. For this reason, the Bank de-emphasizes this type of lending.

              Typically with respect to all personal and residential loans, a
ratio of total debt payments to total income of all borrowers and guarantors
less than 42% is required. With respect to commercial real estate and business
loans, a ratio of income to all debt payments of greater than 1.25x is required.
Therefore, the Bank typically has both income and asset backing to secure its
loans. However, there can always exist valid reasons to have exceptions to each
rule and the Bank's loan committee retains the power to take unusual
circumstances into account when evaluating each loan request versus the Bank's
policies. Loans that are lacking current demonstrated income are classified and
increased reserves are established for those loans. Loans that are lacking both
current demonstrated income and asset backing are allocated even higher reserves
equal to the amount estimated to be realized upon the sale of the collateral
less all estimated costs.

Mortgage Banking

         The Bank and Midwest originate internally or via other financial
institutions residential home loans that generally qualify for sale to secondary
market investors under the underwriting criteria of the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association and the
Government National Mortgage Association. Loans purchased or originated
internally are either sold directly to FHLMC, FNMA or GNMA, or are pooled into
mortgage-backed securities and the securities are sold to investors in the
secondary market. With the exception of Midwest Loan Services, the Bank is
currently selling the servicing rights on all mortgages originated that

<PAGE>
are sold to the secondary  market.  Some  residential  mortgages are held in the
Bank's loan portfolio as an investment.

         University Bank became a seller/servicer and began originating Federal
Home Loan Mortgage Corporation (FHLMC) insured mortgages in 1991 and became a
seller/servicer and began originating Federal National Mortgage Association
(FNMA) insured mortgages 1994. The Bank has also been approved as a
seller/servicer of Government National Mortgage Association (GNMA) mortgages for
many years but only began using our license in 1999 to originate and sell these
loans without retaining the servicing rights. Midwest is also licensed with FNMA
and FHLMC.

Mortgage Subservicing

         Mortgage servicing firms receive monthly payments from loan customers,
aggregate and account for these payments, and send the funds to mortgage-backed
securities holders, including pension funds and financial institutions. For some
mortgage customers, escrow funds are also accumulated, and funds sent to taxing
authorities and insurance companies as needed. Mortgage servicers also dun
delinquent accounts and foreclose loans, if required. Mortgage servicers receive
a fixed monthly fee for performing this service. When these services are
performed for the Bank, it is called `servicing'. When these services are
performed for other institutions, it is called `subservicing'. The Bank's
80%-owned subsidiary, Midwest Loan Services, specializes in subservicing
residential mortgage loans sold to FNMA and FHLMC and other non-agency private
conduits for the account of credit unions, other financial institutions and
mortgage brokers. Midwest's subservicing activity is regulated by FHLMC and
FNMA.

Investment Securities

         The Bank maintains surplus available funds in investments consisting of
short-term money market instruments, U.S. government bonds, U.S. federal agency
obligations, mortgage-backed securities backed by federal agency obligations and
obligations of local units of government. The Bank's President, who is a
licensed Registered Representative, manages these investments, and purchase/sale
decisions are subject to the review and approval of the Asset Liability
Committee of the Bank and the Board of Directors. The securities portfolio
provides a source of liquidity to meet Bank operating needs. At December 31,
2002, the portfolio had a net unrealized loss of $81,997 versus a net unrealized
loss of $167,112 at December 31, 2001, and $335,000 at December 31, 2000.

         Information regarding securities where cost exceeded more than 10% of
the Company's stockholders' equity at December 31, 2002 are as follows:
<TABLE>
<CAPTION>
<S>                                 <C>          <C>             <C>                    <C>              <C>
Issuer                             Coupon       Yield        Final Maturity       Market Value       Amortized Cost
------                             ------       -----             ---------             ------                -----
FHLBI equity (1)                       VAR          6.75%         None                   $848,400            $848,400
FNMA CMO 93-205H (2)                   PO           4.15%       9/25/23                 1,495,356           1,577,056
GNMA (various)                         VAR          5.50%       6/20/22                 1,552,826           1,553,123
Other                                  VAR              -         VAR                      54,656              54,656
</TABLE>

(1)        The rate varies quarterly. The Bank is required to maintain the
           investment in Federal Home Loan Bank of Indianapolis common stock in
           an amount related to the Bank's single family mortgage related assets
<PAGE>
           and FHLBI advances. Shares can be redeemed or sold at par value to
           the FHLBI as required from time to time.

(2)        This Principal Only strip has an expected average life of less than
           two years. The increase in market value is due to interest rate
           fluctuations that have shortened the average life of the instrument.
           Accrued net interest income on this zero coupon bond was increased in
           2001 and 2002 to reflect the decreased average life. The bond is
           rated AAA.


Competition

Community Banking, Ann Arbor

         The attraction and retention of deposits depend on the Bank's ability
to provide investment opportunities that satisfy the requirements of investors
with respect to rate of return, liquidity, risk and other factors. The Bank
competes for these deposits by offering personal service and attention, fair and
competitive rates, low fees, and a variety of savings programs including
tax-deferred retirement programs.

         The Bank competes for loan originations primarily through the quality
of services provided to the loan customers, competitive interest rates and
reasonable loan fees, rapid and local decision-making and the range of services
offered. Competition in originating loans comes principally from other
commercial banks, credit unions, insurance companies, mortgage banking companies
and savings and loans.

         The following table shows market share of deposits for Washtenaw County
by financial institution for June 2002, June 2001 and June 2000, respectively
from the FDIC and National Credit Union Association's annual branch deposit
survey.


Washtenaw County Financial Institution Deposits:

                                            2002           2001            2000
TCF National                              15.63%         16.16%          16.19%
National City                             12.51%         11.93%          12.53%
Comerica                                  11.08%         11.92%          11.36%
Bank One                                   8.89%          9.37%          10.26%
Keybank                                    6.41%          7.23%           7.82%
Ann Arbor Commerce                         5.22%          4.87%           4.83%
University of Michigan CU                  5.21%          4.23%           3.82%
Standard Federal                           4.95%          6.22%           6.38%
Flagstar                                   4.91%          5.06%           4.80%
Bank of Ann Arbor                          4.59%          3.94%           3.43%
Huron River Area CU                        3.36%          3.09%           3.02%
Chelsea State                              3.09%          3.10%           3.38%
Citizens                                   2.61%          2.82%           2.92%
United Bank & Trust                        2.56%          1.40%           1.04%
Midwest Financial CU                       2.24%          2.10%           2.04%

<PAGE>
Republic                                   2.03%          2.27%           2.22%
Automotive FCU                             1.31%          1.33%           1.38%
Bank of Washtenaw                          1.05%          0.64%           0.28%
University Bank                            0.89%          0.91%           0.89%
Charter One                                0.71%          0.67%           0.69%
5 Credit Unions                            0.75%          0.74%           0.72%
Total Deposits (in billions)              $4.53           $4.34           $4.00

        Total deposits in the county increased 4.4% to $4.53 billion from June
2001 to June 2002. Total deposits in the county increased 8.5% to $4.34 billion
from June 2000 to June 2001. In attracting deposits, the Bank's primary
competitors for deposits are mutual funds, other commercial banks, credit
unions, savings and loans and insurance companies.

         The Bank's main office is adjacent to the University of Michigan
Hospital complex. The complex employs a total of 7,800 persons. While the Bank
competes with all of these financial institutions for loans and deposits and in
particular the eight financial institutions that have branch offices in the
northeast Ann Arbor market area, the other major competitor in the immediate
local deposit market near the Medical Center complex is Midwest Financial Credit
Union, formerly known as Hospital & Health Services Credit Union. The Bank's
main office was formerly the headquarters of this credit union, which moved its
office to a new office building three miles from the Medical Center Complex.

         Banks owned by out-of-state holding companies dominate the Ann Arbor
banking market. In the city of Ann Arbor, the University of Michigan Credit
Union is the largest locally-owned financial institution. The only locally-owned
community financial institutions, excluding University Bank, are University of
Michigan Credit Union, Bank of Ann Arbor, Huron River Area Credit Union, Midwest
Financial Credit Union, Automotive Federal Credit Union and several smaller
credit unions.

Mortgage Banking

         The Bank and Midwest's retail mortgage origination operations encounter
competition for the origination of residential real estate loans primarily from
savings institutions, commercial banks, insurance companies and other mortgage
banking firms. Many of these firms have a well-established customer and/or
borrower client base. Some competitors, primarily savings institutions,
insurance companies and commercial banks, have the ability to create unique loan
products from time to time because they are able to hold the loans in their own
portfolio rather than sell into the secondary market. The Bank's ability to hold
mortgage loans in our portfolio helps us to compete more effectively. Most loans
sold into the secondary market, however, go to the same sources, those being
FHLMC, FNMA, and GNMA. Most lenders have access to these secondary market
sources; therefore, competition often becomes more a matter of service and
pricing than that of product. As a mortgage loan originator and a purchaser of
mortgage loans through correspondents, we must be able to compete with respect
to the types of loan products offered by competitors to borrowers and
correspondents, including the price of the loan in terms of origination fees or
fee premium or discount, loan processing costs, interest rates, and the service
provided by our staff. An important element to competing is master purchase
agreements negotiated periodically with FNMA and FHLMC with low and

<PAGE>
competitive  loan  guarantee  fees, a wide variety of mortgage  programs,  and a
variety of flexible  underwriting  criteria.  Our ability to secure these master
purchase agreements is dependent upon the performance from a quality perspective
of loans previously sold to the agencies.

         During lower interest rate environments, competition for loans is less
intense due to the large number of loans available for origination. As interest
rates rise and the number of loans available for origination diminishes,
competition becomes quite intense and companies with larger investor bases,
flexibility with respect to type of product offered and greater experience in
dealing in these types of markets tend to be the most successful.

         The Bank also originates residential loans to be held in portfolio, and
management believes that this product together with the product offerings from
FHLMC, FNMA and GNMA are sufficient for the Bank. The Bank also is licensed as a
HUD Title 1 and Multifamily seller/servicer, but has no plans at this time to
expand utilization of HUD or GNMA programs.

         Mortgage Servicing and Subservicing. Servicing competition is somewhat
less intense than the loan origination aspect of mortgage banking. Due to net
worth and management requirements, many mortgage origination companies do not
have the capacity to service loans. Falling interest rates present competitive
challenges for the mortgage servicing operation in that mortgagors are more
likely to refinance existing mortgages. The quality of service and the ability
of the origination operation to compete on price and service is important in
retaining these customers by refinancing them internally, rather than losing the
refinancing transaction to a competitor. Increased refinancing activity as a
result of falling interest rates should decrease profitability of mortgage
servicing by increasing amortization charges on purchased mortgage servicing
rights.

         In the subservicing business, Midwest Loan Services competes primarily
with about 30 firms nationwide, including specialized subservicing units of
mortgage banking companies, and specialized firms owned by banks and savings and
loans. Most of these companies have substantially larger financial resources
than Midwest Loan Services, and some of them are also located in rural areas
with low prevailing wages.

         Midwest Loan Services is located in Houghton, Michigan in the western
upper peninsula of Michigan. Personnel and occupancy costs are the largest costs
in a mortgage servicing operation, and the prevailing wages and occupancy costs
in the upper peninsula of Michigan are generally lower than the national
average. Midwest Loan Services has developed a unique business extranet website
for its business partners and their retail customers. Through its website at
www.subservice.com, Midwest Loan Services provides the opportunity for all
customers to access their mortgage information 24 hours a day 7 days a week in
an environment which provides seamless access to all information. Business
partners have access to all mortgage data as easily as if it were serviced on
their in-house computer system. Customers can access all information about their
accounts and perform any type of transaction through the internet. As a result
of low personnel costs, its internet technology and the relationships it has
developed in the credit union industry over time, the Company believes that
Midwest Loan Services' mortgage servicing operation has a competitive advantage.

<PAGE>

Regulation

      Primary Regulators of University Bancorp. The Company is a bank holding
company registered under the Federal Bank Holding Company Act of 1956. The
Federal Reserve Bank of Chicago is the Company's primary regulator and the
Company is subject to regulation, supervision and examination by the Federal
Reserve. The Company is required to file semi-annual reports with the Federal
Reserve and other information as required under the rules of the Board of
Governors of the Federal Reserve System. Additionally, the Federal Reserve Board
possesses enforcement powers over bank holding companies and their non-bank
subsidiaries to prevent or remedy actions that represent unsafe or unsound
practices or violations of applicable statutes and regulations. Among these
powers is the ability to bar the payment of dividends by banks and bank holding
companies.

         Acquisitions. The Company is generally prohibited from engaging in a
non-banking activities since it is a bank holding company. The Company cannot
acquire more than 5% of the shares of another company engaged in non-banking
activities. The Company can only acquire direct or indirect control of more than
5% of the voting shares of a company engaged in a banking related activity with
the prior approval by the Federal Reserve Board to acquire these shares or by
regulatory exemption. The Federal Reserve Board has identified specific banking
related activities in which a bank holding company may engage with notice to the
Federal Reserve. The Federal Reserve considers managerial, capital, and other
financial factors, including the impact on local competition of any proposal and
past performance under the Community Reinvestment Act in acting on acquisition
or merger application. Bank holding companies may acquire other banks located in
any state in the United States without regard to geographic restrictions or
reciprocity requirements imposed by state law, but subject to certain
conditions, including limitations on the aggregate amount of deposits that may
be held by the acquiring company and all of its insured depository institution
affiliates.

         Commitments. In connection with obtaining the consent of the Federal
Reserve to a 1989 merger transaction when the Company obtained public listing on
the NASDAQ Small-Cap Market, certain commitments were made to the Federal
Reserve. Management agreed that the Employee Stock Ownership Plan would not
purchase more than 10% of the common stock or 5% of any other class of our
voting shares, without the prior approval of the Federal Reserve. Management
also agreed not to incur additional debt or to have the Bank pay dividends to us
without the prior approval of the Federal Reserve.

         Capital Requirements. The Federal Reserve Board imposes certain capital
requirements on the Company under the Federal Bank Holding Company Act,
including a minimum leverage ratio and a minimum ratio of "qualifying" capital
to risk-weighted assets. These requirements are described below under "Capital
Regulations". The Federal Reserve uses capital adequacy guidelines in its
examination and regulation of bank holding companies. If capital falls below
minimum guidelines, a bank holding company may, among other things, be denied
approval to acquire or establish additional banks or non-bank businesses. The
"prompt corrective action" provisions of federal law and regulation authorizes
the Federal Reserve to restrict the payment of dividends to us from an insured
bank which fails to meet specified capital levels.
<PAGE>
         Source of Strength. In accordance with Federal Reserve Board policy,
the Company is expected to act as a source of financial strength to the Bank and
to commit resources to support the Bank in circumstances in which the Company
may not otherwise wish to do so. Under the Federal Bank Holding Company Act, the
Federal Reserve may require a bank holding company to terminate any activity or
relinquish control of a bank subsidiary if the agency determines that
divestiture may aid the depository institution's financial condition. In
addition, if the Commissioner deems our Bank's capital to be impaired, the
Commissioner may require the Bank to restore its capital by a special assessment
upon us as University Bank's sole stockholder. If the Company were to fail to
pay an assessment, the directors of the Bank would be required, under Michigan
law, to sell the shares of the Bank's stock owned by the Company to the highest
bidder at either a public or private auction and use the proceeds of the sale to
restore the Bank's capital.

         Financial Holding Companies. Beginning March 11, 2000, bank holding
companies may apply to become Financial Holding Companies. We have not applied
to become a Financial Holding Company. Financial Holding Companies may engage in
a wider range of non-banking activities than Bank Holding Companies, including
greater authority to engage in securities and insurance activities. The expanded
powers are available to a bank holding company only if the bank holding company
and its bank subsidiaries remain well-capitalized and well-managed. The new law
also imposes various restrictions on transactions between the depository
institution subsidiaries of bank holding companies and their non-bank
affiliates. These restrictions are intended to protect the depository
institutions from the risks of the new non-banking activities permitted to
affiliates.

         Primary Regulators of University Bank. The Bank is a Michigan banking
corporation and its deposit accounts are insured by the Bank Insurance Fund
(BIF) of the Federal Deposit Insurance Corporation (FDIC). As a
Michigan-chartered commercial bank, University Bank is subject to the
examination, supervision, reporting and enforcement powers of the Commissioner,
as the chartering authority for Michigan banks, and the FDIC, as administrator
of the BIF. These agencies and the federal and state laws applicable to the Bank
and its operations, extensively regulate various aspects of the banking business
including, among other things, reserves against loans, capital levels relative
to operations, lending activities and practices, collateral for loans,
establishment of branches, mergers, acquisitions and consolidations, payment of
dividends, internal controls, permissible types and amounts of loans,
investments and other activities, interest rates on loans and on deposits, and
the safety and soundness and scope of banking practices. As an insured bank,
University Bank is also required to file quarterly reports and other information
as required with the FDIC.

         All subsidiaries of University Bank including Midwest Loan Services and
University Insurance & Investment Services are all also subject to all
regulations applicable to University Bank itself, including regular on-site
examination by both the OFIS and the FDIC.

         Other Regulators. As a FHLMC, FNMA, and HUD Title 1 and Title 2 and HUD
multifamily seller/servicer, University Bank's mortgage banking operation is
subject to regulation and regular on-site examination by FHLMC, FNMA and HUD.
<PAGE>
         Other Regulations.  University Bank and its subsidiaries are also
subject to various regulations including:
o        the Community Reinvestment Act,
o        the Federal Truth-in-Lending Act,
o        the Home Mortgage Disclosure Act,
o        the Equal Credit Opportunity Act,
o        the Fair Credit Reporting Act,
o        the Fair Debt Collection Act,
o        the Right to Privacy Act,
o        the Real Estate Settlement Procedures Act,
o        the Bank Secrecy Act,
o        the Electronic Funds Transfer Act,
o        Federal Reserve regulations,
o        State usury laws, and
o        Federal laws concerning interest rates.

Also, University Bank may not engage in any activity not authorized by the
Michigan Banking Code unless it is authorized by the Commissioner of the OFIS as
being closely related to banking.

         These laws and regulations are primarily intended to protect depositors
and the deposit insurance fund of the FDIC, not the Bank nor the Company's
stockholders. The following is a summary of certain statutes and regulations
affecting University Bank. The following information is qualified in its
entirety by reference to the particular statutory and regulatory provisions.

         Various changes to the Federal Deposit Insurance Act (FDIA) are
currently proposed in Congress. Any change in applicable laws, regulations or
regulatory policies of various governmental regulatory authorities may have a
material effect on the Company's business, operations and prospects. Those
authorities include, but are not limited to, the Board of Governors of the
Federal Reserve System, the FDIC, the Commissioner of the Michigan Office of
Financial and Insurance Services, the Internal Revenue Service, and state taxing
authorities. The Company is unable to predict the nature or extent of the
effects that fiscal or monetary policies, economic controls or new federal or
state legislation may have on future business and earnings.

     Deposit Insurance. As an FDIC-insured institution, the Bank is required to
pay deposit insurance premium assessments to the FDIC. The FDIC has adopted a
risk-based assessment system under which all insured depository institutions are
placed into one of nine categories and assessed insurance premiums, based upon
their respective levels of capital and results of supervisory evaluation. Banks
classified as well-capitalized, as defined by the FDIC, and considered healthy
pay the lowest premium while institutions that are less than adequately
capitalized, as defined by the FDIC, and considered to be of substantial
supervisory concern pay the highest premium. A risk classification of all
insured institutions is made by the FDIC for each semi-annual assessment period.

     The Federal Deposit Insurance Act (FDIA) requires the FDIC to establish
assessment rates at levels that will maintain the Deposit Insurance Fund at a
mandated reserve ratio of not less than 1.25% of estimated insured deposits.
<PAGE>
     The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution or its
directors have engaged or are engaging in unsafe or unsound practices, or have
violated any applicable law, regulation, order, or any condition imposed in
writing by, or written agreement with, the FDIC, or if the institution is in an
unsafe or unsound condition to continue operations. The FDIC may also suspend
deposit insurance temporarily during the hearing process for a permanent
termination of insurance if the institution has no tangible capital.

     Commissioner Assessments. Michigan banks are required to pay supervisory
fees to the Commissioner to fund the operations of the Commissioner. The amount
of supervisory fees paid by a bank is based upon the bank's total assets, as
reported to the Commissioner.

     FICO Assessments. Pursuant to federal legislation enacted in 1996,
University Bank, as a member of the BIF, is subject to assessments to cover the
payments on outstanding obligations of the Financing Corporation (FICO). FICO
was created in 1987 to finance the re-capitalization of the Federal Savings and
Loan Insurance Corporation, the predecessor to the FDIC's Savings Association
Insurance Fund (SAIF), which insures the deposits of thrift institutions.
Between January 1, 2000 and the maturity of the outstanding FICO obligations in
2019, BIF members and SAIF members will share the cost of the interest on the
FICO bonds on a pro rata basis. It is estimated that FICO assessments during
this period will be less than 0.025% of deposits.

