**UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

 

**ý****  Quarterly Report Pursuant to Section 13 or15(d) of theSecurities Exchange Act of 1934**

 

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**For the Quarter Ended September 30, 2002**

 

**OR**

 

**o****  Transition Report Pursuant to Section 13 or15(d) of theSecurities Exchange Act of 1934**

 

**0-22516**

**Securities and Exchange Commission File Number**

 

**GreenPoint Financial Corp.**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                                                    |   | **06-1379001**                                                                     |
|-----------------------------------------------------------------|--------|------------------------------------------------------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |   | (I.R.S. employer identification number)                                            |
|                                                            |   |                                                                               |
| **90 Park Avenue, New York, New York**                          |   | **10016**                                                                          |
| (Address of principal executive offices)                        |   | (Zip Code)                                                                         |
|                                                            |   |                                                                               |
| **(212) 834-1000**                                              |   | **Not Applicable**                                                                 |
| (Registrant’s telephone number,  including area code)      |   | (Former name, former address and former  fiscal year if changed since last report) |

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirements forthe past 90 days.

 
| ý    Yes | o    No |
|-------------------------|-------------------|

 

Asof November 1, 2002 there were 97,597,075 shares of common stock outstanding.

 

 

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**GreenPointFinancial Corp.**

 

**FORM 10-Q**

 

**For theQuarter EndedSeptember 30, 2002**

 

**TABLE OFCONTENTS**

 
| **PART I  - FINANCIAL INFORMATION**                                                                                                                   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                  |
| Item 1 - Financial Statements                                                                                                                         |
|                                                                                                                                                  |
| Consolidated  Statements of Financial Condition (unaudited) as of September 30, 2002 and  December 31, 2001                                           |
|                                                                                                                                                  |
| Consolidated  Statements of Income (unaudited) for the quarter and nine month periods ended  September 30, 2002 and 2001               |
|                                                                                                                                                  |
| Consolidated  Statements of Comprehensive Income (unaudited) for the quarter and nine month  periods ended September 30, 2002 and 2001 |
|                                                                                                                                                  |
| Consolidated  Statements of Changes in Stockholders’ Equity (unaudited) for the nine months  ended September 30, 2002 and 2001    |
|                                                                                                                                                  |
| Consolidated  Statements of Cash Flows (unaudited) for the nine months ended September 30,  2002 and 2001                                             |
|                                                                                                                                                  |
| Notes  to the Unaudited Consolidated Financial Statements                                                                                             |
|                                                                                                                                                  |
| Item 2  - Management’s Discussion and Analysis of Financial Condition and Results of  Operations                                                 |
|                                                                                                                                                  |
| Item 3  - Quantitative and Qualitative Disclosure about Market Risk                                                                                   |
|                                                                                                                                                  |
| Item 4 - Controls and  Procedures                                                                                                                     |
|                                                                                                                                                  |
| **PART II – OTHER INFORMATION**                                                                                                                  |
|                                                                                                                                                  |
| Item 1 - Legal Proceedings                                                                                                                            |
|                                                                                                                                                  |
| Item 5 - Other Information                                                                                                                            |
|                                                                                                                                                  |
| Item 6 -  Exhibits and Reports on Form 8-K                                                                                                            |

 

2

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**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF FINANCIAL CONDITION**

**(Unaudited)**

 
| **(In  millions, except share amounts)**                                                              |   | **Sept. 30,  2002** |   | **Dec. 31,  2001** |   |
|-------------------------------------------------------------------------------------------------------|--------|---------------------|--------|--------------------|--------|
| **ASSETS**                                                                                            |   |                |   |               |   |
| Cash and due from banks                                                                               |   | $                   | 236    |               | $      | 190 |   |
| Money market investments:                                                                             |   |                |   |               |   |
| Interest-bearing deposits in other banks                                                              |   | 6                   |   | 5                  |   |
| Federal funds sold and securities purchased  under agreements to resell                               |   | 108                 |   | 162                |   |
| Total cash and cash equivalents                                                                       |   | 350                 |   | 357                |   |
| Securities:                                                                                           |   |                |   |               |   |
| Securities available for sale                                                                         |   | 1,874               |   | 1,542              |   |
| Securities available for sale-pledged to  creditors                                                   |   | 2,463               |   | 1,677              |   |
| Retained interests in securitizations available  for sale                                             |   | 107                 |   | 131                |   |
| Federal Home Loan Bank of New York stock                                                              |   | 275                 |   | 233                |   |
| Securities held to maturity (fair value of $2  and $3, respectively)                                  |   | 2                   |   | 3                  |   |
| Total securities                                                                                      |   | 4,721               |   | 3,586              |   |
| Loans receivable held for sale                                                                        |   | 6,336               |   | 4,945              |   |
| Loans receivable held for investment (net of  allowance for loan losses of $78 and $81, respectively) |   | 9,810               |   | 9,961              |   |
| Other interest-earning assets                                                                         |   | 141                 |   | 139                |   |
| Banking premises and equipment, net                                                                   |   | 160                 |   | 149                |   |
| Servicing assets                                                                                      |   | 119                 |   | 123                |   |
| Goodwill (net of accumulated amortization and  impairment of $788)                                    |   | 395                 |   | 395                |   |
| Other assets                                                                                          |   | 550                 |   | 531                |   |
| Total assets                                                                                          |   | $                   | 22,582 |               | $      | 20,186 |   |
|                                                                                                  |   |                |   |               |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                         |   |                |   |               |   |
| **Liabilities:**                                                                                      |   |                |   |               |   |
| Deposits:                                                                                             |   |                |   |               |   |
| N.O.W. and checking                                                                                   |   | $                   | 1,622  |               | $      | 648 |   |
| Savings                                                                                               |   | 1,302               |   | 1,215              |   |
| Variable rate savings                                                                                 |   | 2,281               |   | 2,089              |   |
| Money market                                                                                          |   | 950                 |   | 895                |   |
| Total core deposits                                                                                   |   | 6,155               |   | 4,847              |   |
| Term certificates of deposit                                                                          |   | 5,202               |   | 5,859              |   |
| Total deposits                                                                                        |   | 11,357              |   | 10,706             |   |
| Borrowings:                                                                                           |   |                |   |               |   |
| Securities sold under agreements to repurchase                                                        |   | 2,461               |   | 1,600              |   |
| Other short term borrowings                                                                           |   | 825                 |   | 961                |   |
| Federal Home Loan Bank of New York advances                                                           |   | 4,800               |   | 3,800              |   |
| Senior bank notes                                                                                     |   | —              |   | 134                |   |
| Subordinated bank notes                                                                               |   | 150                 |   | 150                |   |
| Guaranteed preferred beneficial interest in  Company’s junior subordinated debentures            |   | 200                 |   | 200                |   |
| Total borrowings                                                                                      |   | 8,436               |   | 6,845              |   |
| Mortgagors’ escrow                                                                               |   | 89                  |   | 81                 |   |
| Liability under recourse exposure                                                                     |   | 355                 |   | 468                |   |
| Other liabilities                                                                                     |   | 436                 |   | 430                |   |
| Total liabilities                                                                                     |   | 20,673              |   | 18,530             |   |
| Commitments and contingencies                                                                         |   |                |   |               |   |
| **Stockholders’ equity:**                                                                        |   |                |   |               |   |
| Preferred stock ($0.01 par value; 50,000,000  shares authorized; none issued)                         |   | —              |   | —             |   |
| Common stock ($0.01 par value; 220,000,000  shares authorized; 110,261,164 shares issued)             |   | 1                   |   | 1                  |   |
| Additional paid-in capital                                                                            |   | 902                 |   | 877                |   |
| Unallocated Employee Stock Ownership Plan (ESOP)  shares                                              |   | (91                 | )      | (95                | )      |
| Unearned stock plans shares                                                                           |   | (1                  | )      | (1                 | )      |
| Retained earnings                                                                                     |   | 1,452               |   | 1,148              |   |
| Accumulated other comprehensive income, net                                                           |   | 37                  |   | 11                 |   |
| Treasury stock, at cost (11,898,754 shares and  10,498,829 shares, respectively)                      |   | (391                | )      | (285               | )      |
| Total stockholders’ equity                                                                       |   | 1,909               |   | 1,656              |   |
| Total liabilities and stockholders’ equity                                                       |   | $                   | 22,582 |               | $      | 20,186 |   |

 

*(Seeaccompanying notes to the unaudited consolidated financial statements)*

 

3

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**GREENPOINTFINANCIAL CORP. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF INCOME**

**(Unaudited)**

 
|                                                         |   | **Quarter Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|--------------------------------------------------------------|--------|----------------------------------|--------|--------------------------------------|--------|
| ***(In millions,  except per share amounts)***               |   | **2002**                         |   | **2001**                             |   | **2002** |   | **2001** |   |
| **Interest income:**                                         |   |                             |   |                                 |   |   |   |   |   |
| Mortgage loans held for investment                           |   | $                                | 181.1  |                                 | $      | 202.5 |   | $ | 561.9 |   | $ | 567.5 |   |
| Loans held for sale                                          |   | 85.8                             |   | 61.0                                 |   | 212.2 |   | 154.3 |   |
| Securities                                                   |   | 58.9                             |   | 60.1                                 |   | 185.6 |   | 177.6 |   |
| Other                                                        |   | 3.3                              |   | 9.3                                  |   | 15.8 |   | 28.2 |   |
| Total interest income                                        |   | 329.1                            |   | 332.9                                |   | 975.5 |   | 927.6 |   |
| **Interest expense:**                                        |   |                             |   |                                 |   |   |   |   |   |
| Deposits                                                     |   | 69.1                             |   | 107.1                                |   | 220.1 |   | 349.4 |   |
| Other borrowed funds                                         |   | 60.6                             |   | 49.9                                 |   | 164.9 |   | 101.6 |   |
| Long-term debt                                               |   | 8.5                              |   | 10.5                                 |   | 29.1 |   | 31.3 |   |
| Total interest expense                                       |   | 138.2                            |   | 167.5                                |   | 414.1 |   | 482.3 |   |
| Net interest income                                          |   | 190.9                            |   | 165.4                                |   | 561.4 |   | 445.3 |   |
| Provision for loan losses                                    |   | (0.5                             | )      | (0.9                                 | )      | (1.2 | ) | (2.2 | ) |
| Net interest income after provision for loan  losses         |   | 190.4                            |   | 164.5                                |   | 560.2 |   | 443.1 |   |
| **Non-interest income:**                                     |   |                             |   |                                 |   |   |   |   |   |
| Income from fees and commissions:                            |   |                             |   |                                 |   |   |   |   |   |
| Loan servicing fees                                          |   | (0.4                             | )      | 3.2                                  |   | 10.7 |   | 9.7 |   |
| Banking services fees and commissions                        |   | 15.4                             |   | 11.0                                 |   | 42.4 |   | 32.6 |   |
| Fees, commissions and other income                           |   | 2.1                              |   | 0.1                                  |   | 6.1 |   | 1.5 |   |
| Total income from fees and commissions                       |   | 17.1                             |   | 14.3                                 |   | 59.2 |   | 43.8 |   |
| Net gain on sales of loans                                   |   | 89.2                             |   | 113.3                                |   | 265.2 |   | 286.3 |   |
| Change in valuation of retained interests                    |   | (0.1                             | )      | (0.4                                 | )      | (7.2 | ) | (0.4 | ) |
| Net gain on securities                                       |   | 3.9                              |   | 4.1                                  |   | 10.7 |   | 16.0 |   |
| Total non-interest income                                    |   | 110.1                            |   | 131.3                                |   | 327.9 |   | 345.7 |   |
| **Non-interest expense:**                                    |   |                             |   |                                 |   |   |   |   |   |
| General and administrative expenses:                         |   |                             |   |                                 |   |   |   |   |   |
| Salaries and benefits                                        |   | 49.2                             |   | 48.0                                 |   | 145.9 |   | 131.4 |   |
| Employee Stock Ownership and stock plans expense             |   | 6.3                              |   | 5.2                                  |   | 19.3 |   | 14.4 |   |
| Net expense of premises and equipment                        |   | 18.1                             |   | 19.7                                 |   | 53.6 |   | 55.1 |   |
| Federal deposit insurance premiums                           |   | 0.4                              |   | 0.5                                  |   | 1.4 |   | 1.6 |   |
| Other administrative expenses                                |   | 27.6                             |   | 28.4                                 |   | 84.8 |   | 73.1 |   |
| Total general and administrative expenses                    |   | 101.6                            |   | 101.8                                |   | 305.0 |   | 275.6 |   |
| Other real estate owned operating income                     |   | —                           |   | (0.5                                 | )      | (1.1 | ) | (1.1 | ) |
| Goodwill amortization                                        |   | —                           |   | 11.3                                 |   | — |   | 33.9 |   |
| Total non-interest expense                                   |   | 101.6                            |   | 112.6                                |   | 303.9 |   | 308.4 |   |
| Income from continuing operations before income  taxes       |   | 198.9                            |   | 183.2                                |   | 584.2 |   | 480.4 |   |
| Income taxes related to earnings from continuing  operations |   | 72.4                             |   | 70.4                                 |   | 214.6 |   | 186.4 |   |
| Net income from continuing operations                        |   | 126.5                            |   | 112.8                                |   | 369.6 |   | 294.0 |   |
| **Discontinued operations:**                                 |   |                             |   |                                 |   |   |   |   |   |
| Net (loss) income from operations of discontinued  business  |   | (0.2                             | )      | (9.6                                 | )      | 1.5 |   | (26.5 | ) |
| **Net income**                                               |   | $                                | 126.3  |                                 | $      | 103.2 |   | $ | 371.1 |   | $ | 267.5 |   |
|                                                         |   |                             |   |                                 |   |   |   |   |   |
| **Basic earnings per share:**                                |   |                             |   |                                 |   |   |   |   |   |
| Net income from continuing operations                        |   | $                                | 1.44   |                                 | $      | 1.26 |   | $ | 4.18 |   | $ | 3.31 |   |
| Net (loss) income from discontinued operations               |   | —                           |   | (0.11                                | )      | 0.02 |   | (0.30 | ) |
| Net income                                                   |   | $                                | 1.44   |                                 | $      | 1.15 |   | $ | 4.20 |   | $ | 3.01 |   |
| **Diluted earnings per share:**                              |   |                             |   |                                 |   |   |   |   |   |
| Net income from continuing operations                        |   | $                                | 1.41   |                                 | $      | 1.23 |   | $ | 4.07 |   | $ | 3.22 |   |
| Net (loss) income from discontinued operations               |   | —                           |   | (0.11                                | )      | 0.02 |   | (0.29 | ) |
| Net income                                                   |   | $                                | 1.41   |                                 | $      | 1.12 |   | $ | 4.09 |   | $ | 2.93 |   |
| **Dividends declared per share**                             |   | $                                | 0.25   |                                 | $      | 0.25 |   | $ | 0.75 |   | $ | 0.75 |   |

 

*(See accompanying notes to the unaudited consolidatedfinancial statements.)*

 

4

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**GREENPOINTFINANCIAL CORP. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF COMPREHENSIVE INCOME**

**(Unaudited)**

 
|                                                                |   | **Quarter Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|---------------------------------------------------------------------|--------|----------------------------------|--------|--------------------------------------|--------|
| ***(In millions)***                                                 |   | **2002**                         |   | **2001**                             |   | **2002** |   | **2001** |   |
|                                                                |   |                             |   |                                 |   |   |   |   |   |
| Net income                                                          |   | $                                | 126.3  |                                 | $      | 103.2 |   | $ | 371.1 |   | $ | 267.5 |   |
| Other comprehensive income, before tax:                             |   |                             |   |                                 |   |   |   |   |   |
| Unrealized gain on securities:                                      |   |                             |   |                                 |   |   |   |   |   |
| Unrealized holding gain arising during period                       |   | 13.2                             |   | 37.1                                 |   | 55.4 |   | 56.2 |   |
| Less: reclassification adjustment for gains  included in net income |   | (3.9                             | )      | (4.1                                 | )      | (10.7 | ) | (16.0 | ) |
| Other comprehensive income, before tax                              |   | 9.3                              |   | 33.0                                 |   | 44.7 |   | 40.2 |   |
| Income tax expense related to items of other comprehensive income   |   | (3.9                             | )      | (14.3                                | )      | (19.0 | ) | (17.4 | ) |
| Other comprehensive income, net of tax                              |   | 5.4                              |   | 18.7                                 |   | 25.7 |   | 22.8 |   |
| **Total comprehensive income, net  of tax**                         |   | $                                | 131.7  |                                 | $      | 121.9 |   | $ | 396.8 |   | $ | 290.3 |   |

 

*(See accompanying notes to the unaudited consolidatedfinancial statements.)*

 

5

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**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY**

**(Unaudited)**

 
|                                                       |   | **Nine Months Ended  September 30,** |   |
|------------------------------------------------------------|--------|--------------------------------------|--------|
| ***(In millions)***                                        |   | **2002**                             |   | **2001** |   |
| **Common stock**                                           |   |                                 |   |   |   |
| Balance at beginning of period                             |   | $                                    | 1      |   | $ | 1 |   |
| Balance at end of period                                   |   | 1                                    |   | 1 |   |
| **Additional paid-in capital**                             |   |                                 |   |   |   |
| Balance at beginning of period                             |   | 877                                  |   | 862 |   |
| Reissuance of treasury stock                               |   | (8                                   | )      | (14 | ) |
| Amortization of ESOP shares committed to be  released      |   | 18                                   |   | 13 |   |
| Amortization of stock plans shares                         |   | 1                                    |   | 1 |   |
| Tax benefit for vested stock plans shares                  |   | 14                                   |   | 11 |   |
| Balance at end of period                                   |   | 902                                  |   | 873 |   |
| **Unallocated ESOP shares**                                |   |                                 |   |   |   |
| Balance at beginning of period                             |   | (95                                  | )      | (100 | ) |
| Amortization of ESOP shares committed to be  released      |   | 4                                    |   | 4 |   |
| Balance at end of period                                   |   | (91                                  | )      | (96 | ) |
| **Unearned stock plans shares**                            |   |                                 |   |   |   |
| Balance at beginning of period                             |   | (1                                   | )      | (2 | ) |
| Amortization of stock plans shares                         |   | —                               |   | 1 |   |
| Balance at end of period                                   |   | (1                                   | )      | (1 | ) |
| **Retained earnings**                                      |   |                                 |   |   |   |
| Balance at beginning of period                             |   | 1,148                                |   | 1,532 |   |
| Net income                                                 |   | 371                                  |   | 267 |   |
| Dividends declared                                         |   | (67                                  | )      | (67 | ) |
| Balance at end of period                                   |   | 1,452                                |   | 1,732 |   |
| **Accumulated other comprehensive income, net**            |   |                                 |   |   |   |
| Balance at beginning of period                             |   | 11                                   |   | 17 |   |
| Net change in accumulated other comprehensive  income, net |   | 26                                   |   | 23 |   |
| Balance at end of period                                   |   | 37                                   |   | 40 |   |
| **Treasury stock, at cost**                                |   |                                 |   |   |   |
| Balance at beginning of period                             |   | (285                                 | )      | (260 | ) |
| Reissuance of treasury stock                               |   | 51                                   |   | 42 |   |
| Purchase of treasury stock                                 |   | (157                                 | )      | (27 | ) |
| Balance at end of period                                   |   | (391                                 | )      | (245 | ) |
| **Total stockholders’ equity**                        |   | $                                    | 1,909  |   | $ | 2,304 |   |

