** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

 

**ý**** Quarterly Report Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

 

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**For the Quarterly Period EndedMarch 31, 2004**

 

**OR**

 

**o**** Transition Report Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

 

**001-14320Commission File Number**

 

**GreenPoint Financial Corp.**

(Exact name of registrant asspecified 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) |

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or forshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.  ý**Yes**o**No**

 

Indicate by check mark whether the registrantis an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  ý**Yes**  o**No**

 

As of April 30, 2004, there were131,823,054 shares of common stock outstanding.

 

 

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**GreenPoint Financial Corp.**

**FORM 10-Q**

**For the Quarterly Period Ended**

**March 31, 2004**

 

**TABLE OF CONTENTS**

 

 
| **PART I – FINANCIAL INFORMATION**                                                                                               |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                  |   |
| Item 1 - Financial Statements                                                                                                         |   |
|                                                                                                                                  |   |
| Consolidated Statements of Financial  Condition (unaudited) as of March 31, 2004 and December 31, 2003                      |   |
|                                                                                                                                  |   |
| Consolidated Statements of Income (unaudited)  for the quarter ended March 31, 2004 and 2003                                     |   |
|                                                                                                                                  |   |
| Consolidated Statements of Comprehensive  Income (unaudited) for the quarter ended March 31, 2004 and 2003                       |   |
|                                                                                                                                  |   |
| Consolidated Statements of Changes in  Stockholders’ Equity (unaudited) for the three months ended March 31,  2004 and 2003 |   |
|                                                                                                                                  |   |
| Consolidated Statements of Cash Flows  (unaudited) for the three months ended March 31, 2004 and 2003                            |   |
|                                                                                                                                  |   |
| 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  Disclosures about Market Risk                                                                  |   |
|                                                                                                                                  |   |
| Item 4 - Controls and Procedures                                                                                                      |   |
|                                                                                                                                  |   |
|                                                                                                                                  |   |
| **PART II – OTHER INFORMATION**                                                                                                  |   |
|                                                                                                                                  |   |
| Item 1 - Legal Proceedings                                                                                                            |   |
|                                                                                                                                  |   |
| Item 2 - Changes in Securities and Use of  Proceeds                                                                                   |   |
|                                                                                                                                  |   |
| Item 6 - Exhibits and Reports on Form 8-K                                                                                             |   |

 

2

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**GreenPointFinancial Corp. and SubsidiariesPart 1 – Item 1. Financial Statements**

 

**ConsolidatedStatements of Financial Condition****(Unaudited)**

 
| **(In millions, except share  amounts)**                                                   |   | **March 31,  2004** |   | **Dec. 31,  2003** |   |
|--------------------------------------------------------------------------------------------|--------|--------------------------|--------|--------------------|--------|
| **ASSETS**                                                                                 |   |                     |   |               |   |
| Cash and due from banks                                                                    |   | $                        | 296    |               | $      | 268 |   |
| Money market investments:                                                                  |   |                     |   |               |   |
| Interest-bearing deposits in other banks                                                   |   | 15                       |   | 3                  |   |
| Federal funds sold and securities purchased  under agreements to resell                    |   | 49                       |   | 64                 |   |
| Total cash and cash equivalents                                                            |   | 360                      |   | 335                |   |
| Securities:                                                                                |   |                     |   |               |   |
| Securities available for sale                                                              |   | 4,667                    |   | 2,785              |   |
| Securities available for sale-pledged to  creditors                                        |   | 2,228                    |   | 3,469              |   |
| Retained interests in securitizations  available for sale                                  |   | 52                       |   | 49                 |   |
| Federal Home Loan Bank of New York stock                                                   |   | 245                      |   | 170                |   |
| Securities held to maturity (fair value of  $6)                                            |   | 6                        |   | 6                  |   |
| Total securities                                                                           |   | 7,198                    |   | 6,479              |   |
| Loans receivable held for sale                                                             |   | 4,601                    |   | 4,764              |   |
| Loans receivable held for investment (net  of allowance for loan losses of $78)            |   | 10,112                   |   | 9,885              |   |
| Other interest-earning assets                                                              |   | 146                      |   | 142                |   |
| Accrued interest receivable                                                                |   | 81                       |   | 81                 |   |
| Banking premises and equipment, net                                                        |   | 180                      |   | 183                |   |
| Servicing assets                                                                           |   | 202                      |   | 183                |   |
| Goodwill (net of accumulated amortization  and impairment of $788)                         |   | 395                      |   | 395                |   |
| Other assets                                                                               |   | 568                      |   | 538                |   |
| Total assets                                                                               |   | $                        | 23,843 |               | $      | 22,985 |   |
|                                                                                       |   |                     |   |               |   |
| **LIABILITIES AND  STOCKHOLDERS’ EQUITY**                                             |   |                     |   |               |   |
| **Liabilities:**                                                                           |   |                     |   |               |   |
| Deposits:                                                                                  |   |                     |   |               |   |
| N.O.W. and checking                                                                        |   | $                        | 3,267  |               | $      | 2,983 |   |
| Savings                                                                                    |   | 1,559                    |   | 1,514              |   |
| Variable rate savings                                                                      |   | 2,096                    |   | 2,146              |   |
| Money market                                                                               |   | 1,502                    |   | 1,388              |   |
| Total core deposits                                                                        |   | 8,424                    |   | 8,031              |   |
| Wholesale money market deposits                                                            |   | 200                      |   | 205                |   |
| Term certificates of deposit                                                               |   | 3,953                    |   | 4,310              |   |
| Total deposits                                                                             |   | 12,577                   |   | 12,546             |   |
| Borrowings:                                                                                |   |                     |   |               |   |
| Securities sold under agreements to  repurchase                                            |   | 2,150                    |   | 3,327              |   |
| Other short term borrowings                                                                |   | 1,100                    |   | 1,062              |   |
| Federal Home Loan Bank of New York advances                                                |   | 4,300                    |   | 2,800              |   |
| Senior notes                                                                               |   | 362                      |   | 353                |   |
| Subordinated bank notes                                                                    |   | 150                      |   | 150                |   |
| Guaranteed preferred beneficial interest in  Company’s junior subordinated debentures |   | 200                      |   | 200                |   |
| Total borrowings                                                                           |   | 8,262                    |   | 7,892              |   |
| Mortgagors’ escrow                                                                    |   | 68                       |   | 55                 |   |
| Liability under recourse exposure                                                          |   | 208                      |   | 226                |   |
| Other liabilities                                                                          |   | 780                      |   | 427                |   |
| Total liabilities                                                                          |   | 21,895                   |   | 21,146             |   |
| 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; 165,391,746 shares issued)  |   | 2                        |   | 2                  |   |
| Additional paid-in capital                                                                 |   | 957                      |   | 941                |   |
| Unallocated Employee Stock Ownership Plan  (ESOP) shares                                   |   | (83                      | )      | (84                | )      |
| Retained earnings                                                                          |   | 2,003                    |   | 1,926              |   |
| Accumulated other comprehensive income, net                                                |   | —                   |   | (30                | )      |
| Treasury stock, at cost (33,669,661 shares  and 33,494,909 shares, respectively)           |   | (931                     | )      | (916               | )      |
| Total stockholders’ equity                                                            |   | 1,948                    |   | 1,839              |   |
| Total liabilities and stockholders’ equity                                            |   | $                        | 23,843 |               | $      | 22,985 |   |

 

*(See accompanyingnotes to the unaudited consolidated financial statements)*

 

3

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**ConsolidatedStatements of Income**

**(Unaudited)**

 
|                                                         |   | **Quarter  Ended  March 31,** |   |
|--------------------------------------------------------------|--------|------------------------------------|--------|
| **(In millions, except per share  amounts)**                 |   | **2004**                           |   | **2003** |   |
| **Interest income:**                                         |   |                               |   |   |   |
| Mortgage loans held for investment                           |   | $                                  | 155.9  |   | $ | 166.7 |   |
| Loans held for sale                                          |   | 55.3                               |   | 75.9 |   |
| Securities                                                   |   | 71.1                               |   | 52.1 |   |
| Other                                                        |   | 3.4                                |   | 3.6 |   |
| Total interest income                                        |   | 285.7                              |   | 298.3 |   |
| **Interest expense:**                                        |   |                               |   |   |   |
| Deposits                                                     |   | 49.5                               |   | 62.7 |   |
| Other borrowed funds                                         |   | 52.5                               |   | 52.7 |   |
| Long-term debt                                               |   | 9.0                                |   | 8.1 |   |
| Total interest expense                                       |   | 111.0                              |   | 123.5 |   |
| Net interest income                                          |   | 174.7                              |   | 174.8 |   |
| Provision for loan losses                                    |   | (1.3                               | )      | (0.3 | ) |
| Net interest income after provision for  loan losses         |   | 173.4                              |   | 174.5 |   |
| **Non-interest  income:**                                    |   |                               |   |   |   |
| Income from fees and commissions:                            |   |                               |   |   |   |
| Loan servicing income                                        |   | (5.9                               | )      | 5.8 |   |
| Banking services fees and commissions                        |   | 22.4                               |   | 14.5 |   |
| Fees, commissions and other income                           |   | 6.9                                |   | 3.4 |   |
| Total income from fees and commissions                       |   | 23.4                               |   | 23.7 |   |
| Net gain on sales of loans                                   |   | 120.7                              |   | 124.3 |   |
| Change in valuation of retained interests                    |   | (0.4                               | )      | (0.7 | ) |
| Net gain on sale of securities                               |   | 0.5                                |   | 1.2 |   |
| Total non-interest income                                    |   | 144.2                              |   | 148.5 |   |
| **Non-interest  expense:**                                   |   |                               |   |   |   |
| General and administrative expenses:                         |   |                               |   |   |   |
| Salaries and benefits                                        |   | 63.8                               |   | 61.6 |   |
| Employee Stock Ownership and stock plans  expense            |   | 8.9                                |   | 6.1 |   |
| Net expense of premises and equipment                        |   | 23.5                               |   | 20.9 |   |
| Federal deposit insurance premiums                           |   | 0.5                                |   | 0.5 |   |
| Other administrative expenses                                |   | 37.8                               |   | 31.5 |   |
| Total general and administrative expenses                    |   | 134.5                              |   | 120.6 |   |
| Other real estate owned operating income                     |   | —                             |   | 0.2 |   |
| Total non-interest expense                                   |   | 134.5                              |   | 120.8 |   |
| Income from continuing operations before  income taxes       |   | 183.1                              |   | 202.2 |   |
| Income taxes related to earnings from  continuing operations |   | 70.6                               |   | 75.3 |   |
| Net income from continuing operations                        |   | 112.5                              |   | 126.9 |   |
| **Discontinued  operations:**                                |   |                               |   |   |   |
| Net income from disposal of discontinued  business           |   | 0.1                                |   | 0.3 |   |
| **Net income**                                               |   | $                                  | 112.6  |   | $ | 127.2 |   |
|                                                         |   |                               |   |   |   |
| **Basic earnings per  share:**                               |   |                               |   |   |   |
| Net income from continuing operations                        |   | $                                  | 0.96   |   | $ | 1.00 |   |
| Net income from discontinued operations                      |   | —                             |   | — |   |
| Net income                                                   |   | $                                  | 0.96   |   | $ | 1.00 |   |
| **Diluted earnings  per share:**                             |   |                               |   |   |   |
| Net income from continuing operations                        |   | $                                  | 0.94   |   | $ | 0.98 |   |
| Net income from discontinued operations                      |   | —                             |   | — |   |
| Net income                                                   |   | $                                  | 0.94   |   | $ | 0.98 |   |
| **Dividends declared  per share**                            |   | $                                  | 0.30   |   | $ | 0.21 |   |

