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.
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