 

*(Seeaccompanying notes to the unaudited consolidated financial statements)*

 

6

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**GREENPOINTFINANCIAL CORP. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
|                                                                           |   | **Nine Months Ended  September 30,** |   |
|--------------------------------------------------------------------------------|--------|--------------------------------------|--------|
| ***(In millions)***                                                            |   | **2002**                             |   | **2001** |   |
| **Cash flows from operating activities:**                                      |   |                                 |   |   |   |
| Net income                                                                     |   | $                                    | 371    |   | $ | 267 |   |
| Adjustments to reconcile net income to net cash  used in operating activities: |   |                                 |   |   |   |
| Provision for loan losses                                                      |   | 1                                    |   | 18 |   |
| Depreciation and amortization                                                  |   | 25                                   |   | 85 |   |
| ESOP and stock plans expense                                                   |   | 24                                   |   | 19 |   |
| Capitalization of servicing assets                                             |   | (39                                  | )      | (43 | ) |
| Amortization and impairment of servicing assets                                |   | 43                                   |   | 45 |   |
| (Increase) decrease in assets associated with  operating activities:           |   |                                 |   |   |   |
| Loans receivable held for sale:                                                |   |                                 |   |   |   |
| Loan originations                                                              |   | (23,310                              | )      | (18,524 | ) |
| Proceeds from loan sales                                                       |   | 21,743                               |   | 16,160 |   |
| Other                                                                          |   | 176                                  |   | (1 | ) |
| Retained interests in securitizations                                          |   | 22                                   |   | (26 | ) |
| Accrued interest receivable                                                    |   | 4                                    |   | (14 | ) |
| Other assets                                                                   |   | (33                                  | )      | 16 |   |
| Increase (decrease) in liabilities associated  with operating activities:      |   |                                 |   |   |   |
| Liabilities under recourse exposure                                            |   | (113                                 | )      | (61 | ) |
| Other liabilities                                                              |   | 6                                    |   | 107 |   |
| Other, net                                                                     |   | 3                                    |   | (19 | ) |
| Net cash used in operating activities                                          |   | (1,077                               | )      | (1,971 | ) |
| **Cash flows from investing activities:**                                      |   |                                 |   |   |   |
| Net change in:                                                                 |   |                                 |   |   |   |
| Loans receivable held for investment                                           |   | 128                                  |   | (1,679 | ) |
| Premises and equipment                                                         |   | (37                                  | )      | (25 | ) |
| Available for sale securities:                                                 |   |                                 |   |   |   |
| Proceeds from maturities                                                       |   | 154                                  |   | 791 |   |
| Proceeds from sales                                                            |   | 1,541                                |   | 1,958 |   |
| Purchase of securities                                                         |   | (4,344                               | )      | (4,257 | ) |
| Principal repayments                                                           |   | 1,579                                |   | 1,202 |   |
| Purchases of Federal Home Loan Bank Stock                                      |   | (42                                  | )      | (114 | ) |
| Other, net                                                                     |   | 22                                   |   | 19 |   |
| Net cash used in investing activities                                          |   | (999                                 | )      | (2,105 | ) |
| **Cash flows from financing activities:**                                      |   |                                 |   |   |   |
| Net change in:                                                                 |   |                                 |   |   |   |
| Domestic deposits                                                              |   | 651                                  |   | (425 | ) |
| Mortgagors’ escrow accounts                                               |   | 8                                    |   | 15 |   |
| Securities sold under agreements to repurchase  and other borrowings           |   | 725                                  |   | 2,895 |   |
| Federal Home Loan Bank advances                                                |   | 1,000                                |   | 1,550 |   |
| Cash dividends paid                                                            |   | (67                                  | )      | (67 | ) |
| Treasury stock purchased                                                       |   | (157                                 | )      | (27 | ) |
| Exercise of stock options                                                      |   | 43                                   |   | 28 |   |
| Retirement of long term debt                                                   |   | (134                                 | )      | (4 | ) |
| Net cash provided by financing activities                                      |   | 2,069                                |   | 3,965 |   |
| Net decrease in cash and cash equivalents                                      |   | (7                                   | )      | (111 | ) |
| Cash and cash equivalents at beginning of period                               |   | 357                                  |   | 311 |   |
| Cash and cash equivalents at end of period                                     |   | $                                    | 350    |   | $ | 200 |   |
| **Non-cash activities:**                                                       |   |                                 |   |   |   |
| Additions to other real estate owned, net                                      |   | $                                    | (21    | ) | $ | (12 | ) |
| **Supplemental disclosure of cash flow information:**                          |   |                                 |   |   |   |
| Cash paid for income taxes                                                     |   | $                                    | 116    |   | $ | 68 |   |
| Interest paid                                                                  |   | $                                    | 436    |   | $ | 508 |   |

 

*(Seeaccompanying notes to the unaudited consolidated financial statements)*

 

7

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**GREENPOINTFINANCIAL CORP. AND SUBSIDIARIES**

**NOTES TOTHE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

 

**1.****                   ****Summary of Significant Accounting Policies**

 

**Basis of Presentation**

Theunaudited consolidated financial statements of GreenPoint Financial Corp. andSubsidiaries (“GreenPoint” or the “Company”) are prepared in accordance withgenerally accepted accounting principles for interim financial information. Inthe opinion of management, all adjustments (consisting only of normal recurringaccruals) necessary for a fair presentation of the Company’s interim financialcondition as of the dates indicated and the results of operations for theperiods presented have been included. Certain reclassifications have been madeto the prior period financial statements to conform to the current periodpresentation. The results of operations for the interim periods shown are notnecessarily indicative of results that may be expected for the entire year.

 

TheCompany adopted a plan to exit the manufactured housing lending business inDecember 2001. Current and comparative prior period consolidated statements ofincome present the results of continuing operations and discontinued operationsseparately.

 

Theunaudited consolidated interim financial statements presented should be read inconjunction with the consolidated financial statements and notes included inthe Company’s Annual Report to shareholders for the year ended December 31,2001.

 

**Accounting for Loan Sales**

TheCompany sells loans both in the whole loan market and through varioussecuritization vehicles.

 

Whenthe Company has sold mortgages on a whole loan basis, in some cases it hasretained the servicing rights related to the loans. In instances where theCompany does not retain the servicing rights to the loans, the gain or loss onthe sale is equal to the difference between the proceeds received and the bookbasis of the loans sold. In instances where the Company does retain theservicing rights, the gain or loss also depends in part on the fair valueattributed to the servicing rights.

 

When GreenPoint has securitized certainmortgages, in some cases it has retained the servicing rights and one or moreretained interests. In calculating the gain or loss on the sale, the Companyallocates the cost basis of the loans sold between the assets sold, and theretained interests and servicing rights based on their relative fair values atthe date of sale. A gain or loss is recognized as the difference between thecash proceeds from the sale and the allocated cost basis of the assets sold.

 

**RetainedInterests**

Retained interests include interest-onlystrips, subordinated certificates, transferor interests, demand notes and therecorded liabilities for limited recourse provided on mortgage loans.

 

The Company classifies its retainedinterests in securitizations as available for sale and carries these securitiesat fair value. Generally, if the fair value of retained interests declinesbelow its carrying amount (excluding unrealized gains), the change in valuationis recognized in the consolidated statement of income and is classified as achange in valuation of retained interests. Unrealized gains are reported, netof applicable taxes, in accumulated other comprehensive income, as a separatecomponent of stockholders’ equity.

 

To obtain fair values, quoted market pricesare used if available. Because market quotes are generally not available forretained interests, the Company generally estimates fair value based upon thepresent value of estimated future cash flows using assumptions of prepayments,defaults, loss severity rates, and discount rates that the Company believesmarket participants would use for similar assets and liabilities.

 

**ServicingAssets**

Servicing assets are carried at the lowerof cost or fair value based on defined risk strata and are amortized inproportion to and over the expected servicing period.

 

The Company stratifies its servicing assetsbased on the risk characteristics of the underlying loan pools and the assetsare evaluated for impairment based on the risk characteristics. A valuationallowance is recognized through a charge to current earnings for servicingassets that have an amortized balance in excess of the current fair value.

 

8

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The fair value of servicing assets isdetermined by calculating the present value of estimated future net servicingcash flows, using assumptions of prepayments, defaults, servicing costs anddiscount rates that the Company believes market participants would use for similarassets.

 

**GoodwillAmortization**

Effective January 1, 2002, GreenPointadopted Statement of Financial Accounting Standards No. 142 (SFAS 142) whichresulted in discontinuing the amortization of goodwill. Goodwill, which isattributable to the consumer-banking segment, will be carried at its January 1,2002 book value of $395 million and will be tested, at least annually, forimpairment. The Company completed its transitional impairment test in the firstquarter of 2002 and did not recognize impairment, as the estimated fair valueof the affected business unit exceeded its carrying value, including goodwill.

 

# **Discontinued Operations**

In December 2001, GreenPoint adopted a planto discontinue the manufactured housing lending business. In accordance withthe provisions of Accounting Principles Board Statement No. 30, theconsolidated statements of income have been presented to reflect this businessas a discontinued operation and the income and expenses of the discontinuedbusiness have been reported separately. The projected future results of thediscontinued operation were initially recorded as part of the loss on disposalof the business recorded in the fourth quarter of 2001. The projectionreflected management’s estimate of the future revenues and expenses of theoperation. The assumptions underlying these estimates are reviewed quarterlyand the impact of revisions is included in current period earnings of thediscontinued operation.

 

**2.****                   ****Loans Receivable**

 

TheCompany’s loans receivable held for sale balances are summarized as follows:

 
| ***(In millions)***                                        |   | **Sept. 30,  2002** |   | **Dec. 31,  2001** |   |
|------------------------------------------------------------|--------|---------------------|--------|--------------------|--------|
| Conventional first  mortgage loans:                        |   |                |   |               |   |
| Residential one-to four-family                             |   | $                   | 5,496  |               | $      | 3,834 |   |
| Commercial property                                        |   | 18                  |   | 14                 |   |
| Second mortgage and home equity loans                      |   | 753                 |   | 358                |   |
| Manufactured housing loans                                 |   | —              |   | 705                |   |
| Other                                                      |   | 1                   |   | 1                  |   |
| Total loans receivable held for sale                       |   | 6,268               |   | 4,912              |   |
| Net deferred loan origination costs and unearned  discount |   | 68                  |   | 33                 |   |
| Loans receivable held for sale, net                        |   | $                   | 6,336  |               | $      | 4,945 |   |

 

TheCompany’s loans receivable held for investment balances are summarized asfollows:

 
| ***(In millions)***                                        |   | **Sept. 30,  2002** |   | **Dec. 31,  2001** |   |
|------------------------------------------------------------|--------|---------------------|--------|--------------------|--------|
| Conventional first  mortgage loans:                        |   |                |   |               |   |
| Residential one-to four-family                             |   | $                   | 8,740  |               | $      | 8,898 |   |
| Residential multi-family                                   |   | 351                 |   | 356                |   |
| Commercial property                                        |   | 558                 |   | 576                |   |
| Second mortgage and home equity loans                      |   | 137                 |   | 119                |   |
| Other                                                      |   | 66                  |   | 70                 |   |
| Total loans receivable held for investment                 |   | 9,852               |   | 10,019             |   |
| Net deferred loan origination costs and unearned  discount |   | 36                  |   | 23                 |   |
| Allowance for loan losses                                  |   | (78                 | )      | (81                | )      |
| Loans receivable held for investment, net                  |   | $                   | 9,810  |               | $      | 9,961 |   |

 

9

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**3.****                   ****Securities Available for Sale**

 

The amortized cost and estimated fair value ofsecurities available for sale at September 30, 2002 and December 31, 2001 aresummarized as follows:

 
|                                                  |   | **September 30, 2002** |   |
|-------------------------------------------------------|--------|------------------------|--------|
| ***(In millions)***                                   |   | **Amortized  Cost**    |   | **Gross  Unrealized  Gains** |   | **Gross  Unrealized  Losses** |   | **Fair  Value** |   |
| U.S. Government and  Federal Agency Obligations:      |   |                   |   |   |   |   |   |   |   |
| U.S. Treasury notes/bills                             |   | $                      | 4      |   | $ | — |   | $ | — |   | $ | 4 |   |
| Agency notes                                          |   | 91                     |   | — |   | — |   | 91 |   |
| Mortgage-backed  securities                           |   | 409                    |   | 19 |   | — |   | 428 |   |
| Collateralized  mortgage obligations                  |   | 3,418                  |   | 41 |   | (2 | ) | 3,457 |   |
| Trust certificates  collateralized by GNMA securities |   | 5                      |   | — |   | — |   | 5 |   |
| Corporate bonds                                       |   | 112                    |   | — |   | (5 | ) | 107 |   |
| Municipal bonds                                       |   | 69                     |   | 6 |   | — |   | 75 |   |
| Equity securities                                     |   | 177                    |   | 1 |   | (8 | ) | 170 |   |
| Total securities  available for sale                  |   | $                      | 4,285  |   | $ | 67 |   | $ | (15 | ) | $ | 4,337 |   |

 
|                                                  |   | **December 31, 2001** |   |
|-------------------------------------------------------|--------|-----------------------|--------|
| ***(In millions)***                                   |   | **Amortized  Cost**   |   | **Gross  Unrealized  Gains** |   | **Gross  Unrealized  Losses** |   | **Fair  Value** |   |
| U.S. Government and  Federal Agency Obligations:      |   |                  |   |   |   |   |   |   |   |
| U.S. Treasury  notes/bills                            |   | $                     | 6      |   | $ | — |   | $ | — |   | $ | 6 |   |
| Agency notes                                          |   | 89                    |   | 1 |   | — |   | 90 |   |
| Mortgage-backed  securities                           |   | 550                   |   | 12 |   | (2 | ) | 560 |   |
| Collateralized  mortgage obligations                  |   | 2,211                 |   | 11 |   | (12 | ) | 2,210 |   |
| Trust certificates  collateralized by GNMA securities |   | 7                     |   | — |   | — |   | 7 |   |
| Corporate bonds                                       |   | 104                   |   | — |   | (2 | ) | 102 |   |
| Municipal bonds                                       |   | 69                    |   | 2 |   | — |   | 71 |   |
| Equity securities                                     |   | 177                   |   | — |   | (4 | ) | 173 |   |
| Total securities  available for sale                  |   | $                     | 3,213  |   | $ | 26 |   | $ | (20 | ) | $ | 3,219 |   |

 

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**4.****                   ****Recourse Arrangements,Retained Interests in Securitizations and Servicing Assets**

 

Thefollowing describes the balances associated with recourse arrangements, thebalances and activity in the corresponding retained interests, the balances andactivity in servicing assets and the economic assumptions used in valuing theretained interests and servicing assets. As described in Note 1, in December2001, GreenPoint formally adopted a plan to discontinue the manufacturedhousing lending business. As a result of the decision to discontinue thisbusiness, manufactured housing operating activities were reported asdiscontinued operations in GreenPoint’s consolidated statements of income.

 

**Recourse Arrangements**

GreenPointhas established liabilities for limited recourse provided on mortgage loans andrecourse provided on manufactured housing loans that have been securitized orsold. The investors and the securitization trusts have no recourse toGreenPoint’s other assets for failure of debtors to pay when due, except forthe retained interests related to the mortgage securitizations and theliability under the corporate guarantee related to the manufactured housingsecuritizations.

 

GreenPoint has loans sold with recoursewith the following principal balances, maximum recourse exposures and recordedliabilities. The manufactured housing securitization maximum recourse exposureand recorded liability as of September 30, 2002 include the impact of anagreement to restructure the credit enhancements with a surety provider whichis fully described in Note 8.

 
|                                 |   | **September 30, 2002** |   |
|--------------------------------------|--------|------------------------|--------|
| ***(In millions)***                  |   | **Principal  Balance** |   | **Maximum  Recourse  Exposure*(1)*** |   | **Recorded  Liability** |   |
| Manufactured housing securitizations |   | $                      | 4,341  |   | $ | 672 |   | $ | 349 |   |
| Manufactured housing sales           |   | 272                    |   | 272 |   | 5 |   |
| Mortgage securitizations*(2)*        |   | 1,000                  |   | 119 |   | — |   |
| Mortgage sales*(3)*                  |   | 382                    |   | 375 |   | 1 |   |
|                                      |        |                        |        |  |  |  |  |  |  |  |

 
|                                 |   | **December 31, 2001**  |   |
|--------------------------------------|--------|------------------------|--------|
| ***(In  millions)***                 |   | **Principal  Balance** |   | **Maximum  Recourse  Exposure*(1)*** |   | **Recorded  Liability** |   |
| Manufactured housing securitizations |   | $                      | 4,966  |   | $ | 785 |   | $ | 456 |   |
| Manufactured housing sales           |   | 301                    |   | 301 |   | 11 |   |
| Mortgage securitizations*(2)*        |   | 1,512                  |   | 144 |   | — |   |
| Mortgage sales*(3)*                  |   | 625                    |   | 611 |   | 1 |   |
|                                      |        |                        |        |  |  |  |  |  |  |  |

 

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*(1)**       Represents the maximumrecourse exposure relating to recourse arrangements in the form of theretention of subordinated interests, the issuance of a corporate guarantee, ora demand note.*

*(2)**       The net present value ofexpected cash outflows on the mortgage securitization recourse arrangements isreflected in the valuation of the mortgage-retained interests.*

*(3)**       The recourse arrangementsunder the mortgage sale transactions represent a risk sharing arrangement inwhich GreenPoint has transferred the first 2% of losses to the purchaser.*

 

11

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Manufacturedhousing securitization letter of credit exposure is as follows:

 
| ***(In millions)***                 |   | **Sept. 30,  2002** |   | **Dec. 31,  2001** |   |
|-------------------------------------|--------|---------------------|--------|--------------------|--------|
| Letters of credit outstanding       |   | $                   | 672    |               | $      | 785 |   |
| Projected letter of credit draws    |   | (379                | )      | (491               | )      |
| Remaining letter of credit exposure |   | $                   | 293    |               | $      | 294 |   |

 

AtSeptember 30, 2002, GreenPoint has six manufactured housing securitizationswith principal balances of $1.8 billion, which have projected letter of creditdraws equal to the maximum recourse exposure for those securitizations.GreenPoint records a liability based on the net present value of the projectedletter of credit draws. At September 30, 2002, the projected draws exceed therecorded liability by $30 million, representing future interest expense.

 

In addition to the recourse arrangementsdescribed in the tables above, GreenPoint has established liabilities relatedto representations and warranties for mortgage loans of $25 million and $19million, at September 30, 2002 and December 31, 2001, respectively.