 

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

 

4

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**ConsolidatedStatements of Comprehensive Income****(Unaudited)**

 
|                                                                         |   | **Quarter  Ended  March 31,** |   |
|------------------------------------------------------------------------------|--------|------------------------------------|--------|
| **(In millions)**                                                            |   | **2004**                           |   | **2003** |   |
|                                                                         |   |                               |   |   |   |
| Net income                                                                   |   | $                                  | 112.6  |   | $ | 127.2 |   |
| Other comprehensive income, before tax:                                      |   |                               |   |   |   |
| Unrealized gains (losses) on securities:                                     |   |                               |   |   |   |
| Unrealized holding gains (losses) arising  during period                     |   | 52.9                               |   | (13.8 | ) |
| Less: reclassification adjustment for  (gains) included in net income        |   | (0.5                               | )      | (1.2 | ) |
| Other comprehensive income (loss), before  tax                               |   | 52.4                               |   | (15.0 | ) |
| Income tax (expense) benefit related to  items of other comprehensive income |   | (22.6                              | )      | 6.2 |   |
| Other comprehensive income (loss), net of  tax                               |   | 29.8                               |   | (8.8 | ) |
| **Total comprehensive  income, net of tax**                                  |   | $                                  | 142.4  |   | $ | 118.4 |   |

 

*(See accompanying notes to the unauditedconsolidated financial statements.)*

 

5

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**ConsolidatedStatements of Changes In Stockholders’ Equity****(Unaudited)**

 
|                                                       |   | **Three  Months Ended  March 31,** |   |
|------------------------------------------------------------|--------|-----------------------------------------|--------|
| **(In millions)**                                          |   | **2004**                                |   | **2003** |   |
| **Common stock**                                           |   |                                    |   |   |   |
| Balance at beginning of period                             |   | $                                       | 2      |   | $ | 1 |   |
| Balance at end of period                                   |   | 2                                       |   | 1 |   |
| **Additional paid-in  capital**                            |   |                                    |   |   |   |
| Balance at beginning of period                             |   | 941                                     |   | 907 |   |
| Reissuance of treasury stock                               |   | 3                                       |   | (1 | ) |
| Amortization of ESOP shares committed to be  released      |   | 9                                       |   | 5 |   |
| Tax benefit for vested stock plans shares                  |   | 4                                       |   | 1 |   |
| Balance at end of period                                   |   | 957                                     |   | 912 |   |
| **Unallocated ESOP  shares**                               |   |                                    |   |   |   |
| Balance at beginning of period                             |   | (84                                     | )      | (89 | ) |
| Amortization of ESOP shares committed to be  released      |   | 1                                       |   | 1 |   |
| Balance at end of period                                   |   | (83                                     | )      | (88 | ) |
| **Retained earnings**                                      |   |                                    |   |   |   |
| Balance at beginning of period                             |   | 1,926                                   |   | 1,563 |   |
| Net income                                                 |   | 112                                     |   | 127 |   |
| Dividends declared                                         |   | (35                                     | )      | (26 | ) |
| Balance at end of period                                   |   | 2,003                                   |   | 1,664 |   |
| **Accumulated other  comprehensive income, net**           |   |                                    |   |   |   |
| Balance at beginning of period                             |   | (30                                     | )      | 24 |   |
| Net change in accumulated other  comprehensive income, net |   | 30                                      |   | (9 | ) |
| Balance at end of period                                   |   | —                                  |   | 15 |   |
| **Treasury stock, at  cost**                               |   |                                    |   |   |   |
| Balance at beginning of period                             |   | (916                                    | )      | (482 | ) |
| Reissuance of treasury stock                               |   | 5                                       |   | 6 |   |
| Purchase of treasury stock                                 |   | (20                                     | )      | (125 | ) |
| Balance at end of period                                   |   | (931                                    | )      | (601 | ) |
| **Total stockholders’  equity**                       |   | $                                       | 1,948  |   | $ | 1,903 |   |

 

*(See accompanyingnotes to the unaudited consolidated financial statements)*

 

6

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**ConsolidatedStatements of Cash Flows****(Unaudited)**

 
|                                                                               |   | **Three  Months Ended  March 31,** |   |
|------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
| **(In millions)**                                                                  |   | **2004**                                |   | **2003** |   |
| **Cash flows from  operating activities:**                                         |   |                                    |   |   |   |
| Net income                                                                         |   | $                                       | 113    |   | $ | 127 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |   |                                    |   |   |   |
| Net premium amortization on mortgage loans                                         |   | 5                                       |   | 8 |   |
| Net premium amortization on securities                                             |   | 5                                       |   | 8 |   |
| Provision for loan losses                                                          |   | 1                                       |   | — |   |
| Depreciation and amortization                                                      |   | 10                                      |   | 8 |   |
| Gain on sales of loans                                                             |   | (121                                    | )      | (124 | ) |
| Gain on sale of securities                                                         |   | (1                                      | )      | (1 | ) |
| ESOP and stock plans expense                                                       |   | 11                                      |   | 8 |   |
| Capitalization of servicing assets                                                 |   | (45                                     | )      | (1 | ) |
| Amortization and impairment of servicing  assets                                   |   | 25                                      |   | 9 |   |
| (Increase) decrease in assets associated  with operating activities:               |   |                                    |   |   |   |
| Loans receivable held for sale:                                                    |   |                                    |   |   |   |
| Loan originations                                                                  |   | (8,211                                  | )      | (9,328 | ) |
| Proceeds from loan sales                                                           |   | 8,288                                   |   | 9,946 |   |
| Other                                                                              |   | 207                                     |   | 59 |   |
| Retained interests in securitizations                                              |   | (3                                      | )      | 28 |   |
| Accrued interest receivable                                                        |   | —                                  |   | 2 |   |
| Other assets                                                                       |   | (53                                     | )      | 45 |   |
| Increase (decrease) in liabilities  associated with operating activities:          |   |                                    |   |   |   |
| Liabilities under recourse exposure                                                |   | (18                                     | )      | (11 | ) |
| Other liabilities                                                                  |   | 364                                     |   | 43 |   |
| Other, net                                                                         |   | 1                                       |   | 4 |   |
| Net cash provided by operating activities                                          |   | 578                                     |   | 830 |   |
| **Cash flows from  investing activities:**                                         |   |                                    |   |   |   |
| Net change in loans receivable held for  investment                                |   | (248                                    | )      | 271 |   |
| Purchases of premises and equipment                                                |   | (7                                      | )      | (14 | ) |
| Available for sale securities:                                                     |   |                                    |   |   |   |
| Proceeds from maturities                                                           |   | 150                                     |   | 796 |   |
| Proceeds from sales                                                                |   | 779                                     |   | 787 |   |
| Purchase of securities                                                             |   | (1,922                                  | )      | (4,130 | ) |
| Principal repayments                                                               |   | 400                                     |   | 898 |   |
| Federal Home Loan Bank Stock – (purchases)  redemptions                       |   | (75                                     | )      | 60 |   |
| Other, net                                                                         |   | 12                                      |   | 12 |   |
| Net cash used in investing activities                                              |   | (911                                    | )      | (1,320 | ) |
| **Cash flows from  financing activities:**                                         |   |                                    |   |   |   |
| Net change in:                                                                     |   |                                    |   |   |   |
| Domestic deposits                                                                  |   | 31                                      |   | 411 |   |
| Mortgagors’ escrow deposits                                                   |   | 13                                      |   | 8 |   |
| Proceeds from securities sold under  agreements to repurchase and other borrowings |   | 44,535                                  |   | 16,044 |   |
| Repayments of securities sold under  agreements to repurchase and other borrowings |   | (45,674                                 | )      | (15,489 | ) |
| Proceeds from advances from Federal Home  Loan Bank                                |   | 37,927                                  |   | 61,960 |   |
| Repayments of advances from Federal Home  Loan Bank                                |   | (36,427                                 | )      | (62,360 | ) |
| Cash dividends paid                                                                |   | (35                                     | )      | (26 | ) |
| Treasury stock purchased                                                           |   | (20                                     | )      | (125 | ) |
| Exercise of stock options                                                          |   | 8                                       |   | 5 |   |
| Net cash provided by financing activities                                          |   | 358                                     |   | 428 |   |
| Net increase (decrease) in cash and cash  equivalents                              |   | 25                                      |   | (62 | ) |
| Cash and cash equivalents – beginning of  period                              |   | 335                                     |   | 369 |   |
| Cash and cash equivalents – end of period                                     |   | $                                       | 360    |   | $ | 307 |   |
| **Non-cash  activities:**                                                          |   |                                    |   |   |   |
| Additions to other real estate owned, net                                          |   | $                                       | 11     |   | $ | 12 |   |
| Unsettled securities trades                                                        |   | $                                       | 257    |   | $ | — |   |
| **Supplemental  disclosure of cash flow information:**                             |   |                                    |   |   |   |
| Cash paid for income taxes                                                         |   | $                                       | 6      |   | $ | 20 |   |
| Interest paid                                                                      |   | $                                       | 113    |   | $ | 126 |   |

 

*(See accompanyingnotes to the unaudited consolidated financial statements)*

 

7

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**NotesTo The Unaudited Consolidated Financial Statements**

 

**NOTE 1****                                                    Summaryof Significant Accounting Policies**

 

**Basis of Presentation**

 

The unaudited consolidated financial statements of GreenPoint FinancialCorp. and Subsidiaries (“GreenPoint” or the “Company”) are prepared inaccordance with generally accepted accounting principles for interim financialinformation. In the opinion of management, all adjustments (consisting only ofnormal recurring accruals) necessary for a fair presentation of the Company’sinterim financial condition as of the dates indicated and the results ofoperations for the periods presented have been included. Certainreclassifications have been made to the prior period financial statements toconform to the current period presentation. The results of operations for theinterim periods shown are not necessarily indicative of results that may beexpected for the entire year.