         Capital Regulations.  The FDIC has established the following minimum
capital  standards for  state-chartered,  FDIC-insured  non-member  banks,  like
University Bank:

o                 a leverage requirement consisting of a minimum ratio of Tier 1
                  capital to total assets of 3% for the most highly-rated banks
                  with minimum requirements of 4% to 5% for all others;
o                 and a risk-based capital requirement consisting of a minimum
                  ratio of total capital to total risk-weighted assets of 8%, at
                  least one-half of which must be Tier 1 capital.

Tier 1 capital consists principally of stockholders' equity. These capital
requirements are minimum requirements. Higher capital levels will be required if
warranted by the particular circumstances or risk profiles of individual
institutions. For example, FDIC regulations provide that higher capital may be
required to take adequate account of, among other things, interest rate risk and
the risks posed by concentrations of credit, nontraditional activities or
securities trading activities.

     Federal law provides the federal banking regulators with broad power to
take prompt corrective action to resolve the problems of undercapitalized
institutions. Depending upon the capital category to which an institution is
assigned, the regulators' corrective powers include: requiring the submission of
a capital restoration plan; placing limits on asset growth and restrictions on
activities; requiring the institution to issue additional capital stock,
including additional voting stock, or to be acquired; restricting transactions
with affiliates; restricting the interest rate the institution may pay on
deposits; ordering a new election of directors of the institution; requiring
that senior executive officers or directors be dismissed; prohibiting the
institution from accepting deposits from
<PAGE>
correspondent banks;  requiring the institution to divest certain  subsidiaries;
prohibiting  the payment of  principal  or interest on  subordinated  debt;  and
ultimately, appointing a receiver for the
institution.

     In general, a depository institution may be reclassified to a lower
category than is indicated by its capital levels if the appropriate federal
depository institution regulatory agency determines the institution to be
otherwise in an unsafe or unsound condition or to be engaged in an unsafe or
unsound practice. This could include a failure by the institution, following
receipt of a less-than-satisfactory rating on its most recent examination
report, to correct the deficiency.

     The extent of the regulators' powers depends on whether the institution in
question is "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," or "critically undercapitalized." An
institution is critically undercapitalized if it has a tangible equity to total
assets ratio that is equal to or less than 2%. An institution is well
capitalized if it has a total risk-based capital ratio of 10% or greater, core
risk-based capital of 6% or greater, and a leverage ratio of 5% or greater, and
the institution is not subject to an order, written agreement, capital
directive, or prompt corrective action directive to meet and maintain a specific
capital level for any capital measure. An institution is adequately capitalized
if it has a total risk-based capital ratio of not less than 8%, a core
risk-based capital of not less than 4%, and a leverage ratio of not less than
4%.

         These capital guidelines can affect the Bank in several ways. Capital
levels are currently adequate, however, rapid growth, poor loan portfolio
performance, or poor earnings performance, or a combination of these factors,
could change our capital position in a relatively short period of time, making
an additional capital infusion necessary. In general, if the FDIC's assessment
of a Bank's financial and managerial strength changes negatively, the Bank's
cost of FDIC insurance will rise in subsequent semi-annual periods. A financial
institution may also be ordered to restrict its growth, dispose of certain
assets, rescind agreements or contracts, or take other actions as determined by
the ordering agency to be appropriate.

         Dividends. Under Michigan law, the Bank is restricted as to the maximum
amount of dividends it may pay on its common stock. The Bank may not pay
dividends except out of net profits after deducting its losses and bad debts.
The Bank may not declare or pay a dividend unless the Bank will have a surplus
amounting to at least 20% of its capital after the payment of the dividend. If
the Bank has a surplus less than the amount of its capital, it may not declare
or pay any dividend until an amount equal to at least 10% of net profits for the
preceding one-half year (in the case of quarterly or semi-annual dividends) or
full-year (in the case of annual dividends) has been transferred to surplus. The
Bank may not declare or pay any dividend until the cumulative dividends on any
issued preferred stock have been paid in full.

     Federal law generally prohibits the Bank from making any capital
distribution, including payment of a dividend, or paying any management fee to
us if the Bank would thereafter be undercapitalized. The FDIC may prevent the
Bank from paying dividends if the Bank is in default of payment of any
assessment due to the FDIC. In addition, the FDIC may prohibit the payment of
dividends by the Bank, if a payment is determined, by reason of the

<PAGE>
financial condition of the Bank, to be an unsafe and unsound banking practice.

     Insider Transactions. The Bank is subject to certain restrictions imposed
by the Federal Reserve Act including any extensions of credit to us, investments
in our stock or other securities, and the acceptance of our stock as collateral
for loans. Certain limitations and reporting requirements are also placed on
extensions of credit by the Bank to its directors and officers, to our directors
and officers, to our principal stockholders, and to "related interests" of the
directors, officers and principal stockholders. In addition, federal law and
regulations may affect the terms upon which any person becoming one of our
directors or officers or one of our principal stockholders may obtain credit
from banks with which the Bank maintains a correspondent relationship.

     Safety and Soundness Standards. Federal banking agencies have adopted
guidelines to promote the safety and soundness of federally insured depository
institutions. These guidelines establish standards for internal controls,
information systems, internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth, compensation, fees and
benefits, asset quality and earnings.

         In general, the guidelines prescribe the goals to be achieved in each
area, and each institution is responsible for establishing its own procedures to
achieve those goals. If an institution fails to comply with any of the standards
set forth in the guidelines, the institution's primary federal regulator may
require the institution to submit a plan for achieving and maintaining
compliance. The preamble to the guidelines states that the agencies expect to
require a compliance plan from an institution whose failure to meet one or more
of the standards is of the severity that it could threaten the safe and sound
operation of the institution. Failure to submit an acceptable compliance plan,
or failure to adhere to a compliance plan that has been accepted by the
appropriate regulator, would constitute grounds for further enforcement action.

     State Bank Activities. Under federal law and FDIC regulations, FDIC-insured
state banks are prohibited, subject to certain exceptions, from making or
retaining equity investments of a type, or in an amount, that are not
permissible for a national bank. Federal law, as implemented by FDIC
regulations, also prohibits FDIC-insured state banks and their subsidiaries,
subject to certain exceptions, from engaging as principal in any activity that
is not permitted for a national bank or its subsidiary, respectively, unless the
bank meets, and continues to meet, its minimum regulatory capital requirements
and the FDIC determines the activity would not pose a significant risk to the
deposit insurance fund of which the bank is a member. Impermissible investments
and activities must be divested or discontinued within certain time frames set
by the FDIC in accordance with federal law.

     Consumer Protection Laws. The Bank's business includes making a variety of
types of loans to  individuals.  In making these  loans,  the Bank is subject to
state usury and regulatory laws, and various federal statutes, including:
o        the Equal Credit Opportunity Act,
o        the Fair Credit Reporting Act,
o        the Truth in Lending Act,
o        the Real Estate Settlement Procedures Act, and
o        the Home Mortgage Disclosure Act.
<PAGE>
Regulations flowing from these laws prohibit discrimination, specify disclosures
to be made to borrowers regarding credit and settlement costs, and regulate the
mortgage loan servicing activities of Midwest Loan Services, including the
maintenance and operation of escrow accounts and the transfer of mortgage loan
servicing.

         In receiving deposits, the Bank is subject to extensive regulation
under State and federal law and regulations, including: o the Truth in Savings
Act,
o        the Expedited Funds Availability Act,
o        the Bank Secrecy Act,
o        the Electronic Funds Transfer Act and
o        the Federal Deposit Insurance Act.

         Violation of these laws could result in the imposition of significant
damages and fines upon the Bank and its directors and officers.

         Real Estate Lending Regulations. Federal regulators have adopted
uniform standards for appraisals of loans secured by real estate or made to
finance improvements to real estate. Banks are required to establish and
maintain written internal real estate lending policies consistent with safe and
sound banking practices and appropriate to the size of the institution and the
nature and scope of its operations. The regulations establish maximum loan to
value ratio limitations on real estate loans, which generally are equal to or
greater than the loan to value limitations established under the Bank's lending
policies.

     Branching Authority. Michigan banks, including University Bank, have
authority under Michigan law to establish branches anywhere in the State of
Michigan, subject to receipt of all required regulatory approvals, including
approval of the Commissioner and the FDIC. The Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994 allows banks to establish interstate branch
networks through acquisitions of other banks, subject to certain conditions,
including certain limitations on the aggregate amount of deposits that may be
held by the surviving bank and all of its insured depository institution
affiliates. The establishment of de novo interstate branches or the acquisition
of individual branches of a bank in another state, rather than the acquisition
of an out-of-state bank in its entirety, is allowed only if specifically
authorized by state law.

         The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
allowed individual states to "opt-out" of interstate branching authority by
enacting appropriate legislation prior to June 1, 1997. Michigan did not opt
out, and now permits both U.S. and non-U.S. banks to establish branch offices in
Michigan. The Michigan Banking Code permits the following in appropriate
circumstances and with the approval of the Commissioner:

o        acquisition of all or substantially all of the assets of a
         Michigan-chartered bank by an FDIC-insured bank, savings
         bank, or savings and loan association located in another state;
o        acquisition by a Michigan-chartered bank of all or substantially all
         of the assets of an FDIC-insured bank, savings
         bank or savings and loan association located in another state;
<PAGE>
o        consolidation of one or more Michigan-chartered banks and FDIC-insured
         banks, savings banks or savings and loan associations located in other
         states having laws permitting this consolidation, with the resulting
         organization chartered by Michigan;
o        establishment by a foreign bank, which has not previously designated
         any other state as its home state under the International Banking Act
         of 1978, of branches located in Michigan
o        establishment or acquisition of branches in Michigan by FDIC-insured
         banks located in other states, the District of Columbia or U.S.
         territories or protectorates having laws permitting Michigan-chartered
         banks to establish branches in these jurisdictions.

Further, the Michigan Banking Code permits the following, upon written notice to
the Commissioner:

o        acquisition by a Michigan-chartered bank of one or more branches, not
         comprising all or substantially all of the assets, of an FDIC-insured
         bank, savings bank or savings and loan association located in another
         state, the District of Columbia, or a U.S. territory or protectorate;
o        establishment by Michigan-chartered banks of branches located in other
         states, the District of Columbia, or U.S.territories or protectorates;
         and
o        consolidation of one or more Michigan-chartered banks and FDIC-insured
         banks, savings banks or savings and loan associations located in other
         states, with the resulting organization chartered by one of the other
         states.

         Primary Regulators for Michigan BIDCO. BIDCO is regulated and
supervised by the Michigan Department of Commerce, Office of Financial and
Insurance Services, Bank & Trust Division. BIDCO is examined annually by the
Bank & Trust Division, and is required to make annual filings of financial
statements, to maintain a license from the Bureau and to operate under strict
rules on transactions with affiliates. Licensing under the terms of the Michigan
BIDCO Act conveys certain exemptions upon BIDCO under Michigan law that are
beneficial to the operations and investment flexibility of the BIDCO. Most
importantly, BIDCO is partially exempt from the state's usury law. As a result,
BIDCO can lend money and take equity participation in the firm it lends to, with
the result that BIDCO's overall combined yield on the investment and loan can
exceed the state's usury limit. The amount of BIDCO's return from the equity
participation or contingent payments is excluded from the calculation to
determine compliance with the state's usury limits.

         Primary Regulator of Midwest Loan Services. Midwest is an approved
seller/servicer of single family mortgage loans for FNMA, FHLMC and HUD Title II
(GNMA), and is subject to their rules, regulations and examinations.

         Primary Regulator of University Insurance & Investment Services.
University Insurance & Investment Services is licensed by the State of
Michigan's Office of Financial and Insurance Services, Insurance Division as
both a life and health and a property casualty insurance agency, and is subject
to their rules, regulations and examinations. University Insurance & Investment
Services also sells broker-dealer investment products and it and its licensed
employees are subject to the rules, regulations and examinations of the National
Association of Securities Dealers, and the Securities & Exchange Commission.

<PAGE>

Item 3. - Legal Proceedings

         We are not currently involved in any material pending legal disputes.

Item 4. - Submission of Matters to a Vote of Security Holders

         Not applicable.



<PAGE>



PART II.

Item 5. - Market for Registrant's Common Equity and Related Stockholder Matters

Common Stock and Dividend Information

     Our common stock trades on the NASDAQ Small-Cap Market under the symbol
UNIB. The high and low sales prices of our common stock as quoted by NASDAQ, for
each quarter since January 1, 2001 are listed below:

                                        High                Low
2001
First Quarter                           $2.50              $0.50
Second Quarter                           2.13               1.50
Third Quarter                            2.95               1.70
Fourth Quarter                           2.50               0.83

2002
First Quarter                           $1.40              $0.55
Second Quarter                           1.10               0.66
Third Quarter                            1.08               0.71
Fourth Quarter                           1.15               0.56

2003
First Quarter (to date)                 $1.49              $0.62

     These quotations represent inter-dealer prices, without retail markup,
markdown or commission, and may not represent actual transactions. As of the
March 28, 2003 we had approximately 360 stockholders including approximately 200
beneficial owners of shares held by brokerage firms or other institutions.

     Our shareholders authorized a 1 for 2 reverse stock split in November 2002,
however, management has not yet opted to implement the reverse stock split. No
cash dividends have been paid on our common stock. We do not currently
anticipate declaring or paying dividends in the first three quarters of 2003. We
plan to reevaluate our dividend policy prior to year-end 2003.

Certain Sales of Equity Securities

         Not applicable.



<PAGE>




Item 6. - Selected Financial Data

                            University Bancorp, Inc.
                 Selected Consolidated Financial and Other Data
                  (Dollars in Thousands Except Per Share Data)

<TABLE>
<CAPTION>
<S>                                                       <C>            <C>             <C>             <C>             <C>
                                                          2002           2001            2000            1999            1998
                                                          ----           ----            ----            ----            ----
Summary of operations (1)
Interest income                                         $3,194         $3,543          $3,315          $3,195          $3,544
Interest expense                                         1,039          1,805           2,074           1,967           2,359
Net interest income                                      2,155          1,738           1,241           1,228           1,185
Provision for loan losses                                  100             40             111              93             110
Net interest income after
  provision for loan losses                              2,055          1,698           1,130           1,135           1,075
Net gain (loss) on securities                               70             13              18            (15)              98
Profit(loss)from investment in  Michigan BIDCO
                                                            -            (115)            235             917             128
Other non-interest income                                4,441          4,057           2,397           1,387           1,903
Non-interest expense                                     6,291          5,960           4,695           4,116           4,204
Income (loss) before tax                                   206          (307)           (915)           (692)         (1,000)
Income tax expense (benefit)                                 -              -               -              32           (199)
Net income (loss) from
  continuing operations                                    206          (307)           (915)           (724)           (801)
Net income (loss)                                          206          (307)           (915)           (915)           (198)

Selected Year End Balances
Total assets                                            46,249         45,623          47,671          40,823          54,536
Loans, net                                              32,784         34,447          35,644          30,580          23,193
Loans, held for sale                                     1,551          2,138             268             305          11,863
Cash, cash equivalents and
  investment securities                                  6,521          3,946           5,340           5,919          13,040
Deposits                                                41,920         40,198          38,179          32,051          43,220
Short-term borrowings                                        -             92           4,094           3,114             277
Long-term borrowings                                       298          1,658             926           2,627           1,196
Minority interest                                          360            305             283             506             205
Stockholders' equity                                     3,156          2,737           2,042           1,950           3,083

Per Share Data
Common shares, year-end                                  3,900          3,753           2,028           2,013           1,989
Weighted avg shares, year-end                            3,859          2,278           2,027           1,994           1,991
Cash dividends                                               -              -               -               -               -
                        Net income (loss) from
                         continuing operations           $0.05        ($0.13)         ($0.45)         ($0.36)         ($0.40)
Net income (loss)                                        $0.05        ($0.13)         ($0.45)         ($0.46)         ($0.10)
Book value of common shares                              $0.81          $0.73           $0.65           $0.97           $1.55

Selected Ratios
Net yield on earning assets                              5.30%          4.37%           3.33%           3.14%           2.86%
Return on average assets                                 0.47%        (0.67%)         (2.06%)         (1.92%)         (0.35%)
Return on average equity                                 7.43%       (12.49%)        (53.56%)        (36.38%)         (6.22%)
Average equity to avg. assets                            6.26%          5.38%           3.84%           5.28%           5.79%
</TABLE>

     (1) Excludes results from discontinued operations.



<PAGE>



Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations

         The purpose of the following discussion and analysis is to assist the
reader in understanding and evaluating the changes in financial position and
results of operations over the past several years. Investors should refer to the
consolidated financial statements, the related notes thereto, and statistical
information presented elsewhere in this report when reading this section of the
report.

         The cautionary statements described below are for the purpose of
qualifying for the "safe harbor" provisions of Section 21E of the Securities
Exchange Act of 1934.

                                  RISK FACTORS

         Our business involves a high degree of risk. You should carefully
consider the risks and uncertainties described below and the other information
in this report before deciding whether to invest in shares of our common stock.
If any of the following risks actually occur, our business, financial condition
and results of operations could be materially adversely affected. This could
cause the trading price of our common stock to decline, with the loss of all or
part of an investment in our common stock.

         Described below, are the material risks of investing in University
Bancorp's common stock. Investors should carefully consider these prior to
purchasing any shares.

If We Are Delisted From The NASDAQ Small-Cap Market the Marketability of Our
Shares Could Decrease

         NASDAQ has informed management that the Company's common stock would be
de-listed from the NASDAQ Small Cap Market if the bid price of the Company's
common stock does not trade for at least $1.00 per share for ten consecutive
trading days prior to September 2, 2003. If the Company's common stock is
de-listed from NASDAQ, the shares will be less marketable in the future and
there will be a smaller potential pool of investors for the stock. This would
significantly limit the ability of shareholders deciding to sell their shares to
do so. If the Company is de-listed, the management of University Bancorp could
opt to list its common stock on the NASDAQ Bulletin Board.

You May Not Be Able To Sell Your Shares Upon Demand

     Although the Company's common stock is currently listed for trading on the
NASDAQ Small-Cap Market, the trading market for University Bancorp historically
has been less active than the average trading market for companies listed on the
exchange. In addition, the share price of University Bancorp has been volatile
and has ranged from $0.56 to $1.49 in the past 12 months. Factors such as the
limited number of shares outstanding held by the public, a limited history of
earnings and the absence of dividends in the near future mean that there might
not be an active and liquid market for the Company's common stock. Even if an
active market develops, there can be no assurance that a market will continue.
Purchasers of the Company's common stock should carefully consider the
potentially illiquid and long-term nature of their investment in the shares.
<PAGE>
The Company's Stock Is Controlled By Insiders Of The Company, Which May Not
Provide You With The Best Possible Return On Your Investment

         Insiders hold a majority of the shares outstanding of the Company. The
Ranzini Group (Mr.  Stephen Lange Ranzini,  Dr. Joseph Lange  Ranzini,  Mr. Paul
Lange  Ranzini,  Orpheus  Capital,  L.P.  and the  Ranzini  Family  Trust  dated
12/20/89)  beneficially owns 2,842,250,  or 72.89% of the issued and outstanding
shares at March 31,  2003.  These  individuals  are able to exert a  significant
measure of control over University Bancorp's affairs and policies.  This control
could be used,  for  example,  to help  prevent  an  acquisition  of  University
Bancorp,  precluding  shareholders from possibly  realizing any possible premium
that may be offered for the common stock by a potential acquirer.

Your Ownership Of The Company May Be Further Diluted If The Bank Requires
Additional Capital

     There can be no assurance that the Bank will not need additional capital in
the future to support the Bank's growth or to counter operating losses. Funds
necessary to meet the Bank's working capital needs and to finance its expansion
might not be available. If additional equity securities are needed to finance
future expansion, such sale could result in significant dilution to the existing
shareholders.

University Bank Has Incurred Significant Start-up Losses And May Never Achieve
Sustained Profitability

     University Bank's operations were relocated to Ann Arbor in 1996.
University Bank has a history of losses and prior to 2002 incurred substantial
operating losses. Shareholders are subject to the risks inherent in starting a
new business. The Bank's future profitability is not assured. Management of the
Bank believes that as the size of loan portfolio and retail deposits increase
that the Bank should become more profitable, but there is no assurance that
expenses will not rise at a faster rate than expected as the Bank grows. There
is no assurance that University Bank will grow to a size that will enable it to
sustain profitability. University Bancorp had an accumulated deficit of
$1,999,846 at December 31, 2002.

The Small Size Of University Bank Limits Its Ability To Compete With Larger
Financial Institutions

     University Bank faces strong competition for deposits, loans and other
financial services from numerous Michigan and out-of-state banks, thrifts,
credit unions and other financial institutions. Some of the financial
institutions with which University Bank competes with are not subject to the
same degree of regulation as University Bank is. Many of these financial
institutions aggressively compete for business in the Ann Arbor area. Most of
the Bank's competitors have been in business for many years, have established
customer bases, have numerous branches, have substantially higher lending
limits, and offer certain services that we do not provide. The dominant
competitors in the Ann Arbor area are TCF National Bank, National City Bank,
Comerica Bank, Bank One and Key Bank. There can be no assurance that University
Bank will be able to compete effectively with these competitors unless it can
continue to grow its operations.

