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GREATER ATLANTIC FINANCIAL CORP.
10700 Parkridge Boulevard - Suite P50 - Reston, Virginia 20191
- (703) 391-1300 - Fax: (703) 391-1506
NEWS RELEASE
DATE: APRIL 30, 2003
CONTACT: DAVID E. RITTER
(703) 390-0344
GREATER ATLANTIC FINANCIAL RELEASES
SECOND QUARTER RESULTS
Reston, Virginia - April 30, 2003 - Charles W. Calomiris, Chairman of the Board
of Greater Atlantic Financial Corp. (NASDAQ: GAFC), the holding company for
Greater Atlantic Bank, announced today that the Company had net earnings for the
three months ended March 31, 2003, of $212,000 or $.07 per diluted share
compared to net earnings of $56,000 or $.02 per diluted share earned for the
three months ended March 31, 2002. For the six months ended March 31, 2003, the
Company had net earnings of $916,000 or $.25 per diluted share, compared to net
earnings of $327,000 or $.11 per share for the comparable period one year ago.
In commenting on the results, Carroll E. Amos, President and Chief Executive
Officer, said, "aided by an increase in net interest income and a substantial
increase in loan origination and sales volumes at the Bank's mortgage banking
subsidiary, our earnings tripled from those achieved for the comparable three-
and six month- periods one year ago. While we had anticipated that our
refinancing activities would slow during the quarter ended March 31, 2003, the
slowdown was greater than anticipated and we were therefore unable to produce
the results in the March quarter that we had achieved in the quarter ended
December 31, 2002." In commenting further, Mr. Amos stated that, "we were able
to get a good start with loan originations in excess of $70.0 million for the
month of March and, with the current outlook for interest rates, we expect our
loan origination and sales to increase during the June 2003 quarter."
Mr. Amos noted that earnings were also negatively impacted during the quarter as
loans receivable, net, decreased by $5.6 million from the quarter ended December
31, 2002 due to repayments and prepayments of $1.9 million in the commercial
lending portfolio and by $4.5 million in the bank's single-family loan
portfolio. Mr. Amos stated that, "this should be a short term decrease as the
Bank closed on approximately $8.5 million of commercial real estate loans in the
first week of April which should help reverse the run-off that occurred in
March."
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Net interest income during the quarter ended March 31, 2003, amounted to $2.0
million, unchanged from the comparable period one year ago, as the $86.9 million
increase in the Bank's average interest earning assets was offset by a 41 basis
point decrease in net interest margin from 2.05% for the three months ended
March 31, 2002, to 1.64% for the current quarter. Contributing to the decline in
the net interest margin was a $455,000 charge resulting from payments made on
certain interest rate swap and cap agreements compared to a $13,000 charge in
the comparable period one-year ago. Also contributing to the decline was the
prepayment of higher yielding interest earning assets that occurred during the
quarter.
For the six months ended March 31, 2003, net interest income amounted to $4.2
million, an increase of $297,000 or 8 percent over the comparable 2002 period.
The increase during the six months ended March 31, 2003 resulted primarily from
a $107.0 million increase in the Bank's average interest earning assets offset
in part by a 32 basis point decrease in net interest margin from 2.04% for the
six months ended March 31, 2002 to 1.72% for the six months ended March 31,
2003. Payments of $836,000 on the interest rate swap and cap agreements referred
to previously compared to a charge of $13,000 in the period one-year ago,
coupled with the prepayment of higher yielding interest earning assets, were the
primary reasons for the decline in net interest margin.
Noninterest income for the three months ended March 31, 2003, increased 64
percent or $1.4 million from the three months ended March 31, 2002. The increase
in the quarter was primarily attributable to a $1.2 million increase in gain on
sale of loans by Greater Atlantic Mortgage Corporation coupled with an increase
of $134,000 in service fees on loans and deposits.
