<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
(Mark One)
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.
      FOR THE TRANSITION PERIOD__________ TO __________.

                           Commission File No. 1-6830

                           ORLEANS HOMEBUILDERS, INC.
             (Exact name of registrant as specified in its charter)


         Delaware                                            59-0874323
(State or other jurisdiction of                      (I.R.S. Employer I.D. No.)
 incorporation or organization)

                         One Greenwood Square, Suite 101
                                3333 Street Road
                               Bensalem, PA 19020
                    (Address of principal executive offices)
                            Telephone: (215) 245-7500
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X   No
                                       ---     ---

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes      No  X
                                                ---     ---

 Number of shares of common stock, par value $0.10 per share, outstanding as of
                            May 12, 2005: 18,698,131
                  (excluding 244,552 shares held in Treasury).


<PAGE>




                   ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES


                                                                            PAGE
                                                                            ----

                         PART 1 - FINANCIAL INFORMATION
                         ------------------------------

Item 1.    Financial Statements (unaudited)

           Consolidated Balance Sheets at March 31, 2005
             and June 30, 2004                                                 1

           Consolidated Statements of Operations for the
              Three and Nine Months Ended March 31, 2005 and 2004              2

           Consolidated Statements of Shareholders' Equity for the
             Nine Months Ended March 31, 2005                                  3

           Consolidated Statements of Cash Flows for the Nine
             Months Ended March 31, 2005 and 2004                              4

           Notes to Consolidated Financial Statements                          5

Item 2.    Management's Discussion and Analysis of Financial
             Condition and Results of Operations                              17

Item 3.    Quantitative and Qualitative Disclosures About Market
             Risk                                                             42

Item 4.    Controls and Procedures                                            42



                           PART II - OTHER INFORMATION
                           ---------------------------

Item 6.    Exhibits                                                           43



<PAGE>

                   ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                March 31,     June 30,
                                                                  2005          2004
                                                                ---------    ---------
<S>                                                             <C>          <C>
Assets:
Cash and cash equivalents                                       $  27,632    $  32,962

Restricted cash - customer deposits                                25,119       17,795
Real estate held for development and sale:
  Residential properties completed or under construction          285,417      140,401
  Land held for development or sale and improvements              348,134      161,265
  Inventory not owned - Variable Interest Entities                 87,460       88,995
Property and equipment, at cost, less accumulated depreciation      2,991        3,163
Deferred taxes                                                      2,542        2,453
Intangible assets                                                     132            -
Goodwill                                                           20,115        7,187
Receivables, deferred charges and other assets                     17,462        9,025
Land deposits and costs of future development                      34,870       23,356
                                                                ---------    ---------
 Total Assets                                                   $ 851,874    $ 486,602
                                                                =========    =========


Liabilities and Shareholders' Equity
Liabilities:
Accounts payable                                                $  30,998    $  26,246
Accrued expenses                                                   48,895       46,981
Customer deposits                                                  35,609       22,620
Obligations related to inventory not owned                         79,418       81,992
Mortgage and other note obligations primarily secured by real
  estate held for development and sale                            443,295      128,773
Notes payable and amounts due to related parties                        -        2,879
Other notes payable                                                 9,421        1,139
                                                                ---------    ---------
  Total Liabilities                                               647,636      310,630
                                                                ---------    ---------

Commitments and contingencies (See Note I)

Redeemable common stock                                             1,067        1,067
                                                                ---------    ---------

Shareholders' Equity:
Common stock, $.10 par, 23,000,000 shares authorized,
  18,698,131 and 18,031,463 shares issued March 31, 2005
  and June 30, 2004, respectively                                   1,870        1,803
Capital in excess of par value - common stock                      69,533       68,554
Retained earnings                                                 132,199      105,564
Treasury stock, at cost (244,552 and 576,330 shares held             (431)      (1,016)
  at March 31, 2005 and June 30, 2004, respectively)
                                                                ---------    ---------
Total Shareholders' Equity                                        203,171      174,905
                                                                ---------    ---------
Total Liabilities and Shareholders' Equity                      $ 851,874    $ 486,602
                                                                =========    =========
</TABLE>

      See accompanying notes which are an integral part of the consolidated
                             financial statements.

                                     - 1 -



<PAGE>


                   ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        AND CHANGES IN RETAINED EARNINGS
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                   Three Months Ended          Nine Months Ended
                                                        March 31,                  March 31,
                                                   2005          2004          2005         2004
                                                 ---------     ---------    ---------    ---------
<S>                                              <C>           <C>          <C>          <C>
Earned revenues
  Residential properties                         $ 198,120     $ 114,563    $ 514,710    $ 334,427
  Land sales                                           250           157          342          614
  Other income                                       1,612         1,226        5,100        4,055
                                                 ---------     ---------    ---------    ---------
                                                   199,982       115,946      520,152      339,096
                                                 ---------     ---------    ---------    ---------
Costs and expenses
  Residential properties                           160,523        86,940      412,068      256,919
  Land sales                                           250           131          338          621
  Other                                                972           624        3,293        2,848
  Selling, general and administrative               20,894        15,085       60,149       40,643
  Interest
    Incurred                                         6,913         2,357       12,951        6,659
    Less capitalized                                (6,878)       (2,082)     (12,887)      (6,174)
                                                 ---------     ---------    ---------    ---------
                                                   182,674       103,055      475,912      301,516
                                                 ---------     ---------    ---------    ---------


Income from operations before income taxes          17,308        12,891       44,240       37,580
Income tax expense                                   6,735         5,072       17,235       14,778
                                                 ---------     ---------    ---------    ---------
Net income                                       $  10,573     $   7,819    $  27,005    $  22,802
                                                 =========     =========    =========    =========

Net income                                          10,573         7,819       27,005       22,802
Preferred dividends                                      -             -            -          104
                                                 ---------     ---------    ---------    ---------
Net income available for common shareholders     $  10,573     $   7,819    $  27,005    $  22,698
                                                 =========     =========    =========    =========
Basic earnings per share                         $    0.58     $    0.49    $    1.52    $    1.64
                                                 =========     =========    =========    =========
Diluted earnings per share                       $    0.56     $    0.45    $    1.44    $    1.36
                                                 =========     =========    =========    =========
</TABLE>

      See accompanying notes which are an integral part of the consolidated
                             financial statements.

                                     - 2 -

<PAGE>


                   ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                             Common Stock      Capital in
                                                          Shares                Excess of               Treasury Stock
                                                        Issued and             Par Value -   Retained   Shares
                                                        Outstanding   Amount  Common Stock   Earnings    Held     Amount    Total
                                                        -----------  -------  ------------  ---------  --------  -------  ---------
<S>                                                     <C>          <C>      <C>           <C>        <C>       <C>      <C>
Balance at June 30, 2004                                 18,031,463  $ 1,803      $ 68,554  $ 105,564   576,330  $(1,016) $ 174,905

Fair market value of stock options issued                                              208                                      208

Stock options exercised                                                                (66)            (115,000)     203        137

Conversion of senior subordinated notes                     666,668       67           933                                    1,000

Shares issued in connection with the acquisition of PLC                               (132)             (75,000)     132          -

Shares awarded under Stock Award Plan                                                   36             (141,778)     250        286

Dividends declared                                                                               (370)                         (370)

Net income                                                                                     27,005                        27,005
                                                        -----------  -------  ------------  ---------  --------  -------  ---------
Balance at March 31, 2005                                18,698,131  $ 1,870      $ 69,533  $ 132,199   244,552  $  (431) $ 203,171
                                                        ===========  =======  ============  =========  ========  =======  =========
</TABLE>

      See accompanying notes which are an integral part of the consolidated
                             financial statements.

                                     - 3 -


<PAGE>


                   ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)


                                                           Nine Months Ended
                                                               March 31,
                                                           2005         2004
                                                         --------     --------
Cash flows from operating activities:
  Net income                                             $ 27,005     $ 22,802
  Adjustments to reconcile net income to net cash
    used in operating activities:
  Depreciation and amortization                             1,051          484
  Deferred taxes                                              (89)           -
  Stock based compensation expense                            226          106
Changes in operating assets and liabilities:
  Restricted cash - customer deposits                      (3,051)      (3,198)
  Real estate held for development and sale              (195,053)     (60,122)
  Receivables, deferred charges and other assets           (6,852)       1,591
  Land deposits and costs of future developments          (10,473)     (14,443)
  Accounts payable and other liabilities                  (13,008)      (3,338)
  Customer deposits                                         4,423        4,099
                                                         --------     --------
Net cash used in operating activities                    (195,821)     (52,019)
                                                         --------     --------
Cash flows from investing activities:
  Purchases of property and equipment                        (452)      (1,626)
  Acquisitions, net of cash acquired                      (56,635)      (5,420)
                                                         --------     --------
Net cash used in investing activities                     (57,087)      (7,046)
                                                         --------     --------

Cash flows from financing activities:
  Borrowings from loans secured by real estate assets     628,811      271,745
  Repayment of loans secured by real estate assets       (384,649)    (245,725)
  Borrowings from unsecured line of credit                135,948            -
  Repayment of unsecured line of credit                  (135,948)           -
  Borrowings from other note obligations                    5,179        2,837
  Repayment of other note obligations                      (2,168)        (603)
  Issuance of common stock, net of expenses                     -       46,106
  Sale of treasury stock                                      268          240
  Stock options exercised                                     137           28
  Preferred stock dividend                                      -         (104)
                                                         --------     --------
Net cash provided by financing activities                 247,578       74,524
                                                         --------     --------

Net increase (decrease) in cash and cash equivalents       (5,330)      15,459
Cash and cash equivalents at beginning of year             32,962        8,883
                                                         --------     --------
Cash and cash equivalents at end of period               $ 27,632     $ 24,342
                                                         ========     ========

Supplemental disclosure of cash flow activities:
  Interest paid, net of amounts capitalized              $     64     $    485
                                                         ========     ========
  Income taxes paid                                      $ 14,512     $ 12,585
                                                         ========     ========

      See accompanying notes which are an integral part of the consolidated
                             financial statements.

                                     - 4 -


<PAGE>


                ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(A)      Summary of Significant Accounting Policies:

         The accompanying unaudited consolidated financial statements are
         presented in accordance with the requirements for Form 10-Q and do not
         include all the disclosures required by generally accepted accounting
         principles for complete financial statements. Reference is made to Form
         10-K as of and for the year ended June 30, 2004 for Orleans
         Homebuilders, Inc. and subsidiaries (the "Company") for additional
         disclosures, including a summary of the Company's accounting policies.

         On July 28, 2004, the Company acquired all of the issued and
         outstanding partnership interests in Realen Homes, L.P., a Pennsylvania
         limited partnership ("Realen Homes"). Unless otherwise indicated, the
         term the "Company" includes the accounts of Realen Homes. Realen Homes
         is engaged in residential real estate development in Southeastern
         Pennsylvania and Chicago, Illinois. The Consolidated Statements of
         Operations and Changes in Retained Earnings and the Consolidated
         Statements of Cash Flows include the accounts of Realen Homes from July
         28, 2004 through March 31, 2005. The Consolidated Balance Sheets
         include the accounts of Realen Homes as of March 31, 2005. All material
         intercompany transactions and accounts have been eliminated.

         In the opinion of management, the consolidated financial statements
         contain all adjustments, consisting only of normal recurring accruals,
         necessary to present fairly the consolidated financial position of the
         Company for the periods presented. The interim operating results of the
         Company may not be indicative of operating results for the full year.

         Recent accounting pronouncements:

         In January 2003, the FASB issued FASB Interpretation No. 46
         "Consolidation of Variable Interest Entities, an interpretation of ARB
         No. 51" ("FIN 46"). The FASB issued a revised FIN 46 in December 2003
         which modifies and clarifies various aspects of the original
         interpretations. A Variable Interest Entity ("VIE") is created when (i)
         the equity investment at risk is not sufficient to permit the entity to
         finance its activities without additional subordinated financial
         support from other parties or (ii) equity holders either (a) lack
         direct or indirect ability to make decisions about the entity, (b) are
         not obligated to absorb expected losses of the entity or (c) do not
         have the right to receive expected residual returns of the entity if
         they occur. If an entity is deemed to be a VIE, pursuant to FIN 46, an
         enterprise that absorbs a majority of the expected losses of the VIE is
         considered the primary beneficiary and must consolidate the VIE. For
         VIEs created before January 31, 2003, FIN 46 was deferred to the end of
         the first interim or annual period ending after March 15, 2004. The
         Company fully adopted FIN 46 effective March 31, 2004.

                                       5
<PAGE>

         Based on the provisions of FIN 46, the Company has concluded that
         whenever it enters into an option agreement to acquire land or lots
         from an entity and pays a significant deposit that is not
         unconditionally refundable, a VIE is created under condition (ii) (b)
         of the previous paragraph. The Company has been deemed to have provided
         subordinated financial support, which refers to variable interests that
         will absorb some or all of an entity's expected theoretical losses if
         they occur. For each VIE created the Company will compute expected
         losses and residual returns based on the probability of future cash
         flows as outlined in FIN 46. If the Company is deemed to be the primary
         beneficiary of the VIE it will consolidate the VIE on its balance
         sheet. The fair value of the VIEs inventory will be reported as
         "Inventory Not Owned - Variable Interest Entities."

