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[GREATER ATLANTIC FINANCIAL CORP. LETTERHEAD]
NEWS RELEASE
DATE: MAY 12, 2006
CONTACT: DAVID E. RITTER
(703) 390-0344
GREATER ATLANTIC FINANCIAL RELEASES
SECOND QUARTER RESULTS
Reston, Virginia - May 12, 2006 - 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 $1.2 million
or $.39 per share for the three months ended March 31, 2006, compared to net
earnings of $65,000 or $.02 per share for the three months ended March 31, 2005.
For the six months ended March 31, 2006, the Company had a net loss of $3.3
million or $1.10 per share, compared to net earnings of $526,000 or $.17 per
share for the comparable period one year ago.
In commenting on the results, Mr. Calomiris, stated that "As we reported when
Greater Atlantic Bank began the process of terminating the operations of Greater
Atlantic Mortgage Corporation, we expected Greater Atlantic Financial Corp. to
incur operating losses and closure costs of approximately $1.0 million to effect
that termination. Greater Atlantic Bank completed the termination of the
operations of Greater Atlantic Mortgage Corporation on March 29, 2006, and was
able to reduce the loss in the termination to $647,000, $353,000 less than the
expected $1.0 million loss." "Further expenses are not expected to be material,"
he added.
Carroll E. Amos, President and Chief Executive Officer, stated "Net earnings of
the Company for the three months ended March 31, 2006 declined by $1.3 million
from the comparable period one year ago and was primarily the result of a
decrease of $619,000 in net earnings from Greater Atlantic Mortgage Corporation.
Also contributing to the decline were the absence of any gain on the sale of a
previously owned branch, which contributed $406,000 to earnings in the year ago
period and a reduction in gain on derivative transactions. Those declines were
offset in part by an increase in net interest income of $386,000 for the three
months ended March 31, 2006," Amos added.
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Net earnings for the six months ended March 31, 2006 declined by $3.8 million
from the comparable period one year ago, primarily as a result of a $2.3 million
decrease in net earnings from Greater Atlantic Mortgage Corporation. Also
contributing to the decline was the absence of any gain on sale of investment
securities, gain on the sale of previously owned branches and reductions in gain
on sale of loans and gain on derivative transactions.
Net interest income for the three months ended March 31, 2006 amounted to $1.8
million, an increase of $372,000 over the comparable period one year ago, and
resulted primarily from a 77 basis point increase in the Bank's net interest
margin (net interest income divided by average interest-earning assets) from
1.58% for the quarter ended March 31, 2005 to 2.35% for the quarter ended March
31, 2006, offset in part by a $57.9 million decrease in the Bank's
interest-earning assets. Contributing to the increase in the net interest margin
was a $66,000 reduction in interest expense resulting from payments received on
certain interest rate swap and cap agreements compared to payments made of
$202,000 in the comparable period one year ago. The increase in net interest
margin also resulted from increasing the average yield on interest-earning
assets by 73 basis points more than the increase in the average cost of
interest-bearing liabilities and was partially offset by the increase in the
Bank's average interest-bearing liabilities exceeding the increase in average
interest earning assets by $2.4 million.
Net interest income for the six months ended March 31, 2006, amounted to $3.7
million, an increase of $660,000 or 22 % from the comparable period one year
ago. The improvement in net interest income during the six months ended March
31, 2005, resulted primarily from a 73 basis point increase in net interest
margin from 1.59% for the six months ended March 31, 2005 to 2.32% for the six
months ended March 31, 2006, offset in part by a $64.7 million decrease in the
Bank's interest-earning assets. Contributing to the increase in the net interest
margin was a $107,000 reduction in interest expense resulting from payments
received on certain interest rate swap and cap agreements compared to payments
made of $413,000 in the comparable period one year ago. The increase in net
interest margin also resulted from increasing the average yield on
interest-earning assets by 68 basis points more than the increase in the average
cost of interest-bearing liabilities and was partially offset by an increase in
the bank's average interest-bearing liabilities exceeding the increase in
average interest earning assets by $741,000.
Compared to the period one year ago, non-interest income decreased $1.1 million
during the three months ended March 31, 2006. That decrease was primarily the
result of decreases totaling $1.4 million in gains on derivatives, gain on sale
of loans and a decline in other operating income. Those decreases in income were
partially offset by an increase of $325,000 in service fees on loans and
deposits. The reduced level of gain on sale of loans during the three months
ended March 31, 2006 resulted from the wind down of the Bank's mortgage banking
subsidiary, which was closed on March 29, 2006. The decrease in other operating
income also reflects the $406,000 gain recognized one year ago from the sale of
the bank's Winchester, Virginia branch without a similar item in the three
months ended March 31, 2006.