 

The following presents quantitativeinformation about delinquencies on loans sold with recourse:

 
|                                                     |   | **Sept. 30,  2002**      |   | **Dec. 31,  2001** |   | **Sept. 30,  2002** |   | **Dec. 31,  2001** |   |
|----------------------------------------------------------|--------|--------------------------|--------|--------------------|--------|---------------------|--------|--------------------|--------|
| ***(In millions)***                                      |   | **Manufactured Housing** |   | **Mortgage**       |   |
| Principal balance of loans                               |   | $                        | 4,613  |               | $      | 5,267               |   | $                  | 1,382  |   | $ | 2,137 |   |
| Principal balance of loans 90 days or more past due*(1)* |   | 165                      |   | 254                |   | 68                  |   | 72                 |   |
|                                                          |        |                          |        |                    |        |                     |        |                    |        |  |  |  |  |

 

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*(1)**      **Manufactured housing pastdue loans include repossessed inventory.*

 

## **Balances and Changes in Retained Interests**

The activity in the recorded liability formanufactured housing securitizations and sales is summarized as follows:

 
|                                      |   | **At and for the  Quarter Ended  September 30,** |   | **At and for the  Nine Months Ended  September 30,** |   |
|-------------------------------------------|--------|--------------------------------------------------|--------|------------------------------------------------------|--------|
| ***(In millions)***                       |   | **2002**                                         |   | **2001**                                             |   | **2002** |   | **2001** |   |
| **Liability for Recourse Exposure**       |   |                                             |   |                                                 |   |   |   |   |   |
| Balance at beginning of period            |   | $                                                | 343    |                                                 | $      | 87 |   | $ | 467 |   | $ | 131 |   |
| Letter of credit draws and other charges  |   | (30                                              | )      | (28                                                  | )      | (153 | ) | (102 | ) |
| Change in valuation of retained interests |   | 41                                               |   | 11                                                   |   | 40 |   | 41 |   |
| Balance at end of period                  |   | $                                                | 354    |                                                 | $      | 70 |   | $ | 354 |   | $ | 70 |   |

 

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Theassets recognized as retained interests in securitizations includeinterest-only strips, transferor interests and subordinated certificates. Theactivity in retained interests in securitizations is summarized as follows:

 
|                                      |   | **At and for the Quarter Ended  September 30,** |   | **At and for the Nine Months  Ended  September 30,** |   |
|-------------------------------------------|--------|-------------------------------------------------|--------|------------------------------------------------------|--------|
|                                      |   | **2002**                                        |   | **2001**                                             |   | **2002** |   | **2001** |   | **2002** |   | **2001** |   | **2002** |   | **2001** |   |
| ***(In millions)***                       |   | **Manufactured  Housing**                       |   | **Mortgage**                                         |   | **Manufactured  Housing** |   | **Mortgage** |   |
| **Retained Interests in Securitizations** |   |                                            |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at beginning of period            |   | $                                               | — |                                                 | $      | 55 |   | $ | 106 |   | $ | 135 |   | $ | 1 |   | $ | 46 |   | $ | 130 |   | $ | 113 |   |
| Additions from securitizations            |   | —                                          |   | —                                               |   | 1 |   | 2 |   | — |   | 13 |   | 8 |   | 17 |   |
| Interest and other income                 |   | —                                          |   | 6                                                    |   | 2 |   | 6 |   | 2 |   | 10 |   | 13 |   | 18 |   |
| Cash received                             |   | —                                          |   | (4                                                   | )      | (5 | ) | (7 | ) | (3 | ) | (14 | ) | (34 | ) | (20 | ) |
| Change in valuation                       |   | —                                          |   | (2                                                   | )      | — |   | — |   | — |   | (4 | ) | (7 | ) | — |   |
| Change in unrealized gain                 |   | —                                          |   | 3                                                    |   | 3 |   | (6 | ) | — |   | 7 |   | (3 | ) | 2 |   |
| Balance at end of period                  |   | $                                               | — |                                                 | $      | 58 |   | $ | 107 |   | $ | 130 |   | $ | — |   | $ | 58 |   | $ | 107 |   | $ | 130 |   |

 

On a quarterly basis, GreenPoint reviewsretained interests for impairment based on management’s best estimate of thefair value of future cash flows associated with the retained interests.GreenPoint also reviews the adequacy of the value of the recorded liability ona quarterly basis, based on management’s best estimate of future cash flowsassociated with the corporate guarantee.

 

**Valuation Assumptions**

There were no newsecuritizations recorded during the quarter ended September 30, 2002. The keyeconomic assumptions used in estimating the fair value of the entire portfolioof retained interests at September 30, 2002 and December 31, 2001 were asfollows:

 
|                                  |   | **Estimate of Fair Value at** |   |
|---------------------------------------|--------|-------------------------------|--------|
|                                  |   | **Sept. 30,  2002**           |   | **Dec. 31,  2001** |   | **Sept. 30,  2002** |   | **Dec. 31,  2001** |   |
|                                  |   | **Manufactured  Housing**     |   | **Mortgage** |   |
| Weighted average life (in years)      |   | 4.9                           |   | 3.6 |   | 1.0 |   | 1.1 |   |
| Weighted average prepayment rate*(1)* |   | 8.1                           | %      | 13.4 | % | 53.6 | % | 49.1 | % |
| Weighted average default rate         |   | 6.5                           | %      | 8.3 | % | N/A |   | N/A |   |
| Loss severity rate                    |   | 85.0                          | %      | 85.0 | % | N/A |   | N/A |   |
| Weighted average loss rate            |   | 5.6                           | %      | 7.0 | % | 2.3 | % | 1.2 | % |
| Asset cash flows discounted at        |   | —                        |   | 14.0 | % | 9.6 | % | 12.4 | % |
| Liability cash flows discounted at    |   | 6.6                           | %      | 6.6 | % | — |   | — |   |

 

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*(1)  Excludes weightedaverage default rate*

 

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**Servicing Assets**

On a quarterly basis, GreenPoint reviewscapitalized servicing rights for impairment. This review is performed based onrisk strata, which are determined on a disaggregated basis given thepredominant risk characteristics of the underlying loans. For manufacturedhousing loans, the predominant risk characteristics are loan type and interestrate type. For mortgage loans, the predominant risk characteristics are loantype and interest rate.

 

The activity in servicing assets issummarized as follows:

 
|                                           |   | **At and for the Quarter Ended  September 30,** |   | **At and for the Nine Months  Ended  September 30,** |   |
|------------------------------------------------|--------|-------------------------------------------------|--------|------------------------------------------------------|--------|
|                                           |   | **2002**                                        |   | **2001**                                             |   | **2002** |   | **2001** |   | **2002** |   | **2001** |   | **2002** |   | **2001** |   |
| ***(In millions)***                            |   | **Manufactured  Housing**                       |   | **Mortgage**                                         |   | **Manufactured  Housing** |   | **Mortgage** |   |
| **Servicing Assets**                           |   |                                            |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at beginning of period                 |   | $                                               | 115    |                                                 | $      | 134 |   | $ | 90 |   | $ | 78 |   | $ | 127 |   | $ | 142 |   | $ | 86 |   | $ | 60 |   |
| Additions                                      |   | —                                          |   | —                                               |   | 17 |   | 19 |   | 3 |   | 5 |   | 44 |   | 50 |   |
| Sales                                          |   | —                                          |   | —                                               |   | — |   | (10 | ) | — |   | — |   | (8 | ) | (12 | ) |
| Amortization                                   |   | (8                                              | )      | (6                                                   | )      | (8 | ) | (7 | ) | (23 | ) | (19 | ) | (23 | ) | (18 | ) |
| Balance at end of period                       |   | 107                                             |   | 128                                                  |   | 99 |   | 80 |   | 107 |   | 128 |   | 99 |   | 80 |   |
| **Reserve for impairment of servicing assets** |   |                                            |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at beginning of period                 |   | (70                                             | )      | —                                               |   | (23 | ) | (9 | ) | (67 | ) | — |   | (23 | ) | (5 | ) |
| Recoveries (additions)                         |   | 10                                              |   | —                                               |   | (4 | ) | (4 | ) | 7 |   | — |   | (4 | ) | (8 | ) |
| Balance at end of period                       |   | (60                                             | )      | —                                               |   | (27 | ) | (13 | ) | (60 | ) | — |   | (27 | ) | (13 | ) |
| **Servicing assets, net**                      |   | $                                               | 47     |                                                 | $      | 128 |   | $ | 72 |   | $ | 67 |   | $ | 47 |   | $ | 128 |   | $ | 72 |   | $ | 67 |   |

 

During the quarter ended September 30,2002, GreenPoint recognized a recovery of $10 million from its manufacturedhousing servicing asset in conjunction with slower prepayment assumptions andan agreement to restructure its credit enhancement and servicing arrangementswith a surety provider.

 

The estimated fair values of manufacturedhousing servicing assets were $54 million and $60 million at September 30, 2002and December 31, 2001, respectively.

 

The estimated fair values of mortgageservicing assets were $78 million and $66 million at September 30, 2002 andDecember 31, 2001, respectively.

 

The significant assumptions used inestimating the fair value of the servicing assets at September 30, 2002 andDecember 31, 2001 were as follows:

 
|                             |   | **Sept. 30,  2002**       |   | **Dec. 31,  2001** |   | **Sept. 30,  2002** |   | **Dec. 31,  2001** |   |
|----------------------------------|--------|---------------------------|--------|--------------------|--------|---------------------|--------|--------------------|--------|
|                             |   | **Manufactured  Housing** |   | **Mortgage**       |   |
| Weighted average prepayment rate |   | 7.7                       | %*(1)* | 13.5               | %*(1)* | 29.3                | %*(2)* | 31.4               | %*(2)* |
| Weighted average life (in years) |   | 5.1                       |   | 3.7                |   | 4.0                 |   | 3.1                |   |
| Weighted average default rate    |   | 5.3                       | %      | 6.0                | %      | N/A                 |   | N/A                |   |
| Cash flows discounted at         |   | 14.0                      | %      | 14.0               | %      | 10.2                | %      | 10.0               | %      |
|                                  |        |                           |        |                    |        |                     |        |                    |        |  |

 

----

*(1)  Excludesweighted average default rate.*

*(2)  Includesweighted average default rate.*

 

14

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**5.****                   ****Derivative Financial Instruments**

 

GreenPoint enters into mandatorycommitments to deliver mortgage whole loans to various investors and to issueprivate securities and Fannie Mae and Freddie Mac securities (“forward deliverycommitments”). The forward delivery commitments are used to manage the interestrate risk associated with mortgage loans and interest rate lock commitmentsmade by GreenPoint to mortgage borrowers. The notional amounts of thesecontracts were $2.3 billion and $1.1 billion at September 30, 2002 and December31, 2001, respectively. The forward delivery commitments designated as fairvalue accounting hedges associated with mortgage loans had notional values of$1.0 billion and $802 million at September 30, 2002 and December 31, 2001, respectively.The notional amounts of forward delivery commitments used to manage theinterest rate risk associated with interest rate lock commitments were $1.3billion and $249 million at September 30, 2002 and December 31, 2001,respectively. There was no hedge ineffectiveness for the nine months endedSeptember 30, 2002. The amount of hedge ineffectiveness for the nine monthsended September 30, 2001 was a gain of $0.3 million and is included in gain onsale of loans.

 

The notional amounts of derivatives do notrepresent amounts exchanged by the parties and, thus, are not a measure of theCompany’s exposure through its use of derivatives. The amounts exchanged aredetermined by reference to the notional amounts and the other terms of thederivatives.

 

The risks inherent in derivatives are thepotential inability of a counterparty to meet the terms of its contract and therisk associated with changes in the fair values of the contracts due tomovements in the underlying interest rates. The current credit exposure ofderivatives is represented by the fair value of contracts with a positive fairvalue at the reporting date. To reduce credit risk, management may deem itnecessary to obtain collateral.

 

**6.****                   ****Stock Incentive Plan**

 

For the nine months ended September 30,2002, the Company granted options to purchase 1,354,800 shares of the Company’scommon stock to certain officers, at an exercise price of $43.58. These awardsvest at various intervals over three years, on the anniversary dates of theawards.

 

**7.****                   ****Adoption of SFAS 142 –Goodwill Amortization**

 

Thefollowing table reflects our results adjusted as though we had adopted SFAS 142on January 1, 2001:

 
|                                                   |   | **Quarter Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|--------------------------------------------------------|--------|----------------------------------|--------|--------------------------------------|--------|
| ***(In millions,  except per share amounts)***         |   | **2002**                         |   | **2001**                             |   | **2002** |   | **2001** |   |
| Net income from continuing operations as  reported     |   | $                                | 126.5  |                                 | $      | 112.8 |   | $ | 369.6 |   | $ | 294.0 |   |
| Goodwill amortization                                  |   | —                           |   | 11.3                                 |   | — |   | 33.9 |   |
| Tax effect at effective tax rate                       |   | —                           |   | (4.3                                 | )      | — |   | (13.1 | ) |
| **Net income from continuing  operations as adjusted** |   | $                                | 126.5  |                                 | $      | 119.8 |   | $ | 369.6 |   | $ | 314.8 |   |
| **Basic earnings per share:**                          |   |                             |   |                                 |   |   |   |   |   |
| Net income from continuing operations as  reported     |   | $                                | 1.44   |                                 | $      | 1.26 |   | $ | 4.18 |   | $ | 3.31 |   |
| Net income from continuing operations as  adjusted     |   | $                                | 1.44   |                                 | $      | 1.34 |   | $ | 4.18 |   | $ | 3.54 |   |
| **Diluted earnings per share:**                        |   |                             |   |                                 |   |   |   |   |   |
| Net income from continuing operations as  reported     |   | $                                | 1.41   |                                 | $      | 1.23 |   | $ | 4.07 |   | $ | 3.22 |   |
| Net income from continuing operations as  adjusted     |   | $                                | 1.41   |                                 | $      | 1.30 |   | $ | 4.07 |   | $ | 3.45 |   |

 

15

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**8.****                   ****Discontinued Operations**

 

The assets and liabilities fromdiscontinued operations at September 30, 2002 and December 31, 2001 were asfollows:

 
| ***(In millions)***                       |   | **Sept. 30,  2002** |       | **Dec. 31,  2001** |       |
|-------------------------------------------|--------|---------------------|------------|--------------------|------------|
| **Assets:**                               |   |                | ** ** |               | ** ** |
| Loans receivable held for sale            |   | $                   | —     |               | $          | 705 |   |
| Retained interests in securitizations     |   | —              |       | 1                  |       |
| Loans receivable held for investment, net |   | 41                  |       | 44                 |       |
| Servicing assets, net                     |   | 47                  |       | 60                 |       |
| Other assets                              |   | 434                 |       | 268                |       |
| Total assets                              |   | $                   | 522        |               | $          | 1,078 |   |
| Liabilities:                              |   |                |       |               |       |
| Liability under recourse exposure         |   | $                   | 354        |               | $          | 467 |   |
| Other liabilities and allocated capital   |   | 168                 |       | 611                |       |
| Total  liabilities and equity             |   | $                   | 522        |               | $          | 1,078 |   |

 

The third quarter financial results includethe impact of an agreement to restructure the credit enhancement and servicingarrangements with a surety provider. Under the terms of the agreement,GreenPoint agreed to issue additional letters of credit totaling $52 million infavor of the surety provider on four of its outstanding securitizations.Additionally, GreenPoint agreed to exercise its optional termination right andretire each transaction insured by the surety provider when the underlyingloans in each securitization total 10% of the original loan balance. Theexercise of this option is a standard and expected operating procedure in thesecuritization markets, and its projected financial statement impact isincluded in the projected operating results of the discontinued business. Inexchange, the surety provider agreed to amend servicer termination provisions,which, prior to their amendment, would have enabled the surety provider totransfer the servicing of certain loans to a third party.

 

Consistent with this agreement, anadditional liability under recourse exposure was recorded to recognize theadditional draws that could arise from the new letters of credit. The balancesand corresponding liability relating to manufactured housing securitizationsincluded in Note 4 include the impact of the agreement. Additionally, theservicing asset valuation and the projected operating results have beenadjusted to reflect the amended servicing termination provisions.

 

Net loss from discontinued operations forthe quarter was $0.2 million and net income for the nine months ended September30, 2002 was $1.5 million. The third quarter results included the net impact ofthe agreement described above and the positive impact of better than expectedperformance in the securitized portfolio.

 

During the quarter and nine months endedSeptember 30, 2002, GreenPoint originated manufactured housing loans totaling$2 million and $106 million respectively. These loans related to commitmentsoutstanding at December 31, 2001 and were recorded at their estimated fairvalue. These loans were sold during the third quarter at a sales price whichapproximated their previously estimated fair value.

 

16

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**9.****                   ****Business Segments**

 

TheCompany consists of three domestic business segments offering unique productsand services. The Mortgage Banking segment specializes in Alt A and NoDocmortgage loan products which are primarily obtained from the Company’s networkof registered mortgage brokers. The Consumer Banking segment consists of 75full service banking offices offering a variety of financial services to theGreater New York City area. The Balance Sheet Management segment includesearnings from the held for investment mortgage portfolios and other corporateinvestment and funding activities.

 

Thesegment disclosure also combines the Balance Sheet Management segment and theConsumer Banking segment into a subtotal. The subtotal, defined as the totalbanking franchise, represents the results of the Company’s traditional bankingoperations as distinguished from its mortgage banking operations.