         At March 31, 2005, the Company consolidated eighteen VIEs as a result
         of its options to purchase land or lots from the selling entities. The
         Company paid cash or issued letters of credit deposits to these
         eighteen VIEs totaling $6,193,000 and incurred additional
         pre-acquisition costs totaling $1,849,000. The Company's deposits and
         any costs incurred prior to acquisition of the land or lots, represent
         the Company's maximum exposure to loss. The fair value of the VIEs
         inventory will be reported as "Inventory Not Owned - Variable Interest
         Entities." The Company recorded $87,460,000 in Inventory Not Owned -
         Variable Interest Entities as of March 31, 2005. The fair value of the
         property to be acquired less cash deposits and pre-acquisition costs,
         which totaled $79,418,000 at March 31, 2005, was reported on the
         balance sheet as "Obligations related to inventory not owned."
         Creditors, if any, of these VIEs have no recourse against the Company.

         The Company will continue to secure land and lots using options.
         Including the deposits and other costs capitalized in connection with
         the VIEs above, the Company had total costs incurred to acquire land
         and lots at March 31, 2005 of approximately $32,036,000, including
         $20,728,000 of cash deposits. The total purchase price under these
         cancelable contracts or options is approximately $522,548,000. The
         maximum exposure to loss is limited to the deposits, although some
         deposits are refundable, and costs incurred prior to the acquisition of
         the land or lots.

         In May 2003, the FASB issued Statement of Financial Accounting
         Standards No. 150 "Accounting for Certain Financial Instruments With
         Characteristics of Both Liabilities and Equity" ("SFAS No. 150"). This
         standard requires issuers to classify as liabilities the following
         three types of freestanding financial instruments: (1) mandatory
         redeemable financial instruments, (2) obligations to repurchase the
         issuer's equity shares by transferring assets; and (3) certain
         obligations to issue a variable number of shares. The Company adopted
         SFAS No. 150 effective July 1, 2003. The adoption of SFAS No. 150 did
         not have a material impact on the financial position or results of
         operations of the Company.

                                       6
<PAGE>

         In December 2003, the SEC issued Staff Accounting Bulletin No. 104
         ("SAB 104"), "Revenue Recognition" which rescinds portions of SAB 101,
         "Revenue Recognition in Financial Statements." SAB 104's primary
         purpose is to rescind the accounting guidance contained in SAB 101
         related to multiple element revenue arrangements, superseded as a
         result of the issuance of EITF 00-21. The Company adopted the
         provisions of this statement immediately, as required, and it did not
         have a significant impact on the Company's Consolidated Financial
         Statements.

         In December 2004, the FASB revised FAS 123 through the issuance of FAS
         No. 123 "Share Based Payment", revised ("FAS 123-R"). FAS 123-R is
         effective for the Company commencing July 1, 2005. FAS 123-R, among
         other things, eliminates the alternative to use the intrinsic value
         method of accounting for stock based compensation and requires entities
         to recognize the cost of employee services received in exchange for
         awards of equity instruments based on the grant-date fair value of
         those awards (with limited exceptions). The fair value based method in
         FAS 123-R is similar to the fair-value-based method in FAS 123 in most
         respects, subject to certain key differences. The Company is in the
         process of evaluating the impact of such key differences between FAS
         123 and FAS-123R, but does not currently believe that the adoption of
         FAS 123-R will have a material impact on the Company.

(B)      Acquisitions:

         On December 23, 2004, pursuant to an Asset Purchase Agreement of the
         same date, the Company acquired, through a wholly-owned subsidiary, the
         real estate assets described below (the "Assets") from Peachtree
         Residential Properties, LLC, a North Carolina limited liability company
         and Peachtree Townhome Communities, LLC, a North Carolina limited
         liability company which are wholly-owned subsidiaries of Peachtree
         Residential Properties, Inc., a Georgia corporation (collectively,
         "Peachtree Residential Properties").

         The Assets include: (a) improved and unimproved real property, (b)
         rights to acquire real estate under options or agreements, (c)
         equipment, (d) rights under certain contracts for the sale of homes to
         be sold and leases for real property, (e) rights to certain tradenames
         and other intangibles, including contract backlog, (f) homes and other
         improvements under construction as of the closing, (g) certain plans,
         drawings, specifications, permits and rights under warranties and (h)
         governmental approvals and books and records associated with, or
         relating to the foregoing.

                                       7
<PAGE>

         The Company paid $29,300,000 in cash, to acquire the Assets and certain
         of liabilities of Peachtree Residential Properties assumed by the
         Company, less $200,000 to be retained by the Company and applied
         towards the administration of certain home warranty claims.

         On July 28, 2004, pursuant to a Purchase Agreement of the same date,
         the Company completed its acquisition of all of the issued and
         outstanding partnership interests in Realen Homes, a Pennsylvania
         limited partnership, from Realen General Partner, LLC, a Pennsylvania
         limited liability company, and DB Homes Venture L.P., a Pennsylvania
         limited partnership. The Company acquired the limited partner's
         interest in Realen Homes and a subsidiary of the Company, RHGP LLC,
         acquired the general partner's interest and serves as the general
         partner of Realen Homes.

         In accordance with the Purchase Agreement, the consideration paid by
         the Company consisted of: (i) $53,348,000 in cash delivered at closing,
         (ii) a promissory note of the Company in the aggregate principal amount
         of $5 million, payable over a period of up to two years, with an
         interest rate of 3% per year and (iii) a warranty holdback of $1.5
         million retained by the Company to be applied toward the administration
         of any warranty claims made against Realen Homes in excess of certain
         predetermined amounts. The purchase price was determined based on
         Realen Homes' book value at June 30, 2004, its management personnel,
         its profitability, its backlog and its land position. In addition to
         the consideration described above, the Company incurred approximately
         $394,000 in professional fees in connection with the acquisition of
         Realen Homes.

         The Company evaluated the $5,000,000 3% note in accordance with APB 21
         and determined that it was a below market rate note. In accordance with
         APB 21, the Company estimated, based on current market conditions that
         the Company would likely have been able to obtain similar fixed-rate
         financing from a third party at approximately 150 basis points higher
         than the note actually obtained. The Company imputed interest on the
         note at 4.5% and reduced the carrying value of the note from $5,000,000
         to $4,863,000. The discount of $137,000 will be recorded as interest
         expense over the life of the note.

         The acquisition included, subject to specified exceptions, all assets
         and liabilities of Realen Homes, including land owned or under
         contract, homes under construction but not sold or sold but not
         delivered, sales offers and reservations, and model homes and
         furnishings. The acquired assets were used by Realen Homes in the
         homebuilding business in Pennsylvania and Illinois. The Company intends
         to continue to use the acquired assets in the homebuilding business.

         The Company accounted for the acquisition as a purchase in accordance
         with SFAS No. 141, "Business Combinations." The purchase price was
         allocated to goodwill for $12,928,000 which is defined as the fair
         value of assets and liabilities acquired in excess of the purchase
         price and to intangible assets for $500,000. The intangible assets
         represent the intangible value of the backlog acquired from Realen
         Homes. The intangible value of the backlog will be amortized into cost

                                       8
<PAGE>

         of sales as the acquired backlog is delivered. The Company amortized
         $368,000 of the intangible value of the backlog acquired from Realen
         Homes for the nine months ended March 31, 2005. The company anticipates
         that most of the intangible asset will be amortized by June 30, 2005.

         If the Realen Homes acquisition occurred as of the beginning of the
         annual periods presented below the pro forma information for the
         Company would have been as follows:


                                                   Nine Months Ended
                                                        March 31,
                                               --------------------------
                                                 2005              2004
                                               --------          --------
                                          (in thousands, except share amounts)

         Earned revenues                       $525,578          $444,577

         Income from operations before
              income taxes                       43,586            40,842

         Net income                              26,369            24,709

         Earnings per share:
              Basic                                1.48              1.78
              Diluted                              1.40              1.47


         On July 28, 2003, the Company acquired all of the issued and
         outstanding shares of Masterpiece Homes and entered into an employment
         agreement with the president of Masterpiece Homes. Masterpiece Homes is
         an established homebuilder located in Orange City, Florida. The terms
         of the stock purchase agreement and employment agreement are as
         follows: (i) $3,900,000 in cash, at closing; and (ii) $2,130,000
         payable January 1, 2005, unless prior to that date the president is
         terminated for cause or terminates his employment without good reason,
         as defined in the employment agreement; (iii) sale of 30,000 shares of
         the Company's common stock at $8 per share with a put option at the
         same price, (iv) stock options to purchase 45,000 shares of the
         Company's common stock at $10.64 per share vesting equally on December
         31, 2004, 2005 and 2006; and (v) contingent payments representing 25%
         of the pre-tax profits of Masterpiece Homes for the calendar years
         ended December 31, 2004, 2005 and 2006. The Company also incurred
         approximately $297,000 in acquisition costs to complete this
         transaction. The aforementioned costs are considered part of the
         purchase price of Masterpiece Homes, except for the following items
         that are considered part of, and contingent upon, the employment
         agreement: (a) $710,000 of the $2,130,000 payable January 1, 2005; (b)
         stock options to purchase 45,000 shares of the Company's common stock
         at $10.64 per share; and (c) contingent payments representing 25% of
         the pre-tax profits of Masterpiece Homes for the calendar years ended
         December 31, 2004, 2005 and 2006.

                                       9
<PAGE>

         The Company accounted for these transactions in accordance with SFAS
         No. 141, "Business Combinations", whereby approximately $5,700,000 was
         considered to be part of the purchase price of the business and the
         remainder part of employee compensation. That portion related to
         employee compensation will be charged to expense over the period to
         which it relates. With respect to the amounts allocated to the
         purchase, such amounts were allocated to the fair value of assets and
         liabilities acquired with the excess of approximately $3,007,000
         allocated to goodwill.

(C)      Mortgage, Other Note Obligations, and Revolving Credit Facility:

         The maximum balance outstanding under construction and inventory loan
         agreements at any month end during the nine months ended March 31, 2005
         was $443,295,000. The average month end balance during the nine months
         ended March 31, 2005 was $299,599,000. At March 31, 2005, the Company
         had $28,000,000 of borrowing capacity of which approximately
         $12,009,000 was then available to be drawn under the secured revolving
         credit facility discussed below. The $443,295,000 at March 31, 2005
         consists of $436,000,000 under the Revolving Credit Facility which is
         defined below plus $7,296,000 under mortgage obligations secured by
         land held for development and sale and improvements which are due in
         varying installments through fiscal 2005 with annual interest at
         variable rates based upon 30-day LIBOR or the prime rate of interest
         plus a spread.

         On December 22, 2004, Greenwood Financial, Inc., a wholly-owned
         subsidiary of the Company and other wholly-owned subsidiaries of the
         Company, as borrowers, and Orleans Homebuilders, Inc. as guarantor,
         entered into a Revolving Credit and Loan Agreement (the "Credit
         Agreement") for a $500 Million Senior Secured Revolving Credit and
         Letter of Credit Facility (the "Revolving Credit Facility") with
         various banks as lenders. The Revolving Credit Facility may be
         increased to $650,000,000 under certain circumstances. Under and
         subject to the terms of the Revolving Credit Facility, the borrowers
         may borrow and re-borrow for the purpose of financing the acquisition
         and development of real estate, the construction of homes and
         improvements, for investment in joint ventures, for working capital and
         for such other appropriate purposes as may be approved by the lenders.
         Capitalized terms used below and not otherwise defined have the
         meanings set forth in the Revolving Credit Agreement.

         The Revolving Credit Facility replaces the Company's July 28, 2004
         Bridge Loan Agreement with Wachovia Bank, N.A. In addition, the Company
         used approximately $388,000,000 of funds available under the Revolving
         Credit Facility to repay substantially all of the outstanding loans of
         the Company and its wholly-owned subsidiaries from other banks and
         financial institutions and to acquire the real estate assets of
         Peachtree Residential Properties in Charlotte, North Carolina. At

                                       10
<PAGE>

         March 31, 2005, there was $436,000,000 outstanding under the Revolving
         Credit Facility. In addition, approximately $36,000,000 of letters of
         credit and other assurances of the availability of funds have been
         provided under the Revolving Credit Facility.

         The Revolving Credit Facility has a three-year term and borrowings and
         advances bear interest on a per annum basis equal to the LIBOR Market
         Index Rate plus a non-default variable spread ranging from 175 basis
         points to 237.5 basis points, depending upon the Company's leverage
         ratio. During the term of the Revolving Credit Facility, interest is
         payable monthly in arrears. The March 31, 2005 interest rate was 5.25%
         which includes the 237.5 basis point spread.