<PAGE>
The Year Ended December 31, 2002 Compared to the Years Ended December 31, 2001
and 2000
Summary of Results of Operations
         The Company's net income from operations was $205,598 versus a net loss
of $306,573 in 2001 and $914,647 in 2000. Earnings (loss) per share from
continuing operations for 2002, 2001 and 2000 were $0.05, $(0.13) and $(0.45),
respectively.
      The Operations of the Company again showed significant progress in 2002 as
compared to 2001. Net income increased 167.06% over the 2001 results. Fourth
quarter 2002 net income established a new record of $308,130 or $0.08 per share
compared to a loss of ($183,906) or ($0.06) per share for the comparable quarter
in 2001. Return on average shareholders' equity was 7.43% for the year ended
December 31, 2002 compared to a negative 12.49% for the year ended December 31,
2001. Return on average assets for the same comparable years were 0.47% and
(0.67%), respectively. The following table summarizes the pre-tax income (loss)
of each profit center of the Company for the years ended December 31, 2002 and
2001 (in thousands):

Twelve months ended December 31, 2002 and 2001 Pre-tax Income (Loss) Summary
                                                 2002        2001
                                                 ----        ----
         Community Banking                       $ 20       $(414)
         Midwest Loan Services                    281         237
         Merchant Banking (Michigan BIDCO)          0        (115)
         Corporate Office                         (95)        (15)
                                                 -----       -----
         Total                                  $ 206       $(307)
                                                 =====       =====

         Company operating results were also greatly improved in 2001 from 2000.
The net loss was reduced by $608,074 to $306,573 in 2001 from $914,647 in 2000.
The Company benefited from the declining interest rates in 2001 and increased
its net interest margin by $497,242 over the previous year. Other income rose by
$1,305,081. The operations of Midwest Loan Services contributed significantly to
this category as their loan servicing and mortgage origination activity exceeded
the prior year. The increase in income was offset partially by an increase in
the Company's non-interest expenses. Non-interest expenses increased by
$1,265,249 from 2000. Increased salary and benefits at Midwest accounted of the
majority of the rise in other expense. Midwest hired additional personnel in
2001 to manage the higher levels of loan servicing and origination.

Twelve months ended December 31, 2001 and 2000 Pre-tax Income (Loss) Summary:
                                                 2001        2000
                                                 ----        ----
         Community Banking                      $(414)    $(1,314)
         Midwest Loan Services                    237         436
         Merchant Banking (Michigan BIDCO)       (115)        235
         Corporate Office                         (15)       (272)
                                                ------       -----
         Total                                  $(307)      $(915)
                                                ======       ======

      Barring four sizeable non-recurring items, both University Bancorp and the
Bank would have made a profit for the entire 2001 year. Those non-recurring
items were:

         Midwest Servicing Rights Valuation      $224,175 (Bank)
         Foreclosed Real Estate Valuation        $ 66,829 (Bank)
         Non-cash Stock Compensation             $ 31,200 (Bank)
         BIDCO Loss                              $114,551 (Bancorp)

The following non-recurring items negatively impacted the Bank's result:
<PAGE>
      1) Midwest Servicing Rights Valuation. The Bank's Midwest Loan Services
subsidiary took a writedown on its servicing rights of $224,175 because long
term rates temporarily dipped to 40-year lows immediately following the
terrorist attacks in September (once written down the servicing rights cannot be
written up under Generally Accepted Accounting Principles even though long term
rates did subsequently rise). The write-down reduced Midwest's basis in
servicing rights to $489,770 from $713,935. The risk in the remaining rights is
effectively offset by a principal-only mortgage-backed security investment that
increased income during 2001 by $120,385;
      2) Foreclosed Real Estate Valuation. In early 2001, management engaged an
experienced real estate company to develop an other real estate owned site
carried on the Bank's books. During 2001, the Bank wrote-down its investment in
this property to $200,000, incurring a $66,829 loss. Substantially all approvals
for the proposed development have been received and the Bank anticipates closing
on the sale of the property at the contracted price of $300,015.
      3) Stock Compensation Expense. The Bank expensed $31,200 in non-cash
compensation expense related to an incentive we provided as a hiring bonus to a
new executive officer in 2001.
         The total of these non-recurring items is $322,194.  Without these
items, the Bank's income would have been $136,876 in 2001.
      4) BIDCO Loss. In addition, the bank holding company took a
write-down on its investment in Michigan BIDCO of $114,551 to $29,152 as a
result of several factors including the writedown of one investment, and
research and development expense related to two e-payment patents that were
applied for during the year. The Bank's investment in the BIDCO is now $600,000
in 7.5% cumulative preferred stock. A capital restructuring of the BIDCO reduced
the Bank's investment in the BIDCO during 2001 by $600,227.


         Net Interest Income

         Net interest income improved 23.99% year-over-year, rising to $2.2
million for the year ended December 31, 2002 compared to $1.7 million the prior
year. For the fourth quarters ended December 31, 2002 and 2001, net interest
income was $474,007 and $424,324, respectively, an improvement of 11.71%. While
Community Banking experienced a decline in interest on loans during the record
low interest rate environment of the past year, it enjoyed a 38.18% increase in
interest on securities and a 42.42% savings in interest expense. Expanding the
base of core deposits also allowed us to realize a 76.95% reduction in interest
expense on other borrowings. The average yield on interest rate liabilities
declined 41% to 2.66% in 2002 from 4.54% in 2001. The average yield on interest
bearing assets decreased to 7.85% from 8.91% in 2001. The spread between the
average yield on rate sensitive assets and liabilities rose from 4.37% in 2001
to 5.19% in 2002. Additionally, the net interest income was positively affected
in 2002 by higher volume of earning assets. Total interest bearing assets
increased by $0.91 million to $40.67 million in 2002 from $39.76 million in
2001. For the year ended December 31, 2002, the Bank's net interest margin
expanded to 5.30% compared to 4.37% for the previous year.

              Net interest income increased $.50 million to $1.74 million in
2001 from $1.24 million in 2000. The increase resulted from an increase in the
net interest rate spread, plus an increase in earning assets. Net interest
income increased primarily due to a lower rate environment in 2001 as compared
to 2000. In 2001, the Federal Reserve Bank lowered the short-term
<PAGE>
interest  rate  numerous  times in an attempt  to  stimulate  the United  States
economy. The Company's  positioning of rate sensitive assets and liabilities was
structured  to benefit  from a drop in  interest  rates.  The  average  yield on
interest rate  liabilities  declined 18% from 5.55% in 2000 to 4.54% in 2001. In
contrast,  the average yield on interest bearing assets increased  slightly from
8.90% to 8.91% in 2001.  The spread  between the average yield on rate sensitive
assets and liabilities  rose to 4.37% in 2001 from 3.35% in 2000.  Additionally,
the net  interest  income was  positively  affected in 2001 by higher  volume of
earning  assets.  Total interest  bearing  assets  increased by $2.51 million to
$39.76 million in 2001 from $37.25 million in 2000.


         The following tables present for the average balances, the interest
earned or paid, and the weighted average yield for the period indicated:


<PAGE>

<TABLE>
<CAPTION>


NET INTEREST INCOME

                                                              At         ---------------------------------------------------
                                                           31-Dec-02                          2002
                                                        ------------------------------------------------------------------
                                                            Average         Average           Interest         Average
                                                             Yield          Balance           Inc(Exp)          Yield
                                                        ------------------------------------------------------------------
                                                        ------------------------------------------------------------------
Interest Earning Assets:
<S>                                                          <C>              <C>                <C>                <C>
          Commercial Loans                                   6.98%            18,047,370         1,459,892          8.09%
          Real Estate Loans (1)                              6.84%            14,104,750         1,049,280          7.44%
          Installment Loans                                  8.24%             3,237,782           296,532          9.16%
                                                        ------------------------------------------------------------------
                                                        ------------------------------------------------------------------
              Total Loans                                    7.06%            35,389,902         2,805,704          7.93%
                                                        ------------------------------------------------------------------
                                                        ------------------------------------------------------------------

     Investment Securities                                   4.90%             3,809,545           366,793          9.63%
     Federal Funds & Bank Deposits                           0.79%             1,470,693            21,955          1.49%
                                                        ------------------------------------------------------------------
                                                        ------------------------------------------------------------------

          Total Interest Bearing
             Assets                                          6.60%            40,670,140         3,194,452          7.85%
                                                        ------------------------------------------------------------------
                                                        ------------------------------------------------------------------

Interest Bearing Liabilities:
     Deposit Accounts:
         Demand                                              1.38%             5,287,117            58,291          1.10%
         Savings                                             1.16%               423,482             4,825          1.14%
         Time                                                3.21%            20,029,396           671,929          3.35%
         Money Market Accts                                  2.33%            12,282,311           271,887          2.21%
         Short-term Borrowings                               2.95%               472,079            11,556          2.45%
         Long-term Borrowings                                5.25%               572,547            20,675          3.61%
                                                        ------------------------------------------------------------------
                                                        ------------------------------------------------------------------

         Total Interest Bearing
            Liabilities                                      2.59%            39,066,932         1,039,163          2.66%
                                                        ------------------------------------------------------------------
                                                        ------------------------------------------------------------------

Net earning assets, net interest
   income, and interest rate spread                          4.01%             1,603,208         2,155,289          5.19%
                                                        ==================================================================
                                                        ==================================================================

Net yield on interest-earning assets                         4.05%                                                  5.30%
                                                        ================                                    ==============
1. Actual yields; not adjusted to take into account tax-equivalent yields.
</TABLE>


<PAGE>


<TABLE>
<CAPTION>

NET INTEREST INCOME

                                                                       ---------------------------------------------------
                                                                                              2001
                                                                       ---------------------------------------------------
                                                                            Average           Interest         Average
                                                                            Balance           Inc(Exp)          Yield
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------
Interest Earning Assets:
<S>                                                                           <C>                <C>                <C>
          Commercial Loans                                                    16,111,575         1,495,597          9.28%
          Real Estate Loans (1)                                               15,545,774         1,289,550          8.30%
          Installment Loans                                                    4,635,651           468,940         10.12%
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------
              Total Loans                                                     36,293,000         3,254,087          8.97%
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------

     Investment Securities                                                     2,929,515           265,437          9.06%
     Federal Funds & Bank Deposits                                               538,676            23,573          4.38%
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------

          Total Interest Bearing
             Assets                                                           39,761,191         3,543,097          8.91%
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------

Interest Bearing Liabilities:
     Deposit Accounts:
         Demand                                                                3,346,502            70,293          2.10%
         Savings                                                                 349,364             6,034          1.73%
         Time                                                                 23,172,173         1,257,631          5.43%
         Money Market Accts                                                   10,273,959           331,092          3.22%
         Short-term Borrowings                                                 1,931,660            87,304          4.52%
         Long-term Borrowings                                                    699,398            52,503          7.51%
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------

         Total Interest Bearing
            Liabilities                                                       39,773,056         1,804,857          4.54%
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------

Net earning assets, net interest
   income, and interest rate spread                                             (11,865)         1,738,240          4.37%
                                                                       ===================================================
                                                                       ===================================================

Net yield on interest-earning assets                                                                                4.37%
                                                                                                            ==============
2. Actual yields; not adjusted to take into account tax-equivalent yields.

</TABLE>





<PAGE>

<TABLE>
<CAPTION>


NET INTEREST INCOME

                                                                       ---------------------------------------------------
                                                                                              2000
                                                                       ---------------------------------------------------
                                                                            Average           Interest         Average
                                                                            Balance           Inc(Exp)          Yield
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------
Interest Earning Assets:
<S>                                                                           <C>                <C>                <C>
          Commercial Loans                                                    13,524,876         1,339,022          9.90%
          Real Estate Loans (1)                                               14,769,498         1,288,810          8.73%
          Installment Loans                                                    4,726,444           481,837         10.19%
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------
              Total Loans                                                     33,020,818         3,109,669          9.42%
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------

     Investment Securities (2)                                                 4,172,915           203,862          4.89%
     Federal Funds & Bank Deposits                                                59,305             1,914          3.23%
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------

          Total Interest Bearing
              Assets                                                          37,253,038         3,315,445          8.90%
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------

Interest Bearing Liabilities:
     Deposit Accounts:
         Demand                                                                2,838,835            80,160          2.82%
         Savings                                                                 325,536             6,542          2.01%
         Time                                                                 16,940,251         1,082,828          6.39%
         Money Market Accts                                                   12,210,290           535,561          4.39%
         Short-term Borrowings                                                 3,589,958           241,782          6.73%
         Long-term Borrowings                                                  1,457,221           127,574          8.75%
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------

         Total Interest Bearing
             Liabilities                                                      37,362,091         2,074,447          5.55%
                                                                       ---------------------------------------------------
                                                                       ---------------------------------------------------

Net earning assets, net interest
   income, and interest rate spread                                            (109,053)         1,240,998          3.35%
                                                                       ===================================================
                                                                       ===================================================

Net yield on interest-earning
      assets                                                                                                        3.33%
                                                                                                            ==============

(1)    Actual yields; not adjusted to take into account tax-equivalent yields.
(2)    The convertible bonds at Michigan BIDCO were converted on May 31,2000,
       resulting in the deconsolidation of BIDCO related interest earning assets
       and interest bearing liabilities.
</TABLE>



<PAGE>

         The table above does not specify the average level of non-interest
bearing demand deposits, which were $2,432,737, $2,643,856, and $2,827,298 for
the years ended December 31, 2002, 2001 and 2000, respectively.

              The following table presents information regarding fluctuations in
our interest income and interest expense for the periods indicated. For each
category of interest-earning asset and interest-bearing liability, information
is provided on changes attributable to (1) changes in volume (changes in volume
multiplied by old rate); and (2) changes in rate (changes in rate multiplied by
old volume); with the rate/volume variance allocated to changes in rate:
<TABLE>
<CAPTION>

RATE VOLUME TABLE
                                                --------------------------------------------------------------------
                                                                                 2002 - 2001
                                                --------------------------------------------------------------------
                                                             Change                  Change
                                                             Due To                  Due To               Total
                                                             Volume                   Rate                Change
Interest Income:
<S>                                                            <C>                 <C>                   <C>
   Commercial Loans                                            $168,534            $(204,239)            $ (35,705)
   Real Estate Mortgage Loans                                 (113,699)             (126,571)             (240,270)
   Installment/Consumer Loans                                 (131,221)              (41,187)             (172,408)
   Investment Securities                                         83,870                17,486               101,356
   Federal Funds & Bank Deposits                                 21,324              (22,942)               (1,618)
                                                  ------------------------------------------------------------------
      Total Interest Income                                      28,808             (377,453)             (348,645)
                                                  ------------------------------------------------------------------
                                                  ------------------------------------------------------------------

Interest Bearing Liabilities:
   Demand Deposits                                               30,117              (42,119)              (12,002)
   Savings Deposits                                               1,113               (2,322)               (1,209)
   Time Deposits                                              (153,498)             (432,204)             (585,702)
   Money Market Accounts                                         56,933             (116,138)              (59,205)
   Short-term Borrowings                                       (47,147)              (28,601)              (75,748)
   Long-term Borrowings                                         (8,243)              (23,585)              (31,828)
                                                  ------------------------------------------------------------------
      Total Interest Expense                                  (120,725)             (644,969)             (765,694)
                                                  ------------------------------------------------------------------
           Net Interest Income                                 $149,533              $267,516             $ 417,049
                                                ====================================================================

</TABLE>

<PAGE>


<TABLE>
<CAPTION>

RATE VOLUME TABLE
                                                --------------------------------------------------------------------
                                                                                2001 - 2000
                                                --------------------------------------------------------------------
                                                             Change                  Change
                                                             Due To                  Due To               Total
                                                             Volume                   Rate                Change
Interest Income:
<S>                                                           <C>                  <C>                    <C>
   Commercial Loans                                           $ 244,047            $ (87,471)             $ 156,576
   Real Estate Mortgage Loans                                    66,014              (65,274)                   740
   Installment/Consumer Loans                                   (9,205)               (3,692)              (12,897)
   Investment Securities                                       (74,166)               135,741                61,575
   Federal Funds & Bank Deposits                                 20,745                   913                21,658
                                                  ------------------------------------------------------------------
      Total Interest Income                                     247,345              (19,783)               227,652
                                                  ------------------------------------------------------------------
                                                  ------------------------------------------------------------------

Interest Bearing Liabilities:
   Demand Deposits                                               12,825              (22,692)               (9,867)
   Savings Deposits                                                 456                 (964)                 (508)
   Time Deposits                                                355,717             (180,914)               174,803
   Money Market Accounts                                       (76,501)             (127,968)             (204,469)
   Short-term Borrowings                                       (90,228)              (64,250)             (154,478)
   Long-term Borrowings                                        (58,923)              (16,148)              (75,071)
                                                  ------------------------------------------------------------------
      Total Interest Expense                                    143,346             (412,936)             (269,590)
                                                  ------------------------------------------------------------------
       Net Interest Income                                    $ 104,089             $ 393,153             $ 497,242

                                                ====================================================================
</TABLE>
         Information regarding the Bank's loan portfolio as of December 31, 2002
and 2001 is set forth under Note 5 to University Bancorp's consolidated
financial statements included with this report.

Provision for Loan Losses

         The Bank charges to operations a provision for possible loan losses
which is intended to create an allowance for future loan losses inherent in the
Bank's portfolio. Each year's provision reflects management's analysis of the
amount necessary to maintain the allowance for possible loan losses at a level
adequate to absorb anticipated losses. In its evaluation, management considers
factors like historical loan loss experience, specifically identified problem
loans, composition and growth of the loan portfolio, current and projected
economic conditions, and other pertinent factors. A loan is charged-off by
management as a loss when deemed uncollectible, although collection efforts
continue and future recoveries may occur.

         Non-performing loans are defined as loans which have been placed on
non-accrual status and loans over 90 days past due as to principal or interest
and still in an accrual status. Where serious doubt exists as to the
collectibility of a loan, the accrual of interest is discontinued. See Note 5 of
the Consolidated Financial Statements for additional information regarding
impaired and past due loans. Non-performing loans amounted to $679,560 and
$1,265,276 at December 31, 2002 and 2001, respectively.
<PAGE>
During 2002,  management  noted a decrease in  delinquencies  primarily due to a
more aggressive collection
effort.
         The provision for loan losses in 2002 was $100,000, an increase of
$60,000 from the 2001 level, which in turn was in down from the 2000 level of
$111,000. Loans charged off, net of recoveries, were $270,894, $23,884 and
$80,588 in 2002, 2001 and 2000, respectively. The increase in net loans charged
off from 2001 to 2002 resulted primarily to 2 loans charged off in late 2002
that relate to long standing problem loan relationships that were specifically
reserved, but not charged off, in prior year periods. The allowance for possible
loan losses totaled $408,219, $579,113 and $562,997 at the end of 2002, 2001 and
2000, respectively. The following table summarizes the loan loss expense for the
Bank for the years ended December 31, 2002, 2001 and 2000.

Analysis of the Allowance for Loan Losses ($ amounts in thousands)

                                           2002           2001            2000
                                           ----           ----            ----
Balance at beginning of the period        $ 579          $ 563           $ 533
Chargeoffs - Domestic:
  Commercial loans                          270             20             135
  Real estate mortgage                        -              7               9
  Installment loans                          17             17               1
                                    ------------- -------------- ---------------
    Subtotal                                287             44             145
                                    ------------- -------------- ---------------
Recoveries - Domestic:
  Commercial loans                           13             12              27
  Real estate mortgage                        -              2              21
  Installment loans                           3              6              16
                                    ------------- -------------- ---------------
    Subtotal                                 16             20              64
                                    ------------- -------------- ---------------
Net chargeoffs                              271             24              81
                                    ------------- -------------- ---------------
Provision for loan losses                   100             40             111
                                    ------------- -------------- ---------------
Balance at end of period                  $ 408          $ 579           $ 563
                                    ============= ============== ===============


Ratio of net chargeoffs during
  period to average loans
  outstanding during period               0.79%          0.07%           0.24%
                                   ============= ============== ===============

Analysis of the Allowance for Loan Losses ($ amounts in thousands)

                        Allocated portion of
                            allowance           Percentage of loans in each
                          at December 31         category to total loans
                         --------------             -----------

                           2002        2001         2002       2001
                           ----        ----         ----       ----
Loan category:
Domestic:
  Commercial loans       $ 341        $ 337        56.26%       50.9%
  Real estate mortgages     42           78        35.05%       38.2%
  Installment loans         19          135         8.69%       10.9%
Unallocated                  6           29          N/A          N/A
                       --------      -------      -------      -------
                         $ 408        $ 579        100.0%      100.0%
                       =========     =======      =======      ========

                                  At                          At
                            December 31, 2002          December 31, 2001
                         ----------------------     -----------------------
Total loans (1)               $33,192,034                  $35,026,024
Reserve for loan losses       $   408,219                  $   579,113
Reserve/Loans %                     1.23%                        1.65%
(1) Excludes loans held for sale.
<PAGE>
         The Bank's overall loan portfolio is geographically concentrated in Ann
Arbor and the future performance of these loans is dependent upon the
performance of relatively limited geographical areas. As a result of the ongoing
business depression, the Bank's future loss ratios may exceed historical loss
ratios.