Non-interest income decreased $2.1 million during the six months ended March 31,
2006, when compared to the period one year ago. That decrease was primarily the
result of decreases totaling $2.8 million in gains on sale of investment
securities, gains on derivatives, gain on sale of loans and a decline in other
operating income. Those decreases in income were partially offset by increases
of $578,000 in service fees on loans and deposits and $65,000 in gain on sale of
real estate owned, respectively. The $862,000 reduction in the level of gain on
sale of loans during
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the six months ended March 31, 2005 resulted from reduced loan origination and
sales volumes at the Bank's mortgage banking subsidiary. The decrease in other
operating income also reflects the $683,000 gain recognized one year ago from
the sale of the Bank's Washington D.C. and Winchester, Virginia, branches
without a similar item in the current period.
For the three months ended March 31, 2006, non-interest expense increased
$547,000 from $3.8 million for the three months ended March 31, 2005 to $4.4
million in the current period. The increase was primarily attributable to a
$398,000 increase in the mortgage banking subsidiary's non-interest expense from
that incurred in the comparable period one year ago. The increase in
non-interest expense at the mortgage banking subsidiary level was primarily
$504,000 in compensation (of which $401,000 was an expense reimbursement by the
manager one year ago with no comparable reimbursement during the three months
ended March 31, 2006). That charge was coupled with increases in expense for
professional services, occupancy, furniture fixtures and equipment and other
operating expense of $256,000 and was offset by a $362,000 reduction in
advertising costs. The increase of $149,000 in the Bank's non-interest expense
occurred from increases in compensation and advertising of $163,000 and
$138,000, respectively, offset in part by a $152,000 reduction in other various
non-interest expense categories.
Non-interest expense increased $2.3 million from $7.4 million for the six months
ended March 31, 2005 to $9.7 million for the six months ended March 31, 2006.
The increase was primarily attributable to a $2.1 million increase in the
mortgage banking subsidiary 's non-interest expense from that incurred in the
comparable period one year ago. That increase in non-interest expense was
primarily a non-recurring pre-tax impairment charge of $996,000 recorded in
other operating expenses and $1.2 million in compensation (of which $972,000 was
an expense reimbursement by the manager one year ago with no comparable
reimbursement during the six months ended March 31, 2006). Those charges were
coupled with increases in expense for professional services, occupancy,
furniture fixtures and equipment and other operating expense of $391,000 and was
offset in part by a $499,000 reduction in advertising costs. The impairment
charge requires a write down of long-lived assets by recording a charge due to
the anticipated discontinuance of operations. The increase of $169,000 in the
Bank's non-interest expense resulted from an increase in compensation and
advertising of $203,000 and $251,000, respectively, offset in part by a $285,000
reduction in other various non-interest expense categories.
Non-performing assets amounts to $1.4 million or 0.45% of total assets at March
31, 2006, with $1.4 million classified as substandard, $27,000 classified as
doubtful and none classified as loss, compared to $1.5 million or 0.40%
classified as non-performing at March 31, 2005. The Company increased the
provision for loan losses by $71,000 during the six months ended March 31, 2006
of which $3,000 was recorded during the three months ended March 31, 2006.
The Company indicated that loans receivable, net, decreased by $2.9 million
during the three months ended March 31, 2006, primarily as a result of a $1.5
million decrease in the Bank's consumer loan portfolio, coupled with decreases
of $993,000 and $425,000, respectively, in the Bank's commercial and
single-family loan portfolios. The Company further noted that, although there
was a decline in commercial loans outstanding during the three months ended
March 31, 2006, as of that date, the Bank had approximately $13.6 million of
commercial loans approved and pending closing.
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Deposits at Greater Atlantic Bank declined approximately $285,000 during the
three months ended March 31, 2006, with wholesale certificates of deposit
declining by $6.3 million. That decline was substantially off-set by a $6.0
million increase in deposits in the Bank's retail branch system. Of the $6.0
million increase in retail deposits, $5.2 million were in certificates of
deposit and $785,000 was in transaction-based accounts. The increase in retail
branch deposits was the result of the retail banking improvement program
instituted by the Bank during fiscal 2005, coupled with an overall increase in
deposit rates that customers found more favorable than the rates that existed
one year ago.
At March 31, 2006, Greater Atlantic Financial Corp. had total assets of $318
million, a decrease of $64 million or 17% from the $382 million recorded at the
close of the comparable period one-year ago. Loans receivable at March 31, 2006,
amounted to $194 million, a decrease of 6 percent from the $207 million held at
March 31, 2005. Investment and mortgage-backed securities at March 31, 2006,
amounted to $107 million, a decrease of $30 million or 21% from the $137 million
held at March 31, 2005. Deposits amounted to $231 million at March 31, 2006, a
decrease of $29 million from the $260 million held one year ago. Stockholders'
equity at March 31, 2006, amounted to $12.2 million that equates to a book value
of $4.03 per share.
Greater Atlantic Financial Corp. conducts its business operations through its
wholly owned subsidiary, Greater Atlantic Bank. 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.
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.
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GREATER ATLANTIC FINANCIAL CORP.
