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GREATER ATLANTIC FINANCIAL CORP.
10700 Parkridge Boulevard o Suite P50 o Reston, Virginia 20191
o (703) 391-1300 o Fax: (703) 391-1506
NEWS RELEASE
DATE: FEBRUARY 11, 2005
CONTACT: DAVID E. RITTER
(703) 390-0344
GREATER ATLANTIC FINANCIAL RELEASES
FIRST QUARTER RESULTS
Reston, Virginia - February 8, 2005 - 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 of
$461,000 or $.14 per diluted share for the quarter ended December 31, 2004,
compared to a net loss of $292,000 or $.10 per diluted share for the quarter
ended December 31, 2003.
In commenting on the results, Carroll E. Amos, President and Chief Executive
Officer, stated that "an improvement in net interest income, coupled with the
gain on sale of loans and mortgage-backed securities and the sale of the Bank's
Washington, D.C. branch office contributed to the $753,000 improvement in net
earnings over the comparable period one year ago." Continuing, Mr. Amos stated:
"The improvement in both net interest income and net interest margin from 2003
is primarily the result of the re-pricing to higher levels of the adjustable
rate assets of the Bank as interest rates continued to rise during the quarter."
Mr. Amos also pointed out that "the gain on sale of loans and mortgage-backed
securities at the bank increased $310,000 over the comparable period one year
ago, based on a $588,000 gain recognized during the quarter. In addition, the
Company recorded a $280,000 gain from the sale of the Bank's Washington, D.C.
branch."
Continuing, Mr. Amos stated, "operation of the Bank's mortgage banking
subsidiary had minimal impact on earnings for the quarter as the subsidiary
entered into a new management agreement with the manager of those operations.
Under the new management agreement, the manager will reimburse operating
expenses equal to approximately 100% of any operating loss in return for an
increase in his share of net earnings from 40% to 80%." Mr. Amos also pointed
out that "the manager has secured his performance under the management contract
with acceptable collateral and may terminate the agreement anytime after June
30, 2005. The agreement is the direct result of the Bank seeking to reduce its
exposure to the mortgage banking operations.
02/11/05 Greater Atlantic Financial Corp. Page 1 of 7
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Regarding the Bank's mortgage banking subsidiary's operations, Mr. Amos noted
"the impact of a 51% decline in mortgage origination activity resulted in a
reduction in gain on sale of loans and earnings from the subsidiary during the
first quarter of 2005. The mortgage banking subsidiary incurred a net loss of
$24,000 in the first quarter of fiscal 2005 after reimbursement of approximately
$571,000 of expenses by the manager, in accordance with the management contract,
compared to net income of $122,000 for the first quarter of fiscal 2004."
Continuing, Mr. Amos noted, "during the three months ended December 31, 2004,
the Bank recognized a $363,000 gain on its free-standing derivative positions,
$25,000 less than the gain recognized in the comparable period one year ago."
Notwithstanding that he noted, "the Bank will benefit in future quarters as $35
million of the $62 million position of interest rate swaps mature between
January and April 2005. Those maturities will reverse any fair value losses
recognized and the current monthly interest expense of $51,000 associated with
those swaps will be terminated."
Mr. Amos continued, stating, "Loans receivable, net, decreased by $28.9 million
during the quarter ended December 31, 2004, primarily as a result of a $26.4
million decrease in the Bank's single family loan portfolio. During the period,
the Bank exchanged approximately $23.3 million of single family loans for
mortgage-backed securities, which were sold during the quarter. Also
contributing to the decrease in loans receivable, net, was a $2.2 million
decline in commercial loans outstanding, due primarily to payoffs that occurred
during the quarter ended December 31, 2004." Mr. Amos also noted that, "although
we had a decline in commercial loans outstanding during the quarter, as of
December 31, 2004, the Bank, had commitments to originate approximately $20.4
million of commercial loans."
Mr. Amos concluded by stating, "deposit growth during the quarter was flat
without considering the sale of the Washington, D.C. branch office. Taking the
sale of that office into consideration, deposits declined by $14.8 million, an
amount equivalent to the deposits transferred in the sale."
