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: AUGUST 11, 2005
CONTACT: DAVID E. RITTER
(703) 390-0344
GREATER ATLANTIC FINANCIAL RELEASES
THIRD QUARTER RESULTS
Reston, Virginia - August 11, 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 a net loss of
$643,000 or $.21 per share for the three months ended June 30, 2005, compared to
net earnings of $783,000 or $.20 per diluted share for the three months ended
June 30, 2004. For the nine months ended June 30, 2005, the Company had a net
loss of $117,000 or $.04 per share, compared to a net loss of $778,000 or $.26
per share for the comparable period one year ago.
In commenting on the results, Carroll E. Amos, President and Chief Executive
Officer, stated that "for the nine months ended June 30, 2005 the Company's net
loss improved by $661,000 from the comparable period one year ago based on an
increase of $1.9 million in net income from the banking segment, aided by a
$946,000 gain on the sale of three branch offices, offset by a $1.2 million
decrease in earnings from the Company's mortgage banking segment. The operating
earnings (net income (loss) excluding gains or losses on investments,
derivatives and branch sales) of the banking segment improved $636,000 or 23%
from the comparable period one year ago based on an improving net interest
margin and declining Noninterest expense."
In commenting further, Mr. Amos noted that, "for the three months ended June 30,
2005, the Company's earnings declined by $1.4 million from the comparable period
one year ago as a result of a decrease of $728,000 in net income from the
Company's mortgage banking segment, coupled with a decrease of $698,000 in net
income from the banking segment. The decrease at the banking segment was
primarily attributable to a $1.4 million decline in derivative gains when
compared to the three months ended June 30, 2004, which was only partially
offset by a $263,000 gain on branch sales. While the banking segment sustained a
decline in net income during the three months ended June 30, 2005, the banking
segment's operating loss (net income (loss) excluding gains or losses on
investments, derivatives and branch sales) improved $461,000 or 45%, from a loss
of $1.0 million in the comparable period one year ago to an operating loss of
$558,000 during the three months ended June 30, 2005. That decline in operating
loss also resulted from the improving net interest margin and declining
Noninterest expense."
08/11/05 Greater Atlantic Financial Corp. Page 1 of 8
Continuing, Mr. Amos stated: "Operations of the Bank's mortgage banking
subsidiary continued to have a minimal impact on earnings for the recently
completed three months under the agreement entered into with the manager
effective at the beginning of the fiscal year year. That agreement, which was
the direct result of the Bank seeking to reduce its exposure to the mortgage
banking operations, provides for the reimbursement of operating expenses equal
to approximately 100% of any operating loss incurred by the subsidiary in return
for 80% of net earnings."
Regarding the operation of the mortgage banking subsidiary, Mr. Amos noted: "The
subsidiary sustained a 42% decline in mortgage origination activity which
resulted in a reduction in gain on sale of loans and earnings during the nine
months ended June 30, 2005. As a result, notwithstanding the reimbursement of
approximately $1.8 million of expenses by the manager, the mortgage banking
subsidiary sustained a net loss of $79,000 for the nine months ended June 30,
2005. That result compared to net income of $1.1 million for the nine months
ended June 30, 2004."
Continuing, Mr. Amos noted, "during the nine months ended June 30, 2005, the
Bank recognized a $560,000 gain on its free-standing derivative positions, a
decrease of $103,000 from the $663,000 gain recognized in the comparable period
one year ago." He further noted, "the decline during the quarter of $1.4 million
was due to the significant gain of $1.1 million recognized in the three months
ended June 30, 2004 compared to a loss of $322,000 for the three months ended
June 30, 2005.
Mr. Amos continued, "Loans receivable, net, decreased by $6.9 million during the
three months ended June 30, 2005, as a result of a $3.5 million decrease in the
Bank's single-family loan portfolio coupled with declines of $2.1 million and
$1.2 million, respectively, in commercial and consumer loans outstanding due
primarily to payoffs that occurred during the period."
Mr. Amos also noted that, "the Bank completed the previously announced sale of
the Sterling, Virginia, branch office on April 1, 2005 with the transfer of $6.7
million in deposits and with the Bank recognizing a $263,000 gain on sale during
the three months ended June 30, 2005. He concluded by stating, "without
considering the sale of the Sterling branch, deposits declined approximately
$9.7 million during the three months ended June 30, 2005. Taking the sale of
that office into consideration, after the transfer of $6.7 million of deposits
from the sale, deposits at the Bank declined by $3.0 million primarily as a
result of a $3.5 million decrease in brokered certificates of deposit."
