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Greater Atlantic Financial Corp.
GREATER ATLANTIC FINANCIAL CORP.
10700 Parkridge Boulevard - Suite P50 - Reston, Virginia 20191 - (703) 391-1300
- - Fax: (703) 391-1506
NEWS RELEASE
Date: January 30, 2004
Contact: David E. Ritter
(703) 390-0344
GREATER ATLANTIC FINANCIAL RELEASES
FIRST QUARTER RESULTS
Reston, Virginia - January 30, 2004 - 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 a net loss for
the three months ended December 31, 2003, of $681,000 or $.23 per diluted share
compared to net earnings of $704,000 or $.18 per diluted share for the three
months ended December 31, 2002.
In commenting on the results, Carroll E. Amos, President and Chief Executive
Officer, stated that "significantly lower than anticipated loan origination and
sales volumes at the Bank's mortgage banking subsidiary, coupled with a decrease
in net interest income due to the prepayments that have occurred in the Bank's
loan and investment securities portfolios, had a negative impact on net earnings
for the quarter." Continuing, Mr. Amos stated: "The decline in both net interest
income and net interest margin from 2002 is primarily the result of low interest
rates and the resulting prepayment and refinancing of higher yielding assets."
Mr. Amos also pointed out that "the Company's net interest income was negatively
impacted by an increase in the amortization of purchase price premiums from the
Bank's mortgage-backed securities portfolio." "In the prior quarter we had
anticipated that, with the increase that occurred in interest rates, we would
see a slowdown in prepayments on loans and mortgage-backed securities. While the
prepayment rate in the Bank's loan portfolio declined somewhat, the prepayments
in the mortgage-backed securities portfolio continued at a very high rate."
"That increased the amortization of the purchase price premiums over
amortization that we saw in the comparable period one year ago and in the
previous quarter," Mr. Amos said.
Continuing Mr. Amos stated, "the Bank did increase assets by $30 million during
the quarter, which was distributed evenly between the loan and investment
portfolios. Given the volatility in the interest rate markets, we primarily
invested that increase in interest-rate sensitive assets for the investment
portfolio because we do not believe that this is an appropriate time to extend
the maturity structure or term to re-pricing of the Bank's investment portfolio.
The net interest rate
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spread on those types of investments are not as great as we could obtain on a
longer maturing or a longer term to re-pricing investment, but, when interest
rates do rise, they will have a positive impact on future earnings."
Regarding the Mortgage Corporations's operations, Mr. Amos said "the impact of
reduced mortgage origination activity and increased competitive pricing
pressures resulted in a significant reduction in gain on sale of loans and
earnings from the Mortgage Corporation during the quarter. The volume of loan
sales was down more than 55 percent from the quarter ended September 30, 2003,
and down 42 percent from the comparable period one year ago." Mr. Amos also
noted that, "while mortgage-related expenses declined during the recently
concluded quarter, because there is a lag in the timing of the reduction of
certain mortgage related expenses compared to the decline in origination
volumes, such expenses should continue to decline in the quarter ending March
31, 2004."
Mr. Amos continued, stating, "our primary focus continues to be on increasing
our commercial loan portfolio and transaction based deposits. While loan growth
continues to be sluggish, the Bank has seen an increase in future commitments to
lend. Loans receivable, net, increased by $12.3 million during the quarter ended
December 31, 2003, primarily as a result of a $12.9 million increase in
commercial loans, coupled with an increase of $1.7 million in the consumer loan
portfolio." "Those increases were offset in part by a $2.4 million decrease in
the Bank's single family loan portfolio," he added.
Mr. Amos concluded by stating, "the Bank experienced solid deposit growth in its
retail branch network during the quarter. $4.3 million of the $5.6 million
increase consisted primarily of transaction accounts with the balance of the
increase coming from certificates of deposit." "The overall decrease in total
deposits of $13.8 million resulted primarily from the Bank allowing $20.0
million of brokered deposits to mature without replacing them," Mr. Amos stated.
Net interest income for the quarter ended December 31, 2003, amounted to $1.4
million, a decrease of $858,000 or 38 percent from the comparable period one
year ago. That decrease was a direct result of a 68 basis point decrease in net
interest margin from 1.79% for the three months ended December 31, 2002, to
1.11% for the recently completed quarter. The prepayment of higher yielding
interest-earning assets was the primary reason for the decline in net interest
margin as the yield on interest earning assets declined by 100 basis points from
4.57% for the three months ended December 31, 2002, to 3.57% for the three
months ended December 31, 2003. The decline in the yield on interest earnings
assets was offset in part by a 46 basis point decrease in the cost of
interest-bearing liabilities.
Noninterest income for the three months ended December 31, 2003, decreased 45
percent or $2.0 million from the level earned for the three months ended
December 31, 2002. The decrease for the period was primarily attributable to a
$2.2 million decrease in gain on sale of loans by Greater Atlantic Mortgage
Corporation, coupled with a decrease of $178,000 in service fees on loans. Loan
sales decreased by 42 percent or $77.0 million from the comparable period one
year ago, coupled with a 37 basis point decrease in the net margin earned on
those sales from 2.24% for the three months ended December 31, 2002, to 1.87%
for the three months ended December 31, 2003. Offsetting those decrease was an
increase in gain on sale of investment securities of $312,000 from the
comparable period one year ago.
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Noninterest expense decreased $942,000 or 17 percent to $4.5 million for the
three months ended December 31, 2003, from the comparable period one year ago.
The decrease was primarily attributable to a $1.1 million decrease in expense at
the Bank's mortgage banking subsidiary as a result of decreased loan origination
and sales activity. While the increase of $151,000 in noninterest expense at the
Bank was distributed over various noninterest expense categories, the decrease
at the mortgage banking subsidiary level was primarily in compensation of $1.4
million, offset in part by a $261,000 increase in advertising.
