TWH The Washtenaw Grp.

The Washtenaw Group, Inc. Earnings Lowered By Mortgage Decline ANN ARBOR, Mich., Aug. 4 /PRNewswire-FirstCall/ -- The Washtenaw Group, Inc. (AMEX:TWH), the holding company for Washtenaw Mortgage Company, recorded lower earnings for the second quarter of 2004, reflecting the industry-wide downturn in residential-mortgage activity, 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 approximately 2,000 correspondent lenders in approximately 40 states. The Washtenaw Group, Inc. resulted from the previously announced spin-off of Washtenaw Mortgage Company into a separate, publicly held corporation, from Pelican Financial, Inc. (AMEX:PFI). The spin-off was effective at the close of business December 31, 2003. Operating results Mortgage-origination volume fell 70% for the second quarter and 64% for the first half of 2004, from the continued industry-wide slump in mortgage- refinance activity and softness in new-mortgage originations. Total originations for the second quarter of 2004 were $384 million, compared with $1.3 billion for Q2-2003. For the first half, originations were $778 million, compared with record originations of $2.2 billion for the first half of 2003. As a result of the lower overall volume, the Corporation posted net income of $116,756, or $0.03 per share, for the second quarter, a turnaround from year-earlier record net income of $3,406,000, or $0.76 per share. For the first half, the Corporation recorded a net loss of $2,987,000, equivalent to $0.67 per share, compared with record net income of $6,065,000, or $1.36 per share, for the first half of 2003. The results for the quarter were aided by a GAAP-required valuation- adjustment to the mortgage-servicing-rights portfolio of $3,944,000, equivalent to $0.88 per share. The results for Q2-2003 included a valuation- adjustment charge of $2,830,000, equivalent to $0.63 per share. For the first half of 2004, the valuation adjustment was $1.0 million, equivalent to $0.23 per share, compared with a valuation-adjustment charge of $4,635,000, or $1.03 per share, for the first half of 2003. Results also included a loss and provision for loss on loan repurchases and other real estate of $2,249,000 for Q2-2004 and $2,865,000 for the first six months of 2004. These provisions were $1,249,000 and $2,167,000, for the second quarter and first half of 2003, respectively. Mr. Huffman noted that the Corporation's investments in technology have been instrumental in reducing overhead, including personnel costs, which were cut by 59% for the second quarter and nearly 50% for the first half. He added, "While we are not happy with the results, our Corporation performed well under the circumstances. We have quickly adapted to market conditions by downsizing, without compromising response time or service quality. We continue to increase our broker network, which exceeds 2,000 independent brokers across the US. We are still building marketshare in our West Coast Region. And we are well positioned to take advantage of an upturn in business volume." 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 June 30, December 31, 2004 2003 (Unaudited) ASSETS Cash and cash equivalents $100,000 $100,000 Accounts receivable, net 4,971,299 5,340,932 Loans held for sale 60,144,176 97,687,823 Mortgage servicing rights, net 23,561,036 24,614,381 Other real estate owned 1,036,772 925,839 Premises and equipment, net 1,648,790 1,480,988 Other assets 1,353,269 1,030,653 $92,815,342 $131,180,616 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Due to bank 10,869,782 11,074,372 Notes payable 28,648,842 33,211,685 Repurchase agreements 17,050,428 43,926,901 GNMA repurchase liability 7,359,982 8,599,700 Other liabilities 9,629,826 12,162,996 Total liabilities 73,558,859 108,975,654 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 June 30, 2004 and December 31, 2003 44,884 44,884 Additional paid in capital 1,994,033 1,955,932 Retained earnings 17,217,566 20,204,146 Total shareholders' equity 19,256,483 22,204,962 $92,815,342 $131,180,616 THE WASHTENAW GROUP, INC. Consolidated Statements of Income (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 Interest income $1,205,151 $3,997,158 $2,413,992 $7,059,173 Interest expense 845,919 1,957,119 1,667,681 3,496,696 Net interest income 359,232 2,040,039 746,311 3,562,477 Noninterest income Servicing income 2,222,773 1,714,144 4,611,651 3,434,101 Gain on sales of mortgage servicing rights and loans, net 1,879,114 15,038,244 4,628,091 26,473,046 Other income 291,292 355,643 576,834 562,212 Total noninterest Income 4,393,179 17,108,031 9,816,576 30,469,359 Noninterest expense Compensation and employee benefits 2,632,013 6,491,306 5,965,099 11,792,450 Occupancy and equipment 452,490 444,563 871,838 839,866 Telephone 76,827 156,704 155,207 285,904 Postage 112,370 207,782 260,294 392,140 Amortization of mortgage servicing rights 1,967,709 1,457,514 3,920,936 2,641,298 Mortgage servicing rights valuation adjustment (3,943,903) 2,830,175 (1,041,589) 4,635,179 Loss and provision for loss on loan repurchases and other real estate 2,248,651 1,249,498 2,865,485 2,166,839 Other noninterest expense 1,045,101 1,118,517 2,015,570 2,051,306 Total noninterest expense 4,591,258 13,956,059 15,012,840 24,804,982 Income (loss) before income taxes 161,153 5,192,011 (4,449,953) 9,226,854 Provision for income taxes 44,397 1,786,421 (1,463,372) 3,162,240 Net income (loss) $116,756 $3,405,590 $(2,986,581) $6,064,614 Basic and diluted earnings (loss) per share $0.03 $0.76 $(0.67) $1.36 DATASOURCE: The Washtenaw Group, Inc. CONTACT: Howard Nathan of The Washtenaw Group, Inc., +1-800-765-5562; or Mike Marcotte of Marcotte Financial Relations, +1-248-656-3873, for The Washtenaw Group, Inc.

Copyright