 

Theaccounting policies of the segments are the same as described in Note 1“Summary of Significant Accounting Policies.” The Company evaluates theperformance of its business segments based on income before income taxes.Expenses under the direct control of each business segment and the expense ofpremises and equipment incurred to support business operations are allocatedaccordingly, by segment. Provision for loan losses are charged to the BalanceSheet Management segment in an amount equal to net charge-offs. The expensesrelating to administrative units of the Company such as executive, finance andaudit are not allocated to individual operating segments.

 
|                               |   | **Quarter Ended September  30, 2002** |   |
|------------------------------------|--------|---------------------------------------|--------|
| ***(In millions)***                |   | **Balance  Sheet  Management**        |   | **Consumer  Banking** |   | **Sub-total  Banking** |   | **Mortgage  Banking** |   | **Segment  Totals** |   | **Other** |   | **Consolidated  Continuing  Operations** |   |
| Net interest income                |   | $                                     | 77.0   |   | $ | 59.4 |   | $ | 136.4 |   | $ | 54.5 |   | $ | 190.9 |   | $ | — |   | $ | 190.9 |   |
| Loan servicing fees                |   | —                                |   | — |   | — |   | 7.4 |   | 7.4 |   | (7.8 | ) | (0.4 | ) |
| Other fees and commissions         |   | 1.7                                   |   | 15.6 |   | 17.3 |   | 0.2 |   | 17.5 |   | — |   | 17.5 |   |
| Net gain on sale of loans          |   | —                                |   | — |   | — |   | 97.7 |   | 97.7 |   | (8.5 | ) | 89.2 |   |
| Segment income (loss) before taxes |   | 81.5                                  |   | 44.3 |   | 125.8 |   | 91.4 |   | 217.2 |   | (18.3 | ) | 198.9 |   |
| Non-cash items:                    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                       |   | —                                |   | 2.2 |   | 2.2 |   | 3.1 |   | 5.3 |   | 1.6 |   | 6.9 |   |
| ESOP and stock plans expense       |   | —                                |   | 1.3 |   | 1.3 |   | 4.4 |   | 5.7 |   | 0.6 |   | 6.3 |   |
| Total Assets                       |   | $                                     | 14,947 |   | $ | 485 |   | $ | 15,432 |   | $ | 6,767 |   | $ | 22,199 |   | $ | 383 |   | $ | 22,582 |   |

 

 
|                               |   | **Quarter Ended September  30, 2001** |   |
|------------------------------------|--------|---------------------------------------|--------|
| ***(In millions)***                |   | **Balance  Sheet  Management**        |   | **Consumer  Banking** |   | **Sub-total  Banking** |   | **Mortgage  Banking** |   | **Segment  Totals** |   | **Other** |   | **Consolidated  Continuing  Operations** |   |
| Net interest income                |   | $                                     | 85.0   |   | $ | 47.6 |   | $ | 132.6 |   | $ | 32.8 |   | $ | 165.4 |   | $ | — |   | $ | 165.4 |   |
| Loan servicing fees                |   | —                                |   | — |   | — |   | 3.3 |   | 3.3 |   | (0.1 | ) | 3.2 |   |
| Other fees and commissions         |   | 2.0                                   |   | 11.6 |   | 13.6 |   | (2.5 | ) | 11.1 |   | — |   | 11.1 |   |
| Net gain on sale of loans          |   | —                                |   | — |   | — |   | 137.9 |   | 137.9 |   | (24.6 | ) | 113.3 |   |
| Segment income (loss) before taxes |   | 89.0                                  |   | 22.0 |   | 111.0 |   | 113.5 |   | 224.5 |   | (41.3 | ) | 183.2 |   |
| Non-cash items:                    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                       |   | —                                |   | 2.2 |   | 2.2 |   | 3.4 |   | 5.6 |   | 1.6 |   | 7.2 |   |
| Goodwill amortization              |   | —                                |   | 11.2 |   | 11.2 |   | 0.1 |   | 11.3 |   | — |   | 11.3 |   |
| ESOP and stock plans expense       |   | —                                |   | 0.9 |   | 0.9 |   | 2.7 |   | 3.6 |   | 1.6 |   | 5.2 |   |
| Total Assets                       |   | $                                     | 13,765 |   | $ | 496 |   | $ | 14,261 |   | $ | 3,978 |   | $ | 18,239 |   | $ | 1,758 |   | $ | 19,997 |   |

 

17

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|                               |   | **Nine Months Ended  September 30, 2002** |   |
|------------------------------------|--------|-------------------------------------------|--------|
| ***(In millions)***                |   | **Balance  Sheet  Management**            |   | **Consumer  Banking** |   | **Sub-total  Banking** |   | **Mortgage  Banking** |   | **Segment  Totals** |   | **Other** |   | **Consolidated  Continuing  Operations** |   |
| Net interest income                |   | $                                         | 244.3  |   | $ | 177.8 |   | $ | 422.1 |   | $ | 139.3 |   | $ | 561.4 |   | $ | — |   | $ | 561.4 |   |
| Loan servicing fees                |   | —                                    |   | — |   | — |   | 18.2 |   | 18.2 |   | (7.5 | ) | 10.7 |   |
| Other fees and commissions         |   | 4.8                                       |   | 43.1 |   | 47.9 |   | 0.6 |   | 48.5 |   | — |   | 48.5 |   |
| Net gain on sale of loans          |   | —                                    |   | — |   | — |   | 299.5 |   | 299.5 |   | (34.3 | ) | 265.2 |   |
| Segment income (loss) before taxes |   | 257.2                                     |   | 133.1 |   | 390.3 |   | 277.9 |   | 668.2 |   | (84.0 | ) | 584.2 |   |
| Non-cash items:                    |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                       |   | —                                    |   | 6.8 |   | 6.8 |   | 10.0 |   | 16.8 |   | 4.3 |   | 21.1 |   |
| ESOP and stock plans expense       |   | —                                    |   | 3.5 |   | 3.5 |   | 11.4 |   | 14.9 |   | 4.4 |   | 19.3 |   |
| Total Assets                       |   | $                                         | 14,947 |   | $ | 485 |   | $ | 15,432 |   | $ | 6,767 |   | $ | 22,199 |   | $ | 383 |   | $ | 22,582 |   |

 

 
|                               |   | **Nine Months Ended  September 30, 2001** |   |
|------------------------------------|--------|-------------------------------------------|--------|
| ***(In millions)***                |   | **Balance  Sheet  Management**            |   | **Consumer  Banking** |   | **Sub-total  Banking** |   | **Mortgage  Banking** |   | **Segment  Totals** |   | **Other** |   | **Consolidated  Continuing  Operations** |   |
| Net interest income                |   | $                                         | 222.7  |   | $ | 150.6 |   | $ | 373.3 |   | $ | 72.0 |   | $ | 445.3 |   | $ | — |   | $ | 445.3 |   |
| Loan servicing fees                |   | —                                    |   | — |   | — |   | 9.3 |   | 9.3 |   | 0.4 |   | 9.7 |   |
| Other fees and commissions         |   | 3.9                                       |   | 33.3 |   | 37.2 |   | (3.1 | ) | 34.1 |   | — |   | 34.1 |   |
| Net gain on sale of loans          |   | —                                    |   | — |   | — |   | 338.7 |   | 338.7 |   | (52.4 | ) | 286.3 |   |
| Segment income (loss) before taxes |   | 239.0                                     |   | 76.9 |   | 315.9 |   | 271.4 |   | 587.3 |   | (106.9 | ) | 480.4 |   |
| Non-cash items:                    |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                       |   | —                                    |   | 6.8 |   | 6.8 |   | 10.7 |   | 17.5 |   | 4.6 |   | 22.1 |   |
| Goodwill amortization              |   | —                                    |   | 33.8 |   | 33.8 |   | 0.1 |   | 33.9 |   | — |   | 33.9 |   |
| ESOP and stock plans expense       |   | —                                    |   | 2.7 |   | 2.7 |   | 7.6 |   | 10.3 |   | 4.1 |   | 14.4 |   |
| Total Assets                       |   | $                                         | 13,765 |   | $ | 496 |   | $ | 14,261 |   | $ | 3,978 |   | $ | 18,239 |   | $ | 1,758 |   | $ | 19,997 |   |

 

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*(1)**      **Balance sheet managementlargely consists of the mortgage portfolio, MBS and investment securities.*

*(2)**      **Consumer Banking segmentexcludes intercompany funds transfers. Intersegment assets and liabilitieseliminated for consolidation purposes were $11.4 billion and $10.7 billion forthe nine months ended September 30, 2002 and 2001, respectively.*

*(3)**      **Other includesintercompany eliminations and unallocated administrative expenses.*

*(4)**      **Total assets includeassets of discontinued business segment, which is included in the other column.*

*(5)**      **Intersegment revenues, inthe mortgage banking segment, for the quarter and nine months ended September30, 2002 were $16.3 million and $41.8 million. Intersegment revenues, in themortgage banking segment, for the quarter and nine months ended September 30,2001 were $24.7 million and $52.0 million.*

 

**10.****            ****Stock Repurchase Program**

 

OnSeptember 24, 2002, the Company’s Board of Directors authorized a new sharerepurchase program of up to 5%, or approximately five million, of itsoutstanding shares. The repurchase will be at the Company’s discretion, basedon ongoing assessments of the capital needs of the business and the marketvaluation of its stock.

 

TheCompany’s previous share repurchase program was completed during the thirdquarter. Under this program, the Company repurchased 5 million shares, at acost of approximately $216 million. The repurchased shares are being heldin treasury.

 

Sharesrepurchased and cost for the quarter and nine months ended September 30, 2002is summarized as follows:

 
|                                              |   | **Quarter Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|---------------------------------------------------|--------|----------------------------------|--------|--------------------------------------|--------|
| ***(Shares in  thousands, dollars in millions)*** |   | **2002**                         |   | **2001**                             |   | **2002** |   | **2001** |   |
|                                              |   |                             |   |                                 |   |   |   |   |   |
| Number of shares repurchased                      |   | 1,530                            |   | 437                                  |   | 3,301 |   | 769 |   |
| Cost of repurchases                               |   | $                                | 72     |                                 | $      | 15 |   | $ | 157 |   | $ | 27 |   |
|                                                   |        |                                  |        |                                      |        |  |  |  |  |  |  |  |  |

 

18

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**11.****            ****Earnings Per Share**

 
|                                                                                                                 |   | **Quarter Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|----------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|--------------------------------------|--------|
| ***(In millions,  except per share amounts)***                                                                       |   | **2002**                         |   | **2001**                             |   | **2002** |   | **2001** |   |
|                                                                                                                 |   |                             |   |                                 |   |   |   |   |   |
| Net income from continuing operations                                                                                |   | $                                | 126.5  |                                 | $      | 112.8 |   | $ | 369.6 |   | $ | 294.0 |   |
| Net income (loss) from discontinued operations                                                                       |   | (0.2                             | )      | (9.6                                 | )      | 1.5 |   | (26.5 | ) |
| Net income                                                                                                           |   | $                                | 126.3  |                                 | $      | 103.2 |   | $ | 371.1 |   | $ | 267.5 |   |
|                                                                                                                 |   |                             |   |                                 |   |   |   |   |   |
| Weighted average number of common shares  outstanding during each period – basic                                |   | 87.9                             |   | 89.5                                 |   | 88.4 |   | 89.0 |   |
| Effect of dilutive securities – stock options                                                                   |   | 2.0                              |   | 2.4                                  |   | 2.3 |   | 2.2 |   |
| Weighted average number of common shares and  common stock equivalents outstanding during each period – diluted |   | 89.9                             |   | 91.9                                 |   | 90.7 |   | 91.2 |   |
|                                                                                                                 |   |                             |   |                                 |   |   |   |   |   |
| **Basic earnings per share:**                                                                                        |   |                             |   |                                 |   |   |   |   |   |
| Net income from continuing operations                                                                                |   | $                                | 1.44   |                                 | $      | 1.26 |   | $ | 4.18 |   | $ | 3.31 |   |
| Net income (loss) from discontinued operations                                                                       |   | —                           |   | (0.11                                | )      | 0.02 |   | (0.30 | ) |
| Net income                                                                                                           |   | $                                | 1.44   |                                 | $      | 1.15 |   | $ | 4.20 |   | $ | 3.01 |   |
|                                                                                                                 |   |                             |   |                                 |   |   |   |   |   |
| **Diluted earnings per share:**                                                                                      |   |                             |   |                                 |   |   |   |   |   |
| Net income from continuing operations                                                                                |   | $                                | 1.41   |                                 | $      | 1.23 |   | $ | 4.07 |   | $ | 3.22 |   |
| Net income (loss) from discontinued operations                                                                       |   | —                           |   | (0.11                                | )      | 0.02 |   | (0.29 | ) |
| Net income                                                                                                           |   | $                                | 1.41   |                                 | $      | 1.12 |   | $ | 4.09 |   | $ | 2.93 |   |

 

19

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**GREENPOINTFINANCIAL CORP. AND SUBSIDIARIES**

**Item 2 –Management’s Discussion and Analysis of****Financial Condition and Results of Operations**

 
|                                                                                       |   | **Quarter Ended**   |   | **Nine Months Ended** |   |
|--------------------------------------------------------------------------------------------|--------|---------------------|--------|-----------------------|--------|
| ***(Dollars in millions, except per share  data)***                                        |   | **Sept. 30,  2002** |   | **June 30,  2002**    |   | **March 31,  2002** |   | **Dec. 31,  2001** |   | **Sept. 30,  2001** |   | **September 30,** |   |
| **2002**                                                                                   |   | **2001**            |
| **Performance Ratios – Continuing Operations  (Annualized):**                         |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Return on average assets                                                                   |   | 2.38                | %      | 2.45                  | %      | 2.51 | % | 2.40 | % | 2.46 | % | 2.44 | % | 2.34 | % |
| Return on average equity                                                                   |   | 27.32               |   | 27.53                 |   | 27.50 |   | 20.68 |   | 20.19 |   | 27.44 |   | 18.21 |   |
| Net interest margin                                                                        |   | 3.85                |   | 4.06                  |   | 4.03 |   | 4.03 |   | 3.97 |   | 3.98 |   | 3.91 |   |
| Net interest spread                                                                        |   | 3.72                |   | 3.91                  |   | 3.88 |   | 3.73 |   | 3.68 |   | 3.83 |   | 3.59 |   |
| Operating expense to average assets                                                        |   | 1.91                |   | 2.05                  |   | 2.10 |   | 2.34 |   | 2.22 |   | 2.02 |   | 2.19 |   |
| Total non-interest expense to operating revenue                                            |   | 23.2                |   | 23.5                  |   | 23.3 |   | 27.5 |   | 24.3 |   | 23.3 |   | 24.2 |   |
| Efficiency ratio*(1)*                                                                      |   | 33.8                |   | 34.6                  |   | 34.5 |   | 38.0 |   | 34.3 |   | 34.3 |   | 34.8 |   |
| Average interest-earning assets to average  interest-bearing liabilities                   |   | 1.05                | x      | 1.06                  | x      | 1.05 | x | 1.09 | X | 1.07 | x | 1.05 | x | 1.08 | x |
|                                                                                       |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| **Per Share Data:**                                                                        |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per share - continuing operations                                           |   | $                   | 1.44   |                  | $      | 1.39 |   | $ | 1.36 |   | $ | 1.30 |   | $ | 1.26 |   | $ | 4.18 |   | $ | 3.31 |   |
| Diluted earnings per share - continuing  operations                                        |   | 1.41                |   | 1.35                  |   | 1.32 |   | 1.28 |   | 1.23 |   | 4.07 |   | 3.22 |   |
| Book value per common share                                                                |   | 21.35               |   | 20.45                 |   | 19.15 |   | 18.39 |   | 25.11 |   | N/A |   | N/A |   |
| Tangible book value per common share                                                       |   | 16.94               |   | 16.09                 |   | 14.82 |   | 14.00 |   | 16.33 |   | N/A |   | N/A |   |
| Dividends per share                                                                        |   | 0.25                |   | 0.25                  |   | 0.25 |   | 0.25 |   | 0.25 |   | 0.75 |   | 0.75 |   |
| Shares used in calculations (in thousands):                                                |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Average*(2)*                                                                               |   | 89,905              |   | 90,968                |   | 91,346 |   | 90,292 |   | 91,892 |   | 90,733 |   | 91,206 |   |
| Period-end*(3)*                                                                            |   | 89,415              |   | 90,609                |   | 91,372 |   | 90,108 |   | 91,755 |   | N/A |   | N/A |   |
| Total                                                                                      |   | 98,362              |   | 99,402                |   | 100,119 |   | 99,762 |   | 101,031 |   | N/A |   | N/A |   |
|                                                                                       |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| **Asset Quality Ratios - continuing operations:**                                          |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Non-accruing loans held for investment to  mortgage loans held for investment              |   | 1.57                | %      | 1.60                  | %      | 1.67 | % | 1.72 | % | 1.70 | % |   |   |   |   |
| Non-accruing loans held for sale to mortgage  loans held for sale                          |   | 0.99                |   | 0.95                  |   | 0.78 |   | 0.73 |   | 0.55 |   |   |   |   |   |
| Non-performing assets to total assets                                                      |   | 1.02                |   | 1.02                  |   | 0.98 |   | 1.06 |   | 0.97 |   |   |   |   |   |
| Allowance for loan losses to non-performing  loans held for investment                     |   | 48.4                |   | 47.5                  |   | 45.5 |   | 43.5 |   | 54.0 |   |   |   |   |   |
| Allowance for loan losses to mortgage loans held  for investment                           |   | 0.76                |   | 0.76                  |   | 0.76 |   | 0.75 |   | 0.92 |   |   |   |   |   |
| Net loan charge-off experience (annualized) to  average mortgage loans held for investment |   | 0.02                |   | 0.01                  |   | 0.02 |   | 0.05 |   | 0.04 |   | 0.02 |   | 0.03 |   |
| Ratio of allowance for loan losses (annualized)  to net charge-offs                        |   | 42.8                | x      | 57.3                  | x      | 43.1 | x | 16.0 | x | 25.7 | x | 46.9 | x | 30.5 | x |
|                                                                                       |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| **Capital Data:**                                                                          |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Tier I Capital (to risk weighted assets)                                                   |   | 11.66               | %      | 12.07                 | %      | 11.42 | % | 10.10 | % | 9.79 | % |   |   |   |   |
| Total Risk Based Capital (to risk weighted  assets)                                        |   | 13.25               |   | 13.77                 |   | 13.09 |   | 11.72 |   | 11.36 |   |   |   |   |   |
| Tier I Capital to average assets                                                           |   | 7.86                |   | 8.05                  |   | 7.82 |   | 7.23 |   | 8.80 |   |   |   |   |   |
| Tangible equity to tangible managed assets                                                 |   | 5.68                |   | 5.90                  |   | 5.40 |   | 5.06 |   | 5.60 |   |   |   |   |   |
| Tangible equity to managed receivables                                                     |   | 7.27                |   | 7.51                  |   | 7.17 |   | 6.17 |   | 6.72 |   |   |   |   |   |
| Purchase of treasury stock                                                                 |   | $                   | 72     |                  | $      | 72 |   | $ | 13 |   | $ | 44 |   | $ | 15 |   | $ | 157 |   | $ | 27 |   |
|                                                                                       |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| **Other Data:**                                                                            |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage loan originations                                                                 |   | $                   | 9,730  |                  | $      | 7,041 |   | $ | 6,434 |   | $ | 8,428 |   | $ | 6,792 |   | $ | 23,205 |   | $ | 17,857 |   |
| Total managed assets*(4)*                                                                  |   | 26,456              |   | 24,620                |   | 25,642 |   | 25,133 |   | 26,890 |   |   |   |   |   |
| Total managed receivables*(5)*                                                             |   | 20,338              |   | 18,990                |   | 19,024 |   | 20,256 |   | 21,720 |   |   |   |   |   |
| Earnings to combined  fixed charges:*(6)*                                                  |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Excluding interest on deposits                                                             |   | 19.09               | x      | 15.92                 | x      | 16.52 | x | 16.41 | x | 15.64 | x | 17.22 | x | 13.31 | x |
| Including interest on deposits                                                             |   | 3.49                | x      | 3.28                  | x      | 3.09 | x | 2.79 | x | 2.52 | x | 3.28 | x | 2.24 | x |
| Full-service consumer bank offices                                                         |   | 75                  |   | 74                    |   | 74 |   | 74 |   | 74 |   | N/A |   | N/A |   |

 

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*(1)**      **The efficiency ratio is calculated by dividing general andadministrative expenses by the sum of net interest income and non-interestincome.*

*(2)**      **Used in the calculation of fully diluted earnings per share.*

*(3)**      **Used in the calculation of common book value and tangiblecommon book value ratios.*

*(4)**      **Managed assets are the sum of total assets and off-balancesheet managed receivables.*

*(5)**      **Managed receivables are the sum of on-balance sheet loansand off-balance sheet managed receivables.*

*(6)**      **For purposes of computing the ratio of earnings to combinedfixed charges, earnings represent net income plus applicable income taxes andfixed charges of a consolidated subsidiary. Fixed charges represent interestexpense on long-term debt and one-third (the portion deemed to berepresentative of the interest factor) of rents.*

 

20

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**1.****                   ****GENERAL**

 

GreenPoint Financial Corp. (the “Company”or “GreenPoint”) a leading national specialty housing finance company with morethan $25 billion in mortgage originations in 2001, has two principalbusinesses. GreenPoint Mortgage (“GPM”), headquartered in Novato, California,is a leading national lender in non-conforming residential mortgages,specializing in “Alternative A” (“Alt A”) mortgage loans. GreenPoint Bank (the“Bank”), a New York State chartered savings bank, is the third largest thriftdepository in the Greater New York area with $11 billion in deposits in 75branches serving more than 400,000 households.