 

The Company adopted a plan to exit themanufactured housing lending business in December 2001. Current andcomparative prior period consolidated statements of income present the resultsof continuing operations and discontinued operations separately.

 

These unaudited consolidated interimfinancial statements should be read in conjunction with the consolidatedfinancial statements and notes included in the Company’s Annual Report toshareholders for the year ended December 31, 2003.

 

##### **Use of Estimates**

 

The preparation of the Consolidated FinancialStatements under U.S. Generally Accepted Accounting Principals (“GAAP”)requires management to make estimates and assumptions that affect the reportedamounts of revenues, expenses, assets, liabilities and disclosures ofcontingent assets and liabilities as of the date of the Consolidated FinancialStatements. Actual results could differ from those estimates.

 

**Accounting for Loan Sales**

 

GreenPoint primarily sells loans in the wholeloan market. Loans sold on a whole loan basis are sold either with GreenPointreleasing or retaining the right to service the loans. When GreenPoint does notretain the servicing rights to the loans, the gain or loss on the sale is equalto the difference between the proceeds received and the book basis of the loanssold. If the loans are sold with GreenPoint retaining the servicing rights, thegain or loss depends in part on the fair value attributed to the servicingrights.

 

In addition to selling through the whole loanmarket, GreenPoint on occasion securitizes certain mortgage loans.

 

The rules governing the accounting for loansecuritizations are established in Statement of Financial Accounting StandardsN0. 140 – “Accounting for Transfers and Servicing of Financial Assets andExtinguishments of Liabilities” (“SFAS 140”). This standard establishes theconditions that must be present for treating a transfer of financial assets asa sale and the conditions that must be met to treat the transferor as aQualifying Special Purpose Entity (“QSPE”).

 

GreenPoint’s securitizations of mortgageloans involve the sale of a pool of loans to a QSPE and securities supported bythe cash flow from the transferred loans are sold by the QSPE to third partyinvestors. Funds received from the third-party investors are returned to GreenPointas payment for the transferred loans. Generally, the Company may retainservicing rights and one or more retained interests. These retained interestsinclude interest-only strips, subordinated certificates, transferor interests,demand notes and certain other credit enhancements.

 

For a securitization transaction to betreated as a sale under SFAS 140, the loans transferred by the Company musthave been isolated from the seller (even in bankruptcy or receivership), theQSPE must meet the significant limitations on it’s activities and thetransferor can not maintain effective control of the transferred assets. Inorder to determine if the loans have been isolated, GreenPoint obtains anopinion of legal counsel. The opinion must state that the transaction is a saleand that the assets transferred would not be consolidated with the transferor’sother assets in the event of a bankruptcy or receivership. A QSPE is exemptfrom being consolidated in the financial statements of a transferor or itsaffiliates under SFAS 140.

 

8

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In calculating the gain or loss on the sale,GreenPoint allocates the cost basis of the loans sold between the assets sold,the retained interests and servicing rights based on their relative fair valuesat the 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.Because market quotes are generally not available for retained interests and servicingassets, the Company generally estimates fair value using modeling techniquesbased on the assumptions the Company believes market participants would use forsimilar assets and liabilities.

 

##### **Representations and Warranties**

#####  

In the normal course of business, GreenPointmay be required to repurchase a previously sold mortgage if certaindeficiencies exist in the loan documentation. GreenPoint has established aliability for losses it estimates might be incurred (“the representation andwarranty liability”). This liability is included in the Consolidated Statementsof Financial Condition under other liabilities.

 

Additions to the representation and warrantyliability are reported as a reduction to gain on sale of loans. Payments madeto indemnify an investor for losses and credit losses that occur afterGreenPoint has re-acquired the loan are deducted from the representation andwarranty liability.

 

**Retained Interests inSecuritizations**

 

Generally, GreenPoint retains one or moreinterests in loans sold in a securitization. These interests includeinterest-only strips, subordinated certificates, transferor interests, demandnotes and the recorded liabilities for limited recourse provided on mortgageloans.

 

GreenPoint classifiesthese retained interests in securitizations as available for sale and carriesthese securities at fair value. To obtain fair values quoted market prices areused if available. Since market quotes are generally not available for retainedinterests, GreenPoint generally estimates fair value by using modelingtechniques to determine the present value of future cash flows usingassumptions of prepayments, defaults, loss severity rates, future interestrates and discount rates. These assumptions are based on GreenPoint’smanagement’s best estimates of what market participants would use for similarassets and liabilities.

 

Generally, if the fairvalue of a retained interest declines below its amortized cost basis, thechange in valuation is recognized in the consolidated statement of income andis classified as a change in valuation of retained interests. If the fair valueof a retained interest increases above its amortized cost basis, the unrealizedgain is reported, net of applicable taxes, in accumulated other comprehensiveincome, as a separate component of stockholders’ equity.

 

**Servicing Assets**

 

Servicing assets are carried at the lower ofcost or fair value and are amortized in proportion to and over the estimatednet servicing revenue.

 

In determining fair valueGreenPoint stratifies its servicing assets based on the risk characteristics ofthe underlying loan pools. The fair value of servicing assets is determined bycalculating the present value of estimated future net servicing cash flows,using assumptions of prepayments, defaults, ancillary income, servicing costsand discount rates that GreenPoint believes market participants would use forsimilar assets.

 

If GreenPoint determines that the impairmentfor a stratum is temporary, a valuation allowance is recognized through acharge to current earnings for the amount the amortized balance exceeds thecurrent fair value. If the fair value of the stratum were to later increase,the reduction of the valuation allowance may be recorded as an increase toservicing income. However, if GreenPoint determines that an impairment for astratum is other-than-temporary, the value of the servicing asset and anyrelated valuation allowance is written down.

 

9

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**Goodwill**

 

Goodwill represents the excess of cost over fair valueof assets of businesses acquired. The goodwill reported on the ConsolidatedStatements of Financial Condition arose from the 1995 acquisition of the NewYork Branches of Home Savings of America. In December 2001, GreenPoint formallyadopted a plan to discontinue the manufactured housing lending business. As aresult of this decision, management determined that the goodwill relating tothe 1998 acquisition of the manufactured housing finance business ofBankAmerica Housing Services (“BAHS”) was impaired and the remaining carryingvalue was written off.

 

In accordance with the adoption onJanuary 1, 2002 of Financial Accounting Standards No. 142, “Goodwill andOther Intangible Assets” (“SFAS 142”), GreenPoint ceased the amortization of goodwill.Since that date, the Company is required to test goodwill annually forimpairment. The test allocates goodwill to the Company’s reporting units andcompares the fair value of a reporting unit with its carrying amount, whichincludes goodwill. Impairment does not exist if the fair value of a reportingunit exceeds its carrying amount.

 

The goodwill shown on the ConsolidatedStatements of Financial Condition is attributable to the retail-banking segmentand is carried at its January 1, 2002 book value of $395 million. Based onGreenPoint’s testing of the retail-banking segment, no goodwill impairment wasrecognized in either 2003 or 2002.

 

**Stock-BasedCompensation Plans**

 

Deferred compensation for stock award plansare recorded as a reduction of stockholders’ equity and are calculated as thecost of the shares purchased by the Bank and contributed to the plan.Compensation expense is recognized over the vesting period of actual stockawards based upon the fair value of shares at the award date.

 

Compensation expense for the Employee StockOwnership Plan and Trust (“ESOP”) is recognized for the number of sharesallocated to ESOP participants, as they are committed to be released. Thedifference between the fair value of the shares allocated and the cost of theshares to the ESOP is charged or credited to additional paid-in capital.

 

The Company adopted the disclosure approachunder Statement of Financial Accounting Standards No. 123, “Accounting forStock-Based Compensation” (“SFAS 123”), as amended by Statement of FinancialAccounting Standards No. 148, “Accounting for Stock-Based Compensation –Transition and Disclosure”. Under these standards the Company discloses in thenotes to the financial statements the pro forma effects on net income andearnings per share, determined as if the fair value-based method had beenapplied in measuring compensation cost. The Company continues to applyAccounting Principal Board Statement No. 25, “Accounting for Stock Issued toEmployees” (“APB 25”) in accounting for its plans. Under APB 25, the Companyhas not recognized any costs related to its stock option plans since theoptions granted under these plans have an exercise price equal to the marketvalue of the Company’s common stock on the grant date.

 

The following table illustrates the effect onnet income and earnings per share if the Company had applied the fair valuerecognition provisions of SFAS 123, to stock-based employee compensation.

 
|                                                                                                                          |   | **Quarter  Ended  March 31,** |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
| **(In millions)**                                                                                                             |   | **2004**                           |   | **2003** |   |
|                                                                                                                          |   |                               |   |   |   |
| Net income as reported                                                                                                        |   | $                                  | 112.6  |   | $ | 127.2 |   |
| Deduct: Total stock-based employee  compensation expense determined under fair value based method net of related  tax effects |   | (2.3                               | )      | (2.3 | ) |
| Proforma net income                                                                                                           |   | $                                  | 110.3  |   | $ | 124.9 |   |
|                                                                                                                          |   |                               |   |   |   |
| Earnings per share:                                                                                                           |   |                               |   |   |   |
| Basic – as reported                                                                                                      |   | $                                  | 0.96   |   | $ | 1.00 |   |
| Basic – pro forma                                                                                                        |   | $                                  | 0.95   |   | $ | 0.98 |   |
| Diluted – as reported                                                                                                    |   | $                                  | 0.94   |   | $ | 0.98 |   |
| Diluted – pro forma                                                                                                      |   | $                                  | 0.92   |   | $ | 0.97 |   |

 

10

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**NOTE 2****                                                   ****Agreement and Plan of Merger**

 

On February 16, 2004, an Agreement andPlan of Merger dated February 15, 2004 by and between North ForkBancorporation, Inc. (“North Fork”) and GreenPoint was announced. The agreementprovides that North Fork will acquire GreenPoint in an all stock transaction.Under the terms of the agreement, in a tax-free exchange of shares, GreenPointshareholders will receive a fixed exchange ratio of 1.0514 shares of North Forkcommon stock for each GreenPoint share held upon consummation of theacquisition.

 

The agreement has been approved unanimouslyby the Boards of Directors of both companies and is subject to all requiredregulatory approvals, approval by shareholders of both companies and othercustomary conditions. The agreement establishes a reciprocal termination fee of$250 million and is expected to be completed in the third quarter of 2004.