Net interest income for the three months ended June 30, 2005, amounted to $1.9
million, an increase of $124,000 or 7 percent from the comparable period one
year ago. The increase in net interest income during the recently completed
three months resulted primarily from a 76 basis point increase in net interest
margin (net interest income divided by average interest-earning assets) from
1.33% for the three months ended June 30, 2004 to 2.09% for the three months
ended June 30, 2005, offset in part by average interest-earning assets declining
by $5.1 million more than the decline in average interest-bearing liabilities.
Contributing to the improvement in the Bank's net interest margin for the three
months ended June 30, 2005 was a $484,000 decline in interest expense resulting
from a decrease in payments made on certain interest rate swap and cap
agreements, compared to a charge of $516,000 made in the comparable period one
year ago. The improvement in net interest margin also resulted from the average
yield on interest-earning assets increasing by 72 basis points more than the
increase in the average cost of interest-bearing liabilities.
08/11/05 Greater Atlantic Financial Corp. Page 2 of 8
Net interest income for the nine months ended June 30, 2005 amounted to $4.9
million, a decrease of $123,000 or 2 percent from the comparable period one year
ago. The decline in net interest income during the nine months ended June 30,
2005 resulted primarily from a $136.9 million decrease in the Bank's average
interest-earning assets offset in part by a decrease of $134.6 million in the
Bank's average interest-bearing liabilities, coupled with a 43 basis point
increase in net interest margin from 1.31% for the nine months ended June 30,
2004 to 1.74% for the nine months ended June 30, 2005. Contributing to the
improvement in the Bank's net interest margin was a $1.1 million decline in
interest expense resulting from payments made on certain interest rate swap and
cap agreements compared to a charge of $1.6 million in the comparable period one
year ago. The improvement in net interest margin also resulted from the average
yield on average interest-earning assets increasing 39 basis points more than
the increase in the average cost on average interest-bearing liabilities, and
was partially offset by the decrease in the Bank's average interest-earning
assets exceeding the decrease in average interest-bearing liabilities by $2.2
million.
Noninterest income decreased $3.5 million during the three months ended June 30,
2005 when compared to the year ago period. That decrease was primarily the
result of a $2.4 million decline in gain on sale of loans coupled with a decline
of $1.4 million in gain on derivatives, offset in part by a $278,000 increase in
other operating income. Loan sales decreased by 46 percent or $64.2 million from
the comparable period one year ago, and were accompanied by a 98 basis point
decrease in the net margin earned on those sales from 2.58% for the three months
ended June 30, 2004, to 1.60% for the three months ended June 30, 2005. The
increase in other operating income reflects a gain of $263,000 recognized from
the sale of the Bank's Sterling, Virginia, branch.
Noninterest income for the nine months ended June 30, 2005, decreased $3.0
million from the comparable period one year ago. That decrease was primarily the
result of a decrease of $4.3 million in gain on sale of loans and was partially
offset by increases of $278,000 in gain on sale of investments and gains on
derivatives, and $984,000 in other operating income. Loan sales decreased by 44
percent or $149.9 million from the comparable period one year ago, and were
accompanied by a 51 basis point decrease in the net margin earned on those sales
from 2.31% for the nine months ended June 30, 2004, to 1.80% for the nine months
ended June 30, 2005. The increase in other operating income reflects the gain of
$946,000 recognized from the sale of the Bank's Washington D.C. and Sterling and
Winchester, Virginia, Branches.
Noninterest expense decreased $1.9 million from $5.8 million for the three
months ended June 30, 2004 to $3.8 million for the three months ended June 30,
2005. The decrease was primarily attributable to a $1.6 million decrease in the
mortgage company's noninterest expense from that incurred in the comparable
period one year ago. The decrease in noninterest expense at the mortgage company
was primarily $1.4 million in compensation, of which $799,000 was an expense
reimbursement by the manager, coupled with decreases in other operating
expenses, data processing and occupancy. Those decreases were offset by
increases in advertising, professional services and in furniture fixtures and
equipment. The decrease in the Bank's noninterest expense was $353,000
distributed over various noninterest expense categories with $216,000 coming
from occupancy expense.
