Washtenaw (AMEX:TWH)
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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.