      Management believes that the allowance for loan losses is adequate to
absorb losses inherent in the loan portfolio, although the ultimate adequacy of
the allowance for loan losses is dependent upon future economic factors beyond
our control. A downturn in the general nationwide economy will tend to
aggravate, for example, the problems of local loan customers currently facing
some difficulties. A general nationwide business expansion could result in fewer
loan customers being unable to repay their loans.


Non-Interest Income and Non-Interest Expense

         Non-interest income. Non-interest income was $4.4 million in 2002
compared to $4.0 million in 2001. Activity throughout the year was brisk at
Midwest Loan Services. The Bank's wholly owned insurance and investment
subsidiary, University Insurance & Investment Services, also enjoyed a record
year, producing $113,870 in fee income compared to $97,489 for the year ended
December 31, 2001, a 16.8% increase. Money under fee management in the brokerage
side of the agency increased to over $5 million during the year.
      Non-interest income increased to $3.96 in 2001 from $2.65 in 2000, an
increase of 49.2%. The increase in 2001 was mainly the result of increased
revenues from Midwest Loan Services' loan subservicing and set-up fees, which
more than offset a decline in income from merchant banking (BIDCO) income,
because the BIDCO's results were deconsolidated after May 1, 2000.

      Mortgage banking. Mortgage banking, servicing and origination fees
increased to $4,040,363 in 2002 from $3,783,721 in 2001. Midwest had a highly
successful year attracting some of the nation's premier credit unions to its
"Members for Life" program. During the year, Midwest grew its mortgages
subserviced by 66% from 5,057 to 8,372 and to over $1 billion of mortgages
subserviced. During the year, Midwest increased its credit union partners so
that at year-end 2002 it had credit union partners with a total of 1,421,380
active members, 8,574,813 potential members and aggregate assets of $9.61
billion. In 2002, Midwest originated 1,769 mortgage loans, an increase of 88%.
Growth was consistent in each month throughout the year. In the fourth quarter
of 2002, a new record of 664 mortgages were originated by Midwest.

      Mortgage banking, servicing and origination fees increased from $2,183,209
in 2000 to $3,783,721 in 2001. The increase in mortgage banking fee income was
the result of an increase in the number of loans subserviced at Midwest Loan
Services. The increases in mortgage banking fee income for 2001 was the result
of an increase in the number of loans subserviced at Midwest Loan Services.
During 2000, Midwest Loan Services increased its mortgage subservicing contracts
by 280% (from $0.5 billion to $1.9 billion) as a result of a new business
relationship with one of the top five mortgage banking firms on Wall Street.
During the first half of 2001, Midwest reached a peak of $2.7 billion in 1-4
family residential loan servicing. In the third quarter of the year, the loan
servicing volume was significantly cut back as Midwest's largest customer
decided to significantly scale back the amount of business it was providing to
Midwest. As of July 1, 2001, 18,500 loans or

<PAGE>
95% of the  mortgages  sub-serviced  by  Midwest  for  this  customer  had  been
transferred to other sub-servicers  including a subsidiary of this firm with the
rest transferred the following month. During 2001 Midwest increased its emphasis
on mortgage loan  originations  through its credit union customers.  Much of the
increase in loan set up and other fees  resulted  from fee income from  mortgage
originations generated from member of credit unions. In 2001, Midwest originated
939 mortgage loans.  Growth was consistent in each month throughout the year. In
January  2001 12  mortgage  loans were  originated  and 135 were  originated  in
December 2001, an 1,125% increase.

       Merchant banking. Michigan BIDCO invests in businesses in Michigan with
the objective of capital gains while fostering job growth and economic
development. As of December 31, 2002, the BIDCO had made thirty investments
since its inception in 1993, amounting to a total of $17,108,680 at original
cost, before repayments or participations sold. At December 31, 2002, Michigan
BIDCO had total assets of $1,464,091 versus $1,125,561 at December 31, 2001 and
$3,429,226 at December 31, 2000.

       Michigan BIDCO's financial results were consolidated into the results of
University Bancorp until May 31, 2000. At that date the outstanding Michigan
BIDCO bonds were converted into common stock and thus diluted University
Bancorp's equity ownership down to 28.8% from 80.1%. As a result, the BIDCO is
no longer consolidated in the financial statements of University Bancorp and the
investment is now accounted for under the equity method of accounting. As a
result of the repurchase of the BIDCO's shares held by University Bank in 2001,
the Company's equity share of BIDCO at December 31, 2001 is 6.10%. Income (loss)
realized from the investment in the BIDCO of was $0, $(114,551) and $234,740 in
2002, 2001 and 2000, respectively.

       Securities. Proceeds from sales of marketable equity securities included
in proceeds from sales of investment securities was $98,625 for the year ended
December 31, 2000. Gross gains of $20,625 was realized in this period.

       Proceeds from sales of available for sale debt securities were
$1,034,160, $541,460 and $1,123,594 for the years ended December 31, 2002, 2001
and 2000, respectively, excluding sales associated with the Bank's mortgage
banking operation. There were gross gains of $69,733, $12,639 and $625 on 2002,
2001 and 2000 sales, respectively and a gross loss of $2,839 on 2000 sales.

       At December 31, 2002 gross unrealized losses in our available-for-sale
securities were $81,764 and gross unrealized gains were $0. At December 31, 2001
gross unrealized losses in our available-for-sale securities were $167,112 and
gross unrealized gains were $0.

     Non-interest expense. Non-interest expenses increased 5.54% to $6.3 million
in 2002 from $6.0 million in 2001. Non-interest expenses during the fourth
quarter 2002 increased as Midwest's mortgage origination function expanded.
During the 4th quarter Midwest reached a new level of 664 mortgages originated
and succeeded in retaining over 80% of all refinanced mortgages in its servicing
rights portfolio that paid-off. Non-interest expense for the quarter ended
December 31, 2002 was $1.8 million compared to $1.3 million for the fourth
quarter in the prior year. Year-end employee performance bonuses increased the
fourth quarter 2002 non-operating expenses as well. The increase was primarily
the result of increased operational expenses at
<PAGE>
Midwest  Loan  Services,  and an increase in state  small  business  tax and the
start-up of the Business Manager product at Community  Banking,  which more than
offset cost control efforts in other areas at Community Banking. During the year
Community  Banking's  non-interest  expenses  increased  by  $97,189  or 3.6% to
$2,773,262  from  $2,676,073,  and all of the  increase  was  caused  by the two
categories mentioned above.  Midwest's operations were expanded in 2002 due to a
substantial increase in mortgage  sub-servicing and origination activity. As the
volume expanded  Midwest  increased its workforce to perform the required tasks.
Other servicing and sub-servicing related expenses, such as occupancy,  supplies
and  postage  increased  also.  Non-interest  expense  was also  impacted  by an
increase in the  amortization  of the mortgage  servicing  rights due to the low
interest rate environment after September 2001.

     Non-interest expense increased to $5,960,223 in 2001 from $4,694,974 in
2000. The increase was primarily the result of increased operational expenses at
Midwest Loan Services, which more than offset cost control efforts in other
areas at the Bank. During the year the retail bank division's non-interest
expenses increased by just $31,226 to $2,676,073 from $2,644,847. Midwest's
operations were expanded in 2001 due to a substantial increase in mortgage
sub-servicing and origination activity. As the volume expanded Midwest increased
its workforce to perform the required tasks. Other servicing and sub-servicing
related expenses, such as occupancy, supplies and postage increased also. At the
Bank level, a concerted effort was made to reduce its non-interest expenses.
Notable improvements were made in the legal and audit expense category.
Non-interest expense was also impacted by an increase in the amortization of the
mortgage servicing rights due to the low interest rate environment after
September 2001.

Liquidity and Capital Resources

         Our total assets at December 31, 2002 amounted to $46.25 million
compared to $45.62 million at December 31, 2001. Loans receivable, net of
reserves and including loans held for sale, decreased by $2.25 million to $34.33
million from $36.58 million. Cash and cash equivalents including Federal Funds
sold on an overnight basis at the end of 2002 increased by $1.73 million from
the prior year, while securities increased by $0.84 million. At year-end 2002,
the Bank had an unused line of credit from the Federal Home Loan Bank of
Indianapolis of $3.5 million, and an unused line of credit from the Federal
Reserve Bank of Chicago of $4.9 million.
         University Bank, as an FDIC-insured bank, is subject to certain
regulations that require the maintenance of minimum liquidity levels of cash and
eligible investments. The Bank has historically exceeded this minimum as a
result of its investments in federal funds sold, U.S. government and U.S. agency
securities and cash. In addition, University Bancorp had $212,273 in cash and
equity securities at the end of 2002 to meet cash needs, primarily operating
expenses and interest and principal reductions on the University Bancorp's note
payable. The balance of the loan was $298,000 and $430,000 at year-end 2002 and
2001. The note is a fully amortizing loan maturing in early 2005. Management
intends that the cash and securities on hand and possible dividends from the
Bank to the University Bancorp to be sufficient to cover the required principal
reductions during 2003 on University Bancorp's loan.

         During 2001, University Bancorp raised working capital by issuing
equity conversion notes, which bear interest at prime rate although all payment
of interest is deferred until conversion into common stock or
<PAGE>
redemption.  Notes are redeemable  only through the proceeds of a future sale of
common stock or preferred stock.  The various equity  conversion notes that were
issued were  converted  into common stock in November 2001 as part of our rights
offering of common stock,  which raised $1,659,749 through the sale of 1,659,749
shares,  less offering  expenses.  The equity  conversion notes were sold to our
President, former Chairman and members of their family.
         The Company's total stockholders' equity at December 31, 2002 was
approximately $3.16 million (or 6.8% of total assets) compared to $2.74 million
(or 6.0% of total assets) at December 31, 2001. The Bank's Tier 1 Capital at
December 31, 2002 was $3.54 million or 7.9% of the Bank's total regulatory
assets. The risk-adjusted capital ratio of 9.9% exceeded the minimum regulatory
risk-based capital requirement of 8% of the risk-adjusted assets for the Bank.
The following table provides detailed information about the Bank's risk-adjusted
assets and actual capital percentages:





           TIER 1 CAPITAL                               2002             2001
Total Equity Capital                                 $3,310           $2,924
 Less: Unrealized losses on available-for-Sale
       Securities                                       (82)            (167)
Plus: Minority Interest                                 360              305
 Less: Other identifiable Intangible Assets              206             125
                                                     -------          ------
 Total Tier 1 Capital                                  3,546           3,271
           TIER 2 CAPITAL
 Allowance for loans & Lease losses                      408             579
 Less: Excess Allowance                                    -             130
 Total Tier 2 Capital                                    408             449
                                                      ------          ------
 Total Tier 1 & Tier 2 Capital                        $3,954          $3,720
                                                      ======          ======
            CAPITAL RATIOS
 Tier 1/Total Average Assets                           7.89%           7.13%
 Tier 1/Total Risk-Weighted Assets                     9.98%           9.14%
 Tier 1 & 2/Total Risk-Weighted Assets                11.13%          10.38%
    .

ITEM 7A.  MARKET RISK

Impact of Inflation

         The primary impact of inflation on our operations is reflected in
increased operating costs. Since our assets and liabilities are primarily
monetary in nature, changes in interest rates have a more significant impact on
our performance than the general effects of inflation. However, to the extent
that inflation affects interest rates, it also affects our net income.


Quantitative and Qualitative Disclosures about Market Risk

     All financial institutions are significantly affected by fluctuations in
interest rates commonly referred to as "interest rate risk." The principal
exposure of a financial institution's earnings to interest rate risk is the
difference in time between interest rate adjustments or maturities on
interest-earning assets compared to the time between interest rate adjustments
or maturities on interest-bearing liabilities. This difference is commonly
referred to as a financial institution's "gap position." In periods when
interest rates are increasing, a negative gap position will
<PAGE>
result in generally  lower  earnings as long-term  assets are  repricing  upward
slower than short-term liabilities. However during a declining rate environment,
the opposite  effect on earnings is true,  with earnings rising due to long-term
assets repricing downward slower than short-term liabilities.

         Rising long term and short term interest rates tend to increase the
value of Midwest Loan Services' investment in mortgage servicing rights and
improve Midwest Loan Services' current return on these rights by lowering
required amortization rates on the rights and decreasing the opportunity for
customers to refinance those loans. Rising interest rates tend to decrease new
mortgage origination activity, negatively impacting current income from the
Bank's retail mortgage banking operations and Midwest's mortgage banking
operations. Rising interest rates also slow Midwest Loan Services' rate of
growth, but increases the duration of its existing mortgages being subserviced
under contract.

     The Bank's securities portfolio is designed to offset a portion of the
market value risk associated with the servicing rights. During period of
declining interest rates, the estimated duration period for the Bank's FNMA CMO
tends to shorten, thus accelerating the income from the accretion of the bond's
discount. This income mitigates the rapid amortization of the servicing rights.
In a rising rate environment, the accretion of income on the bond tends to
lessen.

     The table on the following page details our interest sensitivity gap
between interest-earning assets and interest bearing liabilities at December 31,
2002. Certain items in the table are based upon various assumptions that may not
necessarily reflect future experience, and therefore, certain assets and
liabilities may in fact mature or re-price differently from what is illustrated.
The one-year static gap position at December 31, 2002 was estimated at ($14.9
million) or (32.17%):

<PAGE>



<TABLE>
<CAPTION>



                                      Asset/Liability Position Analysis as of December 31, 2002
                                                       (Dollar amounts in Thousands)
                                                          Maturing or Repricing in

                                         3 Mos      91 Days to        1 - 3        3 - 5      Over 5      ALL
ASSETS                                  Or Less       1 Year          Years        Years      Years      Other        Total
------                                  -------       ------          -----        -----      -----      -----        -----
<S>                                      <C>            <C>            <C>        <C>        <C>         <C>         <C>
    Loans - net                          8,268          3,237          3,666      14,634     4,258       (408)       33,655
    Non-accrual loans                       -              -              -           -         -         680           680
    Securities                             240            676            615          -      1,572         -          3,103
    Other assets                             -            600             -           -         -       5,642         6,242
    Cash and Due from
      banks                              1,312              -             -           -         -       1,257         2,569
                                      ------------------------------------------------------------------------------------------
      Total assets                       9,820          4,513          4,281      14,634     5,830      7,171        46,249
                                      ------------------------------------------------------------------------------------------

LIABILITIES
-----------
    Time deposits                        6,126          7,927          3,060         689       395         -         18,197
    Demand -interest
      bearing                            7,512          7,512          6,028          -         -          -         21,052
    Demand - non interest                   -              -             -            -         -       2,198         2,198
    Savings                                 -              -            474           -         -           -           474
    Long term borrowings                    33            99            166           -         -           -           298
    Other liabilities                       -                                         -         -         874           874
    Stockholders' equity                    -              -             -            -         -       3,156         3,156
                                      ------------------------------------------------------------------------------------------
      Total liabilities                 13,671         15,538          9,728         689       395      6,228        46,249
                                      ------------------------------------------------------------------------------------------

              Gap                       (3,851)       (11,025)        (5,447)     13,945     5,435        943            -
                                      ==========================================================================================

              Cumulative gap            (3,851)       (14,876)       (20,323)     (6,378)     (943)        -
                                      =============================================================================

              Gap percentage            -8.33%        -32.17%         -43.94%     -13.79%    -2.04%       0.00%
                                       ============================================================================
</TABLE>


The following repricing information is provided for the Bank's investment
portfolio, using book values, as of December 31, 2002:

Investment Portfolio Maturities ($ amounts in thousands) and Yield by Type:

                         Maturity or Repricing Interval:
                      Less Than     1 Year to    5 Years to     More Than
                       One Year      5 Years      10 Years      10 Years
                       --------      -------      --------      --------
Government Agencies:
  Amount                $54            $0            $0          $3,048
  Yield                  0%            0%             0%          4.83%

<PAGE>
 Additional information regarding the Bank's investments is set forth under Note
4 to the consolidated financial statements.

       The following information illustrates maturities and sensitivities of the
Bank's loan portfolio to changes in interest rates as of December 31, 2002:

Loan Portfolio Maturities by Type ($ amounts in thousands):
<TABLE>
<CAPTION>

                                                 Maturity Interval:
                                                     Less Than         1 Year to          More Than
                                                      One Year           5 Years            5 Years             Total
                                                      --------           -------            -------             -----
<S>                                                    <C>              <C>                  <C>             <C>
Commercial                                             $ 5,763          $ 11,113             $1,883          $ 18,759
Real Estate Mortgage (1)                               $ 2,070          $  7,960             $1,603          $ 11,633
Installment/Consumer                                     $ 679             $ 831             $1,290            $2,800
                                                         -----             -----             ------            ------
      Total                                            $ 8,512          $ 19,904            $ 4,776          $ 33,192
                                                       =======          ========            =======          ========
</TABLE>
<TABLE>
<CAPTION>


                             Maturity Less Maturity
                               Than More Than One
                                                      One Year               Year             Total
<S>                                                     <C>               <C>               <C>
Total Variable Rate Loans                               $6,268            $ 9,847           $ 16,115
Total Fixed Rate Loans                                  $2,244           $ 14,833           $ 17,077
                                                        ------           --------           --------
      Total Loans (1)                                   $8,512           $ 24,680           $ 33,192
                                                        ======           ========           ========
</TABLE>

(1) Excludes loans held for sale of $1,551 and the allowance for loan losses.

Income Taxes

         Income tax expense (benefit) in 2002, 2001 and 2000 was $0. The
effective tax (benefit) rate was 0% for all three years. No tax benefit was
realized in these years due to loss carryforwards resulting from net losses from
operations.

         In 1996, the Bank, through a subsidiary, purchased a $1,000,000
interest in a partnership investment in Michigan Capital Fund for Housing
Limited Partnership I, a Michigan limited partnership, which invested in federal
low-income housing tax credits. The initial investment consisted of a $50,000
equity purchase and the execution by the subsidiary of a $950,000 promissory
note held by this Partnership. Additional capital contributions were made over
time to reduce the balance of the note, which was paid in full in late 2002. The
purchase of the tax credits increased the deferred federal income tax assets in
2002, 2001 and 2000 and is expected to decrease the amount of federal income
taxes we would otherwise pay annually through 2005.

         At December 31, 2002, the Company had available federal income tax loss
carryforwards that could be utilized to shelter approximately $2,500,000 future
taxable income. Realization of income tax benefits not recorded in the financial
statements is dependent upon generating sufficient future taxable revenue. See
footnote 13 to the financial statements
<PAGE>



Legal Proceedings

         At December 31, 2002 the Company had no outstanding legal proceedings
that would have a material affect on the financial statements.





<PAGE>

















                            UNIVERSITY BANCORP, INC.


                              --------------------


                        CONSOLIDATED FINANCIAL STATEMENTS


                              --------------------


                          DECEMBER 31, 2002, 2001, 2000


<PAGE>







               Report of Independent Certified Public Accountants


Board of Directors and Stockholders
University Bancorp, Inc.

We have audited the accompanying consolidated statement of financial condition
of University Bancorp, Inc. and subsidiaries as of December 31, 2002 and 2001,
and the related consolidated statements of operations, comprehensive income,
stockholders' equity and cash flows for each of the three years ended December
31, 2002. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the 2000 financial statements
of Midwest Loan Services, Inc. an 80 percent owned subsidiary, which statements
reflect total assets and revenues constituting 5 percent and 33 percent,
respectively of the related consolidated totals for the year ended December 31,
2000. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts included
for Midwest Loan Services, Inc. for 2000, is based solely on the report of the
other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of University Bancorp,
Inc. and subsidiaries as of December 31, 2002 and 2001, and the consolidated
results of their operations and their cash flows for each of the three years
then ended, in conformity with accounting principles generally accepted in the
United States of America.