For the six months ended March 31, 2003, noninterest income amounted to $8.0
million, an increase of $3.7 million or 85 percent when compared to the six
months ended March 31, 2002. That increase is primarily attributable to an
increase in gain on sale of loans of $3.4 million, as loan sales increased over
the comparable period one year ago, coupled with an increase of $315,000 in
service fees on loans and deposits offset by a $85,000 decrease in gain on sales
of investment securities.
Noninterest expense increased $1.4 million or 37 percent to $5.2 million for the
three months ended March 31, 2003 from the comparable period one year ago. The
increase was primarily attributable to a $1.1 million increase in noninterest
expense at the Bank's mortgage banking subsidiary for the three months ended
March 31, 2003 from the comparable period one year ago as a result of increased
loan origination and sales activity. While the Bank's increase of $293,000 in
noninterest expense was distributed over various noninterest expense categories,
the increase at the mortgage company level was primarily in compensation, other
operating expense and professional services of $943,000, $54,000 and $43,000,
respectively.
Noninterest expense for the six months ended March 31, 2003, amounted to $10.6
million, an increase of $3.1 million or 42% from the $7.5 million incurred in
the six months ended March 31, 2002. The increase was primarily attributable to
a $2.7 million increase in expense at the Bank's mortgage banking subsidiary as
a result of increased lending activity. The increase in the Bank's noninterest
expense of $429,000 was a result of the Bank's continued growth. While
4/30/03 Greater Atlantic Financial Corp. Page 2 of 7
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the Bank's increase in noninterest expense was distributed over various
categories, the increase in noninterest expense at the Mortgage Corporation
level was primarily in compensation, other operating expense and professional
services of $2.3 million, $178,000 and $85,000, respectively.
Non-performing assets were $1.7 million at March 31, 2003, or .35 percent of
total assets, compared to $307,000 or .07 percent of total assets at March 31,
2002. The increase in non-performing assets from the year ago period was due to
the non-performing status of a previously disclosed commercial business loan
with a current balance of $1.0 million. The Bank is in the process of
liquidating that loan from the cash flow of the collateral securing the loan.
The Bank decreased its provision for loan losses by $222,000 in the three-month
period ended March 31, 2003 from the provision made for the three-month period
ended March 31, 2002 was due primarily to a reduction in the required provision
for that loan during the current quarter. The $284,000 increase in the provision
in the six months ended March 31, 2003 over the comparable period one year ago
was primarily due to the additional provision that was required for that loan in
the quarter ended December 31, 2002.
At March 31, 2003, Greater Atlantic Financial Corp. had total assets of $490.6
million, an increase of $58.7 million or 14 percent from the $431.9 million
recorded at the close of the comparable period one year ago. Loans receivable,
net, at March 31, 2003, amounted to $255.7 million, an increase of 16 percent
from the $220.0 million held at March 31, 2002. Deposits amounted to $287.2
million at March 31, 2003 an increase of $33.0 million from the $254.2 million
held one year ago. Stockholders' equity at March 31, 2003 amounted to $20.9
million or $6.94 per share. Notwithstanding the net earnings of $916,000 or $.25
per share for the six months ended March 31, 2003, book value per share
increased only $.17 per share as accumulated other comprehensive income declined
by $415,000 or $.14 per share from September 30, 2002, the Company's fiscal year
end. The reduction in accumulated other comprehensive income was due to a
decline in the market value of the Bank's cash flow hedges, net of applicable
federal and state taxes, for its interest rate swap and cap agreements of
$13,000, and $199,000 in unrealized losses related to outstanding mortgage loan
hedges, coupled with a $203,000 decrease in unrealized gain on investment
securities available-for-sale.
Greater Atlantic Financial Corp. conducts its business operations through its
wholly-owned subsidiary, Greater Atlantic Bank and the Bank's independent
wholly-owned subsidiary, Greater Atlantic Mortgage Corporation. The Bank offers
traditional banking services to customers through nine branches located in
Washington, D.C., Rockville and Pasadena, Maryland, and Arlington, Front Royal,
New Market, South Riding, Sterling and Winchester, Virginia.