08/11/05 Greater Atlantic Financial Corp. Page 3 of 8
Noninterest expense decreased $3.7 million from $15.0 million for the nine
months ended June 30, 2004 to $11.3 million for the comparable period in the
current year. The decrease was primarily attributable to a $3.4 million decrease
in the mortgage company's noninterest expense from the comparable period one
year ago as a result of decreased loan origination and sales and the management
agreement entered into with the manager of the mortgage banking subsidiary. The
decrease in noninterest expense at the mortgage company level was primarily $3.0
million in compensation, of which $1.8 million was an expense reimbursement by
the manager, coupled with decreases in other operating expenses, professional
services, data processing and occupancy. Those decreases were offset by
increases in advertising and furniture fixtures and equipment. The decrease in
the Bank's noninterest expense was a modest $387,000 distributed over various
noninterest expense categories and was primarily due to a decline of $304,000 in
occupancy expense.
Non-performing assets were $2.2 million or 0.59% of total assets at June 30,
2005, an increase of $947,000 when compared to non-performing assets of $1.2
million or 0.24% at June 30, 2004. The increase in non-performing assets from
the comparable period one-year ago, was due primarily to the Bank's $500,000
interest in a loan on a hotel property, located in Easton, Maryland, and a $1.0
million home loan that became non-performing. As a result, the Bank provided an
increase of $369,000 in the required allowance for the Bank's non-performing
loans. Notwithstanding a reduction in the required allowance of $354,000 based
on the structure of the Bank's overall loan portfolio, the provision for loan
losses for the nine months ended June 30, 2005 increased by $15,000 over the
comparable nine month period one year ago due to an increase in the required
allowance for non-performing loans.
At June 30, 2005, Greater Atlantic Financial Corp. had total assets of $365
million, a decrease of $139 million or 28 percent from the $504 million recorded
at the close of the comparable period one year ago. Loans receivable at June 30,
2005, amounted to $200 million, a decrease of 23 percent from the $260 million
held at June 30, 2004. Investment and mortgage-backed Securities at June 30,
2005, amounted to $137 million, a decrease of $81 million or 37% from the $218
million held at June 30, 2004. Deposits amounted to $250 million at June 30,
2005, a decrease of $49 million from the $299 million held one year ago.
Stockholders' equity at June 30, 2005, amounted to $17.2 million equating to a
book value of $5.70 per share.
Greater Atlantic Financial Corp. conducts its business operations through its
wholly-owned subsidiary, Greater Atlantic Bank and the Bank's wholly-owned
subsidiary, Greater Atlantic Mortgage Corporation. The Bank offers traditional
banking services to customers through six branches located in Rockville and
Pasadena, Maryland, and Front Royal, New Market, Reston and South Riding,
Virginia.
08/11/05 Greater Atlantic Financial Corp. Page 4 of 8
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.
08/11/05 Greater Atlantic Financial Corp. Page 5 of 8
GREATER ATLANTIC FINANCIAL CORP.
THIRD QUARTER RESULTS (UNAUDITED)
(NASDAQ:GAFC)
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
At or for the At or for the
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------- ----------------------------
CONSOLIDATED STATEMENT OPERATIONS 2005 2004 2005 2004
----------- ------------ ----------- -------------
INTEREST INCOME
Loans $ 3,361 $ 3,564 $ 9,630 $ 10,081
Investments 1,151 1,247 3,428 4,256
----------- --------- --------- ---------
TOTAL INTEREST INCOME 4,512 4,811 13,058 14,337
----------- --------- --------- ---------
INTEREST EXPENSE
Deposits 1,614 1,426 4,640 4,271
Borrowed money 1,046 1,657 3,511 5,036
----------- --------- --------- ---------
TOTAL INTEREST EXPENSE 2,660 3,083 8,151 9,307
----------- --------- --------- ---------
NET INTEREST INCOME 1,852 1,728 4,907 5,030
PROVISION FOR LOAN LOSSES 144 52 147 132
----------- --------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,708 1,676 4,760 4,898
----------- --------- --------- ---------
NONINTEREST INCOME
Gain on sale of loans 1,205 3,597 3,532 7,861
Fees and service charges 328 260 777 740
Gain on sale of investment securities - 1 538 157
(Loss) gain on derivatives (322) 1,104 560 663
Gain on sale of branches 263 - 946 -
Other operating income 20 5 52 14
----------- --------- --------- ---------
TOTAL NONINTEREST INCOME 1,494 4,967 6,405 9,435
----------- --------- --------- ---------
NONINTEREST EXPENSE
Compensation and employee benefits 1,210 2,670 3,771 6,844
Occupancy 399 647 1,294 1,658
Professional services 278 153 789 699
Advertising 856 717 1,994 1,662
Deposit insurance premium 41 11 72 33
Furniture, fixtures and equipment 252 306 836 820
Data processing 265 400 902 1,102
Other operating 544 867 1,624 2,204
----------- --------- --------- ---------
TOTAL NONINTEREST EXPENSE 3,845 5,771 11,282 15,022
----------- --------- --------- ---------
Income (loss) before income tax provision (643) 872 (117) (689)
Income tax provision - 89 - 89
----------- --------- --------- ---------
NET EARNING (LOSS) $ (643) $ 783 $ (117) $ (778)
=========== ========= ========= =========
08/11/05 Greater Atlantic Financial Corp. Page 6 of 8
GREATER ATLANTIC FINANCIAL CORP.