         Under the Revolving Credit Facility, the total amount of loans and
         advances outstanding at any time may not exceed the lesser of the
         then-current Borrowing Base Availability or the Revolving Sublimit of
         $500 million. The Revolving Sublimit, under certain circumstances, may
         be increased up to $650 million. The Borrowing Base Availability is
         based on the lesser of the appraised value or cost of real estate owned
         by borrowers that has been admitted to the borrowing base. Various
         conditions must be satisfied in order for real estate to be admitted to
         the borrowing base, including that a mortgage in favor of lenders has
         been delivered to the agent for lenders and that all governmental
         approvals necessary to begin development of for-sale residential
         housing, other than building permits and certain other permits borrower
         in good faith believes will be issued within 120 days, have been
         obtained. Depending on the stage of development of the real estate, the
         loan to value or loan to cost advance rate ranges from 50% to 90% of
         the appraised value or cost of the real estate, whichever is lower.

         As security for all obligations of borrowers to lenders under the
         Revolving Credit Facility, lenders have a first priority mortgage lien
         on all real estate admitted to the borrowing base. In addition, Orleans
         Homebuilders, Inc. has guaranteed the obligations of the borrowers to
         lenders pursuant to a Guaranty executed by the Company on December 22,
         2004. Under the Guaranty, Orleans Homebuilders, Inc. has granted
         lenders a security interest in any balance or assets in any deposit or
         other account Orleans Homebuilders, Inc. has with any lender.

         The Company is required to maintain certain financial ratios and
         customary covenants as set forth in the Revolving Credit Facility.

         On July 28, 2004 the Company entered into an Unsecured Bridge Loan
         Agreement with a maximum borrowing amount of $120,000,000. Proceeds
         from the Unsecured Bridge Loan were used to finance the acquisition of
         Realen Homes, refinance certain outstanding indebtedness of Realen
         Homes and provide the Company with short-term liquidity for land
         purchases and residential development and construction site
         improvements. The Unsecured Bridge Loan had a maturity date of November
         30, 2004. On November 17, 2004, the Unsecured Bridge Loan was increased
         to $140,000,000 and the maturity date was extended to December 31,

                                       11
<PAGE>

         2004. On December 22, 2004, the Unsecured Bridge Loan was replaced with
         part of the proceeds of the Revolving Credit Facility mentioned above.
         Interest on the Unsecured Bridge Loan was payable monthly at 30-day
         LIBOR plus 225 basis points on the portion of the outstanding principal
         balance that did not exceed $60,000,000 and 30-day LIBOR plus 250 basis
         points on the portion of the outstanding principal balance that
         exceeded $60,000,000. The average outstanding debt and interest rate
         under the Unsecured Bridge Loan during the Company's term was
         approximately $95,000,000 and 4.20%, respectively.

         As part of the acquisition of Realen Homes, the Company assumed a
         $70,000,000 secured credit facility. On December 22, 2004, the
         $70,000,000 secured credit facility was replaced with part of the
         proceeds of the Revolving Credit Facility mentioned above. Interest on
         the secured credit facility was payable monthly at a rate based upon
         the agent lender's prime rate. The Company had an option to convert all
         or a portion of the outstanding secured credit facility to a fixed rate
         facility at 30-day LIBOR plus 187.5 basis points to 250 basis points
         per annum in accordance with the lenders pricing formula. The average
         outstanding debt and interest rate under the secured credit facility
         during the Company's term was $70,000,000 and 4.25%, respectively.

         On December 21, 2004 and in accordance with the terms of the Company's
         Convertible Subordinated 7% Note issued to Jeffrey P. Orleans, Chairman
         and Chief Executive Officer of the Company, the third and final
         installment due of $1,000,000 was converted, at $1.50 per share, into
         666,668 shares of the Company's common stock.

(D)      Redeemable Common Stock:

         In connection with the Company's acquisition of Parker and Lancaster
         Corporation on October 13, 2000, the Company issued 300,000 shares of
         common stock of the Company to the former shareholders of Parker and
         Lancaster Corporation. The former shareholders of Parker and Lancaster
         Corporation have the right to cause the Company to repurchase the
         common stock approximately five years after the closing of the
         acquisition at a price of $3.33 per share. Through March 31, 2005, a
         former shareholder of Parker and Lancaster Corporation sold 51,502
         shares of the Company's Common Stock thereby reducing the number of
         shares of redeemable common stock in connection with the Parker and
         Lancaster Corporation acquisition to 248,498 shares.

         In connection with the Company's acquisition of Masterpiece Homes on
         July 28, 2003 (see Note B), the Company sold 30,000 shares of common
         stock of the Company to the president of Masterpiece Homes at $8 per
         share. The president of Masterpiece Homes has the right to cause the
         Company to repurchase the common stock at $8 per share by giving notice
         to the Company no later than the earlier of December 31, 2006 or 30
         days after termination of his employment, as specified in his
         employment agreement.

                                       12
<PAGE>

(E)      Earnings Per Share:

         The weighted average number of shares used to compute basic earnings
         per common share and diluted earnings per common share and a
         reconciliation of the numerator and denominator used in the computation
         for the three months and nine months ended March 31, 2005 and 2004 are
         shown in the following table:
<TABLE>
<CAPTION>
                                                          Three Months Ended         Nine Months Ended
                                                                            March 31,
                                                        ------------------------------------------------
                                                          2005        2004           2005         2004
                                                        --------    --------       --------     --------
                                                                          (Unaudited)
                                                                         (in thousands)

<S>                                                       <C>         <C>            <C>          <C>
         Weighted average common shares issued            18,698      16,493         18,250       14,429
         Unconditional shares issuable                         -          68             32           94
         Less:  Average treasury shares
           Outstanding                                      (359)       (597)          (484)        (645)
                                                        --------    --------       --------     --------
         Basic EPS shares (3)                             18,339      15,964         17,798       13,878
         Effect of assumed shares issued under
           treasury stock method for stock options           554         578            566          568
         Effect of partial conversion of $3 million
           Convertible Subordinated 7% Note                    -         667            448        1,105
         Effect of December 29, 2003 conversion
           of $3 million Series D Preferred Stock              -           -              -        1,316
                                                        --------    --------       --------     --------
         Diluted EPS shares (3)                           18,893      17,209         18,812       16,867
                                                        ========    ========       ========     ========

         Net income available for common
           Shareholders                                 $ 10,573    $  7,819       $ 27,005     $ 22,698
         Effect of December 29, 2003 conversion
           of $3 million Series D Preferred Stock (1)          -           -              -          104
         Effect of partial conversion of $3 million
           Convertible Subordinated 7% Note (2)                           11             22           54
                                                        --------    --------       --------     --------
         Adjusted net income for diluted EPS            $ 10,573    $  7,830       $ 27,027     $ 22,856
                                                        ========    ========       ========     ========
</TABLE>

         (1) On December 29, 2003 and in accordance with the conversion features
             of the Company-issued Series D Preferred Stock, liquidation value
             of $3,000,000, held by Mr. Orleans, the Series D Preferred Stock
             was converted, at $1.50 per share, into 2,000,000 shares of the
             Company's common stock.

         (2) On December 29, 2003 and in accordance with the terms of the
             Company's Convertible Subordinated 7% Note issued to Jeffrey P.
             Orleans, Chairman and Chief Executive Officer of the Company, the
             second annual installment due of $1,000,000 was converted, at $1.50
             per share, into 666,666 shares of the Company's common stock.
             Interest on the remaining principal balance of $1,000,000 was
             payable quarterly and the final installment of principal was
             converted December 21, 2004.

                                       13
<PAGE>

         (3) Dilutive convertible securities converted during a period are
             included in the weighted average number of shares outstanding for
             purposes of computing diluted EPS for the period prior to their
             actual conversion. Therefore, the shares issued upon conversion are
             included in the weighted average calculation of shares outstanding
             used for both basic and diluted EPS.

(F)      Supplemental Cash Flow Disclosure:

         On July 28, 2004, the Company acquired Realen Homes. The following is a
         summary of the effects of this transaction on the Company's
         consolidated financial position:

                                                                    July 28,
                                                                      2004
                                                                   ----------
                                                                 (in thousands)
         Assets acquired:
         Cash                                                      $   (3,174)
         Restricted cash - customer deposits                           (4,273)
         Real estate held for development and sale                   (136,832)
         Property and equipment, at cost, less accumulated
              Depreciation                                               (166)
         Intangible assets, net of amortization                       (13,223)
         Receivables, deferred charges and other assets                (1,478)
         Land deposits and costs of future development                 (2,254)
                                                                   ----------
              Total assets acquired                                  (161,400)
                                                                   ----------

         Liabilities assumed:
         Accounts payable                                              10,771
         Accrued expenses                                               8,191
         Customer deposits                                              8,566
         Mortgage and other note obligations primarily secured
              by real estate held for development and sale             70,282
         Other notes payable                                            3,471
                                                                   ----------
              Total liabilities assumed                               101,281
                                                                   ----------

         Cash paid                                                    (53,348)
         Note payable                                                  (4,863)
         Warranty holdback                                             (1,500)
         Professional fees paid                                          (394)
         Gain on disposition of Realen Homes Mortgage
           Company                                                        297
         Less cash acquired                                             3,174
                                                                   ----------

         Net cash outflow for Realen Homes acquisition             $  (56,635)
                                                                   ==========

                                       14

<PAGE>

(G)      Residential Properties Completed or under Construction:

         Residential properties completed or under construction consist of the
         following:

                                                     March 31,     June 30,
                                                       2005         2004
                                                     ---------    ---------
                                                         (in thousands)
         Under contract for sale (backlog)           $ 206,094    $  89,519
         Unsold                                         79,323       50,882
                                                     ---------    ---------
         Total residential properties completed
              or under construction                  $ 285,417    $ 140,401
                                                     =========    =========

(H)      Restricted Stock Award:

         On March 4, 2005, the Compensation Committee of the Company resolved to
         grant Michael T. Vesey, the Company's President, Chief Operating
         Officer and a member of the Company's Board of Directors, 125,000
         restricted shares of the Company's common stock pursuant to the terms
         of the Company's Stock Award Plan. The award was subject to Mr. Vesey's
         execution of a Restricted Stock Award Agreement which he has executed.
         The Compensation Committee also approved the payment of bonus
         compensation to Mr. Vesey sufficient to allow Mr. Vesey to pay the
         income tax liability triggered on each vesting date.

         The shares of restricted stock granted to Mr. Vesey will vest at a rate
         of ten thousand per year on the first through fifth anniversaries of
         the date of grant and fifteen thousand per year on the sixth through
         tenth anniversaries of the date of the grant, with all shares being
         fully vested by or on the tenth anniversary of the date of grant,
         assuming Mr. Vesey's continued employment with the Company. In
         addition, in the event of a change of control as defined in the Stock
         Award Plan, any shares of restricted stock not vested at that time will
         vest, assuming Mr. Vesey is then employed by the Company. Any shares
         that are not vested are subject to forfeiture in the event Mr. Vesey's
         employment with the Company terminates for any reason.

         On a monthly basis, the Company records compensation expense for the
         portion of the award earned along with additional compensation expense
         sufficient to cover the taxes Mr. Vesey will have to pay on the award.

(I)      Litigation

         From time to time the Company is named as a defendant in legal actions
         arising from its normal business activities. Although the amount of
         liability that could arise with respect to currently pending actions
         cannot be accurately predicted, in the opinion of the Company any such
         liability will not have a material adverse effect on the financial
         position, operating results or cash flows of the Company.

                                       15
<PAGE>

(J)      Commitments and Contingencies:

         As of March 31, 2005, the Company owned or controlled approximately
         16,119 building lots. As part of the aforementioned building lots, the
         Company had contracted to purchase, or has under option, undeveloped
         land and improved lots for an aggregate purchase price of approximately
         $522,548,000 which is expected to yield approximately 8,427 building
         lots. Generally, the Company structures its land acquisitions so that
         it has the right to cancel its agreements to purchase undeveloped land
         and improved lots by forfeiture of its deposit under the agreement.
         Furthermore, purchase of the properties is usually contingent upon
         obtaining all governmental approvals and satisfaction of certain
         requirements by the Company and the sellers.