GRANT THORNTON LLP

Southfield, Michigan
March 21, 2003
<PAGE>

<TABLE>
<CAPTION>



                            UNIVERSITY BANCORP, INC.
                           Consolidated Balance Sheets
                           December 31, 2002 and 2001

                                                   December 31,    December 31,
ASSETS                                                2002              2001
                                                 ---------------  --------------
<S>                                                 <C>            <C>
Cash and due from banks                             $ 2,569,469    $    837,550
Securities available for sale, at market              3,102,838       2,260,103
Federal Home Loan Bank Stock                            848,400         848,400
Loans held for sale, at the lower of cost or market   1,550,995       2,137,786
Loans                                                33,192,034      35,026,024
Allowance for loan losses                              (408,219)       (579,113)
                                                   -------------   --------------
     Loans, net                                      32,783,815      34,446,911

Premises and equipment, net                           1,720,902       1,787,018
Investment in Michigan BIDCO Inc.                       629,258         629,258
Investment in Michigan Capital Fund LPI                 356,244         456,244
Mortgage servicing rights , net                       1,014,939         606,537
Real estate owned, net                                  853,198         200,000
Accounts receivable                                      72,786         862,848
Accrued interest receivable                             169,811         229,417
Prepaid expenses                                        214,472         191,700
Goodwill, net                                           103,914          63,914
Other assets                                            258,272          65,045
                                                   -------------   -------------
      TOTAL ASSETS                                 $ 46,249,313    $ 45,622,731
                                                   =============   =============


</TABLE>
                                                                 -Continued-




<PAGE>






<PAGE>








<TABLE>
<CAPTION>



                            UNIVERSITY BANCORP, INC.
                     Consolidated Balance Sheets (continued)
                           December 31, 2002 and 2001

                                                     December 31,   December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY                     2002           2001
                                                   -------------  --------------
Liabilities:
Deposits:
<S>                                                <C>             <C>
  Demand - non interest bearing                    $  2,197,567    $  2,390,750
  Demand - interest bearing                          21,051,588      13,701,011
  Savings                                               473,894         340,341
  Time                                               18,197,407      23,765,478
                                                   -------------   -------------
     Total Deposits                                  41,920,456      40,197,580
Short term borrowings                                                    91,566
Long term borrowings                                    298,000       1,657,506
Accounts payable                                        228,062         339,536
Accrued interest payable                                 97,068         177,407
Other liabilities                                       189,594         117,398
                                                   -------------   -------------
     Total Liabilities                               42,733,180      42,580,993
Minority Interest                                       360,166         305,129
Stockholders' equity:
  Preferred stock, $0.001 par value;
    $1,000  liquidation value;
    Authorized - 500,000 shares;
    Issued 725 shares in 2001
  Common stock, $0.01 par value;
    Authorized - 5,000,000 shares;
    Issued - 4,014,732 shares in 2002 and
         3,867,732 shares in 2001                        40,147          38,677
  Additional paid-in-capital                          5,537,960       5,411,018
  Accumulated deficit                                (1,999,846)     (2,205,444)
  Treasury stock - 115,184 shares in 2002
    and 2001                                           (340,530)       (340,530)
  Accumulated other comprehensive loss,
    unrealized losses on securities
    available for sale, net                             (81,764)       (167,112)
                                                   -------------   -------------
     Total Stockholders' Equity                       3,155,967       2,736,609
                                                   -------------   -------------
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $ 46,249,313    $ 45,622,731
                                                   =============   =============
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                        UNIVERSITY BANCORP, INC.
                                  Consolidated Statements of Operations
                          For the Years Ended December 31, 2001, 2000 and 1999

                                                          2002              2001              2000
                                                    ------------------ ---------------- ------------------
Interest income:

<S>                                                      <C>              <C>                <C>
  Interest and fees on loans                             $  2,805,704     $  3,254,088       $  3,109,669
  Interest on securities:
   U.S. Government and agencies                               270,127          202,357            129,786
   Other securities                                            96,666           63,080             74,076
   Other interest income                                       21,955           23,572              1,914
                                                         -------------    -------------      -------------
     Total interest income                                  3,194,452        3,543,097          3,315,445
                                                         -------------    -------------      -------------
Interest expense:
  Interest on deposits:
   Demand deposits                                            330,178          401,385            615,721
   Savings deposits                                             4,825            6,034              6,542
   Time certificates of deposit                               671,929        1,257,631          1,082,828
  Short term borrowings                                        11,556           87,304            241,782
  Long term borrowings                                         20,675           52,503            127,574
                                                         -------------    -------------      -------------
     Total interest expense                                 1,039,163        1,804,857          2,074,447
                                                         -------------    -------------      -------------
     Net interest income                                    2,155,289        1,738,240          1,240,998
Provision for loan losses                                     100,000           40,000            111,000
                                                         -------------    -------------      -------------
     Net interest income after
       provision for loan losses                            2,055,289        1,698,240          1,129,998
                                                         -------------    -------------      -------------
Other income:
  Loan servicing and subservicing fees                      3,090,838        2,145,619          1,073,673
  Initial loan set-up and other fees                          713,427        1,570,900          1,069,778
  Gain on sale of mortgage loans                              236,098           67,202             39,758
  Merchant banking/ BIDCO income                                             (114,551)            234,740
  Insurance & investment fee income                           113,870           97,489             71,529
  Deposit service charges and fees                             92,955           86,135             61,538
  Net security gains (losses)                                  69,733           12,639             17,786
  Other                                                       124,098           89,977             81,527
                                                         -------------    -------------      -------------
     Total other income                                     4,441,019        3,955,410          2,650,329
                                                         -------------    -------------      -------------

                    -Continued-

</TABLE>
<PAGE>


<TABLE>
<CAPTION>


                                       UNIVERSITY BANCORP, INC.
                           Consolidated Statements of Operations (continued)
                          For the Years Ended December 31, 2002 2001 and 2000

                                                          2002              2001              2000
                                                    ------------------ ---------------- ------------------
Other expenses:
<S>                                                      <C>              <C>                <C>
  Salaries and benefits                                  $  2,929,540     $  3,250,713       $  1,928,060
  Occupancy, net                                              349,186          464,183            320,089
  Data processing and equipment                               433,239          286,200            336,016
  Legal and audit expense                                     173,139          127,212            408,430
  Consulting fees                                             181,545          231,795            206,313
  Mortgage banking expense                                    579,040          132,832            150,403
  Servicing rights amortization                               529,048          325,091            171,129
  Goodwill amortization                                                         15,978            139,412
  Advertising                                                  92,944          111,862            103,177
  Memberships and training                                    103,095           64,609             98,237
  Travel and entertainment                                     91,330          104,189             59,565
  Supplies and postage                                        199,338          333,682            195,449
  Insurance                                                    87,662           84,772            104,335
  Other operating expenses                                    541,604          427,105            474,359
                                                         -------------    -------------      ------------------
     Total other expenses                                   6,290,710        5,960,223          4,694,974
                                                         -------------    -------------      ------------------
Income (loss) before income taxes                             205,598        (306,573)          (914,647)
Income tax expense (benefit)                                        0                0                  0
                                                         -------------    -------------      ------------------
     Net income (loss)                                   $    205,598     $  (306,573)       $   (914,647)
                                                         =============    =============      ==================
     Preferred stock dividends                                                  52,244              3,933
                                                         -------------    -------------      ----- -------------
     Net income (loss) available to common               $    205,598     $   (358,817)      $   (918,580)
shareholders
                                                         =============    =============      ==================
Basic and diluted income (loss) per common share         $       0.05     $      (0.13)      $      (0.45)
                                                         =============    =============      ==================
Weighted average shares outstanding                         3,859,433        2,278,364          2,026,735
                                                         =============    =============      ==================


 The accompanying notes are an integral part of the consolidated financial
statements.

</TABLE>










<TABLE>
<CAPTION>




                                        UNIVERSITY BANCORP, INC.
                         Consolidated Statements of Comprehensive Income (Loss)
                          For the Years Ended December 31, 2002, 2001 and 2000

                                                          2002              2001              2000
                                                    ------------------ ---------------- ------------------
<S>                                                          <C>            <C>                <C>
Net income (loss)                                            $205,598       ($306,573)         ($914,647)
Other comprehensive income (loss):
   Unrealized gains on
    securities available for sale                             155,081          180,126            268,085
   Less:  reclassification
    adjustment for accumulated
   gains included in net
    loss                                                       69,733           12,639             17,786
                                                    ------------------ ---------------- ------------------
   Other comprehensive income                                  85,348          167,487            250,299
                                                    ------------------ ---------------- ------------------
                                                    ------------------ ---------------- ------------------
Comprehensive income (loss)                                  $290,946       ($139,086)         ($664,348)
                                                    ================== ================ ==================


 The accompanying notes are an integral part of the consolidated financial
statements.

</TABLE>
<PAGE>












<PAGE>





<TABLE>
<CAPTION>

                            UNIVERSITY BANCORP, INC.
                 Consolidated Statements of Stockholders' Equity
             For the years ended December 31, 2002, 2001, and 2000

                                      Preferred Stock $.001      Common Stock $.01          Treasury Stock
                                            Par Value                Par Value
                                    -------------------------------------------------------------------------------   Additional
                                     Number of       Par        Number of      Par      Number of                       Paid In
                                      Shares        Value        Shares       Value      Shares         Cost            Capital
                                      ------        -----        ------       -----      ------         ----            -------

<S>                                     <C>          <C>      <C>         <C>          <C>         <C>               <C>
Balance December 31, 1999                0            0        2,127,985   $  21,280    (115,184)   $(340,530)        $3,786,508
Issuance of common stock at
weighted average price of $2.08 per
share                                    -            -           15,000         150        -            -                31,100

Issuance of preferred stock at                                      -           -           -            -               -
price of $1,000 per share               725     $   725,000

Unrealized gain on securities            -            -                                     -            -               -
available for sale, net of tax                                      -           -

Net loss                                 -            -             -           -           -            -               -
                                    -----------------------------------------------------------------------------------------------
Balance December 31, 2000               725     $   725,000    2,142,985   $  21,430    (115,184)   $(340,530)        $3,817,608

Issuance of preferred stock             733         733,000         -           -           -            -               -

Conversion of preferred stock to
common stock                          (1,458)    (1,458,000)   1,458,000      14,580      -            -               1,443,420

Issuance of common stock at
weighted average price of $1.00 per
share, net of expenses of $114,090                               266,747       2,667                                     149,990
       Payment of preferred dividend

Unrealized gain on securities
available for sale, net of tax

Net loss

                                                                  38,677
                                    -----------------------------------------------------------------------------------------------


Issuance of common stock at                                      147,000       1,470                                       126,942
weighted average price of $1.00 per
share, net of expenses of $18,587
Unrealized gain on securities
available for sale, net of tax
Net loss
                                    -----------------------------------------------------------------------------------------------

December 31, 2002                          -    $     -        4,014,732   $  40,147    (115,184)   $(340,530)        $  5,537,960
                                    ===============================================================================================

</TABLE>


<PAGE>






<TABLE>
<CAPTION>


                            UNIVERSITY BANCORP, INC.
                 Consolidated Statements of Stockholders' Equity
              For the years ended December 31, 2002, 2001, and 2000
                                                                        Accumulated
                                                       Retained            Other               Total
                                                       Earnings        Comprehensive       Stockholders'
                                                      (Deficit)            Loss                Equity
                                                      ---------       --------------    ----------------
<S>                                                    <C>                 <C>               <C>
              Balance December 31, 1999                $  (931,980)        $(584,898)        $ 1,950,380

              Issuance of common stock at weighted          -                -
              average price of $2.08 per share                                                    31,250

              Issuance of preferred stock at price
              of $1,000 per share                           -                -                   725,000

              Unrealized gain on securities                 -
              available for sale, net of tax                                 250,299             250,299

              Net loss
                                                          (914,647)          -                  (914,647)
                                                   ------------------------------------------------------

              Balance December 31, 2000                $(1,846,627)        $(334,599)         $2,042,282

              Issuance of preferred stock                   -                -                   733,000
              Conversion of preferred stock to
              common stock                                  -                -                 -

              Issuance of common stock at weighted
              average price of $1.00 per share,
              net of expenses of $114,090                                                       152,657

              Payment of preferred dividend               $(52,244)                             (52,244)

              Unrealized gain on securities
              available for sale, net of tax                                $167,487            167,487

              Net loss                                    (306,573)                            (306,573)
                                                   ------------------------------------------------------
              Balance December 31, 2001                $(2,205,444)        $(167,112)       $ 2,736,609

              Issuance of common stock at weighted
              average price of $1.00 per share,
              net of expenses of $18,587                                                        128,413

              Unrealized gain on securities
              available for sale, net of tax                                  85,348             85,348

              Net income                                   205,598                              205,598
                                                   ------------------------------------------------------
              December 31, 2002                        $(1,999,846)        $ (81,764)       $ 3,155,967
                                                   ======================================================

---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>



                            UNIVERSITY BANCORP, INC.
                      Consolidated Statements of Cash Flows
              For the years ended December 30, 2002, 2001 and 2000

                                                                               2002               2001              2000
                                                                         ------------------ ----------------- -----------------
     Cash flow provided by (used in) operating activities:
<S>                                                                          <C>               <C>                <C>
     Net income (loss)                                                       $     205,598     $    (306,573)     $   (914,647)
     Adjustments to reconcile net loss to net cash provided by (used
     in) operating activities:
         Depreciation                                                              195,070           268,529           252,726
         Amortization                                                              629,048           441,729           410,541
         Provision for loan loss                                                   100,000            40,000           111,000
         Gain on sale of mortgages                                                (236,098)          (67,202)          (39,758)
         Accretion on securities                                                  (259,463)         (202,277)          (98,341)
         Originations of mortgage loans                                        (70,457,559)      (44,869,505)       (6,525,261)
         Proceeds from mortgage loan sales                                      71,280,448        43,066,491         6,602,498
         Net (gain) on sale of securities                                          (69,733)          (12,639)          (17,786)
         Net change in:
           Real estate owned                                                      (653,198)          140,881           330,590
           Other assets                                                           (318,115)          508,431        (2,055,016)
           Other liabilities                                                       (64,580)       (1,490,094)        2,073,567
                                                                             --------------    --------------     -------------
     Net cash provided by (used in) operating activities                           351,418        (2,482,229)          130,113
                                                                             --------------    --------------     -------------

     Cash flow provided by (used in) investing activities:
           Purchase of investment securities                                    (2,139,503)         (474,780)          (78,000)
           Proceeds from sales of investment
             Securities                                                          1,034,160           541,460         1,222,219
           Proceeds from maturities/paydowns of
             investment securites                                                  651,486               249             3,993
           Net change in Michigan BIDCO equity
             Investments                                                                 0           648,126           197,302
           Loans granted, net of repayments                                      1,563,096         1,156,636        (5,615,966)
           Premises and equipment expenditures, net                               (128,954)         (679,790)         (273,997)
                                                                             --------------    --------------    --------------
     Net cash provided by (used in) investing activities                           980,285         1,191,901        (4,544,449)
                                                                             --------------    --------------    --------------

     Cash flow provided by (used in) financing activities:
           Change in deposits                                                    1,722,876         2,018,857         4,381,278
           Change in short term borrowings                                        (91,566)       (4,002,388)           980,094
           Issuance of long term borrowings                                              0         1,000,000                 0
<PAGE>
           Issuance of equity conversion notes                                           0           212,904           231,000
           Principal payments on long term borrowings                           (1,359,506)         (268,624)         (403,986)
                 Payment of preferred dividends                                          0     (52,244)
           Issuance of preferred stock                                                   0           520,096           190,000
           Issuance of common stock                                                128,412           152,657            31,250
                                                                             --------------    --------------    --------------
            Net cash provided by (used in) financing
             activities                                                            400,216         (418,742)         5,409,636
                                                                             --------------    --------------    --------------

               Net change in cash and cash
                 equivalents                                                     1,731,919       (1,709,070)           995,300
     Cash and cash equivalents:
          Beginning of year                                                        837,550         2,546,620         1,551,320
                                                                             --------------    --------------    --------------
          End of year                                                        $   2,569,469     $     837,550     $   2,546,620
                                                                             ==============    ==============    ==============

     Supplemental disclosure of cash flow information:
           Cash paid for interest                                       $        1,119,502 $       2,053,920 $       1,888,083

     Supplemental disclosure of non-cash transactions:
           BIDCO conversion of bonds to common stock
           Preferred stock converted to common stock                                       $       1,458,000
           Equity conversion notes converted to
             preferred stock                                                               $         212,904 $         535,000


         De-consolidation of Michigan BIDCO, Inc.:
           Cash (deposits at University Bank)                                                                $     (1,746,466)
           Equity investments of Michigan BIDCO, Inc.                                                                (595,663)
           Loans                                                                                                     (518,567)
           Premises & equipment                                                                                       (50,724)
           Real estate owned                                                                                          (12,313)
           Other assets                                                                                               (70,857)
           Long-term borrowings                                                                                        993,000
           Other Liabilities                                                                                           724,206
           Investment in Michigan BIDCO,Inc.                                                                         1,277,384

The accompanying notes are an integral part of the consolidated financial
statements.

</TABLE>

<PAGE>




1. Summary of significant accounting policies

        Principles of Consolidation and Nature of Operations
        The consolidated financial statements of University Bancorp, Inc. (the
        Company) include the operations of its wholly-owned subsidiary,
        University Bank (the Bank), the Bank's wholly-owned subsidiary,
        University Insurance & Investment Services, Inc. (Agency) and an 80%
        owned subsidiary, Midwest Loan Services, Inc. (Midwest). In 1999, the
        consolidated financial statements also include an 80% owned subsidiary,
        Michigan BIDCO (BIDCO). Due to the reduction in the Company's ownership
        percentage, this entity is accounted for using the equity method at
        December 31, 2001 and 2000. The accounts are maintained on an accrual
        basis in accordance with generally accepted accounting principles and
        predominant practices within the banking and mortgage banking
        industries. All significant intercompany balances and transactions have
        been eliminated in preparing the consolidated financial statements.

        The Company is a bank holding company. University Bank, which is located
        in Michigan, is a full service community bank, which offers all
        customary banking services, including the acceptance of checking,
        savings and time deposits. The Bank also makes commercial, real estate,
        personal, home improvement, automotive and other installment, credit
        card and consumer loans, and provides fee based services such as annuity
        and mutual fund sales, stock brokerage and money management, life
        insurance, property casualty insurance and foreign currency exchange.
        The Bank's customer base is primarily located in the Ann Arbor, Michigan
        area. The Bank established its main office in Ann Arbor in February
        1996, by relocating from the eastern Upper Peninsula of Michigan.

        University Bank's loan portfolio is concentrated in Ann Arbor and
        Washtenaw County, Michigan. While the loan portfolio is diversified, the
        customers' ability to honor their debts is partially dependent on the
        local economy. The Ann Arbor area is primarily dependent on the
        education, healthcare, services, and manufacturing (automotive and
        other) industries. Most real estate loans are secured by residential or
        commercial real estate and business assets secure most business loans.
        Generally, installment loans are secured by various items of personal
        property.

        University Insurance and Investments Services (Agency) is engaged in the
        sale of insurance products including life, health, property and
        casualty, and investment products including annuities, mutual funds,
        stock brokerage and money management. The Agency is located in the
        Bank's Ann Arbor main office. The Agency also has a limited partnership
        investment in low-income housing tax credits through Michigan Capital
        Fund for Housing Limited Partnership I with financing assistance from
        the General Partner, Michigan Capital Fund for Housing.

        Midwest Loan Services (Midwest) is engaged in the business of servicing
        and subservicing residential mortgage loans.  Midwest


<PAGE>

1. Summary of significant accounting policies (continued)

        began operations in 1992 and was acquired by University Bank in
        December, 1995. Midwest is based in Houghton, Michigan, and also
        originates mortgage loans for itself and other financial institutions,
        including the Bank (See Note 3).

        Use of Estimates in Preparing Financial Statements:
        --------------------------------------------------
        The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
        assumptions based upon available information. These estimates and
        assumptions affect the reported amounts and disclosures. Actual results
        could differ from those estimates.

        The significant estimates incorporated into these consolidated financial
        statements which are more susceptible to change in the near term include
        the value of mortgage servicing rights, the allowance for loan losses,
        the identification and valuation of impaired loans, the equity interest
        in the fair value and the change in the fair value of investments made
        by the BIDCO, the fair value of financial instruments, and the valuation
        of deferred tax assets.

        Cash flow reporting
        For purposes of the Consolidated Statements of Cash Flows, cash and cash
        equivalents is defined to include the cash on hand, non-interest bearing
        deposits in other institutions, federal funds sold and other investments
        with a maturity of three months or less when purchased. Net cash flows
        are reported for customer loan and deposit transactions and interest
        bearing deposits with other banks.

        Securities
        Securities are classified as available for sale when they might be sold
        before maturity. Securities available for sale are carried at fair
        value, with unrealized holding gains and losses reported in other
        comprehensive income or loss. Realized gains are based on specific
        identification of amortized cost. Securities are written down to fair
        value when a decline in fair value is not temporary. Interest income
        includes amortization of purchase premium or discount. Other securities
        such as Federal Home Loan Bank stock are carried at cost.

        Loans
        Loans are reported at the principal balance outstanding, net of unearned
        interest, deferred loan fees and costs, and an allowance for loan
        losses. Interest income is reported on the interest method and includes
        amortization of net deferred loan fees and costs over the loan term.
        Interest income is not reported when full loan repayment is in doubt,
        typically when payments are past due over 90 days. Payments received on
        such loans are reported as principal reductions, unless all interest and
        principal payments in arrears are paid in full.


<PAGE>




1. Summary of significant accounting policies (continued)

       Mortgage banking activities
       Mortgage banking activities includes retail and servicing operations.
       Mortgage loans held for sale are valued at the lower of cost or market as
       determined by bid prices for loans in the secondary market. The loans are
       sold without recourse, except in the event that documentation errors are
       made during the origination process.

        Allowance for loan losses
        The allowance for loan losses is a valuation allowance for probable
        credit losses, increased by the provision for loan losses and recoveries
        and decreased by charge-offs. Management estimates the allowance balance
        required based on past loan loss experience, known and inherent risks in
        the portfolio, information about specific borrower situations and
        estimated collateral values, economic conditions, and other factors.
        Allocations of the allowance may be made for specific loans, but the
        entire allowance is available for any loan that, in management's
        judgment, should be charged-off.