 

**NOTE 3****                                                   ****Loans Receivable**

 

The Company’s loans receivable held for salebalances are summarized as follows:

 
| **(In millions)**                     |   | **March 31,  2004** |   | **Dec. 31,  2003** |   |
|---------------------------------------|--------|--------------------------|--------|--------------------|--------|
| Conventional first mortgage loans:    |   |                     |   |               |   |
| Residential one-to four-family        |   | $                        | 3,720  |               | $      | 4,036 |   |
| Commercial property                   |   | 54                       |   | 93                 |   |
| Second mortgage and home equity loans |   | 778                      |   | 589                |   |
| Other                                 |   | 1                        |   | 1                  |   |
| Total loans receivable held for sale  |   | 4,553                    |   | 4,719              |   |
| Net deferred loan origination costs   |   | 48                       |   | 45                 |   |
| Loans receivable held for sale, net   |   | $                        | 4,601  |               | $      | 4,764 |   |

 

The Company’s loans receivable held forinvestment balances are summarized as follows:

 
| **(In millions)**                                         |   | **March 31,  2004** |   | **Dec. 31,  2003** |   |
|-----------------------------------------------------------|--------|--------------------------|--------|--------------------|--------|
| Conventional first mortgage loans:                        |   |                     |   |               |   |
| Residential one-to four-family                            |   | $                        | 8,406  |               | $      | 8,289 |   |
| Residential multi-family                                  |   | 198                      |   | 217                |   |
| Commercial property                                       |   | 1,170                    |   | 1,029              |   |
| Second mortgage and home equity loans                     |   | 290                      |   | 301                |   |
| Manufactured housing loans                                |   | 51                       |   | 55                 |   |
| Other                                                     |   | 25                       |   | 25                 |   |
| Total loans receivable held for investment                |   | 10,140                   |   | 9,916              |   |
| Net deferred loan origination costs and  purchase premium |   | 50                       |   | 47                 |   |
| Allowance for loan losses                                 |   | (78                      | )      | (78                | )      |
| Loans receivable held for investment, net                 |   | $                        | 10,112 |               | $      | 9,885 |   |

 

11

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**NOTE 4****                                                   ****Securities Available for Sale**

 

Theamortized cost and estimated fair value of securities available for sale atMarch 31, 2004 and December 31, 2003 are summarized as follows:

 
|                                                  |   | **March 31,  2004** |   |
|-------------------------------------------------------|--------|--------------------------|--------|
| **(In millions)**                                     |   | **Amortized  Cost**      |   | **Gross  Unrealized  Gains** |   | **Gross  Unrealized  Losses** |   | **Fair  Value** |   |
| U.S.  Government and Federal Agency Obligations:      |   |                     |   |   |   |   |   |   |   |
| U.S.  Treasury notes/bills                            |   | $                        | 51     |   | $ | — |   | $ | (1 | ) | $ | 50 |   |
| Agency  notes                                         |   | 172                      |   | 1 |   | (4 | ) | 169 |   |
| Mortgage-backed  securities                           |   | 431                      |   | 8 |   | (1 | ) | 438 |   |
| Collateralized  mortgage obligations                  |   | 5,728                    |   | 24 |   | (22 | ) | 5,730 |   |
| Trust  certificates collateralized by GNMA securities |   | 2                        |   | — |   | — |   | 2 |   |
| Corporate  bonds                                      |   | 149                      |   | 2 |   | (1 | ) | 150 |   |
| Municipal  bonds                                      |   | 36                       |   | 3 |   | — |   | 39 |   |
| Equity  securities                                    |   | 330                      |   | 4 |   | (17 | ) | 317 |   |
| Total  securities available for sale                  |   | $                        | 6,899  |   | $ | 42 |   | $ | (46 | ) | $ | 6,895 |   |

 
|                                                  |   | **December 31,  2003** |   |
|-------------------------------------------------------|--------|-----------------------------|--------|
| **(In millions)**                                     |   | **Amortized  Cost**         |   | **Gross  Unrealized  Gains** |   | **Gross  Unrealized  Losses** |   | **Fair  Value** |   |
| U.S.  Government and Federal Agency Obligations:      |   |                        |   |   |   |   |   |   |   |
| U.S. Treasury  notes/bills                            |   | $                           | 101    |   | $ | — |   | $ | (4 | ) | $ | 97 |   |
| Agency  notes                                         |   | 240                         |   | — |   | (5 | ) | 235 |   |
| Mortgage-backed  securities                           |   | 581                         |   | 9 |   | (5 | ) | 585 |   |
| Collateralized  mortgage obligations                  |   | 4,912                       |   | 8 |   | (44 | ) | 4,876 |   |
| Trust  certificates collateralized by GNMA securities |   | 2                           |   | — |   | — |   | 2 |   |
| Corporate  bonds                                      |   | 149                         |   | 1 |   | (3 | ) | 147 |   |
| Municipal  bonds                                      |   | 46                          |   | 3 |   | — |   | 49 |   |
| Equity  securities                                    |   | 278                         |   | 2 |   | (17 | ) | 263 |   |
| Total  securities available for sale                  |   | $                           | 6,309  |   | $ | 23 |   | $ | (78 | ) | $ | 6,254 |   |

 

Thefollowing is a summary of the fair value of securities with unrealized lossesand identification, by security type, of those unrealized losses that have beenin place for less than twelve months and for twelve months or more:

 
|                                                  |   | **At  March 31, 2004** |   |
|-------------------------------------------------------|--------|-----------------------------|--------|
|                                                  |   | **Less Than  12 Months**    |   | **12 Months  of More** |   | **Total** |   |
| **(In millions)**                                     |   | **Fair  Value**             |   | **Unrealized  Losses** |   | **Fair  Value** |   | **Unrealized  Losses** |   | **Fair  Value** |   | **Unrealized  Losses** |   |
| U.S. Government and Federal Agency  Obligations:      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury notes/bills                             |   | $                           | 50     |   | $ | 1 |   | $ | — |   | $ | — |   | $ | 50 |   | $ | 1 |   |
| Agency notes                                          |   | 169                         |   | 4 |   | — |   | — |   | 169 |   | 4 |   |
| Mortgage-backed securities                            |   | 438                         |   | 1 |   | — |   | — |   | 438 |   | 1 |   |
| Collateralized mortgage obligations                   |   | 5,161                       |   | 19 |   | 569 |   | 3 |   | 5,730 |   | 22 |   |
| Trust certificates collateralized by GNMA  securities |   | —                      |   | — |   | 2 |   | — |   | 2 |   | — |   |
| Corporate bonds                                       |   | 95                          |   | — |   | 55 |   | 1 |   | 150 |   | 1 |   |
| Municipal bonds                                       |   | 39                          |   | — |   | — |   | — |   | 39 |   | — |   |
| Equity securities                                     |   | 248                         |   | 13 |   | 69 |   | 4 |   | 317 |   | 17 |   |
| Total                                                 |   | $                           | 6,200  |   | $ | 38 |   | $ | 695 |   | $ | 8 |   | $ | 6,895 |   | $ | 46 |   |

 

12

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|                                                  |   | **At  December 31, 2003** |   |
|-------------------------------------------------------|--------|--------------------------------|--------|
|                                                  |   | **Less Than  12 Months**       |   | **12 Months  of More** |   | **Total** |   |
| **(In millions)**                                     |   | **Fair  Value**                |   | **Unrealized  Losses** |   | **Fair  Value** |   | **Unrealized  Losses** |   | **Fair  Value** |   | **Unrealized  Losses** |   |
| **U.S. Government and  Federal Agency Obligations:**  |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury notes/bills                             |   | $                              | 97     |   | $ | 4 |   | $ | — |   | $ | — |   | $ | 97 |   | $ | 4 |   |
| Agency notes                                          |   | 235                            |   | 5 |   | — |   | — |   | 235 |   | 5 |   |
| Mortgage-backed securities                            |   | 585                            |   | 5 |   | — |   | — |   | 585 |   | 5 |   |
| Collateralized mortgage obligations                   |   | 4,792                          |   | 43 |   | 84 |   | 1 |   | 4,876 |   | 44 |   |
| Trust certificates collateralized by GNMA  securities |   | 2                              |   | — |   | — |   | — |   | 2 |   | — |   |
| Corporate bonds                                       |   | 74                             |   | 1 |   | 73 |   | 2 |   | 147 |   | 3 |   |
| Municipal bonds                                       |   | —                         |   | — |   | 49 |   | — |   | 49 |   | — |   |
| Equity securities                                     |   | 174                            |   | 10 |   | 89 |   | 7 |   | 263 |   | 17 |   |
| Total                                                 |   | $                              | 5,959  |   | $ | 68 |   | $ | 295 |   | $ | 10 |   | $ | 6,254 |   | $ | 78 |   |

 

The unrealized losses in the portfolio resulted from changes in marketinterest rates and not from a deterioration in the creditworthiness of theissuer. At March 31, 2004 there were 154 positions in the portfolio withan unrealized loss.

 

**NOTE 5****                                                   ****Mortgage RecourseArrangements, Retained Interests in Securitizations and Servicing Assets**

 

The following describes the balancesassociated with recourse arrangements, the balances and activity in thecorresponding retained interests, the balances and activity in servicing assetsand the economic assumptions used in valuing the retained interests andservicing assets of mortgage loans. The discussion of manufactured housingrecourse and servicing assets is discussed in Note 10.

 

**Recourse Arrangements**

 

GreenPoint sells loans in the secondarymarket either through whole loan sales or by securitization.  Generally the credit risk associated withthose loans is transferred to the buyer. GreenPoint retains recourse on suchsales. In whole loan sales the recourse is limited to documentation representationsand warranties and in securitizations the recourse is limited to the amount ofcredit enhancement GreenPoint contributes to the particular transaction. Theinvestors and the securitization trusts have no recourse to GreenPoint’s otherassets for failure of debtors to pay when due except for the limited recoursedescribed herein.

 

Typically insecuritizations, GreenPoint will provide credit enhancement to the transactionto indemnify losses incurred by the investors. These credit enhancements willbe in the form of over-collateralization, excess interest cash flows,subordinated interests or demand notes. GreenPoint retains those interests and,as such, those interests represent the maximum recourse that GreenPoint has ona mortgage securitization. GreenPoint also entered into a whole loan sale wherethe risk of loss is shared between GreenPoint and the investor.