                                       16
<PAGE>



                   ORLEANS HOMEBUILDERS, INC. AND SUBSIDIARIES

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

Orleans Homebuilders, Inc. and its subsidiaries (collectively, the "Company",
"OHB" or "Orleans") are currently engaged in residential real estate development
in the following eleven markets: Southeastern Pennsylvania; Central New Jersey;
Southern New Jersey; Southern New York, Charlotte, Raleigh and Greensboro, North
Carolina; Richmond and Tidewater, Virginia; Orlando and Palm Coast Florida; and
Chicago, Illinois. The Company's Charlotte, North Carolina market also includes
operations in adjacent counties in South Carolina. The Company has operated in
its Pennsylvania and New Jersey markets for over 85 years and began operations
in its North Carolina and Virginia markets in fiscal 2001 through the
acquisition of Parker & Lancaster Corporation, a privately-held residential
homebuilder. The Company entered the Orlando and Palm Coast Florida markets on
July 28, 2003 through its acquisition of Masterpiece Homes, Inc. ("Masterpiece
Homes"), a privately-held residential homebuilder. On July 28, 2004, the Company
entered the Chicago, Illinois market through the acquisition of Realen Homes,
L.P. ("Realen Homes"), an established privately-held homebuilder with operations
in Southeastern Pennsylvania and Chicago, Illinois. On December 23, 2004,
pursuant to an Asset Purchase Agreement of the same date, the Company acquired,
through a wholly-owned subsidiary, certain real estate assets from Peachtree
Residential Properties, LLC, a North Carolina limited liability company and
Peachtree Townhome Communities, LLC, a North Carolina limited liability company
which are wholly-owned subsidiaries of Peachtree Residential Properties, Inc., a
Georgia corporation (collectively, "Peachtree Residential Properties"). The
Results of Operations include the activity of Masterpiece Homes from July 28,
2003 through March 31, 2005 and Realen Homes from July 28, 2004 through March
31, 2005 as well as the revenue and expenses associated with certain real estate
assets acquired from Peachtree Residential Properties from December 22, 2004
through March 31, 2005. Unless otherwise indicated, the term the "Company"
includes the accounts of Realen Homes.

References to a given fiscal year in this Quarterly Report on Form 10-Q are to
the fiscal year ended June 30th of that year. For example, the phrases "fiscal
2005" or "2005 fiscal year" refer to the fiscal year ended June 30, 2005. When
used in this report, "northern region" refers to the Company's Pennsylvania and
New Jersey markets, which includes the Southeastern Pennsylvania operations of
Realen Homes that were acquired on July 28, 2004; "southern region" refers to
the Company's North Carolina and Virginia markets; "Florida region" refers to
the Company's Florida market, and "midwestern region" refers to the Company's
Illinois market.

The Company believes it is well positioned for continued growth. At March 31,
2005, backlog was $665,441,000 representing 1,713 homes compared to a backlog of
$436,710,000 representing 1,250 homes at March 31, 2004. At March 31, 2005, the
Company was selling in 92 communities and owned or controlled approximately
16,119 building lots compared to 80 communities and 12,218 owned or controlled
building lots at March 31, 2004.

                                       17
<PAGE>

The Company has entitled and developed lots in the highly regulated Pennsylvania
and New Jersey markets for over 40 years. As a result, the Company believes it
has expertise in all aspects of the site selection, land planning, entitlement
and land development processes which can be leveraged across all markets in
which the Company operates. In addition, the Company believes that it holds
attractive land positions in the Pennsylvania and New Jersey markets and that
the market value of these land positions will continue to grow due to the highly
regulated environment in these markets.

The Company develops, builds and markets high-quality single-family homes,
townhomes and condominiums to serve various homebuyer segments, including
first-time, move-up, luxury, empty nester and active adult. The Company believes
this broad range of home designs allows it to capitalize on favorable economic
and demographic trends within its markets.

Results of Operations

The following table sets forth certain details as to residential sales activity.
The information provided is for the three and nine months ended March 31, 2005
and 2004 in the case of residential revenue earned and new orders, and as of
March 31, 2005 and 2004 in the case of backlog.

A sales contract or potential sale is classified as a new order and, therefore,
becomes a part of backlog, at the time a homebuyer executes a contract to
purchase a home from the Company.

<TABLE>
<CAPTION>
                                                     Nine Months Ended March 31,
                                               2005                               2004
                                  -----------------------------      ------------------------------
                                                       (Dollars in thousands)

NORTHERN REGION (1)                                     Average                            Average
New Jersey and Pennsylvania:       Amount      Homes     Price        Amount      Homes     Price
<S>                               <C>            <C>       <C>       <C>            <C>        <C>
Residential revenue earned        $214,202       481       $445      $175,335       450        $390
New orders                         256,977       526        489       218,096       488         447
Backlog                            325,594       705        462       232,695       500         465

SOUTHERN REGION(2)
North Carolina, South Carolina
  and Virginia:
Residential revenue earned        $161,708       452       $358      $116,827       376        $311
New orders                         198,484       517        384       175,519       517         339
Backlog                            192,919       477        404       154,525       431         359
</TABLE>


                                       18
<PAGE>

<TABLE>
<CAPTION>
<S>                               <C>            <C>       <C>       <C>            <C>        <C>
FLORIDA REGION (3)
Residential revenue earned         $53,052       310       $171       $42,265       306        $138
New orders                          70,799       320        221        50,093       327         153
Backlog                             70,595       329        215        49,490       319         155

MIDWESTERN REGION (4)
Residential revenue earned         $85,748       233       $368         $   -         -         $ -
New orders                          64,403       169        381             -         -           -
Backlog                             76,333       202        378             -         -           -

COMBINED REGIONS
Residential revenue earned        $514,710     1,476       $349      $334,427     1,132        $295
New orders                         590,663     1,532        386       443,708     1,332         333
Backlog                            665,441     1,713        388       436,710     1,250         349
</TABLE>

(1) Information on residential revenue earned and new orders for the nine months
ending March 31, 2005 includes the acquired operations of Realen Homes'
Southeastern Pennsylvania region from the date of acquisition, July 28, 2004,
through March 31, 2005.
The backlog at March 31, 2005, includes the acquired backlog of Realen Homes'
Southeastern Pennsylvania region not delivered as of March 31, 2005.

(2) Information on residential revenue earned and new orders for the nine months
ending March 31, 2005 includes amounts acquired from Peachtree Residential
Properties for the period beginning December 23, 2004, the date the Company
acquired the assets, through March 31, 2005. The backlog at March 31, 2005
includes the acquired backlog of Peachtree Residential Properties not delivered
as of March 31, 2005.

(3) Information on residential revenue earned and new orders for the nine months
ending March 31, 2004 is for the period beginning July 28, 2003, the date the
Company entered this market through its acquisition of Masterpiece Homes,
through March 31, 2004.

(4) Information on residential revenue earned and new orders is for the period
beginning July 28, 2004, the date the Company entered this market through its
acquisition of Realen Homes, through March 31, 2005. The backlog at March 31,
2005 includes the acquired backlog of Realen Homes midwestern region not
delivered as of March 31, 2005.

<TABLE>
<CAPTION>
                                                     Three Months Ended March 31,
                                               2005                               2004
                                  -----------------------------       -----------------------------
                                                        (Dollars in thousands)

NORTHERN REGION (1)                                     Average                             Average
New Jersey and Pennsylvania:        Amount     Homes     Price        Amount      Homes      Price
<S>                               <C>            <C>       <C>       <C>            <C>        <C>
Residential revenue earned         $78,501       172       $456       $57,798       133        $435
New orders                         116,431       252        462        95,340       218         437
Backlog                            325,594       705        462       232,695       500         465
</TABLE>


                                       19
<PAGE>

<TABLE>
<CAPTION>
<S>                               <C>            <C>       <C>       <C>            <C>        <C>
SOUTHERN REGION(2)
North Carolina, South Carolina
  and Virginia:
Residential revenue earned         $62,995       173       $364       $41,071       131        $314
New orders                          94,880       240        395        67,034       200         335
Backlog                            192,919       477        404       154,525       431         359

FLORIDA REGION
Residential revenue earned         $19,221       104       $185       $15,694       107        $147
New orders                          33,072       141        235        20,575       124         166
Backlog                             70,595       329        215        49,490       319         155

MIDWESTERN REGION (3)
Residential revenue earned         $37,403       100       $374        $    -         -         $ -
New orders                          18,163        49        371             -         -           -
Backlog                             76,333       202        378             -         -           -

COMBINED REGIONS
Residential revenue earned        $198,120       549       $361      $114,563       371        $309
New orders                         262,546       682        385       182,949       542         338
Backlog                            665,441     1,713        388       436,710     1,250         349
</TABLE>

(1) Information on residential revenue earned and new orders for the three
months ending March 31, 2005 includes the acquired operations of Realen Homes'
Southeastern Pennsylvania region for the quarter ending March 31, 2005. The
backlog at March 31, 2005, includes the acquired backlog of Realen Homes'
Southeastern Pennsylvania region not delivered as of March 31, 2005.

(2) Information on residential revenue earned and new orders for the three
months ending March 31, 2005 includes amounts acquired from Peachtree
Residential Properties for the period beginning December 23, 2004, the date the
Company acquired the assets, through March 31, 2005. The backlog at March 31,
2005 includes the acquired backlog of Peachtree Residential Properties not
delivered as of March 31, 2005.

(3) The backlog at March 31, 2005 includes the acquired backlog of Realen Homes'
midwestern region not delivered as of March 31, 2005.


               Nine Months and Three Months Ended March 31, 2005
               -------------------------------------------------

Orders and Backlog

New orders for the nine months ended March 31, 2005 increased $146,956,000, or
33.1%, to $590,664,000 on 1,532 homes, compared to $443,708,000 on 1,332 homes
for the nine months ended March 31, 2004. The average price per home of new
orders increased by approximately 15.9% to $386,000 for the nine months ended
March 31, 2005 compared to $333,000 for the nine months ended March 31, 2004.

                                       20
<PAGE>

New orders for the three months ended March 31, 2005 increased $79,597,000, or
43.5%, to $262,546,000 on 682 homes, compared to $182,949,000 on 542 homes for
the three months ended March 31, 2004. The average price per home of new orders
increased by approximately 13.9% to $385,000 for the three months ended March
31, 2005 compared to $338,000 for the three months ended March 31, 2004.

The backlog at March 31, 2005 increased $228,731,000, or 52.4%, to $665,441,000
on 1,713 homes compared to the backlog at March 31, 2004 of $436,710,000 on
1,250 homes. The increase in backlog was attributable to an increase in new
orders, the Company's obtaining additional backlog through its acquisition of
Realen Homes and Peachtree Residential Properties, and favorable economic
conditions and demographics for the homebuilding industry in the regions where
the Company operates. These favorable economic conditions, including
historically low interest rates, have resulted in positive home pricing trends
and consistent customer demand. The average price per home included in the
Company's backlog increased 11.2% to $388,000 at March 31, 2005 compared to
$349,000 at March 31, 2004.

NORTHERN REGION:

New orders for the nine months ended March 31, 2005 increased $38,881,000 to
$256,977,000 or 17.8% on 526 homes, compared to $218,096,000 on 488 homes for
the nine months ended March 31, 2004. The increase was primarily attributable to
new orders in the communities acquired in the northern region as part of the
Realen Homes acquisition. The new communities acquired in the Realen Homes
acquisition accounted for $35,403,000 and 80 homes for the nine months ended
March 31, 2005. The net decline in the number of new orders excluding the Realen
Homes acquisition is attributable to the delay in the start of new communities
due to increased government regulation in the northern region states in which
the Company operates. The increase in new order dollars and the decrease in new
home orders is also a result of the Company's efforts to intentionally slow
absorption through pricing increases in several new communities to ensure
production, pricing and absorption rates are properly balanced. The average
price per home of new orders increased by 9.4% to $489,000 for the nine months
ended March 31, 2005 compared to $447,000 for the nine months ended March 31,
2004. The Company believes that it has been able to increase sales prices due to
the strong demand for new homes resulting from the growing population, fueled in
part by immigration, and historically low interest rates which have made housing
more affordable. The limited supply of entitled lots for residential housing in
Pennsylvania and New Jersey due to increased governmental regulation has also
positively impacted home pricing trends.

New orders for the three months ended March 31, 2005 increased $21,091,000 to
$116,431,000 or 22.1% on 252 homes, compared to $95,340,000 on 218 homes for the
three months ended March 31, 2004. The increase was primarily attributable to
new orders acquired in the northern region as part of the Realen Homes
acquisition. The new communities acquired in the Realen Homes acquisition
accounted for $13,095,000 and 31 homes for the three months ended March 31,
2005. The average price per home of new orders increased by 5.7% to $462,000 for
the three months ended March 31, 2005 compared to $437,000 for the three months

                                       21
<PAGE>

ended March 31, 2004. The Company believes that it has been able to increase
sales prices due to the strong demand for new homes resulting from the growing
population, fueled in part by immigration, and historically low interest rates
which have made housing more affordable. The limited supply of entitled lots for
residential housing in Pennsylvania and New Jersey due to increased governmental
regulation has also positively impacted home pricing trends.

The Company had 29 active selling communities in the northern region as of March
31, 2005 compared to 19 active selling communities as of March 31, 2004. The
increase in the number of active selling communities was primarily attributable
to the acquisition of Realen Homes which resulted in the addition of 8 active
selling communities in the northern region.

SOUTHERN REGION:

New orders for the nine months ended March 31, 2005 increased $22,966,000 to
$198,485,000 or 13.1% on 517 homes, compared to $175,519,000 on 517 homes for
the nine months ended March 31, 2004. The increase in new order dollars was
attributable to an increase in the average sales price per home for the nine
months ended March 31, 2005 when compared to the nine months ended March 31,
2004 and new orders of $16,154,000 on 36 homes related to the 8 communities
acquired from Peachtree Residential Properties.

