TWH The Washtenaw Grp.

The Washtenaw Group, Inc. Reports Q3 Results ANN ARBOR, Mich., Nov. 5 /PRNewswire-FirstCall/ -- The Washtenaw Group, Inc. (AMEX:TWH), the holding company for Washtenaw Mortgage Company, recorded significantly lower mortgage volume and a net loss for the third quarter and nine-months ended September 30, 2004, 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 precipitously to $212.2 million, from record originations of $1.0 billion for the third quarter of 2003. For the first nine months of 2004, mortgage originations were $990.0 million, a sharp downturn from record originations of $3.2 billion for the first nine months of 2003. As a result of the lower mortgage volume and the continuing losses on loan repurchases and other real estate, the Corporation posted a net loss of $2,258,000, equivalent to $0.50 per share, for the third quarter of 2004, compared with record net income from continuing operations of $3,834,000, or $0.86 per share, for the comparable 2003 period. For the first nine months, the Corporation recorded a net loss of $5,245,000, equivalent to $1.17 per share, compared with record net income from continuing operations of $9,899,000, or $2.22 per share, for the first nine months of 2003. Losses on loan repurchases and other real estate totaled $1.6 million and $4.4 million for Q3-2004 and the first nine months of 2004, respectively. The results for Q3-2004 were lowered by a GAAP-required valuation- adjustment to the mortgage-servicing-rights portfolio of $101,000, equivalent to $0.02 per share. The results for Q3-2003 were aided by a valuation- adjustment credit of $2,416,000, equivalent to $0.54 per share. Results for the first nine months of 2004 were reduced by a valuation adjustment of $941,000, equivalent to $0.21 per share, compared with a valuation-adjustment of $2,219,000, or $0.49 per share, which boosted results for the first nine months of 2003. Mr. Huffman said, "The year has been difficult and disappointing. We have cut expenses, introduced numerous new products, and increased our broker network. New- and existing-housing sales are relatively strong, however the mortgage sector appears to be treading water because of fluctuating interest rates and the buying-public's predilection for lower-margin ARMs over fixed- rate mortgages. We look forward to more stable interest rates, because we are well positioned to grow." He noted that the Corporation's results continue to be impaired by credit- quality issues, such as inflated-property values. 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 Sheet September 30, December 31, 2004 2003 (Unaudited) ASSETS Cash and cash equivalents $100,000 $100,000 Accounts Receivable, net 8,819,429 5,340,932 Loans held for sale 36,001,483 97,687,823 Mortgage servicing rights, net 18,993,159 24,614,381 Other real estate owned 1,209,745 925,839 Premises and equipment, net 1,735,238 1,480,988 Other assets 750,036 1,030,653 $67,609,090 $131,180,616 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Due to bank $6,999,229 $11,074,373 Notes payable 19,290,750 33,211,684 Repurchase agreements 8,098,423 43,926,901 GNMA Repurchase Liability 6,736,448 8,599,700 Other liabilities 9,479,336 12,162,996 Total liabilities 50,604,186 108,975,654 Shareholders' equity Preferred Stock, $.01 par value 1,000,000 shares authorized; none outstanding - - Common stock, $.01 par value 9,000,000 shares authorized; 44,884 44,884 4,488,351 outstanding at September 30, 2004 and December 31, 2003 Additional paid-in capital 2,000,424 1,955,932 Retained earnings 14,959,596 20,204,146 Total shareholders' equity 17,004,904 22,204,962 $67,609,090 $131,180,616 THE WASHTENAW GROUP, INC. Consolidated Statements of Income (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2004 2003 2004 2003 Interest income $759,471 $3,865,346 $3,173,463 $10,924,519 Interest expense 627,301 1,878,526 2,294,982 5,375,221 Net interest income 132,170 1,986,820 878,481 5,549,298 Noninterest income Servicing income 2,137,041 1,857,838 6,748,692 5,291,939 Gain on sales of mortgage servicing rights and loans, net 1,628,134 11,822,407 6,252,720 38,295,453 Other income 208,630 246,930 788,970 809,141 Total noninterest income 3,973,805 13,927,175 13,790,382 44,396,533 Noninterest expense Compensation and employee benefits 2,305,171 6,818,980 8,270,469 18,611,430 Occupancy and equipment 509,951 418,824 1,381,789 1,258,690 Telephone 84,418 160,429 239,624 446,333 Postage 103,862 180,414 364,157 572,554 Amortization of mortgage servicing rights 2,046,115 1,684,337 5,967,051 4,325,636 Mortgage servicing rights valuation adjustment 100,760 (2,416,090) (940,829) 2,219,089 Loss and provision for loss on loan repurchases and other real estate 1,576,413 2,197,541 4,441,898 4,364,381 Other noninterest expense 794,978 1,072,453 2,810,348 3,123,757 Total noninterest expense 7,521,668 10,116,888 22,534,507 34,921,870 Income before income taxes (3,415,693) 5,797,107 (7,865,644) 15,023,961 Provision for income taxes (1,157,723) 1,962,761 (2,621,094) 5,125,001 Net income (loss) $(2,257,970) $3,834,346 $(5,244,550) $9,898,960 Basic and diluted earnings (loss) per share $(0.50) $0.86 $(1.17) $2.22 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.

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