        Loan impairment is reported when full payment under the loan terms is
        not expected. Impairment is evaluated in total for smaller-balance loans
        of similar nature such as residential mortgage, consumer, and credit
        card loans, and on an individual loan basis for other loans. If a loan
        is impaired, a portion of the allowance is allocated so that the loan is
        reported, net, at the present value of estimated future cash flows using
        the loan's existing rate or at the fair value of collateral if repayment
        is expected solely from the collateral. Loans are evaluated for
        impairment when payments are delayed, typically 90 days or more, or when
        it is probable that all principal and interest amounts will not be
        collected according to the original terms of the loan.

        Premises and equipment
        Bank premises and equipment are stated at cost less accumulated
        depreciation. Depreciation is computed primarily on the straight-line
        method for bank premises and the accelerated method for equipment and
        land improvements over their estimated useful lives. The Company uses
        the following useful lives as of December 31, 2002:

                Buildings and building improvements          39 years
                Land and leasehold improvements              15 years
                Furniture, fixtures, and equipment          3-7 years
                Software                                    2-5 years

        Other real estate owned
        Real estate properties acquired in collection of a loan are recorded at
        fair value upon acquisition. Any reduction to fair value from the
        carrying value of the related loan is accounted for as a loan loss.


<PAGE>




1. Summary of significant accounting policies (continued)

        After acquisition, a valuation allowance reduces the reported amount to
        the lower of the initial amount or fair value less costs to sell.
        Expenses, gains and losses on disposition, and changes in the valuation
        allowance are reported in other expenses.

        Servicing rights
        Servicing rights represent both purchased rights and the allocated value
        of servicing rights retained on loans originated and sold. Servicing
        rights are expensed in proportion to, and over the period of, estimated
        net servicing revenues. Impairment is evaluated based on the fair value
        of the rights, using grouping of the underlying loans as to type, term
        and interest rates. Any impairment of a grouping is reported as a
        valuation allowance.

        Income taxes
        Income tax expense/benefit is the sum of the current year estimated tax
        obligation or refund per the income tax return, and the change in the
        estimated future tax effects of temporary differences and carryforwards.
        Deferred tax assets or liabilities are computed by applying enacted
        income tax rates to the expected reversals of temporary differences
        between financial reporting and income tax reporting, and by considering
        carryforwards for operating losses and tax credits. A valuation
        allowance adjusts deferred tax assets to the net amount that is more
        likely than not to be realized.

        Retirement plan
        The Bank has a 401-k Plan that allows an employee to contribute up to
        15% of salary pre-tax, to the allowable limit prescribed by the Internal
        Revenue Service. Management has discretion to make matching
        contributions to the Plan. However, the Bank made no matching
        contributions for the years ended December 31, 2002, 2001 and 2000.

        Employees Stock Ownership Plan (ESOP)
        The Company has a noncontributory ESOP covering all full-time employees
        who have met certain service requirements. The employees' share in the
        Company's contribution is based on their current compensation as a
        percentage of the total employee compensation. As shares are contributed
        to the plan they are allocated to employees and compensation expense is
        recorded at the shares' fair value. The Company made no contribution in
        2002 and 2001.

        Stock options
       At December 31, 2002, the Company has a stock-based employee compensation
       plan, which is described more fully in Note 8. The Company accounts for
       those plans under the recognition and measurement principles of APB
       Opinion No. 25, Accounting for Stock Issued to Employees, and related
       Interpretations. No stock-based employee compensation cost is reflected
       in net income, as all options granted under those plans had an exercise
       price greater than or equal to the market value of the underlying

<PAGE>




1. Summary of significant accounting policies (continued)
       common stock on the date of grant. The following table illustrates the
       effect on net income (loss) and earnings (loss) per share if the company
       had applied the fair value recognition provisions of FASB Statement No.
       123, Accounting for Stock-Based Compensation, to stock-based employee
       compensation.

                                                 Years Ended December 31,
                                               2002        2001        2000
                                               ----        ----        ----

       Net income (loss), as reported        $205,578    $(306,573)  $(914,647)
       Deduct: Total stock-based employee
       compensation expense determined under
       fair value based method for all awards,
       net of tax                               6,000       72,000     48,603
                                             ---------   ---------   ---------
       Pro forma net income (loss)           $199,578    $(378,573)  $(963,250)
                                             =========   =========   =========
       Basic and Diluted Earnings (loss) per
       share:
       As reported                              $0.05      $(0.13)    $(0.45)
       Pro forma                                $0.05      $(0.16)    $(0.46)



        Dividend restriction
       Banking regulations require the maintenance of certain capital levels and
       may limit the amount of dividends that may be paid by the bank to the
       holding company or by the holding company to shareholders. In addition,
       the Bank cannot pay a dividend until it has net retained earnings or
       unless it receives a waiver from the State of Michigan banking
       regulators. The accumulated deficit of the Bank was $1,689,153 and
       1,989,826 at December 31, 2002 and 2001, respectively.

        Earnings (loss) per share
       Basic earnings (loss) per share is net income (loss) of the Company
       (after the dividend requirement for preferred stock) divided by the
       weighted average common shares outstanding for the year. Diluted earnings
       per share includes the effect of any additional dilutive stock options
       which were not significant in 2002. Stock options outstanding in 2001 and
       2000 were considered anti-dilutive and are not included in loss per share
       calculations. As a result, both basic and diluted earnings per share
       available to common are equal to net earning (loss) divided by weighted
       average common shares outstanding.

        Comprehensive Income (Loss):
        Comprehensive income (loss) includes both the net loss and the change in
        unrealized gains and losses on securities available for sale.

<PAGE>
1.Summary of significant accounting policies (continued)
        Segment Reporting
        The Company's segments are determined by the products and services
        offered, primarily distinguished between banking and mortgage banking
        operations. Loans, investments, and deposits provide the revenues in the
        banking operation, and servicing fees, underwriting fees and loan sales
        provide the revenues in mortgage banking. All operations are domestic.

        Reclassification
        Certain items in the 2001 and 2000 consolidated financial statements and
        notes have been reclassified to conform to the 2002 presentation.

2. Michigan BIDCO, Inc.
        BIDCO was incorporated for the purpose of providing financing to small
        businesses located in Michigan for the purpose of creating business and
        industrial development in the State of Michigan. BIDCO is licensed under
        the Michigan BIDCO Act, and is regulated by the Michigan Office of
        Financial and Insurance Services, Bank and Trust Division. The President
        of the Company serves as Chairman and President of BIDCO.

        Upon formation, Michigan BIDCO received a $3 million loan from the State
        of Michigan (Michigan Strategic Fund or MSF). The BIDCO was able to turn
        this loan into a grant by making investments which the increased or
        retained the number of jobs and annual sales volume of each investee
        company. The financial statements of BIDCO are stated using the
        prescribed accounting practices of investment companies.

        On May 31, 2000, BIDCO converted its outstanding convertible bonds into
        common stock (a few convertible bonds were also redeemed at that time).
        With the conversion of these convertible bonds, the Company's
        consolidated ownership in BIDCO dropped from 80.1% to 28.8%. Subsequent
       to May 31, 2000, the BIDCO has been excluded from the Company's
       consolidated financial results and the Company's investment in BIDCO was
       being accounted for using the equity method of accounting. At December
       31, 2000, the Company owned 31.5% of BIDCO (of which 27.1% was held by
       the Bank and 4.4% by the Company). At December 31, 2001, the Bank's
       shares in the BIDCO were redeemed by the BIDCO in exchange for cash of
       $153,417 and preferred stock with a liquidation preference of $600,000.
       The preferred stock accrues 7.5% annual dividends, and it can be retired
       at par value by the Bank, as cash is available. The company retains a
       6.1% ownership of BIDCO's common stock at December 31, 2002 which is held
       as an investment at cost. Total common shareholders' equity of BIDCO was
       $673,000 and $478,000 at December 31, 2002 and 2001, respectively.

3.       Secondary Market Operations
        Midwest Loan Services provides servicing and subservicing of real estate
        mortgage loans for University Bank and several other financial
        institutions. The unpaid principal balance of these loans was
        approximately $1.06 billion, $576 million and $2.2 billion as of
        December 31, 2002, 2001 and 2000 respectively. Custodial escrow balances
        maintained in connection with these respective loans was $23.4 million,
        $18.4 million, and $38.5 million, at December 31, 2002, 2001 and 2000
        respectively. The following summarizes the operations of Midwest for the
        years ended December 31:
<PAGE>
3.       Secondary Market Operations (continued)
<TABLE>
<CAPTION>
                                                                            2002                 2001                2000
                                                                            ----                 ----                ----
<S>                                                                  <C>                  <C>                 <C>
      Loan servicing and subservicing fees                           $ 2,677,966          $ 1,574,615         $ 1,073,673
      Loan set-up and other fees                                         713,427            1,665,664             597,308
      Interest income                                                     45,922              229,625             415,630
      Gain on sale of loans                                              236,098               60,655              29,249
                                                                       ---------            ---------           ---------
           Total income                                                3,673,413            3,530,559           2,115,860

      Salaries and benefits                                            1,348,884            1,706,795             773,569
      Amortization expense                                               522,081              312,232             153,170
      Interest expense                                                     2,520                2,389               7,661
      Other operating expenses                                         1,365,091            1,148,891             581,602
                                                                       ---------            ---------           ---------
           Total expenses                                              3,238,576            3,170,307           1,516,002
                                                                       ---------            ---------           ---------

             Pretax income of Midwest                                  $ 434,837            $ 360,252           $ 599,858

                                                                       =========            =========          =========
</TABLE>
        University Bank sells conforming residential mortgage loans to the
        secondary market. These loans are owned by other institutions and are
        not included in the Company's consolidated balance sheets. Such mortgage
        loans have been sold predominately without recourse or with limited
        recourse. The unpaid principal balance of these loans was $1.8 million,
        $2.3 million and $3.6 million at December 31, 2002, 2001 and 2000
        respectively.

        Following is an analysis of the change the Company's mortgage servicing
rights:

                                 2002             2001            2000
                                 ----             ----            ----
      Balance, January 1        $606,537        $582,210       $ 704,164
      Additions - originated     937,450         349,348          49,175
      Amortization expense      (529,048)       (325,021)       (171,129)
                            ------------      -----------     ------------
      Balance, December 31    $1,014,939        $606,537        $582,210
                            ============      ===========     ============

        Included in the amortization expense is a valuation allowance for the
        years ended December 31, 2002, 2001 and 2000 of $49,326, $224,175 and
        $62,519, respectively.


<PAGE>




4. Securities available for sale
       The following is a summary of the amortized cost, gross unrealized gains,
       gross unrealized losses and fair value of securities available for sale
       at December 31, 2002 and 2001:

                                               December 31, 2002
                                    Amortized    Gross   Unrealized      Fair
                                      Cost       Gains     Losses       Value
    U.S. agency mortgage-backed    $3,184,835  $   -      $(81,997)  $3,102,838
                                   ==========  ========   ========== ===========


                                               December 31, 2001
                                    Amortized    Gross    Unrealized     Fair
                                       Cost      Gains     Losses       Value
    U.S. agency mortgage-backed    $1,948,376 $    -     $(111,373)  $1,837,003
    U.S. Treasury                     478,839      -       (55,739)     423,100
                                   ----------   -------  ---------   ----------
    Total                          $2,427,215 $    -     $(167,112)  $2,260,103
                                   ==========   =======  ==========  ==========

        At December 31, 2002 and 2001, the fair value of securities pledged to
        secure certain borrowings were $3,048,182 and $2,260,103, respectively.


      Sales of available for sale securities:  2002        2001           2000
                                               ----        ----           ----
               Proceeds                    $1,034,160   $541,460     $1,222,219
               Realized gains                  69,733     12,639         24,126
               Realized losses                  -           -             6,340

        The scheduled maturity date of the securities available for sale at
December 31, 2002 is:

                                     Amortized           Fair
                                        Cost             Value
                           2002     $   53,833        $   53,833
                      2003-2006           _                 _
                      2007-2011           -                 -
                     After 2011      3,131,002         3,049,005
                                    ----------        ----------
                                    $3,184,835        $3,102,838
                                    ==========        ==========
<PAGE>




5.      Loans
        Major classifications of loans are as follows as of December 31:

                                            2002                  2001
                                            ----                  ----
      Commercial                      $ 16,550,325          $ 15,088,956
      Real estate - mortgage            11,633,060            13,377,240
      Real estate -construction          2,113,747             2,683,594
      Installment                        2,799,490             3,795,288
      Credit cards                          95,412                80,946
                                       ------------          ------------
         Gross Loans                    33,192,034            35,026,024
      Allowance for loan losses           (408,219)             (579,113)
                                        ------------          ------------
         Net Loans                     $ 32,783,815          $ 34,446,911
                                        ============          ============

        Changes in the allowance for loan losses were as follows:
                                         2002          2001           2000
                                         ----          ----           ----
      Balance, beginning of year       $ 579,113    $ 562,997       $ 532,585
      Provision charged to operations    100,000       40,000         111,000
      Recoveries                          16,570       20,058          63,708
      Charge-offs                       (287,464)     (43,942)       (144,296)
                                        ---------    --------       ---------
      Balance, end of year            $  408,219    $ 579,113      $  562,997
                                        =========    ========       =========

      Past due and non-accrual loans at December 31 are summarized as follows:

                                                  2002          2001
                                                  ----          ----
      Past due loans:
      90 days and more and still accruing:
            Real estate                        $    -         $ 276,654
            Installment loans                       -            24,194
            Commercial loans                        -           194,404
                                                -------         -------
                                               $    -         $ 495,252
                                                =======         =======
      Non accrual loans:
            Real estate - mortgage and
             construction loans                 $ 102,713    $ 770,024
            Installment loans                      67,546          -
            Commercial loans                      509,301          -
                                                  --------     --------
                                                $ 679,560    $ 770,024
                                                  ========     ========

        Information regarding impaired loans for the years ended December 31, is
as follows:

      Impaired loans:                             2002        2001        2000
      --------------                             ----         ----         ----
      Loans with no allowance allocated        $    -       $   -      $     -
      Loans with allowance allocated           $ 679,560    $ 770,024  $  72,375
      Amount of allowance for loan
         losses allocated                      $ 177,069    $ 76,501   $  10,774

      Impaired loans:
      Average balance during the year          $ 531,823    $ 770,714  $  72,199
      Interest Income recognized thereon       $   8,412    $   8,454  $   5,017
      Cash-basis interest income recognized    $   8,412    $   8,454  $    -
<PAGE>

6.     Premises and equipment
        Classifications at December 31 are summarized as follows:
                                        2002           2001            2000
                                        ----           ----            ----
      Land                            $ 132,931      $ 132,931       $ 132,931
      Buildings and improvements      1,157,624      1,134,555       1,030,120
      Furniture, fixtures, equipment
         and software                 2,108,391      2,195,652       1,613,445
      Construction in process             -              -               6,852
                                     ----------    ---------       -----------
                                      3,398,946      3,463,138       2,783,348
    Less:  accumulated depreciation  (1,678,044)    (1,676,120)     (1,407,591)
                                     -----------   -----------     -----------
        Net premises and equipment   $ 1,720,902   $ 1,787,018      $ 1,375,757
                                     ===========   ============    ============

        Depreciation expense amounted to $290,516, $268,529 and $252,726 for the
        years ended December 31, 2002, 2001 and 2000, respectively.

        The Bank leases an ATM drive-thru location in Ann Arbor for
        approximately $25,000 per year and two off-site ATM locations for $9,000
        per year. Midwest leases its office space for approximately $38,000 per
        year in Houghton, Michigan. Total rental expense for all operating
        leases was $55,861, $50,995, and $61,892 in 2002, 2001 and 2000. As of
        December 31, 2002, the Company had no minimum rental commitments under
        non-cancelable operating leases.

        Prior to 2002, the Bank leased part of its main office in Ann Arbor to
        the University of Michigan. Under this lease agreement (which expired in
        September 2001), the Bank was reimbursed for 40.4% of its occupancy
        expense.

        The Bank remains contingently liable in the event that the purchaser of
        one of its branch locations in Sault Ste. Marie does not meet its future
        obligations to the lessor. As of December 31, 2002, management believes
        that the purchaser was in compliance with these lease terms. The annual
        base rent for such branch is currently $32,000, and the future minimum
        rent due is $26,000.


7.     Time deposits
        Time deposit liabilities issued in denominations of $100,000 or more
        were $2,784,947 and $5,499,041 at December 31, 2002 and 2001
        respectively.

        At December 31, 2002, stated maturities of time deposits were:

                  2003                        $14,052,701
                  2004                          1,984,612
                  2005                          1,075,123
                  2006                            447,016
                  2007                            242,549
                  Thereafter                      395,406
                                            -----------------
                                              $18,197,407
<PAGE>

7.       Time deposits (continued)
        The Bank had issued through brokers $7,890,000 and $10,656,000 of time
        deposits as of December 31, 2002 and 2001, respectively. These time
        deposits have maturities ranging from one to five months and are
        included in the table above. These deposits are issued in denominations
        of less than $100,000.

        The Bank had deposits of $1,131,416 and $896,793 from directors,
        officers and their affiliates as of December 31, 2002 and 2001,
        respectively.


8.       Stock options
        In 1993, the Board of Directors approved the grant of options to
        purchase 60,000 shares of common stock to the non-executive directors.
        The exercise price of options granted was set at $1.08 per share, which
        was equivalent to the then current bid price per share as reported by
        NASDAQ. The options are immediately exercisable and expire July 19,
        2003. Under this initial grant, options to purchase 30,000 shares remain
        outstanding as of December 31, 2002. In 1995, the Company adopted a
        stock option and stock award plan (the 1995 Stock Plan), which provides
        for the grant of incentive stock options, as defined in Section 422(b)
        of the Internal Revenue Code of 1986, as amended, as well as the grant
        of non-qualified stock options and other stock awards. The plan provides
        for the grant to officers, directors and key employees of the Company,
        and independent contractors providing services to the Company, of
        options to purchase and other awards of common stock. The exercise price
        of options granted under the plan shall be determined by the Board of
        Directors, or a compensation committee thereof. Options shall expire on
        the date specified by the Board of Directors or such committee, but not
        more than 10 years from the date of grant (or five years from the date
        of grant for incentive stock options if the grantee owned 10% of the
        Company's voting stock at the date of grant). Unless amended, the 1995
        Stock Plan will terminate on November 15, 2005.

<PAGE>


8.       Stock options (continued)
        The following table summarizes the activity relating to options to
purchase the Company's common stock:


                                          Number of        Weighted Average
                                           Options         Exercise price


      Outstanding at December 31, 1999    151,065            $1.64
                                        ---------
      Granted - 2000 ($0.65 Fair Value)    74,594             1.08
      Exercised - 2000                    (15,000)            1.08
      Forfeited - 2000                    (45,750)            2.11
                                        ---------
      Outstanding at December 31, 2000    164,909             1.30
                                        ----------
      Granted - 2001 ($0.72 Fair Value)   100,000             2.00
      Exercised - 2001                     (5,000)            0.75
      Forfeited - 2001                     (8,000)            1.00
                                        ----------
      Outstanding at December 31, 2001    251,909             1.60
      Forfeited - 2002                    (47,000)            1.61
      Granted - 2002 ($0.08 Fair Value)    75,000             1.00
                                        ----------
      Outstanding at December 31, 2002    279,909            $1.44
      2002


        At December 31, 2002:
      Number of options immediately exercisable                          198,909
      Weighted average exercise price of immediately
       exercisable options                                                 $1.21
      Range of exercise price of options outstanding               $0.75 - $2.00
      Weighted-average remaining life of options outstanding          4.21 years

      The following summarizes assumptions used to value stock options.


                                          2002           2001           2000
                                          ----           ----           ----

            Risk-free interest rate       4.13%         5.43%          5.37%
            Expected option life          5.0 years     2.6 years      3.6 years
            Expected stock price
                  volatility                 21.2%      21.6%          24.6%
            Expected dividends                 $0         $0            $0

<PAGE>



9. Employee stock ownership plan (ESOP)
        The employees' allocation of ESOP assets is based on their current
        compensation, after 1 year of service and upon reaching the age of 21.
        The annual contribution to the ESOP is at the discretion of the Board of
        Directors. Assets of the plan are comprised entirely of 77,018 and
        91,462 shares of the Company's stock at December 31, 2002 and 2001,
        respectively, all of which were fully allocated at December 31, 2002.
        Upon retirement from the plan, participants can receive distributions of
        their allocated shares of the Company's stock. The assets of the ESOP
        are held in trust and were valued at approximately $53,000, and $101,000
        at December 31, 2002 and 2001, respectively.


10.      Minority Interest
        The Bank owns an 80% interest in the common stock of Midwest Loan
        Services, with the remaining 20% owned by the President of Midwest. At
        December 31, 2002 and 2001, total common stockholders' equity of Midwest
        was $1,800,830 and $1,525,644 resulting in a $360,166 and $305,129
        minority interest reflected on the Company's consolidated balance sheet,
        respectively. The results of Midwest's operations for 2002, 2001 and
        2000 are included in the Company's consolidated statement of operations.