The average price per home of new orders increased by 13.3% to $384,000 for the
nine months ended March 31, 2005 compared to $339,000 for the nine months ended
March 31, 2004. This increase in the average price per home of new orders is due
to price increases in those communities open during the nine months ended March
31, 2005 when compared with the same communities and products offered for sale
in the comparable prior year period.

New orders for the three months ended March 31, 2005 increased $27,846,000 to
$94,880,000 or 41.5% on 240 homes, compared to $67,034,000 on 200 homes for the
three months ended March 31, 2004. The increase in new orders was attributable
to an increase in the average sales price per home for the three months ended
March 31, 2005 when compared to the three months ended March 31, 2004 and new
orders of $16,154,000 on 36 homes related to the 8 communities acquired from
Peachtree Residential Properties.

The average price per home of new orders increased by 17.9% to $395,000 for the
three months ended March 31, 2005 compared to $335,000 for the three months
ended March 31, 2004. This increase in the average price per home of new orders
is due to price increases in those communities open during the three months
ended March 31, 2005 when compared with the same communities and products
offered for sale in the comparable prior year period.

The Company had 50 active selling communities in the southern region as of March
31, 2005 compared to 53 active selling communities as of March 31, 2004.

                                       22
<PAGE>


FLORIDA REGION:

In spite of a series of hurricanes that struck the Florida region in September
2004, new orders for the nine months ended March 31, 2005 increased $20,706,000
to $70,799,000, or 41.3% on 320 homes, compared to $50,093,000 on 327 homes for
the nine months ended March 31, 2004. The increase in new orders is primarily
attributable to an increase in the average price per home to $221,000 for the
nine months ended March 31, 2005 compared to the $153,000 for the nine months
ended March 31, 2004. While the hurricanes slowed sales activities in September
2004, they did not result in any substantial physical damage to the Company's
properties.

New orders for the three months ended March 31, 2005 increased $12,497,000 to
$33,072,000 or 60.7% on 141 homes, compared to $20,575,000 on 124 homes for the
three months ended March 31, 2004. The increase was attributable to an increase
in demand in the Florida region and an increase in the average selling price per
home.

The average price per home of new orders increased by 41.6% to $235,000 for the
three months ended March 31, 2005 compared to $166,000 for the three months
ended March 31, 2004. The increase in the average selling price per home in the
Florida region is primarily due to the increased demand for new housing.

The Company is continuing to expand its operations in the Florida region. The
Company had 7 active selling communities in the Florida region as of March 31,
2005, compared to 8 active selling communities as of March 31, 2004.

MIDWESTERN REGION:

The Company entered the midwestern region through the acquisition of Realen
Homes on July 28, 2004. For the nine months ended March 31, 2005, the midwestern
region accounted for $64,403,000 in new orders on 169 homes at an average price
per home of new orders of $381,000.

For the three months ended March 31, 2005, the midwestern region accounted for
$18,163,000 in new orders on 49 homes at an average price per home of new orders
of $371,000.

As of March 31, 2005, the midwestern region had 6 active selling communities.

Total Earned Revenues

Total earned revenues for the nine months ended March 31, 2005 increased
$181,056,000, to $520,152,000 or 53.4%, compared to $339,096,000 for the nine
months ended March 31, 2004. Residential revenue earned from the sale of
residential homes included 1,476 homes totaling $514,710,000 during the nine
months ended March 31, 2005, as compared to 1,132 homes totaling $334,427,000
during the nine months ended March 31, 2004. The average selling price per home
delivered in the nine months ended March 31, 2005 increased by approximately
18.3% to $349,000 compared to $295,000 for the nine months ended March 31, 2004.

                                       23
<PAGE>

Total earned revenues for the three months ended March 31, 2005 increased
$84,036,000, to $199,982,000 or 72.5%, compared to $115,946,000 for the three
months ended March 31, 2004. Residential revenue earned from the sale of
residential homes included 549 homes totaling $198,120,000 during the three
months ended March 31, 2005, as compared to 371 homes totaling $114,563,000
during the three months ended March 31, 2004. The average selling price per home
delivered in the three months ended March 31, 2005 increased by approximately
16.8% to $361,000 for the three months ended March 31, 2005 compared to $309,000
for the three months ended March 31, 2004.

NORTHERN REGION:

Residential revenue earned for the nine months ended March 31, 2005 increased
$38,867,000 to $214,202,000 or 22.2% on 481 homes delivered as compared to
$175,335,000 on 450 homes delivered during the nine months ended March 31, 2004.
The increase was primarily attributable to homes delivered in the communities
acquired in the northern region as part of the Realen Homes acquisition. The new
communities acquired in the Realen Homes acquisition accounted for $51,067,000
and 144 homes delivered for the nine months ended March 31, 2005.

Excluding the acquisition of Realen Homes, residential revenue earned decreased
$12,200,000 to $163,135,000 and the number of homes delivered decreased 113
homes to 337 homes for the nine months ended March 31, 2005 when compared to the
nine months ended March 31, 2004. The decrease in residential revenue earned and
the decrease in new home deliveries is primarily a result of the mix of homes
delivered. Specifically, single family homes, which typically have a longer
building cycle than townhomes and active adult single family homes, comprised a
larger percentage of the total homes delivered in the region during the nine
months ended March 31, 2005 than townhomes and active adult single family homes
when compared to the nine months ended March 31, 2004. In addition, the net
decline in the number of homes delivered, excluding the Realen Homes
acquisition, is attributable to the delay in the start of new communities caused
by increased government regulation in the northern region states in which the
Company operates.

The average selling price per home delivered in the nine months ended March 31,
2005 increased by approximately 14.1% to $445,000 compared to $390,000 for the
nine months ended March 31, 2004. This increase in the average selling price per
home delivered contributed to the increase in residential revenue earned
described above. The increase in the average selling price per home delivered is
attributable to increases in the average price per home of new orders in fiscal
2005 resulting from sales price increases as well as the product mix of homes
delivered. Specifically, single family homes, which have higher selling prices
than townhomes and active adult single family homes, comprised a larger
percentage of the total homes delivered in the region during the nine months
ended March 31, 2005 when compared to the nine months ended March 31, 2004.

                                       24
<PAGE>

Residential revenue earned for the three months ended March 31, 2005 increased
$20,703,000 to $78,501,000 or 35.8% on 172 homes delivered as compared to
$57,798,000 on 133 homes delivered during the three months ended March 31, 2004.
The increase was primarily attributable to homes delivered in the communities
acquired in the northern region as part of the Realen Homes acquisition. The new
communities acquired in the Realen Homes acquisition contributed $25,749,000 in
residential revenue on 66 homes delivered for the three months ended March 31,
2005.

Excluding the acquisition of Realen Homes, residential revenue earned decreased
$5,046,000 to $52,752,000 and the number of homes delivered decreased 27 homes
to 106 homes for the three months ended March 31, 2005 when compared to the
three months ended March 31, 2004. The decrease in residential revenue earned
and new home deliveries is primarily a result of the mix of homes delivered.
Specifically, single family homes, which typically have a longer building cycle
than townhomes and active adult single family homes, comprised a larger
percentage of the total homes delivered in the region during the three months
ended March 31, 2005 than townhomes and active adult single family homes when
compared to the three months ended March 31, 2004. In addition, the net decline
in the number of homes delivered, excluding the Realen Homes acquisition, is
attributable to the delay in the start of new communities due to increased
government regulation in the northern region states in which the Company
operates.

The average selling price per home delivered in the three months ended March 31,
2005 increased by approximately 4.8% to $456,000 for the three months ended
March 31, 2005 compared to $435,000 for the three months ended March 31, 2004.
This increase in the average selling price per home delivered contributed to the
increase in residential revenue earned described above. The increase in the
average selling price per home delivered is attributable increases in the
average price per home of new orders in fiscal 2005 resulting from sales price
increases as well as the product mix of homes delivered. Specifically, single
family homes, which have higher selling prices than townhomes and active adult
single family homes, comprised a larger percentage of the total homes delivered
in the region during the three months ended March 31, 2005 when compared to the
three months ended March 31, 2004.

SOUTHERN REGION:

Residential revenue earned for the nine months ended March 31, 2005 increased
$44,881,000 to $161,708,000 or 38.4% on 452 homes delivered as compared to
$116,827,000 on 376 homes delivered during the nine months ended March 31, 2004.

The average price per home delivered increased 15.1% to $358,000 for the nine
months ended March 31, 2005 compared to $311,000 for the nine months ended March
31, 2004. The increase in the average price per home delivered was attributable
to increases in the average price per home of new orders in fiscal 2005 coupled
with an increase in revenue attributable to customer-selected options, such as
bonus rooms and flooring upgrades, for the nine months ended March 31, 2005 when
compared to the nine months ended March 31, 2004. In addition, a change in the
product mix of homes delivered during the nine months ended March 31, 2005
compared to the nine months ended March 31, 2004 contributed to the increase in
the average price per home delivered. Specifically, the Company delivered a
larger percentage of luxury and move-up homes during the nine months ended March
31, 2005 than during the nine months ended March 31, 2004.

                                       25
<PAGE>

Residential revenue earned for the three months ended March 31, 2005 increased
$21,924,000 to $62,995,000 or 53.4% on 173 homes delivered as compared to
$41,071,000 on 131 homes delivered during the three months ended March 31, 2004.

The average price per home delivered increased 15.9% to $364,000 for the three
months ended March 31, 2005 compared to $314,000 for the three months ended
March 31, 2004. The increase in the average price per home delivered was
attributable to increases in the average price per home of new orders in fiscal
2005 coupled with an increase in revenue attributable to customer-selected
options, such as bonus rooms and flooring upgrades, for the three months ended
March 31, 2005 when compared to the three months ended March 31, 2004. In
addition, a change in the product mix of homes delivered during the three months
ended March 31, 2005 compared to the three months ended March 31, 2004
contributed to the increase in the average price per home delivered.
Specifically, the Company delivered a larger percentage of luxury and move-up
homes during the three months ended March 31, 2005 than during the three months
ended March 31, 2004.

FLORIDA REGION:

In spite of a series of hurricanes that struck the Florida region in September
2004, residential revenue earned for the nine months ended March 31, 2005
increased $10,787,000 to $53,052,000, or 25.5% on 310 homes, compared to
$42,265,000 on 306 homes for the nine months ended March 31, 2004. The increase
is primarily attributable to a 23.9% increase in the average selling price per
home to $171,000 for the nine months ended March 31, 2005 compared to $138,000
for the nine months ended March 31, 2004. In addition, the Florida region's
results of operations were included in the Company's results of operations for
the entire nine months ended March 31, 2005 compared to the comparable prior
year period wherein the Company acquired Masterpiece Homes and entered the
Florida region on July 28, 2003. The Company did not experience any significant
construction delays as a result of the hurricanes that struck Florida in
September.

Residential revenue earned for the three months ended March 31, 2005 increased
$3,527,000 to $19,221,000, or 22.5% on 104 homes, compared to $15,694,000 on 107
homes for the three months ended March 31, 2004. The increase is primarily
attributable to a 25.9% increase in the average selling price per home to
$185,000 for the three months ended March 31, 2005 compared to $147,000 for the
three months ended March 31, 2004.

The increase in the average selling price per home delivered is attributable to
the demand for new housing and a change in product mix toward more homes for
move-up buyers.

MIDWESTERN REGION:

The Company entered the midwestern region on July 28, 2004 through the
acquisition of Realen Homes. For the nine months ended March 31, 2005, the
midwestern region accounted for $85,748,000 in residential revenue earned on 233
homes at an average selling price per home delivered of $368,000.

                                       26
<PAGE>

For the three months ended March 31, 2005, the midwestern region accounted for
$37,403,000 in residential revenue earned on 100 homes at an average selling
price per home delivered of $374,000.

Other Income

Other income consists primarily of property management fees and mortgage
processing income. The increase in other income for the nine months ending March
31, 2005 as compared to the nine months ending March 31, 2004 is primarily due
to increased mortgage processing income.

Costs and Expenses

Costs and expenses for the nine months ended March 31, 2005 increased
$174,396,000 to $475,912,000, or 57.8%, compared with the nine months ended
March 31, 2004. The cost of residential properties for the nine months ended
March 31, 2005 increased $155,149,000 to $412,068,000, or 60.5%, when compared
with the nine months ended March 31, 2004. The increase in cost of residential
properties was primarily attributable to increased residential revenue in the
Company's northern, southern, midwestern, and Florida regions as noted above as
well as the increase in residential revenue resulting from the Company's
acquisition of Realen Homes and certain assets of Peachtree Residential
Properties. The consolidated gross profit margin for the nine months ended March
31, 2005 decreased 3.3% to 19.9% compared to 23.2% for the nine months ended
March 31, 2004.

Interest included in the costs and expenses of residential properties and land
sold for the nine months ended March 31, 2005 and March 31, 2004 was $6,423,000
and $4,999,000, respectively. The increase in the interest included in the costs
and expenses of residential properties and land sold is attributable to
increased debt levels and higher interest rates associated with land
acquisitions and the general growth of the Company. The interest incurred during
the construction periods is capitalized to inventory and then expensed to the
cost of residential properties in the period in which the unit settles.