Net interest income for the quarter ended December 31, 2004, amounted to $1.6
million, an increase of $178,000 or 13 percent from the comparable period one
year ago. That increase was a direct result of a 48 basis point increase in net
interest margin from 1.11% for the quarter ended December 31, 2003, to 1.59% for
the recently completed quarter. The re-pricing of adjustable rate assets to a
higher yield was the primary reason for the increase in net interest margin. The
yield on interest earning assets improved by 85 basis points, from 3.57% for the
quarter ended December 31, 2003, to 4.42% for the quarter ended December 31,
2004. The improvement in the yield on interest earnings assets was offset in
part by a 37 basis point increase in the cost of interest-bearing liabilities.
Noninterest income for the quarter ended December 31, 2004, decreased 14 percent
or $395,000 from the level earned for the quarter ended December 31, 2003. That
decrease was primarily attributable to a $962,000 decrease in gain on sale of
loans by our subsidiary mortgage corporation offset by an $84,000 increase in
gain of sale of loans at the Bank. The decrease in gain on sale of loans was due
to a decrease in the volume of loans sold of $54.2 million, or 51 percent, from
the comparable quarter one year ago. Offsetting the decrease was a $226,000
increase in gain on sale of investment securities from the comparable period one
year ago, coupled with a $280,000 gain recognized from the sale of the Bank's
Washington, D.C. branch.
02/11/05 Greater Atlantic Financial Corp. Page 2 of 7
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Noninterest expense decreased $894,000 or 20 percent to $3.6 million for the
quarter ended December 31, 2004, from the comparable period one year ago. The
decrease was primarily attributable to a $905,000 decrease in expenses at the
Bank's mortgage banking subsidiary as a result of decreased loan origination and
sales activity, and the $571,000 reimbursement by the manager. Excluding the
reimbursement by the manager, compensation, other operating and professional
services at the Bank's mortgage banking subsidiary declined by $209,000,
$200,000 and $96,000, respectively. Those decreases were offset by an increase
in advertising cost of $151,000. The Bank's noninterest expense increased
$10,000 over the comparable period one year ago as the sale of the bank's
Washington, D.C. branch contributed approximately $47,000 to the reduction in
non-interest expense for the month of December, 2004.
Non-performing assets were $931,000 at December 31, 2004, or .24 percent of
total assets, compared to $1.1 million or .21 percent of total assets at
December 31, 2003. The primary reason the Bank decreased its provision for loan
losses by $77,000 over the comparable period one year ago was due in part to the
fact that the Bank non-performing assets were unchanged and asset quality
remained stable throughout the period so the allowance for loan losses was not
increased during the quarter ended December 31, 2004.
At December 31, 2004, Greater Atlantic Financial Corp. had total assets of $396
million, a decrease of $133 million or 25 percent from the $529 million recorded
at the close of the comparable period one year ago. Loans receivable at December
31, 2004, amounted to $217 million, a decrease of 15 percent from the $255
million held at December 31, 2003. Investment and mortgage-backed Securities at
December 31, 2004, amounted to $146 million a decrease of $88 million or 38%
from the $234 million held at December 31, 2003. Deposits amounted to $274
million at December 31, 2004, a decrease of $10 million from the $284 million
held one year ago. Stockholders' equity at December 31, 2004, amounted to $17.6
million or $5.86 per share. Notwithstanding the net earnings of $461,000, or
$.14 per diluted share for the quarter ended December 31, 2004, book value per
share increased $.16 per share as accumulated other comprehensive income
improved by $32,000 or $.01 per share from September 30, 2004, the Company's
fiscal year end. The improvement in accumulated other comprehensive income was
due to a decline in the unrealized loss 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 eight branches located in
Rockville and Pasadena, Maryland, and Front Royal, New Market, Reston, South
Riding, Sterling and Winchester, Virginia.
02/11/05 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; 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.
