TWH The Washtenaw Grp.

The Washtenaw Group, Inc. Reports Q1 Results Net Loss Narrowed Despite Lower Mortgage Volume ANN ARBOR, Mich., May 6 /PRNewswire-FirstCall/ -- The Washtenaw Group, Inc. (AMEX:TWH), the holding company for Washtenaw Mortgage Company, narrowed its net loss, despite lower mortgage volume for the first quarter of 2005, Charles C. Huffman, Chairman and CEO, reported today. Washtenaw Mortgage Company, one of the nation's leading wholesale mortgage companies, originates, acquires, sells and services mortgage loans. The Company is headquartered in Ann Arbor, Michigan, and conducts business through some 2,000 mortgage brokers in approximately 40 states. Mortgage-origination volume for the first quarter of 2005 was $169 million, off 57% from year-earlier volume of $394 million, reflecting rising interest rates and the industry-wide downturn in mortgage-refinance activity. Aided by across-the-board cost-cutting steps, the company reduced the net loss to $1.67 million, or $0.37 per diluted share, from $3.10 million, or $0.69 per diluted share, for the first quarter of 2004. Net interest income improved 85%, reflecting the credit received for custodial deposits maintained at the warehouse lender. Noninterest income was down 61% due to a substantial decrease in gains from the sale of loans and mortgage-servicing rights. Operating expenses were successfully reduced by 48%, including a 36% dip in compensation and employee benefits. Headcount has been reduced to 138 from 215 a year ago. Results for the quarter were aided by a $51,541 credit for a valuation adjustment to the mortgage-servicing- rights portfolio. This adjustment was a charge of $2,902,314 for the first quarter of 2004. Mr. Huffman said, "We are doing everything possible to generate mortgage volume and reduce operating expenses. We have introduced many of the newest mortgage products, such as zero-down, interest-only and Alt. A. In fact, we are expanding the criteria for Alt. A. mortgages to cast a wider net and attract additional borrowers. We are well positioned from product, personnel and technology standpoints to take advantage of any up-tick in business activity. "However, interest rates have been generally unappealing to the refinance sector, our core business. The spring and summer home selling season may bring some relief." Safe Harbor. This news release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and are subject to risks and uncertainties, which could cause actual results to differ materially from those described in the forward- looking statements. Among these risks are regional and national economic conditions, competitive and regulatory factors, legislative changes, mortgage interest rates, cost and availability of borrowed funds, our ability to sell mortgages in the secondary market, and housing sales and values. These risks and uncertainties are contained in the Corporation's filings with the Securities and Exchange Commission, available via EDGAR. The Company assumes no obligation to update forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such forward-looking statements. THE WASHTENAW GROUP, INC. Consolidated Balance Sheets March 31, December 31, 2005 2004 (Unaudited) ASSETS Cash and cash equivalents $100,000 $100,000 Accounts receivable 4,503,750 7,107,462 Loans held for sale 34,289,600 68,518,733 Securities available for sale 5,528,870 22,234,244 Mortgage servicing rights, net 17,363,477 17,240,953 Other real estate owned 1,412,638 1,589,591 Premises and equipment, net 1,542,608 1,678,252 Other assets 1,360,772 835,787 $66,101,715 $119,305,022 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Due to bank $5,323,357 $6,507,279 Notes payable 33,845,866 59,952,788 GNMA repurchase liability 1,274,388 6,465,538 Repurchase agreements 5,159,000 22,390,336 Other liabilities 6,359,786 8,000,486 Total liabilities 51,962,397 103,316,427 Shareholders' equity Preferred stock, $.01 par value 1,000,000 shares authorized; none outstanding - - Common stock, $.01 par value 9,000,000 shares authorized; 4,488,351 outstanding at March 31, 2005 and December 31, 2004 44,884 44,884 Additional paid in capital 2,006,816 2,006,816 Retained earnings 12,123,933 13,797,423 Accumulated other comprehensive income/(loss) (36,315) 139,472 Total shareholders' equity 14,139,318 15,988,595 $66,101,715 $119,305,022 THE WASHTENAW GROUP, INC. Consolidated Statements of Income (Unaudited) Three Months Ended March 31, 2005 2004 Interest income $1,184,357 $1,208,841 Interest expense 469,617 821,762 Net interest income 714,740 387,079 Noninterest income Servicing income 1,318,164 2,388,877 Gain on sales of mortgage servicing rights and loans, net 484,935 2,748,977 Gain on sales of securities, net 122,108 - Other income 187,590 285,544 Total noninterest income 2,112,797 5,423,398 Noninterest expense Compensation and employee benefits 2,120,685 3,307,966 Occupancy and equipment 449,227 419,348 Telephone 41,340 78,379 Postage 90,681 148,681 Amortization of mortgage servicing rights 870,209 1,953,227 Mortgage servicing rights valuation adjustment (51,541) 2,902,314 Loss and provision for loss on loan repurchases and other real estate 804,092 616,834 Other noninterest expense 1,034,668 994,833 Total noninterest expense 5,359,361 10,421,582 Loss before income taxes (2,531,824) (4,611,105) Provision for income taxes (858,334) (1,507,768) Net Loss $(1,673,490) $(3,103,337) Basic and diluted loss per share $(0.37) $(0.69) Comprehensive loss $(1,849,277) $(3,103,337) DATASOURCE: The Washtenaw Group, Inc. CONTACT: Howard Nathan of The Washtenaw Group, Inc., +1-800-242-6698; Mike Marcotte of Marcotte Financial Relations, +1-248-656-3873, for The Washtenaw Group, Inc.

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