The decrease in the consolidated gross profit margin was primarily attributable
to the change in geographic mix of homes delivered and the impact of purchase
accounting. The northern region, which has significantly higher gross profit
margins than the other regions in which the Company operates, comprised a
smaller percentage of the consolidated residential properties revenue for the
nine months ended March 31, 2005 than for the nine months ended March 31, 2004.
The gross profit margin is affected when the acquired Realen Homes' inventory is
delivered because the value of the acquired Realen Homes' inventory was
increased to its fair market value as a result of the application of purchase
accounting under SFAS No. 141 "Business Combinations." The additional costs
recognized in connection with the deliveries of the acquired Realen Homes
inventory as a result of the fair market value write-up of the acquired
inventory was approximately $3,424,000 for the nine months ended March 31, 2005.

                                       27
<PAGE>

The additional costs recognized in connection with the amortization of the
intangible value of the acquired Realen Homes backlog delivered during the nine
months ended March 31, 2005 was approximately $368,000. The additional costs
recognized in connection with the deliveries of the acquired Peachtree inventory
as a result of the fair market value write-up of the acquired inventory was
approximately $437,000 for the nine months ended March 31, 2005.

Costs and expenses for the three months ended March 31, 2005 increased
$79,619,000 to $182,674,000, or 77.3%, compared with the three months ended
March 31, 2004. The cost of residential properties for the three months ended
March 31, 2005 increased $73,583,000 to $160,523,000, or 85.0%, when compared
with the three months ended March 31, 2004. The increase in cost of residential
properties was primarily attributable to increased residential revenue in the
Company's northern, southern, midwestern, and Florida regions as noted above as
well as the increase in residential revenue resulting from the Company's
acquisition of Realen Homes. The consolidated gross profit margin for the three
months ended March 31, 2005 decreased 5.1% to 19.0% compared to 24.1% for the
three months ended March 31, 2004.

Interest included in the costs and expenses of residential properties and land
sold for the three months ended March 31, 2005 and March 31, 2004 was $1,696,000
and $1,664,000, respectively. The interest incurred during the construction
periods is capitalized to inventory and then expensed to the cost of residential
properties in the period in which the unit settles.

The decrease in the consolidated gross profit margin was attributable to the
change in geographic mix of homes delivered and the impact of purchase
accounting. The northern region, which has significantly higher gross profit
margins than the other regions in which the Company operates, comprised a
smaller percentage of the consolidated residential properties revenue for the
three months ended March 31, 2005 than for the three months ended March 31,
2004. In addition, the gross profit margin is affected when the acquired Realen
Homes' inventory is delivered because the value of the acquired Realen Homes'
inventory was increased to its fair market value as a result of the application
of purchase accounting under SFAS No. 141 "Business Combinations." The
additional costs recognized in connection with the deliveries of the acquired
Realen Homes inventory as a result of the fair market value write-up of the
acquired inventory was approximately $747,000 for the three months ended March
31, 2005. The additional costs recognized in connection with the amortization of
the intangible value of the acquired Realen Homes backlog delivered during the
three months ended March 31, 2005 was approximately $156,000. The additional
costs recognized in connection with the deliveries of the acquired Peachtree
inventory as a result of the fair market value write-up of the acquired
inventory was approximately $437,000 for the three months ended March 31, 2005.

The Company sells a variety of home types in various communities and regions,
each yielding a different gross profit margin. As a result, depending on the mix
of both communities and of home types delivered, the consolidated gross profit
margin may fluctuate up or down on a periodic basis and periodic profit margins
may not be representative of the consolidated gross profit margin for the year.

                                       28
<PAGE>

Selling, General & Administrative Expenses

For the nine months ended March 31, 2005, selling, general and administrative
expenses increased $19,467,000 to $60,110,000, or 47.9%, when compared with the
nine months ended March 31, 2004. The increase in selling, general and
administrative expenses was due in part to an increase in sales commissions and
incentive compensation of approximately $9,300,000 attributable to the Company's
growth in residential revenue and profit. Additionally, the Company incurred
approximately $6,400,000 in fixed selling, general and administrative expenses
resulting from the Company's expansion in the northern region and its expansion
into the midwestern region through the acquisition of Realen Homes on July 28,
2004. The expansion in the northern region and Midwestern region as a result of
the Realen Homes acquisition added a total of 15 selling communities to the
regions. The remaining increase in selling, general and administrative expenses
was primarily attributable to increases in payroll, legal, consulting,
advertising, and travel expenses in order to support the expansion of the
Company into new regions.

The selling, general and administrative expenses as a percentage of residential
revenue earned for the nine months ended March 31, 2005 decreased .5% to 11.7%
from 12.2% for the nine months ended March 31, 2004. The decreased percentage is
primarily due to the fixed portion of selling, general and administrative
expenses being spread over a larger revenue base. In the prior quarter, the
Company reported a delay in revenue due to utility company constraints at a few
of the Company's communities which resulted in an increase in selling, general,
and administrative expenses as a percentage of revenue when compared to the
prior year. In the third quarter of fiscal year 2005, that constraint was
resolved and many of these finished homes were delivered in the current quarter
resulting in an increase in revenue and a corresponding decrease in selling,
general, and administrative costs as a percentage of revenue for the nine months
ending March 31, 2005.

For the three months ended March 31, 2005, selling, general and administrative
expenses increased $5,770,000 to $20,855,000, or 38.3%, when compared with the
three months ended March 31, 2004. The Company incurred $2,800,000 in selling,
general and administrative expenses resulting from the Company's expansion in
the northern region, its expansion into the midwestern region through the
acquisition of Realen Homes, and its expansion in Charlotte. The remaining
increase in selling, general and administrative expenses was primarily
attributable to increases in general and administrative payroll, incentive
compensation and travel expenses in order to support the expansion of the
Company into new regions.

The selling, general and administrative expenses as a percentage of residential
revenue earned for the three months ended March 31, 2005 decreased 2.7% to 10.5%
as compared to the 13.2% for the three months ended March 31, 2004. The
decreased percentage is primarily due to the fixed portion of selling, general
and administrative expenses being spread over a larger revenue base.

                                       29
<PAGE>


Income Tax Expense

Income tax expense for the nine months ended March 31, 2005 increased $2,457,000
to $17,235,000, or 16.6% from $14,778,000 for the nine months ended March 31,
2004. The increase in income tax expense for the nine months ended December 31,
2005 is attributable to an increase in income from operations.

Additionally, income tax expense as a percentage of income from operations
before income taxes was 39.0% and 39.3% for the nine months ended March 31, 2005
and 2004, respectively. The slight decrease in the effective tax rate is due to
a decrease in net income from operations before income taxes in the northern
region as a percentage of the consolidated income from operations before income
taxes for the nine months ended March 31, 2005 when compared to the nine months
ended March 31, 2004 as the northern region has a higher relative state tax rate
than a majority of the states in which the Company operates.

Income tax expense for the three months ended March 31, 2005 increased
$1,663,000 to $6,735,000, or 32.8% from $5,072,000 for the three months ended
March 31, 2004. The increase in income tax expense for the three months ended
March 31, 2005 is attributable to an increase in income from operations.

Additionally, income tax expense as a percentage of income from operations
before income taxes was 38.9% and 39.3% for the three months ended March 31,
2005 and 2004, respectively. The slight decrease in the effective tax rate is
due to a decrease in net income from operations before income taxes in the
northern region as a percentage of the consolidated income from operations
before income taxes for the three months ended March 31, 2005 when compared to
the three months ended March 31, 2004 as the northern region has a higher
relative state tax rate than a majority of the states in which the Company
operates.

Net Income

Net income for the nine months ended March 31, 2005 increased $4,203,000, or
18.4%, to $27,005,000, compared with $22,802,000 for the nine months ended March
31, 2004. This increase in net income was attributable to an increase in
residential revenue earned primarily as a result of the Realen Homes acquisition
and favorable conditions in the homebuilding industry, resulting in strong
customer demand and positive home pricing trends. The Company believes the
primary factors resulting in favorable conditions in the homebuilding industry
include: the strong demand for new homes as a result of an increase in
immigration and new household formation; historically low interest rates which
enhance the affordability of homes; and the limited supply of entitled lots for
residential housing due to increased governmental regulation, which increases
the value of lots already owned by the Company.

The increase in net income for the nine months ended March 31, 2005 was reduced
by approximately $2,558,000 on an after-tax basis due to the additional costs
recognized in connection with the deliveries of the acquired Realen Homes and
Peachtree Residential Properties inventory, as a result of the fair market value
write-up of the acquired inventory and backlog. This was partially offset by the

                                       30
<PAGE>

recognition of approximately $765,000 of net income that was previously deferred
pending the resolution of outstanding issues associated with one of the
Company's closed communities.

Net income for the three months ended March 31, 2005 increased $2,754,000, or
35.2%, to $10,573,000, compared with $7,819,000 for the three months ended March
31, 2004. This increase in net income was attributable to an increase in
residential revenue earned primarily as a result of favorable conditions in the
homebuilding industry, resulting in strong customer demand and positive home
pricing trends. The Company believes the primary factors resulting in favorable
conditions in the homebuilding industry include: the strong demand for new homes
as a result of an increase in immigration and new household formation;
historically low interest rates which enhance the affordability of homes; and
the limited supply of entitled lots for residential housing due to increased
governmental regulation, which increases the value of lots already owned by the
Company.

The increase in net income for the three months ended March 31, 2005 was reduced
by approximately $810,000 on an after-tax basis due to the additional costs
recognized in connection with the third quarter deliveries of the acquired
Realen Homes and Peachtree Residential Properties inventory, as a result of the
fair market value write-up of the acquired inventory and backlog.

Liquidity and Capital Resources

On an ongoing basis, the Company requires capital to purchase and develop land,
to construct units, to fund related carrying costs and overhead and to fund
various advertising and marketing programs to facilitate sales. These
expenditures include site preparation, roads, water and sewer lines, impact fees
and earthwork, as well as the construction costs of the homes and amenities. The
Company's sources of capital include funds derived from operations, sales of
assets and various borrowings, most of which are secured. The Company believes
that funds generated from operations and financial commitments from available
lenders will provide sufficient capital for the Company to meet its existing
operating needs.

Revolving Credit Facility

At March 31, 2005, the Company had $28,000,000 of borrowing capacity under its
secured revolving credit facility discussed below, of which approximately
$12,009,000 was available to be drawn based upon the Company's borrowing base. A
majority of the Company's debt is variable rate, based on 30-day LIBOR or the
prime rate, and therefore, the Company is exposed to market risk in connection
with interest rate changes. At March 31, 2005, the 30-day LIBOR and prime rates
of interest were 2.86% and 5.75%, respectively.

On December 22, 2004, Greenwood Financial, Inc., a wholly-owned subsidiary of
the Company and other wholly-owned subsidiaries of the Company, as borrowers,
and Orleans Homebuilders, Inc. as guarantor, entered into a Revolving Credit and
Loan Agreement (the "Credit Agreement") for a $500 Million Senior Secured
Revolving Credit and Letter of Credit Facility (the "Revolving Credit Facility")

                                       31
<PAGE>

with various banks as lenders. Under and subject to the terms of the Revolving
Credit Facility, the borrowers may borrow and re-borrow for the purpose of
financing the acquisition and development of real estate, the construction of
homes and improvements, for investment in joint ventures, for working capital
and for such other appropriate purposes as may be approved by the lenders.
Capitalized terms used below and not otherwise defined have the meanings set
forth in the Revolving Credit Agreement.

The Revolving Credit Facility replaces the Company's July 28, 2004 Bridge Loan
Agreement. On December 22, 2004, the Company used approximately $388,000,000 of
funds available under the Revolving Credit Facility to repay substantially all
of the outstanding loans of the Company and its wholly-owned subsidiaries from
other banks and financial institutions and to acquire the real estate assets of
Peachtree Residential Properties in Charlotte, North Carolina. At March 31,
2005, there is $436,000,000 outstanding under the Revolving Credit Facility. In
addition, approximately $36,000,000 of letters of credit and other assurances of
the availability of funds have been provided under the Revolving Credit
facility.

The Revolving Credit Facility has a three-year term and borrowings and advances
bear interest on a per annum basis equal to LIBOR Market Index Rate plus a
non-default variable spread ranging from 175 basis points to 237.5 basis points,
depending upon the Company's leverage ratio. During the term of the Revolving
Credit Facility, interest is payable monthly in arrears.

The total amount of loans and advances outstanding at any time may not exceed
the lesser of the then-current Borrowing Base Availability or the Revolving
Sublimit as defined in the Revolving Credit Facility. The Revolving Sublimit
initially is $500,000,000, but under certain circumstances may be increased to
up to $650,000,000. The Borrowing Base Availability is based on the lesser of
the appraised value or cost of real estate owned by the Company that has been
admitted to the borrowing base. Various conditions must be satisfied in order
for real estate to be admitted to the borrowing base, including that a mortgage
in favor of lenders has been delivered to the agent for lenders and that all
governmental approvals necessary to begin development of for-sale residential
housing, other than building permits and certain other permits borrower in good
faith believes will be issued within 120 days, have been obtained. Depending on
the stage of development of the real estate, the loan to value or loan to cost
advance rate ranges from 50% to 90% of the appraised value or cost of the real
estate.