4/30/03 Greater Atlantic Financial Corp. Page 3 of 7
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PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
THIS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE
FEDERAL SECURITIES LAWS. THESE STATEMENTS ARE NOT HISTORICAL FACTS, BUT
STATEMENTS BASED ON THE COMPANY'S CURRENT EXPECTATIONS REGARDING ITS BUSINESS
STRATEGIES AND THEIR INTENDED RESULTS AND ITS FUTURE PERFORMANCE.
FORWARD-LOOKING STATEMENTS ARE PRECEDED BY TERMS SUCH AS "EXPECTS," "BELIEVES,"
"ANTICIPATES," "INTENDS" AND SIMILAR EXPRESSIONS.
FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE. NUMEROUS
RISKS AND UNCERTAINTIES COULD CAUSE OR CONTRIBUTE TO THE COMPANY'S ACTUAL
RESULTS, PERFORMANCE AND ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM THOSE
EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE
OR CONTRIBUTE TO THESE DIFFERENCES INCLUDE, WITHOUT LIMITATION, GENERAL ECONOMIC
CONDITIONS, INCLUDING CHANGES IN MARKET INTEREST RATES AND CHANGES IN MONETARY
AND FISCAL POLICIES OF THE FEDERAL GOVERNMENT; LEGISLATIVE AND REGULATORY
CHANGES; THE COMPANY'S ABILITY TO REMEDY ANY COMPUTER MALFUNCTIONS THAT MAY
RESULT FROM THE ADVENT OF THE YEAR 2000; AND OTHER FACTORS DISCLOSED
PERIODICALLY IN THE COMPAny's filings with the Securities and Exchange
Commission.
Because of the risks and uncertainties inherent in forward-looking statements,
readers are cautioned not to place undue reliance on them, whether included in
this report or made elsewhere from time to time by the Company or on its behalf.
The Company assumes no obligation to update any forward-looking statements.
4/30/03 Greater Atlantic Financial Corp. Page 4 of 7
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GREATER ATLANTIC FINANCIAL CORP.
SECOND QUARTER RESULTS
(NASDAQ:GAFC)
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
At or for the At or for the
Three Months Ended Six Months Ended
March 31, March 31,
------------------------------ ------------------------------
CONSOLIDATED STATEMENT OPERATIONS 2003 2002 2003 2002
--------------- -------------- --------------- --------------
INTEREST INCOME
Loans $ 3,511 $ 3,361 $ 7,400 $ 6,689
Investments 1,642 1,643 3,546 3,693
--------------- -------------- --------------- --------------
TOTAL INTEREST INCOME 5,153 5,004 10,946 10,382
INTEREST EXPENSE
Deposits 1,683 2,059 3,583 4,488
Borrowed money 1,516 949 3,141 1,969
--------------- -------------- --------------- --------------
TOTAL INTEREST EXPENSE 3,199 3,008 6,724 6,457
--------------- -------------- --------------- --------------
NET INTEREST INCOME 1,954 1,996 4,222 3,925
PROVISION FOR LOAN LOSSES 65 280 713 429
--------------- -------------- --------------- --------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,889 1,716 3,509 3,496
NONINTEREST INCOME
Gain on sale of loans 3,150 1,893 7,260 3,814
Fees and service charges 354 220 785 470
Gain (loss) on sale of investment securities (16) 10 (16) 68
Gain on sale of real estate owned - - - -
Other operating income 10 (1) 14 1
--------------- -------------- --------------- --------------
TOTAL NONINTEREST INCOME 3,498 2,122 8,043 4,353
NONINTEREST EXPENSE
Compensation and employee benefits 2,916 1,886 6,141 3,732
Occupancy 498 438 973 882
Professional services 250 147 476 315
Advertising 198 179 381 387
Deposit insurance premium 12 10 23 22
Furniture, fixtures and equipment 269 209 537 411
Data processing 309 291 625 542
Provision for loss on real estate owned - - - -
Other real estate owned expenses 2 - 2 -
Other operating 721 616 1,478 1,219
--------------- -------------- --------------- --------------
TOTAL NONINTEREST EXPENSE 5,175 3,776 10,636 7,510
--------------- -------------- --------------- --------------
Income (loss) before income tax provision 212 62 916 339
Income tax provision - 6 - 12
--------------- -------------- --------------- --------------
NET (LOSS) EARNINGS $ 212 $ 56 $ 916 $ 327
=============== ============== =============== ==============
4/30/03 Greater Atlantic Financial Corp. Page 5 of 7
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GREATER ATLANTIC FINANCIAL CORP.
