UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
February 6, 2006
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(Date of earliest event reported)
GREATER ATLANTIC FINANCIAL CORP.
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
0-26467 54-1873112
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(Commission File Number) (IRS Employer
Identification Number)
10700 Parkridge Boulevard, Suite P50 Reston, Virginia 20191
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(Address of Principal Executive Offices) (Zip Code)
(703) 391-1300
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT
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On February 6, 2006, the registrant's subsidiary, Greater Atlantic Bank,
and Greater Atlantic Mortgage Corporation, a subsidiary of Greater Atlantic
Bank, terminated the Management Agreement with Stamm Mortgage Management, Inc.,
which had been entered into on December 31, 2004 and effective October 1, 2004
(the "Management Agreement"). Greater Atlantic Mortgage Corporation originated
mortgage loans on a nationwide basis for sale in the secondary market and
participated in niche mortgage products, such as Federal Housing Administration
("FHA") streamline refinancings.
Pursuant to the Management Agreement, the manager had agreed to absorb
100% of any operating loss of Greater Atlantic Mortgage Corporation in exchange
for 80% of its net earnings and established $1.7 million in an escrow account to
absorb any losses. The escrow account was depleted at June 30, 2005, and the
manager contributed an additional $108,000 to cover losses. During the three
months ended September 30, 2005, the losses at Greater Atlantic Mortgage
Corporation continued and reached approximately $993,000, pre-tax. Because the
escrow account was depleted and the manager had not posted sufficient collateral
to securitize the amounts the manager owed to Greater Atlantic Mortgage
Corporation, the pre-tax earnings of Greater Atlantic Financial Corp. were
reduced by the $993,000 loss.
Working under extensions to the Management Agreement, Greater Atlantic
Mortgage Corporation attempted to obtain an amendment to the agreement and to
obtain additional collateral from the manager. Based on those negotiations, and
the need for Greater Atlantic Bank to obtain regulatory approval for any
amendment, which Greater Atlantic Bank was not able to obtain, Greater Atlantic
Mortgage Corporation made demand for the $993,000 payment for losses incurred
through September 30, 2005 in accordance with the Management Agreement. The
manager did not comply with that demand and Greater Atlantic Mortgage
Corporation terminated the Management Agreement.
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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 hereunto duly authorized.
GREATER ATLANTIC FINANCIAL CORP.
Date: February 10, 2006 By: /s/ Carroll E. Amos
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Carroll E. Amos, President and Chief
Executive Officer
Date: February 10, 2006 By: /s/ David E. Ritter
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David E. Ritter, Senior Vice President
and Chief Financial Officer
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