 

**Forward Looking Statements**

 

This Quarterly Reporton Form 10-Q contains certain forward-looking statements, which are based onmanagement’s current expectations. These forward-looking statements includeinformation concerning possible or assumed future results of operations,trends, financial results and business plans, including those relating toearnings growth; revenue growth; origination volume in the Company’s mortgagebusiness; non-interest income levels, including fees from product sales; creditperformance on loans made by the Company; tangible capital generation; marginson sales or securitizations of loans; market share; expense levels; and otherbusiness operations and strategies. For these statements, GreenPoint claims theprotection of the safe harbor for forward-looking statements contained in thePrivate Securities Litigation Reform Act of 1995 to the extent provided byapplicable law. Forward-looking statements involve inherent risks anduncertainties. We caution you that a number of important factors could causeactual results to differ materially from those contained in any forward-lookingstatement. Such factors include, but are not limited to: risks anduncertainties related to acquisitions, divestitures and terminating businesssegments, including related integration and restructuring activities;prevailing economic conditions; changes in interest rates, loan demand, realestate values, and competition, which can materially affect origination levels andgain on sale results in the Company’s mortgage business; the level of defaults,losses and prepayments on loans made by the Company, whether held in portfolio,sold in the whole loan secondary markets or securitized, which can materiallyaffect required loan loss reserve levels and the Company’s periodic valuationof its retained interests from securitizations; changes in accountingprinciples, policies, and guidelines; adverse changes or conditions in capitalor financial markets, which can adversely affect the ability of the Company tosell or securitize loan originations on a timely basis or at prices which areacceptable to the Company; actions by rating agencies and the affects of theseactions on the Company’s businesses, operations and funding requirements;changes in any applicable law, rule, regulation or practice with respect to taxor legal issues; other economic, competitive, governmental, regulatory, andtechnological factors affecting the Company’s operations, pricing, products andservices; and the risk factors or other uncertainties described from time totime in the Company’s filings with the Securities and Exchange Commission,including the Risk Factors section included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2001 filed with the Securitiesand Exchange Commission on March 29, 2002. The forward-looking statements aremade as of the date of this report, and the Company assumes no obligation toupdate the forward-looking statements or to update the reasons why actualresults could differ from those projected in the forward-looking statements.

 

The Company regularlyexplores opportunities for acquisitions of and holds discussions with financialinstitutions and related businesses, and also regularly explores opportunitiesfor acquisitions of liabilities and assets of financial institutions and otherfinancial services providers. The Company routinely analyzes its lines ofbusiness and from time to time may increase, decrease or terminate one or moreactivities.

 

21

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**2.       OPERATING RESULTS – CONTINUING OPERATIONS**

 

**Overviewof third quarter 2002 financial results:**

 

•                        Net income from continuing operations forthe third quarter of 2002 was $1.41 per diluted share, or $127 million, anincrease of 15% over the third quarter of 2001. The results reflect strength inthe Company’s specialty mortgage and consumer banking business. The mortgagebanking business experienced a record level of originations as the favorable interestrate environment provided an ideal climate for continued growth. The consumerbanking business continued to experience growth in core deposits, leading to asignificant improvement in profitability, compared with the quarter and ninemonth periods of a year ago.

 

•                        Total mortgage loan originations for thethird quarter of 2002 were $9.7 billion, an increase of 43% over the $6.8billion originated during the third quarter of 2001 and 38% over the $7.0billion of the second quarter.

 

•                        Mortgage sales and securitizations totaled$6.3 billion resulting in realized gains of $89 million, compared with salesand securitizations of $5.2 billion and a gain of $113 million in thecomparative quarter a year ago.

 

•                        Net interest income from continuingoperations totaled $191 million, an increase of 15% over the $165 million inthe third quarter of 2001. The net interest margin was 3.85%, decreasing from3.97% in the third quarter of 2001.

 

•                        Core deposits grew 5% during the thirdquarter to a balance of $6.2 billion. The core deposit balance increased $1.3billion, or 27%, since the beginning of the year.

 

•                        Consumer banking fees increased 40% overthe third quarter of 2001.

 

•                        A $4 million impairment charge associatedwith the mortgage loan servicing asset was recorded as a result of increasedprepayment speeds.

 

•                        Asset quality in the mortgage portfolioremained very strong. Non-performing loans held for investment were 1.57% ofmortgage loans held for investment, compared with 1.70% at the end of the thirdquarter a year ago.

 

•                        GreenPoint continues to maintain a strongcapital position with a leverage ratio of 7.86%, a Tier 1 risk-based ratio of11.66% and a total risk-based capital ratio of 13.25% at September 30, 2002.

 

•                        The net loss from the discontinued manufacturedhousing business was $0.2 million, reflecting a performance consistent withprojections made at the time the business was discontinued.

 

22

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**BusinessSegment Results:**

•                        The Mortgage Banking business earned $91million before taxes, down from $114 million in the third quarter of 2001. Thereduction was a result of a decrease in loan sales and securitization revenuesdue to a decline in the average gain on sale margin, partially offset by anincrease in net interest income. Segment income for the nine months endedSeptember 30, 2002 increased to $278 million versus $271 million in the sameperiod a year ago, principally due to an increase in net interest income from$72 million to $139 million as a result of a higher average balance in mortgageloans held for sale. This was partially offset by a drop in loan sales andsecuritization revenues from $339 million to $300 million.

 

•                        The Consumer Banking business, whichincludes spreads earned on average deposits of $11.3 billion and consumerbanking fees, had income of $44 million and $133 million, respectively, for thequarter and nine months ended September 30, 2002, an increase of 101% and 73%,respectively over the year ago periods. The growth reflects higher core depositbalances, wider spreads earned on those balances, and higher fee income whichgrew 34% and 29% respectively, over the comparable periods of 2001. Theincrease over the year ago period was also due to the discontinuance ofgoodwill amortization of $11 million and $34 million for the quarter and ninemonths ended September 30, 2001, due to an accounting rule change that tookeffect January 1, 2002.

 

•                        The Balance Sheet Management segmentderives earnings from the spread between yields on loans and marketablesecurities, and funding costs, which are comprised of deposit balances at theirmatch-funded transfer-priced rates and wholesale funds. Net income before taxeswas $82 million and $257 million, respectively, for the quarter and nine monthsended September 30, 2002, compared with $89 million and $239 million in thesame periods a year ago.

 

•                        When combined, the Consumer Banking andBalance Sheet Management segments present a complete picture of the Company’straditional banking business. It portrays a depository institution whichincludes deposit gathering, associated fee income, and the investment of thosedeposits, and additional market borrowings. The total banking business earnedbefore taxes, $126 million and $390 million, respectively, for the quarter andnine months end September 30, 2002, compared with $111 million and $316 millionin prior comparative periods. As such, it provided more than half of pretaxincome before unallocated corporate expenses and eliminations, with the mortgage-bankingsegment providing the remainder.

 

23

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**SupplementalPerformance Measurements -****CashEarnings**

 

Cash earnings is a non-GAAP measurementthat GreenPoint defines as net income from continuing operations less non-cashcharges related to goodwill and the Employee Stock Ownership Plan (“ESOP”).These non-cash expenses, unlike other expenses incurred by the Company, do notreduce GreenPoint’s tangible capital thereby enabling the Company to increaseshareholder value through the growth of earning assets, increases in cashdividends and additional repurchases of the Company’s stock.

 
|                                              |   | **Quarter Ended**   |   | **Nine Months Ended** |   |
|---------------------------------------------------|--------|---------------------|--------|-----------------------|--------|
|                                              |   | **Sept. 30,  2002** |   | **June 30,  2002**    |   | **March 31,  2002** |   | **Dec. 30,  2001** |   | **Sept. 30,  2001** |   | **September 30,** |   |
| **2002**                                          |   | **2001**            |
| Net income from  continuing operations            |   | $                   | 127    |                  | $      | 123 |   | $ | 120 |   | $ | 115 |   | $ | 113 |   | $ | 370 |   | $ | 294 |   |
| Add back:                                         |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Goodwill amortization                             |   | —              |   | —                |   | — |   | 11 |   | 11 |   | — |   | 34 |   |
| Employee Stock  Ownership and stock plans expense |   | 6                   |   | 7                     |   | 6 |   | 5 |   | 5 |   | 19 |   | 14 |   |
| Cash earnings from  continuing operations         |   | $                   | 133    |                  | $      | 130 |   | $ | 126 |   | $ | 131 |   | $ | 129 |   | $ | 389 |   | $ | 342 |   |
|                                              |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Cash earnings per  share*(1)*                     |   | $                   | 1.48   |                  | $      | 1.43 |   | $ | 1.38 |   | $ | 1.45 |   | $ | 1.41 |   | $ | 4.29 |   | $ | 3.75 |   |
|                                              |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| **Performance Ratios (Annualized)**               |   |                |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Cash earnings return on average assets            |   | 2.50                | %      | 2.59                  | %      | 2.64 | % | 2.73 | % | 2.82 | % | 2.57 | % | 2.73 | % |
| Cash earnings return on average equity            |   | 28.67               |   | 29.11                 |   | 28.87 |   | 23.49 |   | 23.16 |   | 28.87 |   | 21.20 |   |
| Cash earnings return on tangible equity           |   | 37.43               |   | 37.75                 |   | 37.66 |   | 37.13 |   | 37.15 |   | 37.60 |   | 35.36 |   |

 

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*(1)**      **Based on the weighted average shares used to calculatediluted earnings per share.*

 

**Net Interest Income**

 

Net interest income in continuing operations,on a fully taxable-equivalent basis, increased by $24 million and $115 million,or 14% and 25%, to $193 million and $569 million for the quarter and ninemonths ended September 30, 2002. Net interest income benefited from an increasein average earning assets, while the net interest margin decreased to 3.85%from 3.97% in the comparable quarter a year ago, due primarily to a higherlevel of prepayments in the mortgage loan and mortgage-backed securityportfolios. The net interest margin for the comparable nine month periodsincreased to 3.98% from 3.91%.

 

Averageearning assets increased by $3.0 billion and $3.6 billion, or 18% and 24% to$20.1 billion in the quarter and $19.1 billion in the nine-month period from$17.1 billion and $15.5 billion a year ago. The increase from the prior yearthird quarter reflected growth in loans held for sale due to higher originationvolume, and higher investment securities. The increase in the year-to-datecomparisons also resulted from a higher average balance of mortgage loans heldfor investment. The yield on interest-earning assets and rates paid oninterest-bearing liabilities declined in both the quarterly and year-to-datecomparison due to declining market interest rates.

 

Thegrowth in average earning assets was funded in part by a substantial growth incore deposits as the average balance increased 34% over the prior years thirdquarter. For the nine month period, average core deposits was 24% higher than2001. The growth reflects the success of the Company’s checking accountpromotions and the continued expansion of products and services offered by thebanking franchise.

 

24

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**Average Consolidated BalanceSheet, Interest and Rates**

 

The following table sets forth certaininformation relating to the continuing operations of the Company’s averagestatements of financial condition (unaudited) and statements of income(unaudited) for the quarter ended September 30, 2002 and 2001, and reflects theaverage yield on assets and average cost of liabilities for the periodsindicated. Such annualized yields and costs are derived by dividing income orexpense by the average balance of assets or liabilities, respectively, for theperiods shown. Average balances are derived from average daily balances.Average balances and yields include non-accrual loans. The yields and costsinclude fees that are considered adjustments to yields. Interest and yields arepresented on a taxable-equivalent yield basis.

 
|                                                                                       |   | **Quarter Ended**      |   |
|--------------------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                                       |   | **September 30, 2002** |   | **September 30, 2001** |   |
| ***(Taxable-equivalent  interest and rates, in millions)(1)***                             |   | **Average  Balance**   |   | **Interest** |   | **Average  Yield/  Cost** |   | **Average  Balance** |   | **Interest** |   | **Average  Yield/  Cost** |   |
| **Assets:**                                                                                |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage loans held for investment*(2)*                                                    |   | $                      | 9,944  |   | $ | 181.1 |   | 7.28 | % | $ | 9,967 |   | $ | 202.5 |   | 8.13 | % |
| Other loans*(2)*                                                                           |   | 20                     |   | 0.4 |   | 8.22 |   | 22 |   | 0.5 |   | 8.46 |   |
| Loans held for sale                                                                        |   | 5,354                  |   | 85.8 |   | 6.35 |   | 3,100 |   | 61.0 |   | 7.81 |   |
| Securities*(3)*                                                                            |   | 4,531                  |   | 58.9 |   | 5.20 |   | 3,665 |   | 60.1 |   | 6.55 |   |
| Other interest-earning assets                                                              |   | 280                    |   | 5.1 |   | 7.31 |   | 335 |   | 11.9 |   | 14.07 |   |
| Total interest-earning assets                                                              |   | 20,129                 |   | 331.3 |   | 6.57 |   | 17,089 |   | 336.0 |   | 7.85 |   |
| Non-interest earning assets*(4)*                                                           |   | 1,136                  |   |   |   |   |   | 1,268 |   |   |   |   |   |
| Total assets                                                                               |   | $                      | 21,265 |   |   |   |   |   | $ | 18,357 |   |   |   |   |   |
|                                                                                       |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities and Stockholders’ Equity:**                                             |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                              |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                                                                                    |   | $                      | 1,310  |   | 4.2 |   | 1.30 |   | $ | 1,198 |   | 6.1 |   | 2.01 |   |
| Demand deposits and N.O.W.                                                                 |   | 1,558                  |   | 6.6 |   | 1.67 |   | 583 |   | 0.7 |   | 0.45 |   |
| Money market and variable rate savings                                                     |   | 3,197                  |   | 14.7 |   | 1.83 |   | 2,761 |   | 20.5 |   | 2.96 |   |
| Total core deposits                                                                        |   | 6,065                  |   | 25.5 |   | 1.68 |   | 4,542 |   | 27.3 |   | 2.38 |   |
| Term certificates of deposit                                                               |   | 5,207                  |   | 43.6 |   | 3.32 |   | 6,248 |   | 79.8 |   | 5.07 |   |
| Total deposits                                                                             |   | 11,272                 |   | 69.1 |   | 2.44 |   | 10,790 |   | 107.1 |   | 3.94 |   |
| Mortgagors’ escrow                                                                    |   | 81                     |   | 0.3 |   | 1.68 |   | 97 |   | 0.5 |   | 1.85 |   |
| Borrowed funds                                                                             |   | 7,444                  |   | 60.3 |   | 3.18 |   | 4,537 |   | 49.4 |   | 4.28 |   |
| Senior bank notes                                                                          |   | 20                     |   | 0.4 |   | 6.86 |   | 134 |   | 2.4 |   | 7.04 |   |
| Subordinated bank notes                                                                    |   | 150                    |   | 3.5 |   | 9.36 |   | 150 |   | 3.5 |   | 9.36 |   |
| Guaranteed preferred beneficial interest in Company’s junior  subordinated debentures |   | 200                    |   | 4.6 |   | 9.16 |   | 200 |   | 4.6 |   | 9.16 |   |
| Total interest-bearing liabilities                                                         |   | 19,167                 |   | 138.2 |   | 2.85 |   | 15,908 |   | 167.5 |   | 4.17 |   |
| Other liabilities*(5)*                                                                     |   | 246                    |   |   |   |   |   | 214 |   |   |   |   |   |
| Total liabilities                                                                          |   | 19,413                 |   |   |   |   |   | 16,122 |   |   |   |   |   |
| Stockholders’ equity                                                                  |   | 1,852                  |   |   |   |   |   | 2,235 |   |   |   |   |   |
| Total liabilities and stockholders’ equity                                            |   | $                      | 21,265 |   |   |   |   |   | $ | 18,357 |   |   |   |   |   |
| Net interest income/interest rate spread*(6)*                                              |   |                   |   | $ | 193.1 |   | 3.72 | % |   |   | $ | 168.5 |   | 3.68 | % |
| Net interest-earning assets/net interest  margin*(7)*                                      |   | $                      | 962    |   |   |   | 3.85 | % | $ | 1,181 |   |   |   | 3.97 | % |
| Ratio of interest-earning assets to interest-earning liabilities                           |   | 1.05                   | x      |   |   |   |   | 1.07 | x |   |   |   |   |

 

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*(1)**      **Net interest income is calculated on a taxable-equivalentbasis.*

*(2)**      **In computing the average balances and average yield onloans, non-accruing loans have been included.*

*(3)**      **The average yield does not give effect to changes in fairvalue that are reflected as a component of stockholders’ equity.*

*(4)**      **Includes goodwill, banking premises and equipment, servicingassets, deferred tax assets, accrued interest receivable, and othermiscellaneous non-interest earning assets.*

*(5)**      **Includes accrued interest payable, accounts payable andother miscellaneous non-interest bearing obligations of the Company.*

*(6)**      **Net interest rate spread represents the difference betweenthe average yield on interest-earning assets and the average cost ofinterest-bearing liabilities.*

*(7)**      **Net interest margin represents net interest income dividedby average interest-earning assets.*

 

25

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**Average Consolidated BalanceSheet, Interest and Rates**

 

The following table sets forth certaininformation relating to the continuing operations of the Company’s averagestatements of financial condition (unaudited) and statements of income(unaudited) for the nine months ended September 30, 2002 and 2001, and reflectsthe average yield on assets and average cost of liabilities for the periodsindicated. Such annualized yields and costs are derived by dividing income orexpense by the average balance of assets or liabilities, respectively, for theperiods shown. Average balances are derived from average daily balances.Average balances and yields include non-accrual loans. The yields and costsinclude fees that are considered adjustments to yields. Interest and yields arepresented on a taxable-equivalent yield basis.