02/11/05 Greater Atlantic Financial Corp. Page 4 of 7
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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,
-------------------------------------
CONSOLIDATED STATEMENT OPERATIONS 2004 2003
----------------- -----------------
INTEREST INCOME
Loans $ 3,303 $ 3,142
Investments 1,102 1,395
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TOTAL INTEREST INCOME 4,405 4,537
INTEREST EXPENSE
Deposits 1,514 1,467
Borrowed money 1,303 1,660
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TOTAL INTEREST EXPENSE 2,817 3,127
----------------- -----------------
NET INTEREST INCOME 1,588 1,410
PROVISION FOR LOAN LOSSES 2 79
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,586 1,331
NONINTEREST INCOME
Gain on sale of loans 1,078 1,956
Fees and service charges 235 234
Gain (loss) on sale of investment securities 538 312
Gain (loss) on derivatives 363 388
Other operating income 285 5
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TOTAL NONINTEREST INCOME 2,499 2,895
NONINTEREST EXPENSE
Compensation and employee benefits 1,230 1,994
Occupancy 461 501
Professional services 221 288
Advertising 559 421
Deposit insurance premium 11 11
Furniture, fixtures and equipment 300 258
Data processing 324 350
Other operating 518 695
----------------- -----------------
TOTAL NONINTEREST EXPENSE 3,624 4,518
----------------- -----------------
Income (loss) before income tax provision 461 (292)
Income tax provision - -
----------------- -----------------
NET EARNINGS (LOSS) $ 461 $ (292)
================= =================
02/11/05 Greater Atlantic Financial Corp. Page 5 of 7
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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,
-------------------------------------
2004 2003
-------------------------------------
PER SHARE DATA:
Net income
Basic $ 0.15 $ (0.10)
Diluted 0.14 (0.10)
Book value $ 5.86 $ 6.71
Weighted average shares outstanding
Basic 3,012,434 3,012,434
Diluted 4,408,362 3,012,434
AVERAGE FINANCIAL CONDITION DATA:
Total assets $ 420,717 $ 525,011
Investment securities 71,840 143,505
Mortgage-backed securities 93,357 107,974
Total loans receivable, net 233,754 256,331
Total deposits 269,356 281,723
Total stockholders' equity 19,475 20,953
SELECTED FINANCIAL RATIOS(1)
Return on average assets 0.44% -0.22%
Return on average equity 9.47% -5.57%
Yield on earning assets 4.42% 3.57%
Cost of funds 2.94% 2.57%
Net interest rate spread 1.48% 1.00%
Net interest rate margin 1.59% 1.11%
02/11/05 Greater Atlantic Financial Corp. Page 6 of 7
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GREATER ATLANTIC FINANCIAL CORP
FIRST QUARTER RESULTS
(NASDAQ:GAFC)
(DOLLARS IN THOUSANDS)
At or for the
Three Months Ended
December 31,
-------------------------------------
2004 2003
-------------------------------------
FINANCIAL CONDITION DATA:
Total assets $ 396,168 $ 529,134
Total loans receivable, net 217,474 254,555
Mortgage-loans held for sale 3,414 8,486
Investments 70,609 125,618
Mortgage-backed securities 84,549 116,236
Total deposits 274,125 284,043
FHLB advances 41,000 129,950
Other borrowings 49,176 82,408
Junior subordinated debt 9,371 9,361
Total stockholders' equity 17,656 20,216
ASSET QUALITY DATA:
Non-performing assets to total assets 0.24% 0.21%
Non-performing loans to total loans 0.40% 0.42%
Net charge-offs to average total loans 0.01% 0.05%
Allowance for loan losses to:
Total loans 0.68% 0.57%
Non-performing loans 170.78% 136.49%
Non-performing loans $ 931 $ 1,099
Non-performing assets $ 931 $ 1,099
Allowance for loan losses $ 1,590 $ 1,500
CAPITAL RATIOS OF THE BANK:
Leverage ratio 6.53% 5.50%
Tier 1 risk-based capital ratio 10.91% 11.59%
Total risk-based capital ratio 11.55% 12.15%
02/11/05 Greater Atlantic Financial Corp. Page 7 of 7