SECOND QUARTER RESULTS
(NASDAQ:GAFC)
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
At or for the At or for the
Three Months Ended Six Months Ended
March 31, March 31,
------------------------------ ------------------------------
2003 2002 2003 2002
--------------- -------------- --------------- --------------
PER SHARE DATA:
Net incoem (loss)
Basic $ 0.07 $ 0.02 $ 0.30 $ 0.11
Diluted 0.07 0.02 0.25 0.11
Book value $ 6.94 $ 7.25 $ 6.94 $ 7.25
Weighted average shares outstanding
Basic 3,012,434 3,009,378 3,012,434 3,008,396
Diluted 4,415,821 3,035,186 4,412,120 3,028,654
AVERAGE FINANCIAL CONDITION DATA:
Total assets $ 492,902 $ 405,556 $ 508,049 $ 399,866
Investment securities 160,714 139,887 161,417 138,262
Mortgage-backed securities 43,474 30,004 46,599 32,272
Total loans receivable, net 272,555 219,977 283,680 214,205
Total deposits 276,058 236,255 277,738 232,470
Total stockholders' equity 20,812 21,660 20,651 21,451
SELECTED FINANCIAL RATIOS(1)
Return on average assets 0.17% 0.06% 0.36% 0.16%
Return on average equity 4.07% 1.03% 8.87% 3.05%
Yield on earning assets 4.32% 5.13% 4.45% 5.40%
Cost of funds 2.81% 3.26% 2.89% 3.57%
Net interest rate spread 1.51% 1.87% 1.56% 1.83%
Net interest rate margin 1.64% 2.05% 1.72% 2.04%
4/30/03 Greater Atlantic Financial Corp. Page 6 of 7
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GREATER ATLANTIC FINANCIAL CORP
SECOND QUARTER RESULTS
(NASDAQ:GAFC)
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
At or for the
Six Months Ended
March 31,
------------------------------
2003 2002
--------------- --------------
FINANCIAL CONDITION DATA:
Total assets $490,605 $431,941
Total loans receivable, net 255,698 219,512
Mortgage-loans held for sale 10,755 4,629
Investments 161,520 151,216
Mortgage-backed securities 39,396 34,426
Total deposits 287,197 254,223
FHLB advances 98,350 87,000
Other borrowings 71,032 57,847
Convertible preferred securities 9,473 9,473
Total stockholders' equity 20,904 21,847
ASSET QUALITY DATA:
Non-performing assets to total assets 0.35% 0.07%
Non-performing loans to total loans 0.59% 0.14%
Net charge-offs to average total loans 0.25% 0.01%
Allowance for loan losses to:
Total loans 0.64% 0.56%
Non-performing loans 108.30% 397.72%
Non-performing loans $ 1,567 $ 307
Non-performing assets $ 1,695 $ 307
Allowance for loan losses $ 1,697 $ 1,221
CAPITAL RATIOS OF THE BANK:
Leverage ratio 6.33% 6.67%
Tier 1 risk-based capital ratio 12.95% 14.28%
Total risk-based capital ratio 13.62% 14.89%
4/30/03 Greater Atlantic Financial Corp. Page 7 of 7