SECOND QUARTER RESULTS
(NASDAQ:GAFC)
(DOLLARS IN THOUSANDS)
For the For the
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------------------------------------
CONSOLIDATED STATEMENT OPERATIONS 2006 2005 2006 2005
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INTEREST INCOME
Loans $ 3,521 $ 2,966 $ 7,061 $ 6,269
1,201 1,175 2,400 2,277
Investments ---------------------------------------------------------
TOTAL INTEREST INCOME 4,722 4,141 9,461 8,546
INTEREST EXPENSE
Deposits 1,890 1,512 3,654 3,026
Borrowed money 993 1,162 2,091 2,465
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TOTAL INTEREST EXPENSE 2,883 2,674 5,745 5,491
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NET INTEREST INCOME 1,839 1,467 3,716 3,055
PROVISION FOR LOAN LOSSES 3 1 74 3
---------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,836 1,466 3,642 3,052
NONINTEREST INCOME
Gain on sale of loans 657 1,249 1,465 2,327
Fees and service charges 538 214 1,027 449
Gain on sale of investment securities - - - 538
Gain on derivative transaction 113 519 184 882
Gain on sale of real estate owned - - 65 -
Other operating income 31 431 46 716
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TOTAL NONINTEREST INCOME 1,339 2,413 2,787 4,912
NONINTEREST EXPENSE
Compensation and employee benefits 1,997 1,330 4,013 2,561
Occupancy 435 434 853 895
Professional services 423 291 785 511
Advertising 355 579 890 1,138
Deposit insurance premium 25 21 52 32
Furniture, fixtures and equipment 265 284 516 583
Data processing 250 313 507 637
Other operating 610 562 2,128 1,081
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TOTAL NONINTEREST EXPENSE 4,360 3,814 9,744 7,438
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Income (loss) before income tax provision (1,185) 65 (3,315) 526
Income tax provision - - - -
---------------------------------------------------------
NET EARNING (LOSS) $ (1,185) $ 65 $ (3,315) $ 526
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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,
-------------------------------------------------------------
2006 2005 2006 2005
-------------------------------------------------------------
PER SHARE DATA:
Net income (loss)
Basic $ (0.39) $ 0.02 $ (1.10) $ 0.17
Diluted (0.39) 0.02 (1.10) 0.17
Book value $ 4.03 $ 5.86 $ 4.03 $ 5.86
Weighted average shares outstanding
Basic 3,020,934 3,012,434 3,020,934 3,012,434
Diluted 3,020,934 4,405,827 3,020,934 4,407,266
AVERAGE FINANCIAL CONDITION DATA:
Total assets $ 327,816 $ 388,138 $ 335,962 $ 404,428
Investment securities 66,487 69,743 66,339 70,791
Mortgage-backed securities 45,913 80,913 49,880 87,135
Total loans receivable, net 200,952 220,609 204,177 227,182
Total deposits 213,455 248,891 214,575 259,125
Total stockholders' equity 13,468 17,648 14,514 18,711
SELECTED FINANCIAL RATIOS
Return on average assets -1.45% 0.07% -1.97% 0.26%
Return on average equity -35.19% 1.47% -45.68% 5.62%
Yield on earning assets 6.03% 4.46% 5.91% 4.44%
Cost of funds 3.86% 3.02% 3.77% 2.98%
Net interest rate spread 2.17% 1.44% 2.14% 1.46%
Net interest rate margin 2.35% 1.58% 2.32% 1.59%
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GREATER ATLANTIC FINANCIAL CORP
SECOND QUARTER RESULTS
(NASDAQ:GAFC)
(DOLLARS IN THOUSANDS)
At or for the
Six Months Ended
March 31,
-----------------------------------------
2006 2005
-----------------------------------------
FINANCIAL CONDITION DATA:
Total assets $ 318,169 $ 382,022
Total loans receivable, net 193,637 206,810
Mortgage-loans held for sale 3,473 11,617
Investments 64,565 60,913
Mortgage-backed securities 42,503 76,318
Total deposits 231,191 260,058
FHLB advances 38,000 41,000
Other borrowings 26,331 52,667
Convertible Preferred Securities 9,383 9,373
Total stockholders' equity 12,174 17,642
ASSET QUALITY DATA:
Non-performing assets to total assets 0.45% 0.40%
Non-performing loans to total loans 0.71% 0.70%
Net charge-offs to average total loans 0.02% 0.02%
Allowance for loan losses to:
Total loans 0.62% 0.71%
Non-performing loans 86.45% 100.39%
Non-performing loans $ 1,446 $ 1,546
Non-performing assets $ 1,446 $ 1,546
Allowance for loan losses $ 1,250 $ 1,552
CAPITAL RATIOS OF THE BANK:
Leverage ratio 6.37% 6.87%
Tier 1 risk-based capital ratio 9.90% 11.48%
Total risk-based capital ratio 10.52% 11.91%
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