Washtenaw Group earnings lowered by mortgage decline.

THE WASHTENAW GROUP INC., ANN ARBOR, Michigan, the holding company for Washtenaw Mortgage Co., reported it recorded lower earnings for the second quarter of 2004, reflecting the industry-wide downturn in residential mortgage activity.

Washtenaw Mortgage Co., a wholesale mortgage company,

Mortgage origination volume fell 70 percent for the second quarter and 64 percent for the first half of 2004, from the continued industrywide 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 second-quarter 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, Washtenaw Group posted net income of $116,756, or $0.03 per share, for the second quarter, a substantial change from year-earlier record net income of $3,406,000, or $0.76 per share. For the first half, it recorded a net loss of $2,987,000, equivalent to a $0.67 per share loss, 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 generally accepted accounting principles-required (GAAP-required) valuation adjustment to the mortgage servicing rights portfolio of $3,944,000, equivalent to $0.88 per share. The results for second-quarter 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 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 second-quarter 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.

According to the company, investments in technology have been instrumental in reducing its overhead, including personnel costs, which were cut by 59 percent for the second quarter and nearly 50 percent for the first half.

"While we are not happy with the results, our corporation performed well under the circumstances," said Charles C. Huffman, Washtenaw's chairman and chief executive officer. "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 U.S. We are still building market share in our West Coast region. And we are well-positioned to take advantage of an upturn in business volume."