 
|                                                                                       |   | **Nine Months Ended**  |   |
|--------------------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                                       |   | **September 30, 2002** |   | **September 30, 2001** |   |
| ***(Taxable-equivalent  interest and rates, in millions)****(1)*                           |   | **Average  Balance**   |   | **Interest** |   | **Average  Yield/  Cost** |   | **Average  Balance** |   | **Interest** |   | **Average  Yield/  Cost** |   |
| **Assets:**                                                                                |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage loans held for investment*(2)*                                                    |   | $                      | 10,019 |   | $ | 561.9 |   | 7.48 | % | $ | 8,991 |   | $ | 567.5 |   | 8.42 | % |
| Other loans*(2)*                                                                           |   | 20                     |   | 1.3 |   | 8.49 |   | 22 |   | 1.5 |   | 8.65 |   |
| Loans held for sale                                                                        |   | 4,355                  |   | 212.2 |   | 6.51 |   | 2,594 |   | 154.3 |   | 7.96 |   |
| Securities*(3)*                                                                            |   | 4,419                  |   | 185.6 |   | 5.60 |   | 3,484 |   | 177.6 |   | 6.80 |   |
| Other interest-earning assets                                                              |   | 291                    |   | 22.1 |   | 10.20 |   | 372 |   | 34.9 |   | 12.56 |   |
| Total interest-earning assets                                                              |   | 19,104                 |   | 983.1 |   | 6.87 |   | 15,463 |   | 935.8 |   | 8.07 |   |
| Non-interest earning assets*(4)*                                                           |   | 1,060                  |   |   |   |   |   | 1,282 |   |   |   |   |   |
| Total assets                                                                               |   | $                      | 20,164 |   |   |   |   |   | $ | 16,745 |   |   |   |   |   |
|                                                                                       |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities and Stockholders’ Equity:**                                             |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                              |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                                                                                    |   | $                      | 1,284  |   | 13.0 |   | 1.36 |   | $ | 1,207 |   | 18.2 |   | 2.01 |   |
| Demand deposits and N.O.W.                                                                 |   | 1,083                  |   | 10.4 |   | 1.28 |   | 580 |   | 2.0 |   | 0.46 |   |
| Money market and variable rate savings                                                     |   | 3,157                  |   | 44.6 |   | 1.89 |   | 2,654 |   | 63.6 |   | 3.21 |   |
| Total core deposits                                                                        |   | 5,524                  |   | 68.0 |   | 1.65 |   | 4,441 |   | 83.8 |   | 2.52 |   |
| Term certificates of deposit                                                               |   | 5,463                  |   | 152.1 |   | 3.72 |   | 6,497 |   | 265.6 |   | 5.47 |   |
| Total deposits                                                                             |   | 10,987                 |   | 220.1 |   | 2.68 |   | 10,938 |   | 349.4 |   | 4.27 |   |
| Mortgagors’ escrow                                                                    |   | 83                     |   | 1.1 |   | 1.72 |   | 97 |   | 1.3 |   | 1.82 |   |
| Borrowed funds                                                                             |   | 6,653                  |   | 163.8 |   | 3.25 |   | 2,852 |   | 100.3 |   | 4.64 |   |
| Senior bank notes                                                                          |   | 96                     |   | 4.9 |   | 6.76 |   | 134 |   | 7.1 |   | 7.04 |   |
| Subordinated bank notes                                                                    |   | 150                    |   | 10.5 |   | 9.36 |   | 150 |   | 10.5 |   | 9.36 |   |
| Guaranteed preferred beneficial interest in Company’s junior  subordinated debentures |   | 200                    |   | 13.7 |   | 9.16 |   | 200 |   | 13.7 |   | 9.16 |   |
| Total interest-bearing liabilities                                                         |   | 18,169                 |   | 414.1 |   | 3.03 |   | 14,371 |   | 482.3 |   | 4.48 |   |
| Other liabilities*(5)*                                                                     |   | 199                    |   |   |   |   |   | 221 |   |   |   |   |   |
| Total liabilities                                                                          |   | 18,368                 |   |   |   |   |   | 14,592 |   |   |   |   |   |
| Stockholders’ equity                                                                  |   | 1,796                  |   |   |   |   |   | 2,153 |   |   |   |   |   |
| Total liabilities and stockholders’ equity                                            |   | $                      | 20,164 |   |   |   |   |   | $ | 16,745 |   |   |   |   |   |
| Net interest income/interest rate spread*(6)*                                              |   |                   |   | $ | 569.0 |   | 3.83 | % |   |   | $ | 453.5 |   | 3.59 | % |
| Net interest-earning assets/net interest margin*(7)*                                       |   | $                      | 935    |   |   |   | 3.98 | % | $ | 1,092 |   |   |   | 3.91 | % |
| Ratio of interest-earning assets to interest-earning liabilities                           |   | 1.05                   |   |   |   |   |   | 1.08 | x |   |   |   |   |

 

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*(1)**      **Net interest income is calculated on a taxable-equivalentbasis.*

*(2)**      **In computing the average balances and average yield onloans, non-accruing loans have been included.*

*(3)**      **The average yield does not give effect to changes in fairvalue that are reflected as a component of stockholders’ equity.*

*(4)**      **Includes goodwill, banking premises and equipment, servicingassets, deferred tax assets, accrued interest receivable, and othermiscellaneous non-interest earning assets.*

*(5)**      **Includes accrued interest payable, accounts payable andother miscellaneous non-interest bearing obligations of the Company.*

*(6)**      **Net interest rate spread represents the difference betweenthe average yield on interest-earning assets and the average cost ofinterest-bearing liabilities.*

*(7)**      **Net interest margin represents net interest income dividedby average interest-earning assets.*

 

26

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**Rate/Volume Analysis**

 

Thefollowing table presents the effects of changes in interest rates and changesin volume of interest-earning assets and interest-bearing liabilities on theCompany’s interest income on a tax equivalent basis and interest expense duringthe periods indicated. Information is provided in each category on changes (i)attributable to changes in volume (changes in volume multiplied by prior rate),(ii) changes attributable to changes in rate (changes in rate multiplied byprior volume), and (iii) the net change. The changes attributable to thecombined impact of volume and rate have been allocated proportionately tovolume and rate.

 
|                                                                                       |   | **Quarter Ended Sept. 30,  2002  Compared to  Quarter Ended Sept. 30, 2001  Increase/(Decrease)** |   | **Nine Months Ended Sept.  30, 2002  Compared to  Nine Months Ended Sept. 30, 2001  Increase/(Decrease)** |   |
|--------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|
|                                                                                       |   | **Due to**                                                                                        |   | **Due to**                                                                                                |   |
| ***(In millions)***                                                                        |   | **Average  Volume**                                                                               |   | **Average  Rate**                                                                                         |   | **Net  Change** |   | **Average  Volume** |   | **Average  Rate** |   | **Net  Change** |   |
| Mortgage loans held for investment*(1)*                                                    |   | $                                                                                                 | (0.5   | )                                                                                                         | $      | (20.9 | ) | $ | (21.4 | ) | $ | 61.2 |   | $ | (66.8 | ) | $ | (5.6 | ) |
| Other loans*(1)*                                                                           |   | (0.1                                                                                              | )      | —                                                                                                    |   | (0.1 | ) | (0.2 | ) | — |   | (0.2 | ) |
| Loans held for sale                                                                        |   | 37.9                                                                                              |   | (13.1                                                                                                     | )      | 24.8 |   | 89.8 |   | (31.9 | ) | 57.9 |   |
| Securities                                                                                 |   | 12.6                                                                                              |   | (13.8                                                                                                     | )      | (1.2 | ) | 42.6 |   | (34.6 | ) | 8.0 |   |
| Other interest-earning assets                                                              |   | (1.7                                                                                              | )      | (5.1                                                                                                      | )      | (6.8 | ) | (6.8 | ) | (6.0 | ) | (12.8 | ) |
| Total interest earned on assets                                                            |   | 48.2                                                                                              |   | (52.9                                                                                                     | )      | (4.7 | ) | 186.6 |   | (139.3 | ) | 47.3 |   |
| Savings                                                                                    |   | 0.5                                                                                               |   | (2.4                                                                                                      | )      | (1.9 | ) | 1.1 |   | (6.3 | ) | (5.2 | ) |
| Demand deposits and N.O.W.                                                                 |   | 2.3                                                                                               |   | 3.6                                                                                                       |   | 5.9 |   | 2.8 |   | 5.6 |   | 8.4 |   |
| Money market and variable rate savings                                                     |   | 2.9                                                                                               |   | (8.7                                                                                                      | )      | (5.8 | ) | 10.5 |   | (29.5 | ) | (19.0 | ) |
| Term certificates of deposit                                                               |   | (11.8                                                                                             | )      | (24.4                                                                                                     | )      | (36.2 | ) | (37.8 | ) | (75.7 | ) | (113.5 | ) |
| Mortgagors’ escrow                                                                    |   | (0.1                                                                                              | )      | (0.1                                                                                                      | )      | (0.2 | ) | (0.2 | ) | — |   | (0.2 | ) |
| Other borrowed funds                                                                       |   | 25.9                                                                                              |   | (15.0                                                                                                     | )      | 10.9 |   | 101.0 |   | (37.5 | ) | 63.5 |   |
| Senior bank notes                                                                          |   | (1.9                                                                                              | )      | (0.1                                                                                                      | )      | (2.0 | ) | (1.9 | ) | (0.3 | ) | (2.2 | ) |
| Subordinated bank notes                                                                    |   | —                                                                                            |   | —                                                                                                    |   | — |   | — |   | — |   | — |   |
| Guaranteed preferred beneficial interest in  Company’s junior subordinated debentures |   | —                                                                                            |   | —                                                                                                    |   | — |   | — |   | — |   | — |   |
| Total interest paid on liabilities                                                         |   | 17.8                                                                                              |   | (47.1                                                                                                     | )      | (29.3 | ) | 75.5 |   | (143.7 | ) | (68.2 | ) |
| Net change in net interest income                                                          |   | $                                                                                                 | 30.4   |                                                                                                      | $      | (5.8 | ) | $ | 24.6 |   | $ | 111.1 |   | $ | 4.4 |   | $ | 115.5 |   |

 

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*(1)**      **In computing the volume and rate components of net interestincome for loans, non-accrual loans have been included.*

 

27

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**Provision for loan losses**

 

The provision for loan losses was $0.5million for the third quarter of 2002 and $1.2 million for the first ninemonths of 2002, down from $0.9 million and $2.2 million, respectively for thecomparable 2001 periods. The provision equaled net charge-offs for all periods.

 

**Non-Interest Income**

 

Thefollowing table summarizes the components of non-interest income:

 
|                                      |   | **Quarter Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|-------------------------------------------|--------|----------------------------------|--------|--------------------------------------|--------|
| ***(In millions)***                       |   | **2002**                         |   | **2001**                             |   | **2002** |   | **2001** |   |
| Income from fees and commissions:         |   |                             |   |                                 |   |   |   |   |   |
| Loan servicing fees                       |   | $                                | (0.4   | )                                    | $      | 3.2 |   | $ | 10.7 |   | $ | 9.7 |   |
| Banking services fees and commissions     |   | 15.4                             |   | 11.0                                 |   | 42.4 |   | 32.6 |   |
| Fees, commissions and other income        |   | 2.1                              |   | 0.1                                  |   | 6.1 |   | 1.5 |   |
| Total income from fees and commissions    |   | 17.1                             |   | 14.3                                 |   | 59.2 |   | 43.8 |   |
| Net gain on sales of mortgage loans       |   | 89.2                             |   | 113.3                                |   | 265.2 |   | 286.3 |   |
| Change in valuation of retained interests |   | (0.1                             | )      | (0.4                                 | )      | (7.2 | ) | (0.4 | ) |
| Net gain on securities                    |   | 3.9                              |   | 4.1                                  |   | 10.7 |   | 16.0 |   |
| Total non-interest income                 |   | $                                | 110.1  |                                 | $      | 131.3 |   | $ | 327.9 |   | $ | 345.7 |   |

 

Non-interestincome in the third quarter was $110 million, down 16% from the comparableperiod a year ago. The decline versus the year ago period was due to a smallernet gain on sale of mortgage loans. The gain on sale of loans is described infurther detail in the following paragraphs.

 

Incomefrom fees and commissions was $17 million and $59 million for the quarter andnine months ended September 30, 2002, versus $14 million and $44 million in theyear ago periods. The increase included a $4 million and $10 million increasein banking fees due to an increase in the number of checking accounts. The $4million decline in loan servicing fees for the third quarter, reflects theimpact of a $4 million servicing asset impairment recorded in the quarter.

 

28

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*Gain on sale of loans:*

 

Thefollowing table summarizes loans sold and average margins earned:

 
|                                 |   | **Quarter Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|--------------------------------------|--------|----------------------------------|--------|--------------------------------------|--------|
| ***(In millions)***                  |   | **2002**                         |   | **2001**                             |   | **2002** |   | **2001** |   |
| **Whole loan – Mortgage:**      |   |                             |   |                                 |   |   |   |   |   |
| Sales                                |   | $                                | 6,293  |                                 | $      | 5,099 |   | $ | 17,690 |   | $ | 11,938 |   |
| Gain on sale                         |   | $                                | 88     |                                 | $      | 111 |   | $ | 258 |   | $ | 270 |   |
| Average margin                       |   | 1.40                             | %      | 2.21                                 | %      | 1.46 | % | 2.27 | % |
| Average margin by product type:      |   |                             |   |                                 |   |   |   |   |   |
| Specialty products*(1)*              |   | 2.86                             | %      | 3.40                                 | %      | 2.93 | % | 3.17 | % |
| Home equity / Seconds                |   | 1.13                             | %      | 3.28                                 | %      | 1.23 | % | 3.23 | % |
| Agency / Jumbo                       |   | 0.59                             | %      | 0.75                                 | %      | 0.62 | % | 0.76 | % |
| **Securitizations – Mortgage:** |   |                             |   |                                 |   |   |   |   |   |
| Sales                                |   | $                                | 49     |                                 | $      | 60 |   | $ | 275 |   | $ | 535 |   |
| Gain on sale*(2)*                    |   | $                                | 1      |                                 | $      | 2 |   | $ | 7 |   | $ | 16 |   |
| Average margin                       |   | 2.27                             | %      | 3.07                                 | %      | 2.53 | % | 2.99 | % |

 

----

*(1)  Specialty productsincludes: Alt A, No Doc and A minus programs.*

*(2)  Includes drawsfrom prior period securitizations.*

 

Gainon sale of mortgage loans declined for the quarter and nine months endedSeptember 30, 2002, versus the comparable periods a year ago, principally dueto a lower average sale margin. The sale margin was 140 and 146 basis pointscompared to 221 and 227 basis points for the third quarter and nine monthsended September 30, 2001. The lower margin is the result of a change in productmix as the prior year included a higher proportion of specialty products sold,and lower margins earned on specialty product and agency loans. As a percentageof total mortgage loans sold, specialty mortgages sold were 33% and 35% for thequarter and nine months ended September 30, 2002, compared with 53% and 59% forthe corresponding periods in 2001. The margins on specialty products declinedto 286 basis points from 340 basis points in the third quarter of 2001 whileagency / jumbo margins declined to 59 basis points from 75 basis points in theprior year’s third quarter.

 

Duringthe third quarter of 2002, $655 million of home equity and second mortgageloans were sold as whole loans. In prior periods these loans had beensecuritized. In contrast to securitizations, the whole loan sales result in thetransfer of credit and prepayment risk to the investor. In the third quarterand nine months ended September 30, 2002, the Company did recognize a gain of$1 million and $7 million, respectively, related to previously securitized homeequity lines of credit. These gains compared to $2 million and $16 million inthe year ago periods which included both previously and newly securitized homeequity lines.

 

29

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**Non-Interest Expense**

 

Thefollowing is a summary of the components of non-interest expense:

 
|                                             |   | **Quarter Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|--------------------------------------------------|--------|----------------------------------|--------|--------------------------------------|--------|
| ***(In millions)***                              |   | **2002**                         |   | **2001**                             |   | **2002** |   | **2001** |   |
| Salaries and benefits                            |   | $                                | 49.2   |                                 | $      | 48.0 |   | $ | 145.9 |   | $ | 131.4 |   |
| Employee Stock Ownership and stock plans expense |   | 6.3                              |   | 5.2                                  |   | 19.3 |   | 14.4 |   |
| Net expense of premises and equipment            |   | 18.1                             |   | 19.7                                 |   | 53.6 |   | 55.1 |   |
| Advertising                                      |   | 4.0                              |   | 2.0                                  |   | 12.6 |   | 6.0 |   |
| Federal deposit insurance premiums               |   | 0.4                              |   | 0.5                                  |   | 1.4 |   | 1.6 |   |
| Other administrative expenses                    |   | 23.6                             |   | 26.4                                 |   | 72.2 |   | 67.1 |   |
| Total general and administrative expenses        |   | 101.6                            |   | 101.8                                |   | 305.0 |   | 275.6 |   |
| Other real estate owned operating income, net    |   | —                           |   | (0.5                                 | )      | (1.1 | ) | (1.1 | ) |
| Goodwill amortization                            |   | —                           |   | 11.3                                 |   | — |   | 33.9 |   |
| Total non-interest expense                       |   | $                                | 101.6  |                                 | $      | 112.6 |   | $ | 303.9 |   | $ | 308.4 |   |

 

Excluding goodwill amortization expense andother real estate owned operating income, total general and administrativeexpense was flat compared with the year ago quarter and increased $29 millionto $305 million from $276 million for the nine months ended September 30, 2002.Non-interest expense in the third quarter of 2002 benefited from one-time itemstotaling $3 million. A reserve set up at the time of the Headlands MortgageCompany acquisition was released, partly offset by non-recurring outsourcingand other staff related charges.

 

Salaries and benefits increased $1 millionand $14 million for the quarter and nine months ended September 30, 2002,principally due to additional staff and incentive commissions related to thehigher mortgage volume. Employee stock ownership and stock plans expenseincreased $1 million and $5 million due to a higher average stock price versusthe same periods a year ago. Increases of $2 million and $7 million inadvertising expense in the quarter and year to date periods reflectedconsumer-banking promotions associated with core deposit growth initiatives.The decrease of $3 million in other administrative costs for the quarter was aresult of the one-time items referred to above.

 

The increase in non-interest expense forthe nine months ended September 30, 2002 versus the same period a year ago, wasprimarily associated with increased loan servicing personnel and mortgage loanprocessing costs. The Company’s efficiency ratio, which relates operatingexpenses to revenues, was 33.8% for the third quarter of 2002, compared with34.3% in the year ago quarter.

 

**Income Tax Expense**

 

Incometax expense increased $2 million, or 3%, to $72 million for the third quarterof 2002 and $28 million, or 15%, to $215 million for the nine months endedSeptember 30, 2002, versus the comparable periods a year ago. The rise in thecurrent quarter and nine month periods, compared to 2001, is due to higherpre-tax income partially offset by a decline in the effective tax rate from38.4% and 38.8% in the third quarter and first nine months, of 2001 to 36.4%and 36.7% in the third quarter and first nine months of 2002.

 

30

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**Loan Originations**

 

Thefollowing table summarizes loan origination activity for each of the reportedperiods:

 
|                                           |   | **Quarter Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|------------------------------------------------|--------|----------------------------------|--------|--------------------------------------|--------|
| ***(In millions)***                            |   | **2002**                         |   | **2001**                             |   | **2002** |   | **2001** |   |
| **Mortgage:**                                  |   |                             |   |                                 |   |   |   |   |   |
| Total applications received                    |   | $                                | 20,478 |                                 | $      | 13,302 |   | $ | 47,552 |   | $ | 36,660 |   |
| Loans originated:                              |   |                             |   |                                 |   |   |   |   |   |
| Specialty products                             |   | $                                | 2,689  |                                 | $      | 3,236 |   | $ | 7,335 |   | $ | 8,589 |   |
| Home equity / Seconds                          |   | 646                              |   | 397                                  |   | 1,958 |   | 1,220 |   |
| Agency / Jumbo                                 |   | 6,395                            |   | 3,159                                |   | 13,912 |   | 8,048 |   |
| Total loans originated                         |   | $                                | 9,730  |                                 | $      | 6,792 |   | $ | 23,205 |   | $ | 17,857 |   |
| Commitments to originate loans (end of period) |   | $                                | 9,415  |                                 | $      | 7,449 |   | $ | 9,415 |   | $ | 7,449 |   |
| Loans held for sale (end of period)            |   | $                                | 6,336  |                                 | $      | 3,703 |   | $ | 6,336 |   | $ | 3,703 |   |

 

Totalloan originations during the quarter for the mortgage business were $9.7billion, up from $6.8 billion during the third quarter of 2001. For the ninemonths ended September 30th, loan originations were $23.2 billion,up from $17.9 billion for the comparable period a year ago. Specialty productoriginations were $2.7 billion and $7.3 billion for the quarter and nine monthsended September 30, 2002, down from $3.2 billion and $8.6 billion in thecomparable period a year ago. Agency / Jumbo originations increased from $3.2billion to $6.4 billion and from $8.0 billion to $13.9 billion, respectively,for the quarter and nine months ended September 30, 2002 versus the sameperiods a year ago. The change in loan origination product mix reflects thedeclining interest rate environment and strong demand for mortgage refinancing.