11.      Commitments and contingencies
        The Bank is party to financial instruments with off-balance sheet risk
        in the normal course of business to meet the financing needs of its
        customers. These financial instruments include commitments to buy, sell
        and fund loans, letters of credit and unused lines of credit. The Bank's
        exposure to credit loss in the event of non-performance is equal to or
        less than the contractual amount of these instruments. The Bank follows
        the same credit policy to make such commitments as that followed by
        loans recorded in the consolidated financial statements. The following
        is a summary of commitments as of December 31:

                                             2002                     2001
                                             ----                     ----
      Unused lines of credit              $ 2,094,000              $ 2,808,000
      Commitments to fund loans           $ 3,748,000              $ 3,085,000
                                           -----------              -----------
           Total                          $ 5,842,000              $ 5,893,000
                                           ===========              ===========


12.      Related party transactions
        The Company's President also serves as President and Chairman of
        Michigan BIDCO. As such, the President is actively involved in the
        BIDCO's operations, including investment activity and estimation of the
        fair value of its equity investments.

       In July 2000, the Company's former Chairman, now deceased, purchased
       equity securities from the Company for $58,125, resulting in a gain to
       the Company of $20,625.

       During 2001, the Company issued $733,000 of preferred stock, of which
       $212,904 was originated from the conversion of equity conversion notes.
       The preferred shares were issued to the Company's former Chairman, the
       Chairman's wife, the President and related family trusts. In November
<PAGE>
12. Related party transactions (continued)
       2001, the preferred shares of $1,458,000 were converted to common stock
       pursuant to the stock rights offering agreement. In November 2000, the
       Company issued $725,000 of preferred stock of which $535,000 was
       originated from the conversion of equity conversion notes. The preferred
       shares were issued to the Company's former Chairman and his wife, the
       President and related family trusts

        The Bank had loans of $950,513 and $15,830 to related officers and
        directors at December 31, 2002 and 2001, respectively. During 2002, the
        Bank originated a construction line of credit for $800,000 and a
        mortgage note of $269,000. Available lines of credit to related parties
        at the December 31, 2002 and 2001, totaled $229,487 and $95,170,
        respectively. These loans were made in the normal course of business and
        are considered to be performing at December 31, 2002.

13.      Income taxes

        The Company has recorded no income tax expense in each of the three
        years ended December 31, 2002 due to the existence of net operating loss
        carryforwards and a valuation allowance equal to 100% of the net
        deferred tax assets at December 31, 2002 and 2001.

        The net deferred tax asset at December 31, 2002 and 2001 is comprised of
        the following:

                                                   2002                   2001
                                                   ----                   ----
      Allowance for loan losses             $    212,183             $  178,183
      Net operating loss carry-forward           677,617                582,669
      Tax credit carryforward                    866,436                743,749
      Donation carryforward                       43,667                 76,666
      Other                                       15,617                 44,816
                                               ---------              ---------
          Deferred tax assets                  1,815,521              1,626,083
                                               ---------              ---------
      Servicing rights                         (353,350)              (206,223)

           Deferred tax liabilities            (353,350)              (206,223)
                                               ---------              ---------

           Net deferred tax asset             1,462,171              1,419,861
           Valuation allowance for
            deferred tax assets              (1,462,171)            (1,419,861)
                                             -----------            -----------
           Net deferred tax asset           $    -                  $    -
                                             ===========            ============

       The Company has net operating loss carryforwards of approximately
       $1,986,000 which expire beginning in 2012; and general business credit
       carryforwards of approximately $866,000 which expire beginning in 2011.
       In addition, the Company has an alternative minimum tax (AMT) credit
       carryforward of approximately $115,000. Under current tax regulations,
       the AMT credit can be carried forward indefinitely. Management has
       established an allowance against deferred tax assets that are not
       considered realizable at December 31, 2002 and 2001.
<PAGE>
13.      Income taxes (continued)
       Financial statement tax expense amounts differ from the amounts computed
       by applying the statutory federal tax rate of 34% to pretax income
       because of operating losses and valuation allowances recorded to reduce
       deferred tax assets as noted above.

14.      Short Term Borrowings
        The Bank has a line of credit available from the Federal Home Loan Bank
        (the FHLB) in the amount of $3.5 million and $5 million at December 31,
        2002 and 2001, respectively. At December 31, 2002, borrowings are
        secured by the pledge of specific mortgage loans held for investment
        with unpaid principal balances of $4.8 million and available-for-sale
        securities with a balance of $3.0 million.

        The Bank has a line of credit available from the Federal Reserve Bank of
        Chicago (the FRB) in the amount of $4.9 million. There were no amounts
        outstanding on this line from the FRB at December 31, 2002 and 2001.
        Borrowings are secured by the pledge of specific commercial loans held
        for investment with unpaid principal balances of $7.9 million. The
        following information provides a summary of short-term borrowings for
        the years indicated:
                                                    2002            2001
      Amount outstanding at the end of the
       year and  interest rate                     None        $   91,566 2.95%

      Maximum amount of borrowing outstanding
       at any month end during the year        $2,881,000      $3,505,607

         Average amount outstanding during the
          year and weighted average
          interest rate                       $ 472,079 2.09%  $1,931,660 4.52%

15.      Long Term Borrowings
        The Company has a note payable to North Country Bank & Trust (NCB&T)
        secured by the stock of the Bank with a balance of $298,000 and $430,000
        at December 31, 2002 and 2001, respectively. The note has a maturity
        date of February 15, 2005. Interest is payable quarterly at the prime
        rate (4.25%) of NCB&T plus 1.00 percent. Principal payments required are
        as follows:

                           2003                                     $132,000
                           2004                                     $132,000
                           2005                                     $ 34,000
                                                                    --------
                           Total                                    $298,000
                                                                    ========

        Dividends by the Bank to the holding company in excess of the prior
        year's annual net income are not permitted without prior permission from
        NCB&T under the terms of the Company's credit facility.

        University Insurance and Investment Services Inc. has an obligation of
        $0 and $227,506 at December 31, 2002 and 2001, respectively, payable to
        the Michigan Capital Fund for Housing Nonprofit Housing Corporation in
        connection with its investment in a low-income housing limited
        partnership.
<PAGE>
15.      Long Term Borrowings (continued)
        In December 2001, the Federal Home Loan Bank advanced the Company a
        $1,000,000, two year fixed rate bullet loan. The loan carried an
        interest rate of 3.62%. In early 2002, the note was paid off.

        University Bancorp issued equity conversion notes in the amount of
        $212,904 during 2001. The notes were redeemed from the proceeds of the
        sale of convertible preferred stock. No conversion notes were issued by
        the Company as of December 31, 2002 and 2001.


16.      Regulatory matters
       University Bank is subject to various regulatory capital requirements
       administered by the federal banking agencies. Failure to meet minimum
       capital requirements can initiate certain mandatory, and possibly
       additional discretionary, actions by regulators that, if undertaken,
       could have a direct material effect on the Company's financial
       statements. Under capital adequacy guidelines and the regulatory
       framework for prompt corrective action, the Bank must meet specific
       capital guidelines that involve quantitative measures of the Bank's
       assets, liabilities, and certain off-balance-sheet items as calculated
       under regulatory accounting practices. The Bank's capital amounts and
       classification are also subject to qualitative judgments by regulators
       about components, risk weightings, and other factors.


       The Bank is also subject to prompt corrective action capital requirement
       regulations set forth by the FDIC. The FDIC requires the Bank to maintain
       a minimum of total capital and Tier 1 capital (as defined) to
       risk-weighted assets (as defined), and of Tier I capital (as defined) to
       average total assets (as defined). Management believes, as of December
       31, 2002, that the Bank meets all capital adequacy requirements to which
       it is subject.

       As of December 31, 2002, the most recent guidelines from the FDIC
       categorized the Bank as "well capitalized" under the regulatory framework
       for prompt corrective action. At December 31, 2001 the Bank was
       classified as "well capitalized." To be categorized as "well
       capitalized," the Bank must maintain minimum total risk-based, Tier 1
       risk-based, and Tier 1 leverage ratios as set forth in the table. There
       are no conditions or events since that notification that management
       believes have changed the Bank's category.

<PAGE>


16.      Regulatory matters (continued)



<TABLE>
<CAPTION>
                                                                         To Be Adequately               To Be Well
                                                                           Capitalized                  Capitalized
                                                                           Under Prompt                 Under Prompt
                                                                         Corrective Action            Corrective Action
                                                 Actual                     Provisions                  Provisions
                                          ----------------              --------------------          ----------------------
                                          Amount           Ratio           Amount         Ratio          Amount          Ratio
As of December 31, 2002:
<S>                                      <C>               <C>             <C>             <C>         <C>                <C>
Total capital (to risk weighted assets)  $3,954,000        11.1 %          $2,841,000      8.0 %       $3,552,000         10.0 %
Tier I capital (to risk weightedassets)   3,546,000         9.9 %           1,421,000      4.0 %        2,131,000          6.0 %
Tier I capital (to average assets)        3,546,000         7.9 %           1,797,000      4.0 %        2,247,000          5.0 %

As of December 31, 2001:
Total capital (to risk weighted assets)  $3,720,000        10.4 %         $2,870,000      8.0 %       $3,575,000         10.0 %
Tier I capital (to risk weighted
assets)                                   3,271,000         9.1 %          1,431,000      4.0 %        2,147,000          6.0 %
Tier I capital (to  average assets)       3,271,000         7.1 %          1,834,000      4.0 %        2,292,000          5.0 %
</TABLE>

        The Bank presently has an agreement with its regulators that the Bank
        will maintain the ratio of Tier 1 capital to average assets at 7% or
        more.


17.      Management's Plan Regarding Continuing Operations
        At December 31, 2002, University Bancorp had an accumulated deficit of
        $1,999,846 and recurring losses from operations for 4 of the past 5
        years. Future operations of University Bancorp are intended to continue.
        Management has reviewed operating results, prepared projections of
        possible future results, performed other analyses of its operations to
        reduce operating costs and divested certain of its unprofitable
        subsidiaries. Management of the Company has implemented a plan to
        improve core earnings by adding low-cost deposits, adjusting fees,
        growing the loan portfolio of the Bank, and eliminating inefficient or
        redundant costs at the Bank level. Both the Bank and Midwest Loan
        Services are projected to have profits in 2003, however, the Company's
        continued existence is dependent upon its ability to maintain profitable
        operations and retain adequate capital levels.
<PAGE>

18.      Fair Value of Financial Instruments
        The following methods and assumptions were used to estimate fair values
        for financial instruments. The carrying amount is considered to estimate
        fair value for cash and short-term instruments, demand deposits,
        short-term borrowings, accrued interest, and variable rate loans or
        deposits that reprice frequently and fully. Securities fair values are
        based on quoted market prices or, if no quotes are available, on the
        rate and term of the security and on information about the issuer. For
        fixed rate loans or deposits and for variable rate loan or deposits with
        infrequent repricing or repricing limits, the fair value is estimated by
        the discounted cash flow analysis using current market rates for the
        estimated life and credit risk. Fair values for impaired loans are
        estimated using discounted cash flow analyses of underlying collateral
        values, where applicable. Fair value of loans held for sale is based on
        market estimates. Fair value of mortgage servicing rights is estimated
        using discounted cash flows based on current market interest rates net
        of estimated costs of servicing loans. Fair value of mortgage
        subservicing rights is based on a multiple of servicing contract
        revenue. The fair value of debt is based on currently available rates
        for similar financing. The fair value of off-balance sheet items is
        based on the fees or cost that would normally be charged to enter into
        or terminate such agreements. Fair value of unrecognized financial
        instruments include commitments to extend credit and the fair value of
        letters of credit are considered immaterial.



        The carrying amounts and fair values of the Company's financial
instruments were as follows:

                                                  December 31, 2002
                                                Carrying       Fair
        Financial Assets                        Amount         Value
        ----------------                        ------         -----
        Cash and short term investments     $ 2,569,000   $ 2,569,000
        Securities available for sale         3,103,000     3,103,000
        Federal Home Loan Bank stock            848,000       848,000
        Loans held for sale                   1,551,000     1,551,000
        Loans, net                           32,784,000    34,860,000
        Mortgage servicing rights             1,015,000     1,015,000
        Accrued interest receivable             170,000       170,000

        Financial Liabilities
        Deposits                             41,920,000    42,102,000
        Long term borrowings                    298,000       298,000
        Accrued interest payable                 97,000        97,000

<PAGE>

18.      Fair Value of Financial Instruments (continued)


                                                   December 31, 2001
                                                  Carrying        Fair
        Financial Assets                          Amount         Value
        Cash and short term investments         $ 838,000     $ 838,000
        Securities available for sale           2,260,000     2,260,000
        Federal Home Loan Bank stock              848,000       848,000
        Loans held for sale                     2,138,000     2,138,000
        Loans, net                             34,447,000    36,549,000
        Mortgage servicing rights                 607,000       607,000
        Accrued interest receivable               863,000       863,000

        Financial Liabilities
        Deposits                               40,198,000    40,855,000
        Short term borrowings                      92,000        92,000
        Long term borrowings                    1,658,000     1,658,000
        Accrued interest payable                  177,000       177,000



19.      Segment Reporting

        The Company's operations include three primary segments: retail banking,
        mortgage banking, and merchant banking. Through its banking subsidiary's
        branch in Ann Arbor, the Company provides traditional community banking
        services such as accepting deposits, making loans, and providing cash
        management services to individuals and local businesses. Mortgage
        banking activities includes servicing of residential mortgage loans for
        others and discontinued operations have been excluded for 1999 (See Note
        2). Merchant banking is conducted entirely through Michigan BIDCO, which
        makes loans to growing businesses. As additional consideration for the
        loans it makes, BIDCO typically receives equity or options in each
        business. (See Note 3)

        The Company's three reportable segments are strategic business units
        that are separately managed as they offer different products and
        services and have different marketing strategies. In addition, both the
        merchant banking segment and mortgage banking segment service a
        different customer base from that of the retail banking segment.

        The segment financial information provided below has been derived from
        the internal profitability reporting system used by management to
        monitor and manage the financial performance of the Company. The
        accounting policies of the three segments are the same as those
        described in the summary of significant accounting policies. The Company
        evaluates segment performance based on profit or loss before income
        taxes, not including nonrecurring gains and losses. Certain indirect
        expenses have been allocated based on actual volume measurements and
        other criteria, as appropriate. The Company accounts for transactions
        between segments at current market prices. Segment profit is measured
        before allocation of corporate overhead and income tax expense.

<PAGE>

19.      Segment Reporting (continued)
        Information about reportable segments for the year ended December 31,
2002 follows:

                                      Retail         Mortgage
                                     Banking          Banking          Totals
      Interest income               $3,148,530          $45,922      $3,194,452
     Other non-interest income         813,528        3,627,491       4,441,019
      Interest expense               1,036,643            2,520       1,039,163
      Provision for loan losses        110,000         (11,000)         100,000
      Salaries and benefits          1,580,656        1,348,884       2,929,540
      Occupancy                        185,859          163,327         349,186
      Data processing                  390,770           42,469         433,239
      Legal and audit                  127,749           45,390         173,139
      Advertising                       69,274           23,670          92,944
     Other operating expense           658,701        1,643,522       2,302,223
     (Loss) income before tax expense (229,239)         434,837         205,598
      Income tax (benefit) expense    (153,665)         153,665               0
      Segment (loss) profit           $(75,574)        $281,172        $205,598
      Segment assets               $44,078,661       $2,170,652     $46,249,313
      Capital expenditures             $22,255         $106,699        $128,954
      Depreciation                     $75,831         $119,239        $195,070
      Amortization                    $106,967         $522,081        $629,048

<TABLE>
<CAPTION>
        Information about reportable segments for the year ended December 31,
2001 follows:

                                        Retail           Mortgage       Merchant
                                       Banking            Banking      Banking       Totals
<S>                                   <C>               <C>                        <C>
        Interest income               $3,313,473        $229,624                   $3,543,097
        Other non-interest income        769,026       3,300,935       (114,551)    3,955,410
        Interest expense               1,804,856               0                    1,804,856
        Provision for loan losses        40,000                0                       40,000
        Salaries and benefits          1,543,918       1,706,795                    3,250,713
        Occupancy                        336,109         128,074                      464,183
        Data processing                  247,338          38,862                      286,200
        Legal and audit                  102,028          25,184                      127,212
        Advertising                       85,006          26,856                      111,862
       Other operating expense           442,635       1,277,420                    1,720,055
       (Loss) income before tax expense (552,275)        360,253       (114,551)     (306,573)
        Income tax (benefit) expense    (122,830)        122,830                            0
        Segment (loss) profit          $(429,445)       $237,423      $(114,551)    $(306,573)
        Segment assets               $43,955,154      $1,667,577                  $45,622,731
        Capital expenditures            $288,753        $391,037                     $679,790
        Depreciation                    $159,332        $109,197                     $268,529
        Amortization                    $129,497        $312,233                     $441,730

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

20.      Segment Reporting (continued)
Information about reportable segments for the year ended December 31, 2000
follows:
                                        Retail         Mortgage        Merchant
                                        Banking          Banking         Banking       Totals
<S>                                   <C>                 <C>           <C>           <C>
      Interest income                 $3,229,954          $21,977       $63,514       $3,315,445
      Other non-interest income          474,721        1,940,712       234,896        2,650,329
      Interest expense                 2,025,162            7,661        41,624        2,074,447
      Provision for loan losses          111,000                0             0          111,000
      Salaries and benefits            1,065,556          773,569        88,935        1,928,060
      Occupancy                          231,873           82,403         5,813          320,089
      Data processing                    276,937           55,438         3,641          336,016
      Legal and audit                    368,267           23,758        16,405          408,430
      Advertising                         59,903           42,252         1,022          103,177
     Other operating expense           1,098,755          473,558        26,889        1,599,202
     (Loss) income before tax expense (1,532,778)         504,050       114,081        (914,647)
      Income tax (benefit) expense      (204,523)         165,485        39,038                0
      Segment (loss) profit           (1,328,255)        $338,565       $75,043       $(914,647)
      Segment assets                 $45,271,725       $2,398,928            $0      $47,670,653
      Capital expenditures              $168,214         $105,783            $0         $273,997
      Depreciation                      $123,826          $82,935        $6,553         $213,314
      Amortization                       $17,959         $153,170            $0         $171,129
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

21.      Quarterly Financial Data -Unaudited
       The following tables represent summarized data for each of the quarters
       in 2002 and 2001 (in thousands, except loss per share data).

                                                                             2002
                                              -------------------------------------------------------------------
                                              -------------------------------------------------------------------------
                                                  Quarter           Quarter           Quarter            Quarter
                                                   Ended             Ended              Ended             Ended
                                                  March 31          June 30         September 30       December 31
                                              -------------------------------------------------------------------------
<S>                                                      <C>               <C>                <C>               <C>
Interest income                                          $ 788             $ 838              $ 839             $ 729
Interest expense                                           283               252                248               256
                                              -------------------------------------------------------------------------
Net interest income                                        505               586                591               473
Provision for losses                                        23                23                 15                39
                                              -------------------------------------------------------------------------
Net interest income after
   Provision for losses                                    482               563                576               434
Loan set-up and other fees                                 652               471                663             1,305
Loan servicing and subservicing fees                       259               133                143               178
Gain on sale of loans                                       35                20                 43               138
Merchant banking/BIDCO                                       -                 -                  -                 -
Other non-interest income                                   86                58                171                86
Non-interest expense
                                                         1,536             1,483              1,439             1,832
                                              -------------------------------------------------------------------------
Income tax expense                                           -                 -                  -                 -
                                              -------------------------------------------------------------------------
                                              -------------------------------------------------------------------------
Net (loss) earnings available to common                 $ (22)           $ (238)              $ 157             $ 309
shareholders
                                              =========================================================================
Basic and diluted (loss) earnings per share           $ (0.01)          $ (0.06)              $0.04             $0.08
                                              =========================================================================
Weighted average shares outstanding                 3,810,326         3,850,130           3,875,538        3,899,548
                                              ========================================================================
</TABLE>
<PAGE>
21.Quarterly Financial Data -Unaudited (continued)


<TABLE>
<CAPTION>



                                                                                2001
                                              -------------------------------------------------------------------------
                                              -------------------------------------------------------------------------
                                                 Quarter          Quarter           Quarter             Quarter
                                                  Ended            Ended              Ended        Ended December 31
                                                                                      -----
                                                 March 31         June 30         September 30
                                              -------------------------------------------------------------------------
<S>                                                    <C>               <C>              <C>                   <C>
Interest income                                        $ 944             $ 831            $ 1,015               $ 753
Interest expense                                         553               505                418                 329
                                              -------------------------------------------------------------------------
Net interest income                                      391               326                597                 424
Provision for losses                                      22                22                 22                (26)
                                              -------------------------------------------------------------------------
Net interest income after
   Provision for losses                                  369               304                575                 450
Loan set-up and other fees                               494               630                199                 248
Loan servicing and subservicing fees                     580               751                358                 457
Gain on sale of loans                                      9                22                 19                  17
Merchant banking/BIDCO                                     -                 -                  -               (115)
Other non-interest income                                 54                69                 64                  99
Non-interest expense
                                                       1,480             1,720              1,418               1,342
                                              -------------------------------------------------------------------------
Income tax expense                                         -                 -                  -                   -
                                              -------------------------------------------------------------------------
Earnings (loss) from continuing operations                26                                (204)               (185)
                                                                            56
Preferred stock requirements                              11                16                 18                   7
                                              -------------------------------------------------------------------------
Net earnings (loss) available to common
shareholders                                            $ 15              $ 40            $ (222)             $ (192)
                                              =========================================================================
Basic and diluted earnings (loss) per share      $ 0.01                 $ 0.02           $ (0.11)            $ (0.06)
                                              =========================================================================
Weighted average shares outstanding                2,027,801         2,062,878          2,092,312           2,922,676
                                              =========================================================================
</TABLE>

22.    Recent Accounting Pronouncements

         In April 2002, the Financial Accounting Standards Board ("FASB") issued
         Statement of Financial Accounting Standards ("SFAS") No. 145. SFAS No.
         145 requires that gains and losses from extinguishments of debt be
         classified as extraordinary items only if they meet the criteria
         defined in APB Opinion No. 30 which are that the extent or transaction
         is both unusual in nature and infrequent in occurrence. Events
         considered unusual should have a high degree of abnormality and be
         clearly unrelated to the Company's normal operations and infrequency is
         defined as not expected to recur in the foreseeable future. It is not
         expected that provisions of SFAS No. 145 will have a material impact on
         the financial position or results of operations of the Company.