 

13

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The following table showsthe principal balances of mortgage loans and amounts of maximum recourse toGreenPoint for securitizations and risk-share sales:

 
| **(In millions)**          |   | **March 31,  2004** |   | **Dec. 31,  2003** |   |
|----------------------------|--------|--------------------------|--------|--------------------|--------|
| Mortgage securitizations:  |   |                     |   |               |   |
| Principal balance          |   | $                        | 416    |               | $      | 458 |   |
| Maximum recourse *(1)*     |   | 51                       |   | 48                 |   |
| Mortgage risk-share sales: |   |                     |   |               |   |
| Principal balance          |   | 147                      |   | 170                |   |
| Maximum recourse *(2)*     |   | 144                      |   | 166                |   |
|                            |        |                          |        |                    |        |  |  |

 

----

*(1)**      **Represents the sum of allmortgage retained interests on the balance sheet.*

*(2)**      **The recourse arrangementsunder the mortgage sale transactions represent a risk sharing arrangement inwhich GreenPoint has transferred the first 2% of losses to the purchaser.GreenPoint maintains a liability of $1 million to cover expected losses fromthis arrangement.*

 

The following represents quantitativeinformation about delinquencies on loans securitized and loans sold underrisk-sharing arrangements:

 
|                                                 |   | **March 31,  2004** |   | **December 31,  2003** |   |
|------------------------------------------------------|--------|--------------------------|--------|-----------------------------|--------|
| **(In millions)**                                    |   | **Securitized**          |   | **Sold**                    |   | **Securitized** |   | **Sold** |   |
| Principal balance of loans                           |   | $                        | 416    |                        | $      | 147 |   | $ | 458 |   | $ | 170 |   |
| Principal balance of loans 90 days or more  past due |   | 12                       |   | 24                          |   | 14 |   | 26 |   |
|                                                      |        |                          |        |                             |        |  |  |  |  |  |  |  |  |

 

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

 

The assets recognized as retained interestsin mortgage securitizations include interest-only strips, transferor interests,demand notes and subordinated certificates. These retained interests representthe maximum amount of loss GreenPoint can incur in its mortgagesecuritizations. The activity in retained interests in mortgage securitizationsis summarized as follows:

 
|                                       |   | **At and for  the  Quarter Ended  March 31,** |   |
|--------------------------------------------|--------|----------------------------------------------------|--------|
| **(In millions)**                          |   | **2004**                                           |   | **2003** |   |
| **Retained Interests in Securitizations:** |   |                                               |   |   |   |
| Balance at beginning of period             |   | $                                                  | 48     |   | $ | 104 |   |
| Additions from securitizations             |   | —                                             |   | — |   |
| Interest and other income                  |   | 1                                                  |   | 2 |   |
| Cash advanced (received)                   |   | 2                                                  |   | (6 | ) |
| Cleanup call exercise                      |   | —                                             |   | (23 | ) |
| Change in unrealized gain                  |   | 1                                                  |   | (1 | ) |
| Change in subordinated certificates        |   | (1                                                 | )      | — |   |
| Change in valuation of retained interests  |   | —                                             |   | (1 | ) |
| Balance at end of period                   |   | $                                                  | 51     |   | $ | 75 |   |

 

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.

 

14

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**Valuation Assumptions**

 

There were no new securitizations recordedduring the quarter ended March 31, 2004. The key economic assumptions usedin estimating the fair value of the entire portfolio of mortgage retainedinterests at March 31, 2004 and December 31, 2003 were as follows:

 
|                             |   | **Estimate  of Fair  Value at** |   |
|----------------------------------|--------|---------------------------------|--------|
|                             |   | **March 31,  2004**        |   | **Dec. 31,  2003** |   |
| Weighted average life (in years) |   | 0.7                             |   | 0.7 |   |
| Weighted average prepayment rate |   | 58.2                            | %      | 59.7 | % |
| Weighted average loss rate       |   | 3.6                             | %      | 3.2 | % |
| Cumulative loss *(1)*            |   | 2.5                             | %      | 2.2 | % |
| Asset cash flows discounted at   |   | 8.1                             | %      | 8.0 | % |

 

----

*(1)**       Remaining estimated netlosses divided by outstanding principal balance.*

 

**Representationsand Warranties**

 

**A majority of GreenPoint’s loansales are done as whole loan sales. GreenPoint makes certain representationsand warranties, which permit the investor to return the mortgage loan to the originatorif deficiencies exist in the loan documentation. This is a common practice inthe mortgage secondary markets. GreenPoint maintains a liability for suchpotential indemnifications and repurchases. The following table summarizes theactivity in that liability and the amount of losses incurred by GreenPoint onsuch repurchases:**

 
|                              |   | **At and for  the  Quarter Ended  March 31,** |   |
|-----------------------------------|--------|----------------------------------------------------|--------|
| **(In millions)**                 |   | **2004**                                           |   | **2003** |   |
| Balance at beginning of period    |   | $                                                  | 61     |   | $ | 32 |   |
| Provision charged to income *(1)* |   | 11                                                 |   | 12 |   |
| Losses                            |   | (6                                                 | )      | (9 | ) |
| Balance at end of period          |   | $                                                  | 66     |   | $ | 35 |   |

 

----

*(1)**       The provision charged toincome is reported as a reduction to gain on sale of loans.*

 

**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 mortgage loans,the predominant risk characteristics are loan type and interest rate. The assetpools underlying certain mortgage servicing assets at times do not meetagreed-upon servicing covenants. Management evaluates the impact of thesecovenants on the value of the servicing assets and incorporates the assessmentin their quarterly impairment review.

 

15

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The activity in mortgage servicing assets issummarized as follows:

 
|                                           |   | **At and for  the  Quarter Ended  March 31,** |   |
|------------------------------------------------|--------|----------------------------------------------------|--------|
| **(In millions)**                              |   | **2004**                                           |   | **2003** |   |
| **Servicing assets**                           |   |                                               |   |   |   |
| Balance at beginning of period                 |   | $                                                  | 203    |   | $ | 112 |   |
| Additions                                      |   | 45                                                 |   | 20 |   |
| Sales                                          |   | (1                                                 | )      | (20 | ) |
| Amortization                                   |   | (15                                                | )      | (7 | ) |
| Balance at end of period                       |   | 232                                                |   | 105 |   |
| **Reserve for impairment of servicing assets** |   |                                               |   |   |   |
| Balance at beginning of period                 |   | (27                                                | )      | (27 | ) |
| Additional (impairment) recovery               |   | (10                                                | )      | 1 |   |
| Balance at end of period                       |   | (37                                                | )      | (26 | ) |
| Servicing assets, net                          |   | $                                                  | 195    |   | $ | 79 |   |

 

The estimated fair values of mortgageservicing assets were $196 million and $82 million at March 31, 2004 and2003, respectively and $177 million at December 31, 2003.

 

Servicer advances receivable totaled $90million and $62 million at March 31, 2004 and 2003, respectively and $79million at December 31, 2003.

 

The significant assumptions used inestimating the fair value of the servicing assets at March 31, 2004 andDecember 31, 2003 were as follows:

 
|                             |   | **March 31,  2004** |   | **Dec. 31,  2003** |   |
|----------------------------------|--------|--------------------------|--------|--------------------|--------|
| Weighted average prepayment rate |   | 28.6                     | %      | 30.5               | %      |
| Weighted average life (in years) |   | 3.7                      |   | 4.2                |   |
| Cash flows discounted at         |   | 10.4                     | %      | 10.3               | %      |

 

**NOTE 6****                                                   ****Derivative Financial Instruments**

 

GreenPoint enters into mandatory commitmentsto deliver mortgage whole loans to various investors and to issue privatesecurities 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 $3.3 billion and $2.6 billion at March 31, 2004 andDecember 31, 2003, respectively. The forward delivery commitmentsdesignated as fair value hedges associated with mortgage loans had notionalvalues of $2.0 billion and $2.2 billion at March 31, 2004 andDecember 31, 2003, respectively. The notional amounts of forward deliverycommitments used to manage the interest rate risk associated with interest ratelock commitments on mortgage loans were $1.3 billion and $494 million atMarch 31, 2004 and December 31, 2003, respectively. The followingtable shows hedge ineffectiveness on fair value hedges included in gain on saleof loans for the quarter ended March 31, 2004 and 2003:

 
|                                     |   | **For the  Quarter  Ended March 31,** |   |
|------------------------------------------|--------|--------------------------------------------|--------|
| **(In millions)**                        |   | **2004**                                   |   | **2003** |   |
| Gain (loss) on hedged asset or liability |   | $                                          | 18     |   | $ | 15 |   |
| Gain (loss) on derivatives               |   | (16                                        | )      | (13 | ) |
| Hedge ineffectiveness                    |   | $                                          | 2      |   | $ | 2 |   |

 

16

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In November 2003, the company enteredinto an interest swap agreement with a notional amount of $350 million.The company has designated this swap as fair value hedge of the $350 million of3.20% Senior Notes issued in June of 2003. This swap met the criteriarequired to qualify for short cut method accounting for derivatives. Based onthis method, no ineffectiveness is assumed and fair value changes in the swapare recorded as changes in value of the swap and the long term debt.

 

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. At March 31, 2004 and December 31, 2003the receivable on contracts with a positive fair value was $6 million and $3million, respectively. To reduce credit risk, management may deem it necessaryto obtain collateral.

 

**NOTE 7****                                                   ****Pension Plan and Other Employee Benefits**

 

The Company maintains a noncontributory, qualified,defined benefit pension plan (the “Pension Plan”) covering substantially allemployees who have completed one year of service. The funding of the PensionPlan is actuarially determined on an annual basis.

 

The Company also provides a comprehensivemedical plan for certain current and future retirees and certain of theirspouses until they become eligible for Medicare and a Medicare SupplementalPlan once they become eligible for Medicare. The plan was amended effectiveMarch 1, 1998 to provide different benefit and eligibility provisions toemployees who retire after that date. The Company also offers life insurance tocertain current and future retirees. Benefits are funded on a pay-as-you-gobasis and there are no plan assets to pre-fund the liability. Currently, thecompany expects to make a post-retirement contribution in 2004 of less than onemillion.