As security for all obligations of borrowers to lenders under the Revolving
Credit Facility, lenders have a first priority mortgage lien on all real estate
admitted to the borrowing base. In addition, Orleans Homebuilders, Inc. has
guaranteed the obligations of the borrowers to lenders pursuant to a Guaranty
executed by Orleans Homebuilders, Inc. on December 22, 2004. Under the Guaranty,
Orleans Homebuilders, Inc. has granted lenders a security interest in any
balance or assets in any deposit or other account Orleans Homebuilders, Inc. has
with any lender.

                                       32
<PAGE>

In the event that the Company's leverage ratio is less than 2.00:1 as shown on
its financial statements for two consecutive quarters, and provided that there
exists no event of default or any fact or circumstance that, but for delivery of
notice or the passage of time (or both) would constitute an event of default and
that certain other conditions are met, upon request, the lenders are obligated
to release their mortgage liens granted pursuant to the Revolving Credit
Facility. After such a release, the requirements for real estate to be admitted
to the borrowing base are decreased and a mortgage in favor of lenders will no
longer be required for real estate to be admitted to the borrowing base.

The Revolving Credit Facility contains customary covenants that, subject to
certain exceptions, limit the ability of the Company to (among other things):

         Incur or assume other indebtedness, except certain permitted
         indebtedness;

         Grant or permit to exist any lien, except certain permitted liens;

         Enter into any merger, consolidation or acquisition of all or
         substantially all the assets of another entity;

         Sell, assign, lease or otherwise dispose of all or substantially all of
         its assets; or

         Enter into any transaction with an affiliate that is not a borrower or
         a guarantor under the Revolving Credit Facility, or a subsidiary of
         either.


The Revolving Credit Facility also contains various financial covenants. Among
other things, the financial covenants require that:

         As of the last day of each fiscal quarter, the ratio of the Company's
         Adjusted EBITDA to Debt Service for the prior four fiscal quarters be
         not less than 2.25:1.

         The Company maintain a minimum Consolidated Adjusted Tangible Net Worth
         equal to an amount not less than the sum of (i) $140,000,000 plus (ii)
         an amount equal to fifty percent (50%) of the net income of the Company
         earned during each fiscal quarter that ends on or after December 22,
         2004 plus (iii) all of the net proceeds of equity securities issued by
         the Company or any of its subsidiaries after December 22, 2004.

         As of the last day of each fiscal quarter that ends on or before June
         30, 2006, the Company's Leverage Ratio not exceed 3.25:1.

                                       33
<PAGE>

         As of the last day of each fiscal quarter that ends after June 30,
         2006, the Company's Leverage Ratio not exceed 3.00:1.

         As of the last day of each fiscal quarter that ends on or after the
         date, if any, on which the collateral securing the loans under the
         Revolving Credit Facility is released in accordance with the terms of
         the Revolving Credit Agreement, the Company's Leverage Ratio shall not
         exceed 2.25:1.

In addition, the Revolving Credit Facility contains various financial covenants
with respect to the value of land in certain stages of development that may be
owned by the Company, a borrower or any subsidiary of the Company and limits the
number of units which are not subject to a bona-fide agreement of sale that may
be in the inventory of any borrower, the Company or any subsidiary of the
Company.

The Revolving Credit Facility provides that, subject to any applicable notice
and cure provisions, each of the following (among others) is an event of
default:

         Failure by borrowers to pay when due any amounts owing under the
         Revolving Credit Facility;

         Failure by the Company to observe or perform any promise, covenant,
         warranty, obligation, representation or agreement under the Revolving
         Credit Facility or any other loan document;

         Bankruptcy and other insolvency events with respect to any borrower or
         the Company;

         Dissolution or reorganization of any borrower or the Company;

         The entry of a judgment or judgments against borrower(s) or the
         Company: (i) in an aggregate amount that is at least $500,000 in excess
         of available insurance proceeds, if such judgment or judgments are not
         dismissed or bonded within 30 days; or (ii) that prevents borrowers
         from conveying lots and units in the ordinary course of business if
         such judgment or judgments are not dismissed or bonded within 30 days;
         or the issuance of any writs of attachment, execution or garnishment
         against any borrower or the Company;

         Any material adverse change in the financial condition of a borrower or
         the Company which causes the lenders, in good faith, to believe that
         the performance of any of the obligations under the Revolving Credit
         Facility is impaired or doubtful for any reason; and

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<PAGE>

         Specified cross defaults.

Upon the occurrence and continuation of an event of default, after completion of
any applicable grace or cure period, lenders may demand immediate payment in
full of all indebtedness outstanding under the Revolving Credit Facility,
terminate their obligations to make any loans or advances or issue any letter of
credit, set off and apply any and all deposits held by any lender for the credit
or account of any borrower. In addition, upon the occurrence of certain events
of bankruptcy or other insolvency events with respect to any borrower or the
Company, all indebtedness outstanding under the Revolving Credit Facility shall
be immediately due and payable without any act or action by lenders.

The Company is in compliance with the financial and other covenants of the
Revolving Credit Facility.

Acquisitions

On December 23, 2004, pursuant to an Asset Purchase Agreement of the same date,
the Company acquired the real estate assets ("Peachtree Assets") described below
from Peachtree Residential Properties.

The Peachtree Assets include: (a) improved and unimproved real property, (b)
rights to acquire real estate under options or agreements, (c) equipment, (d)
rights under certain contracts for the sale of homes to be sold and leases for
real property, (e) rights to certain tradenames, (f) homes and other
improvements under construction as of the closing, (g) certain plans, drawings,
specifications, permits and rights under warranties and (h) governmental
approvals and books and records associated with, or relating to the foregoing.

The Company paid $29,300,000 in cash, which covers the Peachtree Assets and
certain of Seller's liabilities assumed by the Company, less $200,000 to be
retained by the Company and applied towards the administration of certain home
warranty claims.

On July 28, 2004, pursuant to a Purchase Agreement of the same date, the Company
completed its acquisition of all of the issued and outstanding partnership
interests in Realen Homes, a Pennsylvania limited partnership. The terms of the
Purchase Agreement are as follows: (i) $53,348,000 in cash delivered at closing,
(ii) a promissory note of the Company in the aggregate principal amount of $5
million, payable over a period of up to two years, with an interest rate of 3%
per year and (iii) a warranty holdback of $1.5 million retained by the Company
to be applied toward the administration of any warranty claims made against
Realen Homes in excess of certain predetermined amounts. To finance the
acquisition of Realen Homes, refinance certain outstanding indebtedness of
Realen Homes and provide the Company with short-term liquidity for land
purchases and residential development and construction site improvements, the
Company obtained a $120,000,000 unsecured bridge loan. The unsecured bridge loan
has a maturity date of November 30, 2004. On November 17, 2004, the Unsecured
Bridge Loan was increased to $140,000,000 and the maturity date was extended to

                                       35
<PAGE>

December 31, 2004. On December 22, 2004, the Unsecured Bridge Loan was replaced
with the Revolving Credit Facility mentioned above. Interest was payable monthly
at 30-day LIBOR plus 225 basis points on the portion of the outstanding
principal balance that does not exceed $60,000,000 and 30-day LIBOR plus 250
basis points on the portion of the outstanding principal balance that exceeds
$60,000,000.

Cash Flow Statement

Net cash used in operating activities for the nine months ended March 31, 2005
was $195,821,000, compared to net cash used by operating activities for the
prior fiscal year period of $52,019,000. The increase in net cash used in
operating activities during the nine months ended March 31, 2005 was primarily
attributable to the acquisition of undeveloped land and improved building lots
that will yield approximately 3,787 building lots with an aggregate purchase
price of approximately $177,672,000. Net cash used in investing activities for
the nine months ended March 31, 2005 was $57,087,000, compared to $7,046,000 for
the prior fiscal year period. This increase was primarily related to the
acquisition of Realen Homes on July 28, 2004. Net cash provided by financing
activities for the nine months ended March 31, 2005 was $247,578,000, compared
to $74,524,000 for the prior fiscal year period. The increase in net cash
provided by financing activities is primarily attributable to borrowings under
the new credit facility to acquire Realen Homes, Peachtree Residential
Properties, and the acquisition of undeveloped land and improved building lots
as noted above.

Lot Positions

As of March 31, 2005, the Company owned or controlled approximately 16,119
building lots. Included in the aforementioned lots, the Company had contracted
to purchase, or has under option, undeveloped land and improved building lots
for an aggregate purchase price of approximately $522,548,000 that are expected
to yield approximately 8,427 building lots.

Undeveloped Land Acquisitions

In recent years, the process of acquiring desirable undeveloped land has become
extremely competitive, particularly in the northern region, mostly due to the
lack of available parcels suitable for development. In addition, expansion of
regulation in the housing industry has increased the time it takes to acquire
undeveloped land with all of the necessary governmental approvals required to
begin construction. Generally, the Company structures its land acquisitions so
that it has the right to cancel its agreements to purchase undeveloped land by
forfeiture of its deposit under the agreement. For the nine months ended March
31, 2005, the Company forfeited $30,000 of land deposits related to the
cancellation of purchase agreements. Included in the balance sheet captions
"Inventory not owned - Variable Interest Entities" and "Land deposits and costs
of future development," at March 31, 2005 the Company had $26,184,000 invested
in 63 parcels of undeveloped land, of which $14,985,000 is deposits, a portion
of which is non-refundable. Overall undeveloped parcels of land under contract
have an aggregate purchase price of approximately $395,310,000 and are expected
to yield approximately 6,889 building lots.

                                       36
<PAGE>

The Company attempts to further mitigate the risks involved in acquiring
undeveloped land by structuring its undeveloped land acquisitions so that the
deposits required under the agreements coincide with certain benchmarks in the
governmental approval process, thereby limiting the amount at risk. This process
allows the Company to periodically review the approval process and make a
decision on the viability of developing the acquired parcel based upon expected
profitability. In some circumstances the Company may be required to make
deposits solely due to the passage of time. This structure still provides the
Company an opportunity to periodically review the viability of developing the
parcel of land. In addition, the Company primarily structures its agreements to
purchase undeveloped land to be contingent upon obtaining all governmental
approvals necessary for construction. Under most agreements, the Company secures
the responsibility for obtaining the required governmental approvals as the
Company believes that it has significant expertise in this area. The Company
intends to complete the acquisition of undeveloped land after all governmental
approvals are in place. In certain circumstances, however, when all extensions
have been exhausted, the Company must make a decision on whether to proceed with
the purchase even though all governmental approvals have not yet been received.
In these circumstances, the Company performs reasonable due diligence to
ascertain the likelihood that the necessary governmental approvals will be
granted. At March 31, 2005, the Company owned one parcel that is expected to
yield 646 building lots for which preliminary governmental approval for the
construction of homes has not been obtained. The $10,876,000 invested in the
parcel, of which $9,285,000 pertains to land and $1,591,000 pertains to site
improvements, is included in the balance sheet caption "Land deposits and costs
of future development," at March 31, 2005.

Improved Lot Acquisitions

The process of acquiring improved building lots from developers is extremely
competitive. The Company competes with many national homebuilders to acquire
improved building lots, some of which have greater financial resources than the
Company. The acquisition of improved lots is usually less risky than the
acquisition of undeveloped land as the contingencies and risks involved in the
land development process are borne by the developer. In addition, governmental
approvals are generally in place when the improved building lots are acquired.

At March 31, 2005, the Company had contracted to purchase or had under option
approximately 1,538 improved building lots for an aggregate purchase price of
approximately $127,238,000, including $5,743,000 of deposits. There were no
deposits forfeited during the nine months ended March 31, 2005 with respect to
improved building lots.

The Company expects to utilize primarily the Revolving Credit Facility as
described above as well as other existing capital resources, to finance the
acquisitions of undeveloped land and improved lots described above. The Company
anticipates completing a majority of these acquisitions during the next several
years.

                                       37
<PAGE>

Critical Accounting Policies

For a discussion the Company's critical accounting policies, see "Critical
Accounting Policies" under Item 7 of the Company's Annual Report on Form 10-K
for fiscal year ended June 30, 2004 filed with the Securities and Exchange
Commission.

Recent Accounting Pronouncements

In January 2003, the FASB issued FASB Interpretation No. 46 "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51" ("FIN 46"). The
FASB issued a revised FIN 46 in December 2003 which modifies and clarifies
various aspects of the original interpretations. A Variable Interest Entity
("VIE") is created when (i) the equity investment at risk is not sufficient to
permit the entity to finance its activities without additional subordinated
financial support from other parties or (ii) equity holders either (a) lack
direct or indirect ability to make decisions about the entity, (b) are not
obligated to absorb expected losses of the entity or (c) do not have the right
to receive expected residual returns of the entity if they occur. If an entity
is deemed to be a VIE, pursuant to FIN 46, an enterprise that absorbs a majority
of the expected losses of the VIE is considered the primary beneficiary and must
consolidate the VIE. For VIEs created before January 31, 2003, FIN 46 was
deferred to the end of the first interim or annual period ending after March 15,
2004. The Company fully adopted FIN 46 effective March 31, 2004.