         In June 2002, the FASB issued SFAS 146, "Accounting for Costs
         Associated with Exit or Disposal Activities", which is effective for
         exit or disposal activities that are initiated after December 31, 2002.
         This Statement addresses financial accounting and reporting for costs
         associated with exit or disposal activities and nullifies Emerging
         Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
         Certain Employee Termination Benefits and Other Costs to Exit an
         Activity (including Certain Costs Incurred in a Restructuring)." SFAS
         No. 146 requires that a liability for a cost associated with an exit or


<PAGE>




22.  Recent Accounting Pronouncements (continued)
         disposal activity be recognized when the liability is incurred. Under
         Issue 94-3, a liability for an exit cost as defined in Issue 94-3 was
         recognized at the date of an entity's commitment to an exit plan. The
         Company is currently evaluating the effects of adopting this statement
         and cannot predict whether or not its provisions will have a material
         impact on its financial position or results of operations.

         In November 2002, the FASB issued Interpretation No. 45 (FIN
         45),"Guarantor's Accounting and Disclosure Requirements for Guarantees,
         Including Indirect Guarantees of Indebtedness of Others", which
         addresses the disclosure to be made by a guarantor in its interim and
         annual financial statements about its obligations under guarantees. FIN
         45 requires the guarantor to recognize a liability for the
         non-contingent component of the guarantee, this is the obligation to
         stand ready to perform in the event that specified triggering events or
         conditions occur. The initial measurement of this liability is the fair
         value of the guarantee at inception. The recognition of the liability
         is required even if it is not probable that payments will be required
         under the guarantee or if the guarantee was issued with a premium
         payment or as part of a transaction with multiple events. The initial
         recognition and measurement provisions are effective for all guarantees
         within the scope of FIN 45 issued or modified after December 31, 2002.
         The impact of adoption is not expected to have a significant impact on
         the Company's financial reporting.

23.       Parent Company Only Condensed Financial Information
                             Condensed Balance Sheet
                                                   December 31,    December 31,
                                                       2002            2001
                                                  --------------- --------------
   ASSETS
   Cash and cash equivalents                      $    212,273    $     96,045
   Securities available for sale                           233             233
   Investment in University Bank                     3,309,617       2,923,596
   Investment in Michigan BIDCO                         29,258          29,258
   Receivable from University Bank                         -           286,196
   Other assets                                          3,362           3,107
                                                  ------------    -------------
      Total Assets                                $  3,554,743    $  3,338,435
                                                  ============    =============
   LIABILITIES AND STOCKHOLDERS' EQUITY
   Notes payable                                  $    298,000$        430,000
   Accounts payable                                     98,805         168,631
   Accrued interest payable                              1,972           3,196
                                                  ------------    -------------
      Total Liabilities                                398,777         601,827
   Stockholders' Equity                              3,155,966       2,736,609
                                                  ------------    -------------
      Total Liabilities and Stockholders' Equity  $  3,554,743    $  3,338,435
                                                  ============    =============

<PAGE>

<TABLE>
<CAPTION>



23   Parent Company Only Condensed Financial Information (continued)
                         Condensed Statements of Income

                                                                                2002              2001             2000
                                                                     ---------------- ----------------- ----------------
     INCOME:
<S>                                                                     <C>               <C>             <C>
        Interest and dividends on investments                           $        328      $       407     $      4,072
        Net security gains                                                      -                 -             20,625
        Other income                                                            _             (114,551)          4,047
                                                                     ---------------- ----------------- ----------------
                    Total Income                                                 328          (114,144)         28,744

     EXPENSES:
        Interest                                                              20,675            52,503          89,883
        Amortization of goodwill                                                -             (139,412)        139,412
        Salaries and benefits                                                   -                  -               -
        Public listing                                                        38,202            45,902          33,920
        Professional fees                                                     33,513            43,330          31,765
        Other miscellaneous                                                    3,014             4,788           5,913
                                                                     ---------------- ----------------- ----------------
                    Total Expense                                             95,404             7,111         300,893
     Loss before federal income taxes
          and equity in undistributed
          net loss of subsidiaries                                           (95,076)          (121,255)       (272,149)
     Federal income taxes                                                       -                  -               -
                                                                     ---------------- ----------------- ----------------
     Loss before equity in undistributed
          net income (loss) of subsidiaries                                  (95,076)         (121,255)       (272,149)
     Equity in undistributed net income (loss)
          of subsidiaries                                                    300,674          (185,318)       (642,498)

     Net income (loss)                                                  $    205,598      $   (306,573)   $   (914,647)
                                                                     ================ ================= ================
</TABLE>
<PAGE>


<TABLE>
<CAPTION>

23. Parent Company Only Condensed Financial Information (continued)
                                 Condensed Statements of Cash Flows
                                                                                                  For Year Ended
                                                                                    2002            2001               2000
                                                                                -------------- ----------------  ------------------
      Cash flow provided by (used in) investing activities:
<S>                                                                              <C>             <C>              <C>
      Net Income (Loss)                                                          $   205,598     $   (306,573)    $  (914,647)
      Adjustments to reconcile net loss to net cash provided by
      (used in) operating activities:
       Amortization of goodwill                                                             -          139,412        139,412
       Gain on sale of investments                                                          -                -        (20,625)
       Decrease/(increase) in receivable from affiliate                               286,196        (136,624)           -
       (Increase)/decrease in other assets                                              (256)           55,495        (55,018)
       (Decrease)/increase in other liabilities                                      (71,050)        (158,153)         59,180
       (Increase)/decrease investment in subsidiaries                               (300,673)          185,317        642,577
       Decrease/(increase) investment in Michigan BIDCO                                     -          114,551         (3,760)
                                                                                -------------- ----------------  ------------------
         Net cash provided by (used in) operating activities                          119,815        (106,575)       (152,881)
                                                                                -------------- ----------------  ------------------
      Cash flow from investing activities:
       Purchase of available for sale securities                                                      (66,652)        (78,000)
       Proceeds from sale of available for sale securities                                  -                -         98,625
                                                                                -------------- ----------------  ------------------
         Net cash (used in) provided by investing activities                                          (66,652)         20,625
                                                                                 -------------- ----------------  ------------------
      Cash flow from financing activities:
       Principal payment on notes payable                                           (132,000)        (132,000)       (132,000)
       Issuance of equity conversion bonds                                                  -          184,082        231,000
       Conversion of equity conversion bonds                                                -        (184,082)           -
       Issuance of preferred stock                                                          -          733,000          2,032
       Conversion of preferred stock                                                        -      (1,458,000)           -
       Payment of preferred dividend                                                        -         (52,244)
       Issuance of common stock                                                       128,413        1,162,656         31,250
                                                                                -------------- ----------------  ------------------
          Net cash (used in) provided by financing activities                          (3,587)          253,412       132,282
                                                                                -------------- ----------------  ------------------
                 Net change in cash and cash equivalents                              116,228           80,185             26
           Cash and cash equivalents:
             Beginning of year                                                         96,045           15,860         15,834
                                                                                -------------- ----------------  ------------------
             End of year                                                         $    212,273     $     96,045    $    15,860
                                                                                ============== ================  ==================
          Supplemental disclosure of cash flow information:
           Cash paid during the year for:
             Interest                                                            $     21,899     $     60,686    $   103,504

</TABLE>


<PAGE>

Item 8. - Financial Statements and Supplementary Data

         The financial statements provided pursuant to this item are listed
under Item 14(a) below and appear beginning on page 44.

Item 9. - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.

          None

PART III.

Item 10. - Directors and Executive Officers of the Registrant

         The information required by this item is incorporated by reference
herein from the portions of the Company's Proxy Statement for its 2003 Annual
Meeting (the "Proxy Statement") to be under the captions:

         Election of Directors
         Executive Officers
         Section 16(a) Beneficial Ownership Reporting Compliance

Item 11. - Executive Compensation

         The information required by this item is incorporated by reference
herein from the portions of the Company's Proxy Statement to be under the
captions:

         Executive Compensation
         Compensation Plans

Item 12. -  Security Ownership of Certain Beneficial Owners and Management

         The information required by this item is incorporated by reference
herein from the portion of the Company's Proxy Statement to be under the
caption:

         Security Ownership of Certain Beneficial Owners and
            Management

Item 13. - Certain Relationships and Related Transactions

         The information required by this item is incorporated by reference
herein from the portion of the Company's Proxy Statement to be under the
caption:

         Certain Relationships and Related Transactions



<PAGE>


PART IV.

Item 14. - Exhibits, Financial Statement Schedules and Report on Form 8-K

(a) Index of Financial Statements:
                  The following statements are filed as part of this Report:

                  Audited consolidated balance sheets as of December 31, 2002
                  and December 31, 2001, and consolidated statements of
                  operations, comprehensive income (loss), stockholders' equity
                  and cash flows for the years ended December 31, 2002, 2001,
                  and 2000 of the Company.

(b) Reports on Form 8-K:

                  None

         (c) Exhibits:

         (3) Certificate of Incorporation and By-laws:

         3.1          Composite Certificate of Incorporation of the Company, as
                      amended (incorporated by reference to Exhibit 3.1 to the
                      Company's Quarterly Report on Form 10-Q for the quarter
                      ended June 30, 1996).

         3.1.1        Certificate of Amendment, dated June 10, 1998, of the
                      Company's Certificate of Incorporation (incorporated by
                      reference to Exhibit 3.1.1 to the Company's Quarterly
                      Report on Form 10-Q for the quarter ended June 30, 1998).

         3.2          Composite By-laws of the Company (incorporated by
                      reference to Exhibit 3.2 to the Company's Annual Report
                      on Form 10-K for the year ended December 31, 1989).

         (10) Material Contracts.

         10.1         Loan Agreement and Promissory Note dated December 31, 1997
                      issued to North Country Bank & Trust (incorporated by
                      reference to Exhibit 10.1 to the Company's Annual Report
                      on Form 10-K for the year ended December 31, 1997).

         10.2         University Bancorp, Inc. Employee Stock Ownership Plan
                      (the "ESOP"), as amended November 27, 1990 (incorporated
                      by reference to Exhibit 10.2 to the Company's Annual
                      Report on Form 10-K for the year ended December 31, 1990).
                      *

         10.2.1       Amendment to the ESOP, effective as of December 31, 1991
                      (incorporated by reference to Exhibit 10.2.A to the
                      Company's Annual Report on Form 10-K for the year ended
                      December 31, 1991). *

         10.3         University Bank 401(k) Profit Sharing Plan, adopted August
                      1, 1996, effective as of January 1, 1996 (incorporated by
                      reference to Exhibit 10.3 to the Company's Annual Report
                      on Form 10-K for the year ended December 31, 1996). *

         10.4         Letter regarding grant of options to outside directors,
                      dated as of July 20, 1993 (incorporated by reference to
                      Exhibit 10.6 to the
<PAGE>
                      Company's Annual Report on Form 10-K
                      for year ended December 31,1993).*

         10.5         1995 Stock Plan of the Company (incorporated by reference
                      to Exhibit A to the definitive Proxy Statement of the
                      Company for 1996 Annual Meeting of Stockholders). *

         10.5.1       Form of Stock Option Agreement related to the 1995 Stock
                      Plan (incorporated by reference to Exhibit 10.7.1 to the
                      Annual Report on Form 10-K for the year ended December 31,
                      1995). *

         10.6         Letter, dated December 1, 1989, from Federal Reserve Bank
                      of Minneapolis (incorporated by reference to
                      Exhibit 10.9).

         10.7         Lease Agreement (the "Cascade Lease Agreement") between RG
                      Properties, Inc., as agent for Sault Associates, a
                      Michigan Limited Partnership, and University Bank, dated
                      September 30, 1992 (incorporated by reference to exhibit
                      10.9 to the Company's Annual Report on Form 10-K for the
                      year ended December 31, 1992).

         10.7.1       First Amendment to the Cascade Lease Agreement, dated
                      January 5, 1993 (incorporated by reference
                      exhibit 10.9.1).

         10.8         Federal Income Tax Allocation Agreement Between Newberry
                      State Bank and Newberry Holding Inc. dated March 21, 1992
                      (incorporated by reference to Exhibit 10.11).

         10.8.1       Federal Income Tax Allocation Agreement Between Newberry
                      Holding Inc. and University Bancorp, Inc. dated May 21,
                      1991 (incorporated by reference to Exhibit 10.11.1).


         21           Subsidiaries of Registrant: List of subsidiaries filed
                      herewith.


         23.1     Reports of Independent Auditors, Richard C. Woodbury, P.C.,
                  dated March 8, 2001 regarding Midwest Loan Services, Inc.

                      * Denotes a management compensatory plan or arrangement.

<PAGE>

 SIGNATURES

         Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                              UNIVERSITY BANCORP, INC.


                              By:      /s/Stephen Lange Ranzini
                                       Stephen Lange Ranzini,
                                       President and Chief Executive Officer

                              Date:    April 8, 2003

                              By:      /s/Nicholas K. Fortson
                                       Nicholas K. Fortson
                                       Chief Financial Officer

                              Date:    April 8, 2003

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

         Signature          Title                         Date

/s/Stephen Lange Ranzini   Director, President and
Stephen Lange Ranzini      Chief Executive Officer    April 8, 2003


/s/Robert Goldthorpe       Director, Chairman         April 8, 2003
--------------------
Robert Goldthorpe

/s/Gary Baker               Director                  April 8, 2003
-------------
Gary Baker

/s/Michael Talley           Director                  April 8, 2003
-----------------
Michael Talley

/s/Dr. Joseph L. Ranzini    Director                  April 8, 2003
------------------------
Dr. Joseph Lange Ranzini

/s/Paul Lange Ranzini       Director                  April 8, 2003
---------------------
Paul Lange Ranzini

<PAGE>
                                Index of Exhibits

         Sequentially
         Exhibit Number and Description                         Numbered Page

(3) Certificate of Incorporation and By-laws:

3.1      Composite Certificate of Incorporation of the Company, as amended
         (incorporated by reference to Exhibit 3.1 to the June 30, 1996 10-Q").

3.1.1    Certificate of Amendment, dated June 10, 1998, of the Company's
         Certificate of Incorporation (incorporated by reference to Exhibit
         3.1.1 to the June 30, 1998 10-Q").

3.2      Composite By-laws of the Company (incorporated by reference to Exhibit
         3.2 to the 1989 10-K).

(10) Material Contracts.

10.1     Loan Agreement and Promissory Note dated December 31, 1997 issued to
         North Country Bank & Trust (incorporated by reference to Exhibit 10.1
         to the 1997 10-K"))

10.2     University Bancorp, Inc. Employee Stock Ownership Plan (the "ESOP"), as
         amended November 27, 1990 (incorporated by reference to Exhibit 10.2 to
         the 1990 10-K).

10.2.1   Amendment to the ESOP, effective as of December 31, 1991 (incorporated
         by reference to Exhibit 10.2.A to the 1991 10-K).

10.3     University Bank 401(k) Profit Sharing Plan, adopted August 1, 1996,
         effective as of January 1, 1996 (incorporated by reference to Exhibit
         10.3 to the 1996 10-K).

10.4     Letter regarding grant of options to outside directors, dated as of
         July 20, 1993 (incorporated by reference to Exhibit 10.6 to the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1993 (the "1993 10-K")).

10.5     1995 Stock Plan of the Company (incorporated by reference to Exhibit A
         to the definitive Proxy Statement of the Company for the 1996 Annual
         Meeting of Stockholders (the "1996 Proxy).

10.5.1   Form of Stock Option Agreement related to the 1995 Stock Plan
         (incorporated by reference to Exhibit 10.7.1 to the the 1995 10-K).

10.6     Letter, dated December 1, 1989, from Federal Reserve Bank of
         Minneapolis (incorporated by reference to Exhibit 10.9 to the 1989
         10-K).

10.7     Lease Agreement (the "Cascade Lease Agreement")
         between RG Properties, Inc., as agent for Sault
         Associates, a Michigan Limited Partnership, and
         University Bank, dated September 30, 1992
         (incorporated by reference to exhibit 10.9 to the
         1992 10-K).

10.7.1   First Amendment to the Cascade Lease Agreement, dated January 5, 1993
         (incorporated by reference exhibit 10.9.1 to the 1992 10-K).

10.8     Federal Income Tax Allocation Agreement Between
         Newberry State Bank and Newberry Holding Inc. dated
         March 21, 1992 (incorporated by reference to
         Exhibit 10.11 to the 1991 10-K).

10.8.1   Federal Income Tax Allocation Agreement Between
         Newberry Holding Inc. and University Bancorp, Inc.
         dated May 21, 1991 (incorporated by reference to
         Exhibit 10.11.1 to the 1991 10-K).

21       Subsidiaries of Registrant.                                   83



23     Report of Independent Auditors, Richard C. Woodbury, P.C.       87


<PAGE>


                     Exhibit 21. Subsidiaries of Registrant.


 University Bank, a Michigan state chartered bank
 University Insurance & Investment Services, Inc., a Michigan Corporation
      (100% owned by Bank)
 Midwest Loan Services, Inc., a Michigan Corporation
      (80% owned by University Bank)


<PAGE>

                           FORM 10-K 302 CERTIFICATION

I, Stephen Ranzini certify that:

1)   I have reviewed this annual report on Form 10-K of University Bancorp,
     Inc.;
2)   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;
3)   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;
4)   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)   designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

b)   evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

c)   presented in this annual report our conclusions about the effectiveness of
     the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

2)   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):
a)   all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

b)   any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

3)   The registrant's other certifying officers and I have indicated in this
     annual report whether there were significant changes in internal controls
     or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material
     weaknesses.




     Date:    April 8,2003               /s/Stephen Lange Ranzini
           ----------------               ----------------------------------
                                          Stephen Lange Ranzini
                                          President and Chief Executive Officer
<PAGE>

                           FORM 10-K 302 CERTIFICATION

I, Nicholas K. Fortson certify that:

1)   I have reviewed this annual report on Form 10-K of University Bancorp,
     Inc.;
2)   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;
3)   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;
4)   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)   designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

b)   evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

c)   presented in this annual report our conclusions about the effectiveness of
     the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5)   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):
a)   all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

b)   any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6)   The registrant's other certifying officers and I have indicated in this
     annual report whether there were significant changes in internal controls
     or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material
     weaknesses.



     Date:    April 8,2003               /s/Nicholas K. Fortson
           ----------------               ----------------------
                                            Nicholas K. Fortson
                                            Chief Financial Officer

<PAGE>


                             CERTIFICATION PURSUANT
                           TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of University Bancorp, Inc. (the
"Registrant") on Form 10-K for the period ended December 31, 2002 as filed with
the Securities and Exchange Commission on April 8, 2003, hereof (the "Report"),
the undersigned officers certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report
fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.




                                               University Bancorp, Inc


Date:    April 8,2003         By:   /s/ Stephen Lange Ranzini
                                        Stephen Lange Ranzini
                                        President and Chief Executive Officer


<PAGE>


                             CERTIFICATION PURSUANT
                           TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


 In connection with the annual report of University Bancorp, Inc. (the
 "Registrant") on Form 10-K for the period ended December 31, 2002 as filed with
 the Securities and Exchange Commission on April 8, 2003, hereof (the "Report"),
 the undersigned officers certify, pursuant to 18 U.S.C. Section 1350, as
 adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
 (1) The Report fully complies with the requirements of Section 13(a) or 15(d)
 of the Securities Exchange Act of 1934, and



 (2) The information contained in the Report fairly presents, in all material
 respects, the financial condition and results of operations of the Registrant.



                                 University Bancorp, Inc


 Date:    April 8, 2003       By:   /s/ Nicholas K. Fortson
                                    Nicholas K. Fortson
                                    Chief Financial Officer