 

The following tables set forth the componentsof net periodic benefit cost for the periods ended March 31, 2004 and2003. An actuarial analysis of plan assets and benefit obligations is completedas of September 30th of each year.

 
|                                     |   | **Pension  Benefits**             |   | **Postretirement  Benefits** |   |
|------------------------------------------|--------|-----------------------------------|--------|------------------------------|--------|
|                                     |   | **Quarter  Ended March 31,** |   |
|                                     |   | **2004**                          |   | **2003**                     |   | **2004** |   | **2003** |   |
| Components of Net Periodic Benefit Cost: |   |                              |   |                         |   |   |   |   |   |
| Service cost                             |   | $                                 | 1.1    |                         | $      | 1.0 |   | $ | 0.2 |   | $ | 0.2 |   |
| Interest cost                            |   | 0.8                               |   | 0.7                          |   | 0.3 |   | 0.2 |   |
| Expected return on plan assets           |   | 0.9                               |   | (0.7                         | )      | — |   | — |   |
| Amortization of prior service cost       |   | —                            |   | —                       |   | (0.1 | ) | (0.1 | ) |
| Recognized actuarial gain                |   | —                            |   | —                       |   | — |   | — |   |
| Curtailment                              |   | —                            |   | —                       |   | — |   | — |   |
| Net periodic benefit cost                |   | $                                 | 1.0    |                         | $      | 1.1 |   | $ | 0.4 |   | $ | 0.3 |   |

 

**NOTE 8****                                                   ****Stock Incentive Plans**

 

For the three months ended March 31,2004, the Company granted options to purchase 1,933,750 shares of the Company’scommon stock to certain officers and directors, at an exercise price of $37.95.These awards vest at various intervals over three years, on the anniversarydates of the awards.

 

17

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**NOTE 9****                                                   ****Discontinued Operations**

 

In December 2001, GreenPoint formally adopted a plan todiscontinue the manufactured housing lending business. GreenPoint’sconsolidated statements of income have been presented to reflect themanufactured housing lending business as a discontinued operation. Accordingly,the income and expenses relating to the manufactured housing business arereported as “discontinued operations” in the consolidated statements of income.In conjunction with this plan, GreenPoint honored previously existing loancommitments to fund approved loans, but did not approve or process any new loanapplications subsequent to the announcement to discontinue the business.GreenPoint continues to service a portfolio of manufactured housing loans andwill proceed with the orderly liquidation of the business in conjunction withits existing servicing commitments. See Note 10 for a further description ofthe valuation of retained interests associated with the discontinuedoperations.

 

The assets and liabilities from discontinuedoperations at March 31, 2004 and December 31, 2003 were as follows:

 
| **(In millions)**                         |   | **March 31,  2004** |   | **Dec. 31,  2003** |   |
|-------------------------------------------|--------|--------------------------|--------|--------------------|--------|
| **Assets:**                               |   |                     |   |               |   |
| Cash, cash equivalents and securities     |   | $                        | 35     |               | $      | 37 |   |
| Retained interests in securitizations     |   | 1                        |   | 1                  |   |
| Loans receivable:                         |   |                     |   |               |   |
| Loans receivable held for investment      |   | 51                       |   | 55                 |   |
| Deferred loan fees and unearned discount  |   | —                   |   | (1                 | )      |
| Allowance for loan losses                 |   | (3                       | )      | (3                 | )      |
| Loans receivable held for investment, net |   | 48                       |   | 51                 |   |
| Servicing assets                          |   | 7                        |   | 7                  |   |
| Deferred tax assets                       |   | 114                      |   | 117                |   |
| Intercompany receivable                   |   | 26                       |   | 25                 |   |
| Other assets                              |   | 129                      |   | 134                |   |
| Total assets                              |   | $                        | 360    |               | $      | 372 |   |
| Liabilities:                              |   |                     |   |               |   |
| Liability under recourse exposure         |   | $                        | 207    |               | $      | 225 |   |
| Other liabilities                         |   | 62                       |   | 69                 |   |
| Allocated capital                         |   | 91                       |   | 78                 |   |
| Total liabilities and equity              |   | $                        | 360    |               | $      | 372 |   |

 

## **The deferred tax asset representsthe tax receivable associated with the write-down to the carrying value ofcertain assets of the discontinued business. A portion of the recorded loss(primarily goodwill) was not currently deductible for tax purposes and will beamortized on a straight-line basis through 2011.**

 

## **Other assets include premises andequipment, servicer advances, intercompany receivables and other operatingreceivables associated with the servicing operation. Other liabilitiesrepresent balances due to investors and surety providers and accrued expensesincurred in the normal course of the discontinued operation. Allocated equityrepresents the balance of equity capital allocated to the discontinued businessunder the Company’s equity allocation formula.**

 

The net income of $0.1 million and $0.3million reported for the quarters ended March 31, 2004 and 2003,respectively, represents the difference between the projected results and theactual results of the discontinued business.

 

The Bank has used interest rate swaps forspecific manufactured housing securitizations. These swaps are recorded at fairvalue. The combined notional value of these swaps was $511 million and $533million at March 31, 2004 and December 31, 2003, respectively.

 

18

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**NOTE 10****                                            ****Manufactured Housing Recourse Arrangements, RetainedInterests in Securitizations and Servicing Assets**

 

InDecember 2001, GreenPoint formally adopted a plan to discontinue themanufactured housing lending business. Although it exited the manufacturedhousing lending business, GreenPoint continues to service existing loans. Suchcommitments expose GreenPoint to losses on or from securitizations and loansales. The investors and the securitization trusts have no recourse to GreenPoint’sother assets for failure of debtors to pay when due except for the recoursedescribed herein. The following describes the balances associated with recoursearrangements, the balances and activity in the corresponding retainedinterests, the balances and activity in servicing assets and the economicassumptions used in valuing the retained interests and servicing assets.

 

**Recourse Arrangements**

 

The following table summarizes the principal balances of manufacturedhousing loans securitized and sold, the maximum recourse to GreenPoint on thoseloans and the liability recorded for such recourse.

 
| **(In millions)**                     |   | **March 31,  2004** |   | **Dec. 31,  2003** |   |
|---------------------------------------|--------|--------------------------|--------|--------------------|--------|
| Manufactured housing securitizations: |   |                     |   |               |   |
| Principal balance                     |   | $                        | 3,499  |               | $      | 3,623 |   |
| Maximum recourse *(1)*                |   | 522                      |   | 538                |   |
| Recorded liability                    |   | 200                      |   | 217                |   |
| Manufactured housing sales:           |   |                     |   |               |   |
| Principal balance                     |   | 211                      |   | 218                |   |
| Maximum recourse                      |   | 211                      |   | 218                |   |
| Recorded liability                    |   | 7                        |   | 8                  |   |
|                                       |        |                          |        |                    |        |  |  |

 

----

*(1)**       A portion of thesecuritization maximum exposure is a retained interest asset. As ofMarch 31, 2004 and December 31, 2003 the manufactured housingretained interest asset was $1 million for both periods.*

 

GreenPoint’s manufactured housing securitization exposure lies in acorporate guarantee issued with each securitization in the form of a letter ofcredit to indemnify a limited amount of losses to the investors. The followingtable summarizes those letters of credit and the amount of draws GreenPointexpects.

 
| **(In millions)**                |   | **March 31,  2004** |   | **Dec. 31,  2003** |   |
|----------------------------------|--------|--------------------------|--------|--------------------|--------|
| Letters of credit outstanding    |   | $                        | 521    |               | $      | 537 |   |
| Projected letter of credit draws |   | (219                     | )      | (239               | )      |
| Unreserved exposure              |   | $                        | 302    |               | $      | 298 |   |

 

GreenPoint’s liability under recourseexposure for manufactured housing securitizations represents the present valueof the projected letter of credit draws. Of the $3.5 billion of securitizedloans outstanding there are five securitizations totaling $1.4 billion, with$68 million in letters of credit remaining, in which GreenPoint’s recordedliability is equal to its remaining exposure under those letters of credit.

 

Under certain securitizations, GreenPoint is committed to exercise itsoptional termination right and retire such transactions when the underlyingloans total 10% of the original loan balance. Loans to be repurchased underthis commitment total $376 million and the projected financial statement impactis included in the operating results of the discontinued business.

 

Pursuant to GreenPoint’s letter of credit agreements associated withits manufactured housing securitizations, the announcement of a change incontrol, more fully described in Note 2, may require GreenPoint to fully fundits remaining obligations under its outstanding letters of credit. If required,the funding would result in a payment of approximately $521 million into thesecuritization trusts. The funds remaining in the trusts would be returned toGreenPoint upon maturity of each securitization agreement. Although a finalassessment of the impact will be determined by the timing, structure, anddollar amount of the fundings, the event is not expected to have a materialimpact on the Company’s financial position.

 

19

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

 
|                                                       |   | **March 31,  2004** |   | **December 31,  2003** |   |
|------------------------------------------------------------|--------|--------------------------|--------|-----------------------------|--------|
| **(In millions)**                                          |   | **Securitized**          |   | **Sold**                    |   | **Securitized** |   | **Sold** |   |
| Principal balance of loans                                 |   | $                        | 3,499  |                        | $      | 211 |   | $ | 3,623 |   | $ | 218 |   |
| Principal balance of loans 90 days or more  past due *(1)* |   | 161                      |   | 1                           |   | 191 |   | 2 |   |
|                                                            |        |                          |        |                             |        |  |  |  |  |  |  |  |  |

 

----

*(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  March 31,** |   |
|-------------------------------------------|--------|----------------------------------------------------|--------|
| **(In millions)**                         |   | **2004**                                           |   | **2003** |   |
| **Liability for Recourse Exposure:**      |   |                                               |   |   |   |
| Balance at beginning of period            |   | $                                                  | 225    |   | $ | 300 |   |
| Interest expense                          |   | 3                                                  |   | 5 |   |
| Letter of credit draws and other charges  |   | (17                                                | )      | (17 | ) |
| Letter of credit pre-funding              |   | —                                             |   | — |   |
| Change in valuation of retained interests |   | (4                                                 | )      | 1 |   |
| Balance at end of period                  |   | $                                                  | 207    |   | $ | 289 |   |

 

On a quarterly basis, GreenPoint reviews theliability for recourse exposure on manufactured housing securitizations basedon management’s best estimate of future cash flows associated with thecorporate guarantees.

 
|                                       |   | **At and for  the  Quarter Ended  March 31,** |   |
|--------------------------------------------|--------|----------------------------------------------------|--------|
| **(In millions)**                          |   | **2004**                                           |   | **2003** |   |
| **Retained Interests in Securitizations:** |   |                                               |   |   |   |
| Balance at beginning of period             |   | $                                                  | 1      |   | $ | 4 |   |
| Letter of credit pre-funding               |   | —                                             |   | — |   |
| Interest and other income                  |   | —                                             |   | — |   |
| Cash received                              |   | —                                             |   | — |   |
| Change in unrealized gain                  |   | —                                             |   | — |   |
| Change in valuation of retained interests  |   | —                                             |   | (1 | ) |
| Balance at end of period                   |   | $                                                  | 1      |   | $ | 3 |   |

 

20

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**Valuation Assumptions**

 

The key economic assumptions used inestimating the fair value of the entire portfolio of manufactured housingretained interests, both assets and liabilities, at March 31, 2004 andDecember 31, 2003 were as follows:

 
|                                   |   | **Estimate  of Fair  Value at** |   |
|----------------------------------------|--------|---------------------------------|--------|
|                                   |   | **March 31,  2004**        |   | **Dec. 31,  2003** |   |
| Weighted average life (in years)       |   | 5.4                             |   | 5.4 |   |
| Weighted average prepayment rate *(1)* |   | 5.9                             | %      | 5.9 | % |
| Weighted average default rate          |   | 6.0                             | %      | 6.1 | % |
| Loss severity rate                     |   | 92.0                            | %      | 90.5 | % |
| Weighted average loss rate             |   | 5.5                             | %      | 5.5 | % |
| Cumulative loss *(2)*                  |   | 29.7                            | %      | 29.7 | % |
| Asset cash flows discounted at         |   | 14.0                            | %      | 14.0 | % |
| Liability cash flows discounted at     |   | 6.6                             | %      | 6.6 | % |

 

----

*(1)**      **Excludes weighted averagedefault rate.*

*(2)**      **Remaining estimated netlosses divided by outstanding principal balance.*

 

**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 manufactured housingloans, the predominant risk characteristics are loan type and interest ratetype. The asset pools underlying certain manufactured housing servicing assetsat times do not meet agreed-upon servicing covenants. Management evaluates theimpact of these covenants on the value of the servicing assets and incorporatesthe assessment in their quarterly impairment review.