Based on the provisions of FIN 46, the Company has concluded that whenever it
enters into an option agreement to acquire land or lots from an entity and pays
a significant deposit that is not unconditionally refundable, a VIE is created
under condition (ii) (b) of the previous paragraph. The Company has been deemed
to have provided subordinated financial support, which refers to variable
interests that will absorb some or all of an entity's expected theoretical
losses if they occur. For each VIE created the Company will compute expected
losses and residual returns based on the probability of future cash flows as
outlined in FIN 46. If the Company is deemed to be the primary beneficiary of
the VIE it will consolidate the VIE on its balance sheet. The fair value of the
VIEs inventory will be reported as "Inventory Not Owned - Variable Interest
Entities."

At March 31, 2005, the Company consolidated eighteen VIEs as a result of its
option to purchase land or lots from the selling entities. The Company paid cash
or issued letters of credit deposits to these eighteen VIEs totaling $6,193,000
and incurred additional pre-acquisition costs totaling $1,849,000. The Company's
deposits and any costs incurred prior to acquisition of the land or lots,
represent the Company's maximum exposure to loss. The fair value of the VIEs
inventory will be reported as "Inventory Not Owned - Variable Interest
Entities." The Company recorded $87,460,000 in Inventory Not Owned - Variable
Interest Entities as of March 31, 2005. The fair value of the property to be
acquired less cash deposits and pre-acquisition costs, which totaled $79,418,000
at March 31, 2005, was reported on the balance sheet as Obligations related to
inventory not owned. Creditors, if any, of these VIEs have no recourse against
the Company.

                                       38
<PAGE>

The Company will continue to secure land and lots using options. Including the
deposits and other costs capitalized in connection with the VIEs above, the
Company had total costs incurred to acquire land and lots at March 31, 2005 of
approximately $32,036,000, including $20,728,000 of cash deposits. The total
purchase price under these cancelable contracts or options is approximately
$522,548,000. The maximum exposure to loss is limited to the deposits, although
some deposits are refundable, and costs incurred prior to the acquisition of the
land or lots.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150
"Accounting for Certain Financial Instruments With Characteristics of Both
Liabilities and Equity" ("SFAS No. 150"). This standard requires issuers to
classify as liabilities the following three types of freestanding financial
instruments: (1) mandatory redeemable financial instruments, (2) obligations to
repurchase the issuer's equity shares by transferring assets; and (3) certain
obligations to issue a variable number of shares. The Company adopted SFAS No.
150 effective July 1, 2003. The adoption of SFAS No. 150 did not have a material
impact on the financial position or results of operations of the Company.

In December 2003, the SEC issued Staff Accounting Bulletin No. 104 ("SAB 104"),
"Revenue Recognition" which supersedes SAB 101, "Revenue Recognition in
Financial Statements." SAB 104's primary purpose is to rescind the accounting
guidance contained in SAB 101 related to multiple element revenue arrangements,
superseded as a result of the issuance of EITF 00-21. The Company adopted the
provisions of this statement immediately, as required, and it did not have a
significant impact on the Company's Consolidated Financial Statements.

In December 2004, the FASB revised FAS 123 through the issuance of FAS No. 123
"Share Based Payment", revised ("FAS 123-R"). FAS 123-R is effective for the
Company commencing July 1, 2005. FAS 123-R, among other things, eliminates the
alternative to use the intrinsic value method of accounting for stock based
compensation and requires entities to recognize the cost of employee services
received in exchange for awards of equity instruments based on the grant-date
fair value of those awards (with limited exceptions). The fair value based
method in FAS 123-R is similar to the fair-value-based method in FAS 123 in most
respects, subject to certain key differences. The Company is in the process of
evaluating the impact of such key differences between FAS 123 and FAS-123R, but
does not currently believe that the adoption of FAS 123-R will have a material
impact on the Company.

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995

In addition to historical information, this report contains statements relating
to future events or our future results. These statements are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and are subject to the Safe Harbor provisions created by statute.
Generally words such as "may", "will", "should", "could", "anticipate",
"expect", "intend", "estimate", "plan", "continue", and "believe" or the
negative of or other variation on these and other similar expressions identify
forward-looking statements. These forward-looking statements are made only as of
the date of this report. The Company does not undertake to update or revise the

                                       39
<PAGE>

forward-looking statements, whether as a result of new information, future
events or otherwise. Forward-looking statements are based on current
expectations and involve risks and uncertainties and the Company's future
results could differ significantly from those expressed or implied by the
Company's forward-looking statements.

Many factors, including those listed below, could cause the Company's actual
consolidated results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company:

         o   Future increases in interest rates or a decrease in the
             availability of mortgage financing could lead to fewer home sales,
             which could adversely affect the Company's total earned revenues
             and earnings.

         o   Changes in consumer confidence due to perceived uncertainty of
             future employment opportunities or other factors could lead to
             fewer home sales by the Company.

         o   The Company is subject to substantial risks with respect to the
             land and home inventories it maintains and fluctuations in market
             conditions may affect the Company's ability to sell its land and
             home inventories at expected prices, if at all, which could reduce
             the Company's total earned revenues and earnings.

         o   The Company's business is subject to governmental regulations that
             may delay, increase the cost of, prohibit or severely restrict the
             Company's development and homebuilding projects and reduce its
             total earned revenues and growth.

         o   States, cities and counties in which the Company operates have
             adopted, or may adopt, slow or no growth initiatives which would
             reduce the Company's ability to build and sell homes in these areas
             and could adversely affect the Company's total earned revenues and
             earnings.

         o   The Company may not be successful in its effort to identify,
             complete or integrate acquisitions, which could disrupt the
             activities of the Company's current business and adversely affect
             the Company's results of operations and future growth.

         o   The Company is dependent on the services of certain key employees
             and the loss of their services could harm the Company's business.

         o   The Company may not be able to acquire suitable land at reasonable
             prices, which could result in cost increases the Company is unable
             to recover and reduce the Company's total earned revenues and
             earnings.

         o   The Company's significant level of debt could adversely affect its
             financial condition and prevent it from fulfilling its debt service
             obligations.

                                       40
<PAGE>

         o   The competitive conditions in the homebuilding industry could
             increase the Company's costs, reduce its total earned revenues and
             earnings and otherwise adversely affect its results of operations
             or limit its growth.

         o   The Company may need additional financing to fund its operations or
             to expand its business, and if the Company is unable to obtain
             sufficient financing or such financing is obtained on adverse
             terms, the Company may not be able to operate or expand its
             business as planned, which could adversely affect the Company's
             results of operations and future growth.

         o   Shortages of labor or materials and increases in the price of
             materials can harm the Company's business by delaying construction,
             increasing costs, or both.

         o   The Company depends on the continued availability and satisfactory
             performance of its subcontractors which, if unavailable, could have
             a material adverse effect on the Company's business by limiting its
             ability to build and deliver homes.

         o   The Company is subject to construction defect, product liability
             and warranty claims arising in the ordinary course of business that
             could adversely affect its results of operations.

         o   The Company is subject to mold litigation and mold claims arising
             in the ordinary course of business for which the Company has no
             insurance that could adversely affect the Company's results of
             operations.

         o   The Company's business, total earned revenues and earnings may be
             adversely affected by natural disasters or adverse weather
             conditions.

         o   The Company may be subject to environmental liabilities that could
             adversely affect its results of operations or the value of its
             properties.

         o   Increases in taxes or government fees could increase the Company's
             costs and adverse changes in tax laws could reduce customer demand
             for the Company's homes, either of which could reduce the Company's
             total earned revenues or profitability.

         o   There are a number of laws, regulations and accounting
             pronouncements, recently adopted or proposed, that could affect the
             Company's corporate governance or accounting practices.

         o   Acts of war or terrorism may seriously harm the Company's business.

         o   Jeffrey P. Orleans, Chairman and Chief Executive Officer and the
             Company's majority shareholder, can cause the Company to take
             certain actions or preclude the Company from taking actions without
             the approval of the other shareholders and may have interests that
             could conflict with the interests of other shareholders.

         o   The Company has entered into several transactions with related
             parties, including entities controlled by Mr. Jeffrey P. Orleans,
             which may create conflicts of interest.

                                       41
<PAGE>


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact the financial position,
results of operations or cash flows of the Company, due to adverse changes in
financial and commodity market prices and interest rates. The Company's
principal market risk exposure continues to be interest rate risk. A majority of
the Company's debt is variable based on LIBOR or the prime rate, and, therefore,
affected by changes in market interest rates. Based on current operations, an
increase or decrease in interest rates of 100 basis points will result in a
corresponding increase or decrease in cost of sales and interest charges
incurred by the Company of approximately $4,300,000 in a fiscal year, a portion
of which will be capitalized and included in cost of sales as homes are
delivered. The Company believes that reasonably possible near-term interest rate
changes will not result in a material negative effect on future earnings, fair
values or cash flows of the Company. Generally, the Company has been able to
recover any increased costs of borrowing through increased selling prices;
however, there is no assurance the Company will be able to continue to increase
selling prices to cover the effects of any increase in near-term interest rates.

Changes in the prices of commodities that are a significant component of home
construction costs, particularly lumber, may result in unexpected short term
increases in construction costs. Since the sales price of the Company's homes is
fixed at the time the buyer enters into a contract to acquire a home and because
the Company generally contracts to sell its homes before construction begins,
any increase in costs in excess of those anticipated may result in gross margins
lower than anticipated for the homes in the Company's backlog. The Company
attempts to mitigate the market risks of price fluctuation of commodities by
entering into fixed-price contracts with its subcontractors and material
suppliers for a specified period of time, generally commensurate with the
building cycle.

There have been no material adverse changes to the Company's (1) exposure to
risk and (2) management of these risks, since June 30, 2004.

Item 4.  Controls and Procedures

The Company's management, with the participation of the Company's Chief
Executive Officer, President and Chief Operating Officer, and Chief Financial
Officer, evaluated the effectiveness of the Company's disclosure controls and
procedures as of the end of the period covered by this report. Based upon that
evaluation, the Chief Executive Officer, President and Chief Operating Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures are functioning effectively to provide reasonable assurance that
information required to be disclosed by the Company in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the Security and Exchange Commission's
rules and forms. There has been no change in the Company's internal control over
financial reporting during the Company's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

                                       42
<PAGE>

                           PART II. OTHER INFORMATION


Item 6.  Exhibits.

    (a)  Exhibits.

         10.1     Form of Restricted Stock Award Agreement (Incorporated by
                  reference to Exhibit 10.1 to the Company's Form 8-K filed
                  with the Commission on March 10, 2005).

         31.1*    Certification of Jeffrey P. Orleans pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002.

         31.2*    Certification of Michael T. Vesey pursuant to Section 302
                  of the Sarbanes-Oxley Act of 2002.

         31.3*    Certification of Joseph A. Santangelo pursuant to Section
                  302 Sarbanes-Oxley Act of 2002.

         32.1*    Certification of Jeffrey P. Orleans pursuant to Section
                  906 Sarbanes-Oxley Act of 2002.

         32.2*    Certification of Michael T. Vesey pursuant to Section 906
                  Sarbanes-Oxley Act of 2002.

         32.3*    Certification of Joseph A. Santangelo pursuant to Section
                  906 Sarbanes-Oxley Act of 2002.

* Exhibits filed herewith electronically.

                                       43
<PAGE>


                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        ORLEANS HOMEBUILDERS, INC.
                                        (Registrant)

         May 12, 2005                   Michael T. Vesey
                                        ----------------
                                        Michael T. Vesey
                                        President and Chief Operating Officer


         May 12, 2005                   Joseph A. Santangelo
                                        --------------------
                                        Joseph A. Santangelo
                                        Treasurer, Secretary and Chief Financial
                                        Officer




                                       44
<PAGE>


                                  EXHIBIT INDEX

         10.1     Form of Restricted Stock Award Agreement (Incorporated by
                  reference to Exhibit 10.1 to the Company's Form 8-K filed with
                  the Commission on March 10, 2005).

         31.1     Certification of Jeffrey P. Orleans pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002.

         31.2     Certification of Michael T. Vesey pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002.

         31.3     Certification of Joseph A. Santangelo pursuant to Section 302
                  Sarbanes-Oxley Act of 2002.

         32.1     Certification of Jeffrey P. Orleans pursuant to Section 906
                  Sarbanes-Oxley Act of 2002.

         32.2     Certification of Michael T. Vesey pursuant to Section 906
                  Sarbanes-Oxley Act of 2002.

         32.3     Certification of Joseph A. Santangelo pursuant to Section 906
                  Sarbanes-Oxley Act of 2002.





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