 

31

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**Non-Performing Assets:**

 

Non-performingassets consist of non-accruing loans and other real estate owned. GreenPointreports non-accruing loans separately for the held for investment and held forsale portfolios. The ratio of non-accruing loans held for investment tomortgage loans held for investment fell to 1.57% at September 30, 2002from 1.72% at December 31, 2001 while the ratio of non-performing assets tototal assets fell to 1.02% at September 30, 2002 from 1.06% at December31, 2001. GreenPoint attempts to convert these assets to interest-earningassets as quickly as possible, while minimizing potential losses on conversion.

 

Non-performingloans held for sale represent delinquent loans in the mortgage warehouse thatmostly have been acquired as repurchases against representations andwarranties. These loans increased to $63 million at the end of the third quarterfrom $31 million at December 31, 2001. The volume increase has mirrored growthin loans sold in the past two years. GreenPoint maintains a valuation reservethrough which the value of these loans is adjusted to the estimated fair value.

 

Non-performingassets, were as follows:

 
| ***(In millions)***                                           |   | **Sept. 30,  2002** |   | **Dec. 31,  2001** |   |
|---------------------------------------------------------------|--------|---------------------|--------|--------------------|--------|
| Non-accruing loans receivable held for  investment:           |   |                |   |               |   |
| Mortgage loans secured by:                                    |   |                |   |               |   |
| Residential one-to four-family                                |   | $                   | 136    |               | $      | 146 |   |
| Residential multi-family                                      |   | 7                   |   | 8                  |   |
| Commercial property                                           |   | 11                  |   | 14                 |   |
| Other loans                                                   |   | —              |   | 4                  |   |
| Total non-accruing loans receivable held for  investment*(1)* |   | 154                 |   | 172                |   |
| Non-accruing loans receivable held for sale                   |   | 63                  |   | 31                 |   |
| Total non-accruing loans                                      |   | 217                 |   | 203                |   |
| Total other real estate owned, net                            |   | 14                  |   | 10                 |   |
| Total non-performing assets                                   |   | $                   | 231    |               | $      | 213 |   |

 

----

*(1)*       *Includes $4 million and $7 million of non-accrual mortgageloans under 90 days past due at September 30, 2002 and December 31, 2001,respectively.*

 

**Loan Servicing Portfolio**

 

Thefollowing table summarizes the dollar amount of loans serviced for GreenPointand for others:

 
| ***(In millions)***                 |   | **Sept. 30,  2002** |   | **Dec. 31,  2001** |   |
|-------------------------------------|--------|---------------------|--------|--------------------|--------|
| **Mortgage:**                       |   |                |   |               |   |
| Serviced for GreenPoint*(1)*        |   | $                   | 15,383 |               | $      | 13,978 |   |
| Serviced for others (third parties) |   | 11,942              |   | 11,796             |   |
| **Total loan servicing portfolio**  |   | $                   | 27,325 |               | $      | 25,774 |   |

 

----

*(1)**      **Includes loans held forsale and loans held for investment at end of period.*

 

32

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**Allowance for Possible LoanLosses:**

 

Thefollowing is a summary of the provision and allowance for possible loan losses:

 
|                                                                    |   | **Quarter Ended  September 30,** |   | **Nine Months Ended  September 30,** |   |
|-------------------------------------------------------------------------|--------|----------------------------------|--------|--------------------------------------|--------|
| ***(In millions)***                                                     |   | **2002**                         |   | **2001**                             |   | **2002** |   | **2001** |   |
| Balance at beginning of period                                          |   | $                                | 77.7   |                                 | $      | 113.0 |   | $ | 80.6 |   | $ | 113.0 |   |
| Provision charged to income:                                            |   |                             |   |                                 |   |   |   |   |   |
| Continuing                                                              |   | 0.5                              |   | 0.9                                  |   | 1.2 |   | 2.2 |   |
| Discontinued                                                            |   | (0.3                             | )      | 7.2                                  |   | (0.4 | ) | 16.3 |   |
| Charge-offs:                                                            |   |                             |   |                                 |   |   |   |   |   |
| Mortgage                                                                |   | (0.5                             | )      | (0.9                                 | )      | (1.2 | ) | (4.1 | ) |
| Manufactured housing                                                    |   | —                           |   | (10.9                                | )      | — |   | (28.0 | ) |
| Manufactured housing – transfer to loans receivable  held for sale |   | —                           |   | —                               |   | (2.9 | ) | — |   |
| Recoveries:                                                             |   |                             |   |                                 |   |   |   |   |   |
| Mortgage                                                                |   | —                           |   | —                               |   | — |   | 0.2 |   |
| Manufactured housing                                                    |   | 0.3                              |   | 3.7                                  |   | 0.4 |   | 13.4 |   |
| Balance at end of period                                                |   | $                                | 77.7   |                                 | $      | 113.0 |   | $ | 77.7 |   | $ | 113.0 |   |

 

Netmortgage loan charge-offs were approximately $0.5 million and $1.2 million forthe quarter and nine months ended September 30, 2002, down from $0.9million and $2.2 million in the year ago periods.

 

**CapitalRatios**

 

TheCompany and the Bank are subject to various regulatory capital requirementsadministered by the federal and state banking agencies. The Board of Governorsof the Federal Reserve System establishes minimum capital requirements for theconsolidated bank holding company, as well as for the Bank.

 

Undercapital adequacy guidelines and the regulatory framework for prompt correctiveaction, the Bank must meet specific capital guidelines that involvequantitative measures of its assets, liabilities, and certain off balance sheetitems as calculated under regulatory accounting practices. These guidelinesrequire minimum ratios of risk-based capital to risk adjusted assets of 4% forTier 1 capital and 8% for total capital. The Federal Reserve Board also hasguidelines for a leverage ratio that is designed to complement the risk-basedcapital ratios in determining the overall capital adequacy of banks and bankholding companies. A minimum leverage ratio of Tier 1 capital to average totalassets of 3% is required for banks and bank holding companies, with anadditional 100 to 200 basis points required for all but the highest ratedinstitutions. Management believes, as of September 30, 2002, that the Companyand the Bank meet all capital adequacy requirements to which it is subject.

 

FDICIA,among other things, identifies five capital categories for insured depositoryinstitutions (well capitalized, adequately capitalized, undercapitalized,significantly undercapitalized and critically undercapitalized) and requiresfederal banking regulatory agencies to implement systems for “prompt correctiveaction” for insured depository institutions that do not meet minimum capitalrequirements based on these categories. As of September 30, 2002, the Bank waswell capitalized based on the prompt corrective action guidelines.

 

33

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Themost recent notification from the FDIC categorized the Bank as well capitalizedunder the regulatory framework for prompt corrective action. To be categorizedas well capitalized, the Bank must maintain minimum Tier 1 capital, total capitaland leverage ratios of 6%, 10% and 5%, respectively. There have been noconditions or events since that notification that management believes havechanged the Company’s or Bank’s category.

 

TheCompany’s Total Capital and Tier 1 Capital (to risk weighted assets) improvedfrom 11.72% and 10.10%, respectively, at December 31, 2001 to 13.25% and11.66%, respectively at September 30, 2002. The improvement in the ratios isattributable to the growth in tangible capital from earnings. The Company’sratio of period-end stockholders’ equity to ending total assets at September30, 2002 was 8.45% compared to 8.20% at December 31, 2001.

 

In October of 2001 the FDIC approved afinal rule revising the regulatory capital treatment of recourse, direct creditsubstitutes, and residual interests in securitizations. The final rule iseffective for transactions settled on or after January 1, 2002, with a one-yeartransition rule for transactions settled before that date. For transactionssettled before January 1, 2002, banks can delay adoption of any provision untilDecember 31, 2002 if adoption would result in an increased capital charge.Management is in the process of assessing the impact of the final rule inconnection with both continuing operations and the discontinued business anddoes not expect the new rule to have a significant impact on GreenPoint’s riskbased capital ratios, when fully implemented.

 
|                                      |   | **Actual** |   | **Required for Capital  Adequacy Purposes** |   |
|-------------------------------------------|--------|------------|--------|---------------------------------------------|--------|
| ***(In millions)***                       |   | **Amount** |   | **Ratio**                                   |   | **Amount** |   | **Ratio** |   |
| **As of September 30, 2002**              |   |       |   |                                        |   |   |   |   |   |
| Total Capital (to Risk Weighted Assets):  |   |       |   |                                        |   |   |   |   |   |
| Company                                   |   | $          | 1,899  |                                        | 13.25  | % | $ | 1,147 |   | 8.00 | % |
| Bank                                      |   | 1,884      |   | 13.15                                       |   | 1,147 |   | 8.00 |   |
| Tier 1 Capital (to Risk Weighted Assets): |   |       |   |                                        |   |   |   |   |   |
| Company                                   |   | $          | 1,671  |                                        | 11.66  | % | $ | 573 |   | 4.00 | % |
| Bank                                      |   | 1,657      |   | 11.56                                       |   | 573 |   | 4.00 |   |
| Tier 1 Capital (to Average Assets):       |   |       |   |                                        |   |   |   |   |   |
| Company                                   |   | $          | 1,671  |                                        | 7.86   | % | $ | 851 |   | 4.00 | % |
| Bank                                      |   | 1,657      |   | 7.79                                        |   | 851 |   | 4.00 |   |
|                                      |   |       |   |                                        |   |   |   |   |   |
| **As of December 31, 2001**               |   |       |   |                                        |   |   |   |   |   |
| Total Capital (to Risk Weighted Assets):  |   |       |   |                                        |   |   |   |   |   |
| Company                                   |   | $          | 1,669  |                                        | 11.72  | % | $ | 1,139 |   | 8.00 | % |
| Bank                                      |   | 1,656      |   | 11.63                                       |   | 1,139 |   | 8.00 |   |
| Tier 1 Capital (to Risk Weighted Assets): |   |       |   |                                        |   |   |   |   |   |
| Company                                   |   | $          | 1,438  |                                        | 10.10  | % | $ | 570 |   | 4.00 | % |
| Bank                                      |   | 1,426      |   | 10.01                                       |   | 570 |   | 4.00 |   |
| Tier 1 Capital (to Average Assets):       |   |       |   |                                        |   |   |   |   |   |
| Company                                   |   | $          | 1,438  |                                        | 7.23   | % | $ | 796 |   | 4.00 | % |
| Bank                                      |   | 1,426      |   | 7.17                                        |   | 795 |   | 4.00 |   |

 

34

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**Consolidated Statement of Financial Condition**

 

Totalassets of $22.6 billion at September 30, 2002 increased from $20.2 billion atDecember 31, 2001. The balance sheet reflects growth in the securitiesportfolio of $1.1 billion and loans receivable held for sale of $1.4 billion.Loans receivable held for sale rose due to increased mortgage production. Thiswas partially offset by the first quarter sale of manufactured housing loanswith a principal balance of $843 million. The sale proceeds of the manufacturedhousing loans were reinvested in securities available for sale.

 

Thebalance of core deposits increased $1.3 billion since year-end 2001, reflectingthe success of a variety of initiatives to attract checking accounts. Thisgrowth was offset in part by a decline of $657 million in higher-costcertificates of deposit. Market borrowings increased $1.7 billion sinceyear-end 2001, reflecting the net additional funding needed due to the increasein mortgage origination volume.

 

35

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**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**Item 3 – Quantitative and Qualitative Disclosure****about Market Risk**

 

**Market Risk Management**

 

**Overview:**

The Company’s market risk exposure islimited solely to interest rate risk. Interest rate risk is defined as thesensitivity of the Company’s current and future earnings to changes in the levelof market interest rates. It arises in the ordinary course of the Company’sbusiness, as the repricing characteristics of its assets do not match those ofits liabilities. The resulting interest rate risk is managed by adjustments tothe Company’s investment portfolios and the maturities of market borrowings aswell as various deposit pricing and derivative strategies.

 

**MarketRisk Management Process:**

Management responsibility for interest raterisk resides with the Asset and Liability Management Committee (“ALCO”). Thecommittee is chaired by the Chief Financial Officer and includes the Treasurer,the Head of Risk Management and the Company’s senior business-unit andfinancial executives. Interest rate risk management strategies are formulatedand monitored by ALCO within policies and limits approved by the Board ofDirectors. These policies and limits set forth the maximum risk which the Boardof Directors deems prudent, govern permissible investment securities andoff-balance sheet instruments, and identify acceptable counterparties tosecurities and off-balance sheet transactions.

 

ALCO risk management strategies allow forthe assumption of interest rate risk within the Board approved limits. Thestrategies are formulated based upon ALCO’s assessments of likely marketdevelopments and trends in the Company’s lending and consumer bankingbusinesses. Strategies are developed with the aim of enhancing the Company’snet income and capital, while ensuring the risks to income and capital fromadverse movements in interest rates are acceptable.

 

**InterestRate Risk Position:**

The Company’s income is affected by changesin the level of market interest rates based upon mismatches between therepricing of its assets and liabilities. One measure of interest rate risksensitivity is provided by the accompanying net gap analysis, which organizesassets and liabilities according to the time period in which they reprice ormature. More assets than liabilities repricing in a period (a positive gap)implies earnings will rise as interest rates rise, and decline as interestrates decline. More liabilities than assets repricing (a negative gap) impliesdeclining income as rates rise and rising income as rates fall. For many of theCompany’s assets and liabilities, the maturity or repricing date is notdeterminable with certainty. For example, the Company’s mortgage loans and itsmortgage-backed securities can be prepaid before contractual amortizationand/or maturity. Also, repricing of the Company’s non-time deposits is subjectto management’s evaluation of the existing interest rate environment, currentfunding and liquidity needs, and other factors influencing the marketcompetition for such deposits. The amounts in the accompanying table reflectmanagement’s judgment of the most likely repricing schedule; actual results mayvary from those detailed herein.

 

These repricing relationships do notconsider the impact that rate movements might have on other components of theBank’s risk profile. For example, an increase in interest rates, while implyingthat earnings will rise in a positive gap period, might also result in highercredit or default risk due to a higher probability of borrowers being unable topay the contractual payments on loans. Likewise, a decrease in rates mightresult in an increase in the risk that funds received from loan and securitiesprepayments are reinvested at lower rates and/or spreads. The management ofthese risks is discussed more fully in the section covering earnings at risk.

 

36

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Thefollowing table presents the Company’s interest rate sensitivity gap positionas of September 30, 2002:

 
| **Interest  Rate Sensitivity Gap Analysis**                                                     |   | **At September 30, 2002** |   |
|-------------------------------------------------------------------------------------------------|--------|---------------------------|--------|
| ***(Dollars in  millions)***                                                                    |   | **Within  One Year**      |   | **More Than  1 Year to  3 Years** |   | **More Than  3 Years to  5 Years** |   | **More than  5 Years to  9 Years** |   | **More  Than  9 Years** |   | **Total** |   |
| Total loans, net                                                                                |   | $                         | 11,202 |   | $ | 2,736 |   | $ | 1,115 |   | $ | 731 |   | $ | 362 |   | $ | 16,146 |   |
| Money market investments                                                                        |   | 114                       |   | — |   | — |   | — |   | — |   | 114 |   |
| Securities                                                                                      |   | 3,148                     |   | 729 |   | 217 |   | 181 |   | 446 |   | 4,721 |   |
| Other interest-earning assets                                                                   |   | 141                       |   | — |   | — |   | — |   | — |   | 141 |   |
| Total interest-earning assets                                                                   |   | 14,605                    |   | 3,465 |   | 1,332 |   | 912 |   | 808 |   | 21,122 |   |
| Cash and due from banks                                                                         |   | 236                       |   | — |   | — |   | — |   | — |   | 236 |   |
| Servicing assets                                                                                |   | 21                        |   | 32 |   | 22 |   | 25 |   | 19 |   | 119 |   |
| Other non-interest earning assets                                                               |   | 748                       |   | 75 |   | 75 |   | 151 |   | 56 |   | 1,105 |   |
| Total assets                                                                                    |   | $                         | 15,610 |   | $ | 3,572 |   | $ | 1,429 |   | $ | 1,088 |   | $ | 883 |   | $ | 22,582 |   |
|                                                                                            |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Term certificates of deposit                                                                    |   | $                         | 2,544  |   | $ | 2,257 |   | $ | 389 |   | $ | 12 |   | $ | — |   | $ | 5,202 |   |
| Core deposits                                                                                   |   | 1,624                     |   | 1,990 |   | 731 |   | 629 |   | 1,181 |   | 6,155 |   |
| Total deposits                                                                                  |   | 4,168                     |   | 4,247 |   | 1,120 |   | 641 |   | 1,181 |   | 11,357 |   |
| Securities sold under agreements to repurchase  and other short term borrowings                 |   | 1,886                     |   | 1,000 |   | 100 |   | 300 |   | — |   | 3,286 |   |
| Federal Home Loan Bank advances                                                                 |   | 2,750                     |   | 750 |   | 200 |   | 1,100 |   | — |   | 4,800 |   |
| Senior bank notes                                                                               |   | —                    |   | — |   | — |   | — |   | — |   | — |   |
| Subordinated bank debt                                                                          |   | —                    |   | — |   | — |   | 150 |   | — |   | 150 |   |
| Guaranteed preferred beneficial interest in  Company’s junior subordinated debentures      |   | —                    |   | — |   | 200 |   | — |   | — |   | 200 |   |
| Mortgagors’ escrow                                                                         |   | 12                        |   | 18 |   | 14 |   | 18 |   | 27 |   | 89 |   |
| Total interest-bearing liabilities                                                              |   | 8,816                     |   | 6,015 |   | 1,634 |   | 2,209 |   | 1,208 |   | 19,882 |   |
| Other liabilities                                                                               |   | 791                       |   | — |   | — |   | — |   | — |   | 791 |   |
| Stockholders’ equity                                                                       |   | —                    |   | — |   | — |   | — |   | 1,909 |   | 1,909 |   |
| Total liabilities and stockholders’ equity                                                 |   | $                         | 9,607  |   | $ | 6,015 |   | $ | 1,634 |   | $ | 2,209 |   | $ | 3,117 |   | $ | 22,582 |   |
| Interest rate sensitivity gap                                                                   |   | $                         | 6,003  |   | $ | (2,443 | ) | $ | (205 | ) | $ | (1,121 | ) | $ | (2,234 | ) |   |   |
| Cumulative interest rate sensitivity gap                                                        |   | $                         | 6,003  |   | $ | 3,560 |   | $ | 3,355 |   | $ | 2,234 |   | — |   |   |   |
| Cumulative interest rate sensitivity gap as a  percentage of total assets at September 30, 2002 |   | 26.6                      | %      | 15.8 | % | 14.9 | % | 9.9 | % |   |   |   |   |

 

As of September 30, 2002, the cumulativevolume of assets maturing or repricing within one year exceeded liabilities by$6.0 billion, or 26.6% of total assets. This compares to a positive GAP of $4.4billion at June 30, 2002. As interest rates fell to near historic lows in thethird quarter, the effective repricing schedule of the Company’s mortgageportfolio shortened based upon faster assumed prepayments. Also during thequarter, the Company’s core deposits, which are assumed to have relatively slowrepricing characteristics, continued to grow. Certificates of deposits, withrelatively short maturities, declined. Finally, in response to historically lowinterest rates, the Company extended its market borrowings, such as FederalHome Loan Bank advances and repurchase agreements.