 

The activity in manufactured housingservicing assets is summarized as follows:

 
|                                           |   | **At and for  the  Quarter Ended  March 31,** |   |
|------------------------------------------------|--------|----------------------------------------------------|--------|
| **(In millions)**                              |   | **2004**                                           |   | **2003** |   |
| **Servicing assets**                           |   |                                               |   |   |   |
| Balance at beginning of period                 |   | $                                                  | 35     |   | $ | 101 |   |
| Additions                                      |   | —                                             |   | — |   |
| Sales                                          |   | —                                             |   | — |   |
| Amortization                                   |   | 1                                                  |   | (2 | ) |
| Balance at end of period                       |   | 36                                                 |   | 99 |   |
| **Reserve for impairment of servicing assets** |   |                                               |   |   |   |
| Balance at beginning of period                 |   | (28                                                | )      | (69 | ) |
| Additions                                      |   | (1                                                 | )      | — |   |
| Balance at end of period                       |   | (29                                                | )      | (69 | ) |
| Servicing assets, net                          |   | $                                                  | 7      |   | $ | 30 |   |

 

The estimated fair values of manufacturedhousing servicing assets were $15 million and $38 million at March 31,2004 and 2003, respectively and $16 million at December 31, 2003.

 

Manufactured housing servicer advancesreceivable totaled $37 million at March 31, 2004 and 2003 and$39 million at December 31, 2003.

 

21

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The significant assumptions used inestimating the fair value of manufactured housing servicing assets atMarch 31, 2004 and December 31, 2003 were as follows:

 
|                                   |   | **March 31,  2004** |   | **Dec. 31,  2003** |   |
|----------------------------------------|--------|--------------------------|--------|--------------------|--------|
| Weighted average prepayment rate *(1)* |   | 6.6                      | %      | 6.6                | %      |
| Weighted average life (in years)       |   | 5.2                      |   | 5.3                |   |
| Weighted average default rate          |   | 5.0                      | %      | 5.1                | %      |
| Cash flows discounted at               |   | 14.0                     | %      | 14.0               | %      |

 

----

*(1)**      **Excludes weighted averagedefault rate.*

 

**NOTE 11****                                            ****Loan Commitments and Contingencies**

 

In the normal course of business, there arevarious outstanding loan commitments and contingent liabilities that have notbeen reflected in the consolidated financial statements. In addition, in thenormal course of business, there are various other outstanding legal andadministrative proceedings. In the opinion of management, after consultationwith legal counsel, the financial position and results of operations of theCompany will not be affected materially as a result of such loan commitmentsand contingent liabilities or by the outcome of such legal or administrativeproceedings.

 

The principal commitments and contingentliabilities of the Company are discussed in the following paragraphs.

 

**Pending Litigation**

 

In the ordinary course of business, the Corporation and itssubsidiaries are defendants in or parties to a number of pending and threatenedlegal actions and proceedings, and are also involved from time to time ininvestigations and administrative proceedings by governmental agencies. Certainof such actions and proceedings involve alleged violations of consumerprotection laws, including claims relating to the Corporation’s loanorigination and collection efforts, and other federal and state banking laws.Certain of such actions and proceedings include claims for breach of contract,restitution, compensatory damages, punitive damages and other forms of relief.Due to the difficulty of predicting the outcome of such matters, theCorporation can give no assurance that it will prevail on all claims madeagainst it; however, management believes, based on current knowledge and afterconsultation with counsel, that these legal matters and administrativeproceedings and the losses, if any, resulting from the final outcome thereof,will not have a material adverse effect on the Corporation and itssubsidiaries’ financial position, results of operations or liquidity, but cangive no assurance that they will not have such an effect.

 

**Loan Commitments**

 

At March 31, 2004 and December 31,2003, the Company had an outstanding pipeline of mortgage loans ofapproximately, $9.4 billion and $7.0 billion, respectively. This pipelinerepresents applications received, but not yet funded and is therefore themaximum amount of the Company’s origination commitments. Of this amount, atMarch 31 2004 approved applications totaled approximately $5.3 billion.

 

The Company is contractually committed tofund the undrawn portion of home equity lines of credit (HELOC’s), which it hasoriginated. The commitment extends to HELOC’s, which are currently held by theCompany, and HELOC’s securitized by the Company. As of March 31, 2004, thecompany is primarily responsible to fund undrawn HELOC’s of approximately $389million.

 

22

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##### **Guarantees**

#####  

Under agreements with a third party, the Company has guaranteed aportion of the third party’s secured lending arrangements. As of March 31,2004, the total potential commitment under this guarantee totaled approximately$40 million. This guarantee would require payment by the company only if thethird party’s were to default on payment of this borrowing. Management believesthe likelihood a material payment will be required under this guarantee isremote.

 

**NOTE 12****                                            ****Business Segments**

 

The Company has identified three domestic business segments. Thepredominant factor by which each segment is organized is the unique productsand services they offer. The accounting policies of the segments are the sameas those described in Note 1 “Summary of Significant Accounting Policies”. TheMortgage Banking segment originates, sells and services mortgage loans with aspecialization in Alt A and NoDoc mortgage loan products. The Retail Bankingsegment consists of 90 full service banking offices offering a variety offinancial services to the Greater New York area. The balance sheet managementsegment includes earnings from the held for investment mortgage portfolios andother corporate investment activities.

 

Expenses under the direct control of eachbusiness segment and the expense of premises and equipment incurred to supportbusiness operations are allocated accordingly, by segment. Credit losses arecharged to asset management segment in an amount equal to net charge-offs. Theexpenses relating to administrative units of the Company such as executive,finance and audit are not allocated to individual operating segments and areidentified in the “other” column. The “other” column also includes intercompanyeliminations. The management of the Company evaluates the performance of eachbusiness segment based on income before income taxes.

 

23

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The following table sets forth information bybusiness segment:

 
|                                                 |   | **Quarter  Ended March 31, 2004** |   |
|------------------------------------------------------|--------|----------------------------------------|--------|
| **(In millions)**                                    |   | **Balance  Sheet  Management(1)**      |   | **Retail  Banking** |   | **Sub-total  Banking** |   | **Mortgage  Banking(5)** |   | **Segment  Totals** |   | **Other(4)** |   | **Consolidated  Continuing  Operations** |   |
| Net interest income                                  |   | $                                      | 83.6   |   | $ | 55.3 |   | $ | 138.9 |   | $ | 35.8 |   | $ | 174.7 |   | $ | — |   | $ | 174.7 |   |
| Provision for loan losses                            |   | (1.3                                   | )      | — |   | (1.3 | ) | — |   | (1.3 | ) | — |   | (1.3 | ) |
| Net interest income after provision for  loan losses |   | 82.3                                   |   | 55.3 |   | 137.6 |   | 35.8 |   | 173.4 |   | — |   | 173.4 |   |
| Non-interest income:                                 |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan servicing fees                                  |   | —                                 |   | — |   | — |   | (11.6 | ) | (11.6 | ) | 5.7 |   | (5.9 | ) |
| Banking fees and commissions                         |   | —                                 |   | 22.4 |   | 22.4 |   | — |   | 22.4 |   | — |   | 22.4 |   |
| Other income                                         |   | 4.2                                    |   | 0.3 |   | 4.5 |   | 2.4 |   | 6.9 |   | — |   | 6.9 |   |
| Net gain on sale of loans                            |   | —                                 |   | — |   | — |   | 132.9 |   | 132.9 |   | (12.2 | ) | 120.7 |   |
| Change in valuation of retained interests            |   | —                                 |   | — |   | — |   | (0.4 | ) | (0.4 | ) | — |   | (0.4 | ) |
| Net gain on sale of securities                       |   | 0.5                                    |   | — |   | 0.5 |   | — |   | 0.5 |   | — |   | 0.5 |   |
| Total non-interest income                            |   | 4.7                                    |   | 22.7 |   | 27.4 |   | 123.3 |   | 150.7 |   | (6.5 | ) | 144.2 |   |
| Non-interest expense:                                |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                                         |   | —                                 |   | 3.1 |   | 3.1 |   | 4.9 |   | 8.0 |   | 1.6 |   | 9.6 |   |
| ESOP and stock plans expense                         |   | —                                 |   | 1.7 |   | 1.7 |   | 5.4 |   | 7.1 |   | 1.8 |   | 8.9 |   |
| Other expenses                                       |   | 0.5                                    |   | 34.8 |   | 35.3 |   | 56.0 |   | 91.3 |   | 24.7 |   | 116.0 |   |
| Total non-interest expense                           |   | 0.5                                    |   | 39.6 |   | 40.1 |   | 66.3 |   | 106.4 |   | 28.1 |   | 134.5 |   |
| Segment income (loss) before taxes                   |   | $                                      | 86.5   |   | $ | 38.4 |   | $ | 124.9 |   | $ | 92.8 |   | $ | 217.7 |   | $ | (34.6 | ) | $ | 183.1 |   |
| Total Assets                                         |   | $                                      | 17,020 |   | $ | 521 | *(2)* | $ | 17,541 |   | $ | 5,097 |   | $ | 22,638 |   | $ | 1,205 | *(3)* | $ | 23,843 | * * |