THIRD QUARTER RESULTS (UNAUDITED)
(NASDAQ:GAFC)
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
At or for the At or for the
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------------- ----------------------------
2005 2004 2005 2004
----------- ------------ ------------ ------------
PER SHARE DATA:
Net income (loss)
Basic $ (0.21) $ 0.26 $ (0.04) $ (0.26)
Diluted (0.21) 0.20 (0.04) (0.26)
Book value $ 5.70 $ 6.38 $ 5.70 $ 6.38
Weighted average shares outstanding
Basic 3,016,175 3,012,434 3,013,681 3,012,434
Diluted 3,016,175 4,413,874 3,013,681 3,012,434
AVERAGE FINANCIAL CONDITION DATA:
Total assets $ 369,248 $ 540,338 $ 392,701 $ 532,418
Investment securities 69,721 118,395 72,544 128,455
Mortgage-backed securities 72,688 116,567 82,319 114,889
Total loans receivable, net 212,152 285,338 222,172 270,562
Total deposits 238,156 279,419 252,135 275,201
Total stockholders' equity 17,555 21,038 18,357 20,780
SELECTED FINANCIAL RATIOS(1)
Return on average assets -0.70% 0.58% -0.04% -0.19%
Return on average equity -14.65% 14.89% -0.85% -4.99%
Yield on earning assets 5.09% 3.70% 4.62% 3.72%
Cost of funds 3.15% 2.48% 3.03% 2.52%
Net interest rate spread 1.94% 1.22% 1.59% 1.20%
Net interest rate margin 2.09% 1.33% 1.74% 1.31%
08/11/05 Greater Atlantic Financial Corp. Page 7 of 8
GREATER ATLANTIC FINANCIAL CORP
THIRD QUARTER RESULTS (UNAUDITED)
(NASDAQ:GAFC)
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE)
At or for the
Nine Months Ended
June 30,
-----------------------------------------
2005 2004
------------------- --------------------
FINANCIAL CONDITION DATA:
Total assets $ 365,017 $ 504,438
Total loans receivable, net 199,930 260,314
Mortgage-loans held for sale 12,697 7,831
Investments 69,939 113,628
Mortgage-backed securities 67,217 104,411
Total deposits 250,349 298,820
FHLB advances 42,000 96,200
Other borrowings 44,132 77,108
Subordinated debentures 9,376 9,366
Total stockholders' equity 17,233 19,223
ASSET QUALITY DATA:
Non-performing assets to total assets 0.59% 0.24%
Non-performing loans to total loans 0.92% 0.45%
Net charge-offs to average total loans 0.04% 0.06%
Allowance for loan losses to:
Total loans 0.78% 0.56%
Non-performing loans 85.32% 124.18%
Non-performing loans $ 1,934 $ 1,220
Non-performing assets $ 2,167 $ 1,220
Allowance for loan losses $ 1,650 $ 1,515
CAPITAL RATIOS OF THE BANK:
Leverage ratio 6.95% 5.60%
Tier 1 risk-based capital ratio 11.01% 10.79%
Total risk-based capital ratio 11.69% 11.33%
08/11/05 Greater Atlantic Financial Corp. Page 8 of 8