 

37

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**DerivativeFinancial Instruments:**

 

The Company does currently utilizederivative instruments to manage its exposure to interest rate risk associatedwith mortgage loan commitments and mortgage loans held for sale. Prior to theclosing of a loan, the Company generally extends an interest rate lockcommitment to the borrower. The Company is exposed to subsequent changes in thelevel of market interest rates, and the spread over Treasuries required byinvestors. An increase in market interest rates or a widening of spreads willreduce the prices paid by investors and the resultant gain on sale. To mitigatethis risk, at the time the Company extends the interest rate lock commitment tothe borrower, the Company will enter into mandatory commitments to deliver mortgagewhole loans to various investors, or to issue private securities and/or FannieMae and Freddie Mac securities (forward delivery commitments.) Thesecommitments effectively establish the price the Company will receive for therelated mortgage loan thereby minimizing the risk of subsequent changes ininterest rates. At September 30, 2002, the Company had mandatory forwarddelivery commitments outstanding amounting to $2.3 billion.

 

# **Earnings at RiskSensitivity Analysis:**

The static gap analysis is an incompleterepresentation of interest rate risk for several reasons. The gap analysis doesnot provide a clear presentation of the risks to income arising from optionsembedded in the Company’s balance sheet. It fails to account for potentialchanges in prepayment speeds on the Company’s mortgage loans and mortgagebacked securities portfolios related to changes in market interest rates. Inaddition the static gap analysis does not capture the behavior of depositbalances which may vary with changes in the general level of interest rates andmanagement’s pricing strategies. Accordingly, ALCO makes extensive use of anearnings simulation model in the formulation of its market risk managementstrategy.

 

The earnings simulation model gives effectto management assumptions concerning the repricing of assets, liabilities andderivative financial instruments, as well as business volumes, under a varietyof hypothetical interest rate scenarios. These hypothetical scenariosincorporate parallel shifts in interest rates of plus or minus 100, 200 and 300basis points. In addition, deterministic non-parallel flattening and steepeningscenarios are also incorporated into the interest rate risk management process.

 

The most crucial management assumptions,which are incorporated into the earnings simulation model, concern prepaymentson the Company’s mortgage loan and mortgage-backed securities portfolios andthe pricing of consumer deposits in various interest rate environments. Asinterest rates decline, mortgage prepayments tend to increase, reducing loanportfolio growth and lowering the portfolio’s average yield. Rates onnon-maturity deposits rise and fall with the general level of interest rates,but tend to move less than proportionately. Rates offered on consumer certificatesof deposit tend to move in close concert with market rates, though historysuggests that they increase less rapidly when market rates rise. Extensivehistorical analysis shows that the Company’s deposit volumes are relativelyinsensitive to interest rate movements within the range encompassed in theparallel shift scenarios. Management has included all derivative and otherfinancial instruments that have a material effect in calculating the Company’spotential earnings at risk. The fair values of the company’s servicing assetsand retained interests from securitizations are directly affected by the levelof prepayments associated with the underlying loans. As interest rates declinethe value of these assets will decline. Conversely as interest rates rise, thevalue of these assets will increase.

 

Based on this model, at September 30, 2002,the Company’s potential net interest income at risk to a gradual, parallel 200basis point decline in market interest rates over the next twelve months, was adecline of approximately 8.0% of net income over the next twelve months.Conversely, a gradual 300 basis point increase in interest rates over the nexttwelve months would result in a projected increase in net interest income of6.0% over what would be earned if rates remained constant.

 

38

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ALCOcontinuously monitors the Company’s risk profile as it changes, and alters therate sensitivity to ensure limits are adhered to, and that the resulting riskprofile is appropriate to its views on the likely course of interest rates anddevelopments in its core businesses.

 

# **Credit Risk Management**

 

The Company originates mortgage loans forits own portfolio and for disposition in the secondary markets in the form ofwhole loan sales and securitizations. In general, whole loan sales transfer thecredit risk to the purchasers. In contrast, for loans placed in the portfolio,or for loans securitized, the Company retains all or much of the credit risk.As of December 31, 2001, the Company discontinued the origination ofmanufactured housing loans. However, it continues to service its manufacturedhousing loan portfolio, including its securitized loan pools.

 

GreenPoint Mortgage maintains underwritingpolicies, procedures and approval authorities appropriate to its business. Thechief credit executive reports directly to the chief executive of the business,outside of the production organization. With respect to loans originated forwhole loan sale to the secondary markets, where credit risk is transferred,underwriting criteria are established to meet investor requirements. Anexecutive-level Risk Management Division determines the criteria required forloans which will be transferred to GreenPoint’s portfolio or sold throughsecuritizations.

 

Oversight of the appraiser approval andappraisal review process is provided independent of the productionorganization. Appraisers are required to meet strict standards for approval byGreenPoint, and their performance is monitored on a regular basis. Withoversight by Risk Management, a comprehensive quality control process is inplace to ensure that loans being originated meet the Company’s underwritingstandards, and that required operating procedures are followed. Loans areselected monthly on a pre and post funding basis for review by quality controlanalysts and staff appraisers.

 

Risk Management personnel monitor closelythe performance of all loans on which the Company retains credit risk. Uponsecuritization or sale, assumptions are made by executive management,independent of the business unit, regarding the default, recovery and voluntaryprepayment rates. Each pool of loans is reviewed monthly to ensure thatperformance is meeting those expectations.

 

Risk Management reviews monthly the delinquencyand loss trends in all of the mortgage and manufactured housing loans servicedby the Company, whether or not it retains credit exposure. These reviews areintended to identify significant changes in credit quality which may indicatechanges to the Company’s exposures or to the efficacy of its underwriting ofloans sold to other investors. Such changes could prompt adjustments to theCompany’s underwriting criteria or servicing procedures. The Company alsoclosely monitors trends in delinquent and non-performing loans through cyclesin the economy and in the real estate market. These economic and performancetrends are analyzed and incorporated in the ongoing fine-tuning of lendingpractices. GreenPoint’s loan origination activity is geographically diversifiedthroughout the U.S.

 

39

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The Company uses various collectionstrategies and works to maintain contact with the borrowers in order to obtainrepayment. Collection activities for GreenPoint Mortgage are centralized in aservicing unit in Columbus, Georgia. GreenPoint Credit’s remarketing activitiesare decentralized among its regional offices in order to repossess andliquidate collateral more effectively, thereby minimizing the loss severity. Duringthe third quarter of 2002 certain collection activities previously conductedthrough the regional offices were centralized in a new default managementcenter in Atlanta, Georgia. The centralization is expected to promote effectiveand timely collection activities and loss mitigation efforts.

 

TheCompany has set forth a policy for establishment and review of the adequacy ofthe allowance for loan losses in order to provide for estimated costs relatedto problem loans. Management believes that the allowance for loan losses isadequate. However, such determination is susceptible to the effect of futureunanticipated changes in general economic and market conditions that may affectthe financial circumstances of borrowers and/or residential real estate valueswithin the Company’s lending areas. The Company has also established a reserveto cover losses associated with repurchases of sold loans due to representationand warranty violations. This reserve was sized using historical loss dataassociated with loan sales and additional reserves are set aside as the volumeof sold loans increases.

 

40

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**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**Item 4 – Controls and Procedures**

 

**Evaluationof Disclosure Controls and Procedures**

 

The Company’s Chief Executive Officer andChief Financial Officer have determined that the Company’s disclosure controlsand procedures (as defined in Rules 13a-14 and 15d-14 under the SecuritiesExchange Act of 1934 (“Act”)), which are designed to ensure that informationrequired to be disclosed by the Company in the periodic reports it files underthe Act is recorded, processed, summarized and reported in a timely manner, areeffective based on their evaluation of these controls and procedures as of adate within 90 days prior to the filing date of this Quarterly Report on Form10-Q (“Evaluation Date”).

** **

**Changesin Internal Controls**

 

There were no significant changes in theCompany’s internal controls or in other factors that could significantly affectthese controls subsequent to the Evaluation Date, including any correctiveactions with regard to significant deficiencies and material weakness.

 

41

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**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**PART II – OTHER INFORMATION**

**Item 1 – Legal Proceedings**

 

In the ordinary course of business, theCorporation and its subsidiaries are defendants in or parties to a number ofpending and threatened legal actions and proceedings, and are also involvedfrom time to time in investigations and administrative proceedings bygovernmental agencies. Certain of such actions and proceedings involve allegedviolations of consumer protection laws, including claims relating to theCorporation’s loan origination and collection efforts, and other federal andstate banking laws. Certain of such actions and proceedings include claims forbreach of contract, restitution, compensatory damages, punitive damages andother forms of relief. Due to the difficulty of predicting the outcome of suchmatters, the Corporation can give no assurance that it will prevail on allclaims made against it; however, management believes, based on currentknowledge and after consultation with counsel, that these legal matters andadministrative proceedings and the losses, if any, resulting from the finaloutcome thereof, will not have a material adverse effect on the Corporation andits subsidiaries’ financial position, results of operations or liquidity, butcan give no assurance that they will not have such an effect.

 

42

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**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**PART II – OTHER INFORMATION**

**Item 5 –Other Information**

 

**Shareholder Proposals**

 

In order to ensure an appropriate amount oftime to comply with all of the applicable requirements under recently enactedlegislation and rules, the Company’s 2003 annual meeting of shareholders iscurrently scheduled to be held on April 29, 2003 (and not April 8, 2003, aspreviously disclosed in the Company’s second quarter 2002 Form 10-Q).Accordingly, as originally disclosed in the Company’s 2002 Proxy Statement, inorder to be eligible for inclusion in the Company’s proxy materials for its2003 annual meeting, any shareholder proposal to take action at such meetingmust be received at the Company’s main office at 90 Park Avenue, New York, NewYork 10016, no later than November 29, 2002. Any such proposal shall be subjectto the requirements of the Company’s Bylaws and the proxy rules adopted underthe Securities Exchange Act of 1934.

 

### **Preapprovalof Non-Audit Services**

 

In accordance with Section 10A(i)(2) of theSecurities Exchange Act of 1934, the Audit Committee of the Board of Directorsof the Company has preapproved the provision of (i) tax consulting services and(ii) consulting services in connection with a review of hedging strategies tothe Company by its independent auditor, PricewaterhouseCoopers LLP, aspermitted by subsection (h) of Section 10A.

 

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**GREENPOINTFINANCIAL CORP. AND SUBSIDIARIES**

**PART II –OTHER INFORMATION**

**Item 6 – Exhibits and Reports on Form 8-K**

 
| **(a)** | **Exhibits**        |                                                                                                        |
|---------|---------------------|-------------------------------------------------------------------------------------------------------------|
|    |                |                                                                                                        |
|    | **Exhibit Number:** |
|    | 12.1                | Ratios of Earnings to Combined Fixed Charges                                                                |
|    |                |                                                                                                        |
|    | 99.1                | Certification of Periodic Report of Thomas S. Johnson, Chairman and  Chief Executive Officer                |
|    |                |                                                                                                        |
|    | 99.2                | Certification of Periodic Report of Jeffrey R. Leeds, Executive Vice  President and Chief Financial Officer |

 

44

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**(b)     Reports on Form 8-K**

 

OnAugust 9, 2002, GreenPoint filed a current report on Form 8-K in connectionwith the issuance of an administrative order (Order No. 4-460 (the “Order”)) bythe Securities and Exchange Commission (the “Commission”) on June 27, 2002,requiring the principal executive officer and the principal financial officerof 947 companies, including GreenPoint, to file statements under oath regardingthe accuracy of those companies’ most recent annual report, as well as allquarterly reports and other filings made with the Commission since the filingof the annual report, and the consultation by such officers with the auditcommittee or independent directors of their boards of directors. A copy of thestatement filed pursuant to the Order by Thomas S. Johnson, Chairman and ChiefExecutive Officer of GreenPoint, as principal executive officer within themeaning of the Order, dated August 9, 2002, and a copy of the statement filedpursuant to the Order by Jeffrey R. Leeds, Executive Vice President and ChiefFinancial Officer of GreenPoint, as principal financial officer within themeaning of the Order, dated August 9, 2002, were attached as Exhibits to theForm 8-K and incorporated therein by reference.

 

45

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|                    | GreenPoint Financial Corp. |
|-------------------------|----------------------------|
|                    |                       |   |
|                    |                       |   |
|                    | By:                        | /s/ Thomas S. Johnson |   |
|                    |                       | Thomas S. Johnson |
|                    |                       | Chairman of the Board and  Chief Executive Officer |
|                    |                       |   |
|                    |                       |   |
|                    | By:                        | /s/ Jeffrey R. Leeds |   |
|                    |                       | Jeffrey R. Leeds |
|                    |                       | Executive Vice President and  Chief Financial Officer |
|                    |                       |   |
|                    |                       |   |
|                    | By:                        | /s/ Joseph D. Perillo |   |
|                    |                       | Joseph D. Perillo |
|                    |                       | Senior Vice President and  Controller |
|                    |                       |   |
| Dated November 12, 2002 |                       |   |

 

46

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**CERTIFICATIONS**

 

I, Thomas S. Johnson, Chairman and ChiefExecutive Officer of GreenPoint Financial Corp., certify that:

 
| 1.     | I have reviewed this  quarterly report on Form 10-Q of GreenPoint Financial Corp.;                                                                                                                                                                                                                                                                                                                  |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                |   |
| 2.     | Based on my knowledge,  this quarterly report does not contain any untrue statement of a material  fact or omit to state a material fact necessary to make the statements made,  in light of the circumstances under which such statements were made, not  misleading with respect to the period covered by this quarterly report;                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |   |
| 3.     | Based on my knowledge,  the financial statements, and other financial information included in this  quarterly report, fairly present in all material respects the financial  condition, results of operations and cash flows of the registrant as of, and  for, the periods presented in this quarterly report;                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |   |
| 4.     | The registrant’s other  certifying officers and I are responsible for establishing and maintaining  disclosure controls and procedures (as defined in Exchange Act Rules 13a-14  and 15d-14) for the registrant and we have:                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |   |
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                  | designed such disclosure  controls and procedures to ensure that material information relating to the  registrant, including its consolidated subsidiaries, is made known to us by  others within those entities, particularly during the period in which this  quarterly report is being prepared; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |   |
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                  | evaluated the  effectiveness of the registrant’s disclosure controls and procedures as of a  date within 90 days prior to the filing date of this quarterly report (the  “Evaluation Date”); and |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |   |
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                  | presented in this  quarterly report our conclusions about the effectiveness of the disclosure  controls and procedures based on our evaluation as of the Evaluation Date; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |   |
| 5.     | The registrant’s other  certifying officers and I have disclosed, based on our most recent  evaluation, to the registrant’s auditors and the audit committee of  registrant’s board of directors (or persons performing the equivalent function):                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |   |
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                  | all significant  deficiencies in the design or operation of internal controls which could  adversely affect the registrant’s ability to record, process, summarize and  report financial data and have identified for the registrant’s auditors any  material weaknesses in internal controls; and |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |   |
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                  | any fraud, whether or  not material, that involves management or other employees who have a  significant role in the registrant’s internal controls; and |
|   |                                                                                                                                                                                                                                                                                                                                                                                                |   |
| 6.     | The registrant’s other  certifying officers and I have indicated in this quarterly report whether or  not there were significant changes in internal controls or in other factors  that could significantly affect internal controls subsequent to the date of  our most recent evaluation, including any corrective actions with regard to  significant deficiencies and material weaknesses. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                     |  |  |

 

Date: November 12, 2002

 
|   | /s/ Thomas S. Johnson                                             |   |
|--------|-------------------------------------------------------------------|--------|
|   | Thomas S. Johnson                                                 |
|   | Chairman and  Chief Executive Officer  GreenPoint Financial Corp. |

 

47

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| I, Jeffrey R. Leeds,  Executive Vice President and Chief Financial Officer of GreenPoint Financial  Corp., certify that: |
|--------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                     |   |   |
| 1.                                                                                                                       | I have reviewed this  quarterly report on Form 10-Q of GreenPoint Financial Corp.; |
|                                                                                                                     |   |   |
| 2.                                                                                                                       | Based on my knowledge,  this quarterly report does not contain any untrue statement of a material  fact or omit to state a material fact necessary to make the statements made,  in light of the circumstances under which such statements were made, not  misleading with respect to the period covered by this quarterly report; |
|                                                                                                                     |   |   |
| 3.                                                                                                                       | Based on my knowledge,  the financial statements, and other financial information included in this  quarterly report, fairly present in all material respects the financial  condition, results of operations and cash flows of the registrant as of, and  for, the periods presented in this quarterly report; |
|                                                                                                                     |   |   |
| 4.                                                                                                                       | The registrant’s other  certifying officers and I are responsible for establishing and maintaining  disclosure controls and procedures (as defined in Exchange Act Rules 13a-14  and 15d-14) for the registrant and we have: |
|                                                                                                                     |   |   |
|                                                                                                                     | a) | designed such disclosure  controls and procedures to ensure that material information relating to the  registrant, including its consolidated subsidiaries, is made known to us by  others within those entities, particularly during the period in which this  quarterly report is being prepared; |
|                                                                                                                     |   |   |
|                                                                                                                     | b) | evaluated the  effectiveness of the registrant’s disclosure controls and procedures as of a  date within 90 days prior to the filing date of this quarterly report (the  “Evaluation Date”); and |
|                                                                                                                     |   |   |
|                                                                                                                     | c) | presented in this  quarterly report our conclusions about the effectiveness of the disclosure  controls and procedures based on our evaluation as of the Evaluation Date; |
|                                                                                                                     |   |   |
| 5.                                                                                                                       | The registrant’s other  certifying officers and I have disclosed, based on our most recent  evaluation, to the registrant’s auditors and the audit committee of  registrant’s board of directors (or persons performing the equivalent function): |
|                                                                                                                     |   |   |
|                                                                                                                     | a) | all significant  deficiencies in the design or operation of internal controls which could  adversely affect the registrant’s ability to record, process, summarize and  report financial data and have identified for the registrant’s auditors any  material weaknesses in internal controls; and |
|                                                                                                                     |   |   |
|                                                                                                                     | b) | any fraud, whether or  not material, that involves management or other employees who have a  significant role in the registrant’s internal controls; and |
|                                                                                                                     |   |   |
| 6.                                                                                                                       | The registrant’s other  certifying officers and I have indicated in this quarterly report whether or  not there were significant changes in internal controls or in other factors  that could significantly affect internal controls subsequent to the date of  our most recent evaluation, including any corrective actions with regard to  significant deficiencies and material weaknesses. |
|                                                                                                                     |   |   |

 

Date: November 12, 2002

 
|   | /s/ Jeffrey R. Leeds                                                               |   |
|--------|------------------------------------------------------------------------------------|--------|
|   | Jeffrey R. Leeds                                                                   |
|   | Executive Vice President  and  Chief Financial Officer  GreenPoint Financial Corp. |

 

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