Non-performing assets were $1.1 million at December 31, 2003, or .21 percent of
total assets, compared to $2.1 million or .41 percent of total assets at
December 31, 2002. The primary reason for the decrease over the comparable
three-month period ended December 31, 2002, was due to the reduction of the
outstanding balance on a previously noted problem commercial business loan. The
primary reason the Bank decreased its provision for loan losses by $569,000 over
the comparable period one year ago was due in part to the fact that the Bank no
longer had to make a specific provision for this one credit.
At December 31, 2003, Greater Atlantic Financial Corp. had total assets of $529
million, an increase of $18 million or 3 percent from the $511 million recorded
at the close of the comparable period one year ago. Loans receivable at December
31, 2003, amounted to $255 million, a decrease of 2 percent from the $261
million held at December 31, 2002. Deposits amounted to $284 million at December
31, 2003, a decrease of $18 million from the $302 million held one year ago.
Stockholders' equity at December 31, 2003, amounted to $21 million or $7.11 per
share. Notwithstanding the net loss of $681,000, or $.23 per share for the
quarter ended December 31, 2003, book value per share decreased $.51 per share
as accumulated other comprehensive income declined by $848,000 or $.28 per share
from September 30, 2003, 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, and unrealized losses related to
outstanding mortgage loan hedges of $15,000, coupled with an $833,000 decrease
in unrealized gain on investment securities available-for-sale. An increase in
the anticipated prepayment rate on floating rate Small Business Administration
Certificates was the primary reason for the decline in the market value of the
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 Front Royal, New Market,
Reston, South Riding, Sterling and Winchester, Virginia.
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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.
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GREATER ATLANTIC FINANCIAL CORP.
FIRST QUARTER RESULTS
(NASDAQ:GAFC)
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
At or for the
Three Months Ended
December 31,
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CONSOLIDATED STATEMENT OPERATIONS 2003 2002
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INTEREST INCOME
Loans $ 3,142 $ 3,889
Investments 1,395 1,904
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TOTAL INTEREST INCOME 4,537 5,793
INTEREST EXPENSE
Deposits 1,467 1,900
Borrowed money 1,660 1,625
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TOTAL INTEREST EXPENSE 3,127 3,525
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NET INTEREST INCOME 1,410 2,268
PROVISION FOR LOAN LOSSES 79 647
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,331 1,621
NONINTEREST INCOME
Gain on sale of loans 1,956 4,110
Fees and service charges 234 431
Gain on sale of investment securities 312 -
Gain on sale of real estate owned - -
Other operating income 5 4
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TOTAL NONINTEREST INCOME 2,507 4,545
NONINTEREST EXPENSE
Compensation and employee benefits 1,994 3,225
Occupancy 501 475
Professional services 288 226
Advertising 421 183
Deposit insurance premium 11 11
Furniture, fixtures and equipment 258 268
Data processing 350 315
Provision for loss on real estate owned - -
Other real estate owned expenses - -
Other operating 696 759
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TOTAL NONINTEREST EXPENSE 4,519 5,462
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Income (loss) before income tax provision (681) 704
Income tax provision - -
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NET (LOSS) EARNINGS $ (681) $ 704
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GREATER ATLANTIC FINANCIAL CORP.
FIRST QUARTER RESULTS
(NASDAQ:GAFC)
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
At or for the
Three Months Ended
December 31,
------------------------------
2003 2002
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PER SHARE DATA:
Net income (loss)
Basic $ (0.23) $ 0.23
Diluted (0.23) 0.18
Book value $ 7.11 $ 6.92
Weighted average shares outstanding
Basic 3,012,434 3,012,434
Diluted 3,012,434 4,408,118
AVERAGE FINANCIAL CONDITION DATA:
Total assets $ 525,011 $ 523,196
Investment securities 143,505 162,120
Mortgage-backed securities 107,974 49,724
Total loans receivable, net 256,331 294,804
Total deposits 294,405 303,835
Total stockholders' equity 22,454 20,555
SELECTED FINANCIAL RATIOS(1)
Return on average assets -0.52% 0.54%
Return on average equity -12.13% 13.70%
Yield on earning assets 3.57% 4.57%
Cost of funds 2.57% 3.03%
Net interest rate spread 1.00% 1.54%
Net interest rate margin 1.11% 1.79%
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GREATER ATLANTIC FINANCIAL CORP
FIRST QUARTER RESULTS
(NASDAQ:GAFC)
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
At or for the
Three Months Ended
December 31,
-----------------------------
2003 2002
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FINANCIAL CONDITION DATE:
Total assets $529,134 $510,758
Total loans receivable, net 254,555 261,283
Mortgage-loans held for sale 8,486 26,567
Investments 125,618 153,218
Mortgage-backed securities 116,236 46,339
Total deposits 284,043 301,561
FHLB advances 129,950 95,800
Other borrowings 82,408 79,340
Convertible preferred securities 9,361 9,346
Total stockholders' equity 21,413 20,850
ASSET QUALITY DATA:
Non-performing assets to total assets 0.21% 0.41%
Non-performing loans to total loans 0.42% 0.77%
Net charge-offs to average total loans 0.05% 0.21%
Allowance for loan losses to:
Total loans 0.57% 0.63%
Non-performing loans 136.49% 81.74%
Non-performing loans $ 1,099 $ 2,119
Non-performing assets $ 1,099 $ 2,119
Allowance for loan losses $ 1,500 $ 1,732
CAPITAL RATIOS OF THE BANK:
Leverage ratio 6.09% 6.00%
Tier 1 risk-based capital ratio 12.83% 13.28%
Total risk-based capital ratio 13.39% 14.03%
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