 
|                                                 |   | **Quarter  Ended March 31, 2003** |   |
|------------------------------------------------------|--------|----------------------------------------|--------|
| **(In millions)**                                    |   | **Balance  Sheet  Management(1)**      |   | **Retail  Banking** |   | **Sub-total  Banking** |   | **Mortgage  Banking(5)** |   | **Segment  Totals** |   | **Other(4)** |   | **Consolidated  Continuing  Operations** |   |
| Net interest income                                  |   | $                                      | 66.8   |   | $ | 58.8 |   | $ | 125.6 |   | $ | 49.2 |   | $ | 174.8 |   | $ | — |   | $ | 174.8 |   |
| Provision for loan losses                            |   | (0.3                                   | )      | — |   | (0.3 | ) | — |   | (0.3 | ) | — |   | (0.3 | ) |
| Net interest income after provision for  loan losses |   | 66.5                                   |   | 58.8 |   | 125.3 |   | 49.2 |   | 174.5 |   | — |   | 174.5 |   |
| Non-interest income:                                 |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan servicing fees                                  |   | —                                 |   | — |   | — |   | 1.5 |   | 1.5 |   | 4.3 |   | 5.8 |   |
| Banking fees and commissions                         |   | —                                 |   | 14.5 |   | 14.5 |   | — |   | 14.5 |   | — |   | 14.5 |   |
| Other income                                         |   | 4.1                                    |   | — |   | 4.1 |   | (0.7 | ) | 3.4 |   | — |   | 3.4 |   |
| Net gain on sale of loans                            |   | —                                 |   | — |   | — |   | 139.0 |   | 139.0 |   | (14.7 | ) | 124.3 |   |
| Change in valuation of retained interests            |   | —                                 |   | — |   | — |   | (0.7 | ) | (0.7 | ) | — |   | (0.7 | ) |
| Net gain on sale of securities                       |   | 1.2                                    |   | — |   | 1.2 |   | — |   | 1.2 |   | — |   | 1.2 |   |
| Total non-interest income                            |   | 5.3                                    |   | 14.5 |   | 19.8 |   | 139.1 |   | 158.9 |   | (10.4 | ) | 148.5 |   |
| Non-interest expense:                                |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                                         |   | —                                 |   | 2.3 |   | 2.3 |   | 3.8 |   | 6.1 |   | 1.4 |   | 7.5 |   |
| ESOP and stock plans expense                         |   | —                                 |   | 1.5 |   | 1.5 |   | 3.6 |   | 5.1 |   | 1.0 |   | 6.1 |   |
| Other expenses                                       |   | 0.3                                    |   | 30.0 |   | 30.3 |   | 57.9 |   | 88.2 |   | 19.0 |   | 107.2 |   |
| Total non-interest expense                           |   | 0.3                                    |   | 33.8 |   | 34.1 |   | 65.3 |   | 99.4 |   | 21.4 |   | 120.8 |   |
| Segment income (loss) before taxes                   |   | $                                      | 71.5   |   | $ | 39.5 |   | $ | 111.0 |   | $ | 123.0 |   | $ | 234.0 |   | $ | (31.8 | ) | $ | 202.2 |   |
| Total Assets                                         |   | $                                      | 16,083 |   | $ | 490 | *(2)* | $ | 16,573 |   | $ | 5,462 |   | $ | 22,035 |   | $ | 364 | *(3)* | $ | 22,399 | * * |

 

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*(1)**       Balance Sheet Managementsegment largely consists of the mortgage portfolio, MBS and investmentsecurities.*

*(2)**       Retail Banking segmentexcludes intercompany funds transfers. Intersegment assets and liabilities eliminatedfor consolidation purposes were $12.6 billion and $12.2 billion for the quarterended March 31, 2004 and 2003, respectively.*

*(3)**       Includes the assets of thediscontinued business segment.*

*(4)**       Other includes intercompanyeliminations and unallocated administrative expenses.*

*(5)**       Intersegment revenues, inthe mortgage banking segment, for the quarter ended March 31, 2004 and2003 were $6.5 million and $10.4 million.*

 

24

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**NOTE 13****                                            ****Earnings Per Share**

 

The Company’s reconciliation of the income and shares used in the basicand diluted EPS computations is summarized as follows:

 
|                                                                                                                 |   | **Quarter  Ended  March 31,** |   |
|----------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
| **(In millions, except per share  amounts)**                                                                         |   | **2004**                           |   | **2003** |   |
|                                                                                                                 |   |                               |   |   |   |
| Net income from continuing operations                                                                                |   | $                                  | 112.5  |   | $ | 126.9 |   |
| Net income from discontinued operations                                                                              |   | 0.1                                |   | 0.3 |   |
| Net income                                                                                                           |   | $                                  | 112.6  |   | $ | 127.2 |   |
|                                                                                                                 |   |                               |   |   |   |
| Weighted average number of common shares  outstanding during each period – basic                                |   | 116,699,000                        |   | 127,047,000 |   |
| Effect of dilutive securities – stock  options                                                                  |   | 3,157,000                          |   | 2,280,000 |   |
| Weighted average number of common shares  and common stock equivalents outstanding during each period – diluted |   | 119,856,000                        |   | 129,327,000 |   |
|                                                                                                                 |   |                               |   |   |   |
| **Basic earnings per share:**                                                                                        |   |                               |   |   |   |
| Net income from continuing operations                                                                                |   | $                                  | 0.96   |   | $ | 1.00 |   |
| Net income from discontinued operations                                                                              |   | —                             |   | — |   |
| Net income                                                                                                           |   | $                                  | 0.96   |   | $ | 1.00 |   |
|                                                                                                                 |   |                               |   |   |   |
| **Diluted earnings per share:**                                                                                      |   |                               |   |   |   |
| Net income from continuing operations                                                                                |   | $                                  | 0.94   |   | $ | 0.98 |   |
| Net income from discontinued operations                                                                              |   | —                             |   | — |   |
| Net income                                                                                                           |   | $                                  | 0.94   |   | $ | 0.98 |   |

 

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*(1)**      **All options to purchaseshares of common stock were included in the computation of diluted earnings pershare because the options’ exercise prices were less than the average marketprice of the common shares for the quarter ended March 31, 2004.*

*(2)**      **Options to purchase1,407,200 shares of common stock at prices between $30.52 and $33.40 per sharewere outstanding at March 31, 2003, but were not included in thecomputation of diluted earnings per share because the options’ exercise priceswere greater than the average market price of the common shares for the quarterended March 31, 2003.*

 

25

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**GreenPoint Financial Corp. and Subsidiaries**

**Part I – Item 2. Management’s Discussion andAnalysis of**

**Financial Condition and Results of Operations**

 
|                                                                                                  |   | **Quarter  Ended**  |   |
|-------------------------------------------------------------------------------------------------------|--------|---------------------|--------|
| **(Dollars in millions, except per share data)**                                                      |   | **March 31,  2004** |   | **Dec. 31,  2003** |   | **Sept. 30,  2003** |   | **June 30,  2003** |   | **March 31,  2003** |   |
| **Performance Ratios – Continuing Operations  (Annualized):**                                    |   |                |   |   |   |   |   |   |   |   |   |
| Return on average assets                                                                              |   | 1.98                | %      | 2.00 | % | 1.76 | % | 2.34 | % | 2.40 | % |
| Return on average equity                                                                              |   | 23.95               |   | 25.07 |   | 21.86 |   | 27.46 |   | 26.52 |   |
| Net interest margin                                                                                   |   | 3.30                |   | 3.19 |   | 2.84 |   | 3.23 |   | 3.51 |   |
| Net interest spread                                                                                   |   | 3.21                |   | 3.09 |   | 2.73 |   | 3.11 |   | 3.37 |   |
| General and administrative expense to average assets                                                  |   | 2.36                |   | 2.08 |   | 2.26 |   | 2.24 |   | 2.28 |   |
| Total non-interest expense to operating revenue                                                       |   | 31.3                |   | 28.2 |   | 31.4 |   | 27.3 |   | 27.0 |   |
| Efficiency ratio *(1)*                                                                                |   | 42.2                |   | 39.2 |   | 44.3 |   | 37.5 |   | 37.3 |   |
| Average interest-earning assets to average interest-bearing  liabilities                              |   | 1.05                | x      | 1.05 | x | 1.05 | x | 1.05 | x | 1.06 | x |
|                                                                                                  |   |                |   |   |   |   |   |   |   |   |   |
| **Per Share Data:**                                                                                   |   |                |   |   |   |   |   |   |   |   |   |
| Basic earnings per share – continuing operations                                                 |   | $                   | 0.96   |   | $ | 1.00 |   | $ | 0.84 |   | $ | 1.05 |   | $ | 1.00 |   |
| Diluted earnings per share – continuing operations                                               |   | 0.94                |   | 0.98 |   | 0.82 |   | 1.03 |   | 0.98 |   |
| Book value per common share                                                                           |   | 16.24               |   | 15.46 |   | 15.17 |   | 15.35 |   | 15.00 |   |
| Tangible book value per common share                                                                  |   | 12.95               |   | 12.14 |   | 11.91 |   | 12.19 |   | 11.89 |   |
| Dividends per share                                                                                   |   | 0.30                |   | 0.24 |   | 0.24 |   | 0.21 |   | 0.21 |   |
| Shares used in calculations (in thousands):                                                           |   |                |   |   |   |   |   |   |   |   |   |
| Average *(2)*                                                                                         |   | 119,856             |   | 119,897 |   | 123,253 |   | 126,035 |   | 129,327 |   |
| Period-end *(3)*                                                                                      |   | 119,941             |   | 118,885 |   | 121,351 |   | 125,011 |   | 126,879 |   |
| Total shares outstanding (shares issued less treasury stock  purchased)                               |   | 131,722             |   | 131,897 |   | 134,404 |   | 138,110 |   | 140,541 |   |
|                                                                                                  |   |                |   |   |   |   |   |   |   |   |   |
| **Asset Quality Ratios – continuing operations:**                                                |   |                |   |   |   |   |   |   |   |   |   |
| Non-accruing loans held for investment to mortgage loans held for  investment                         |   | 1.44                | %      | 1.60 | % | 1.72 | % | 1.62 | % | 1.67 | % |
| Non-accruing loans held for sale to mortgage loans held for sale                                      |   | 1.99                |   | 2.15 |   | 1.60 |   | 1.60 |   | 1.87 |   |
| Non-performing assets to total assets                                                                 |   | 1.10                |   | 1.24 |   | 1.22 |   | 1.18 |   | 1.23 |   |
| Allowance for loan losses to non-performing loans held for investment                                 |   | 51.3                |   | 47.2 |   | 46.0 |   | 46.0 |   | 46.4 |   |
| Allowance for loan losses to mortgage loans held for investment                                       |   | 0.74                |   | 0.75 |   | 0.79 |   | 0.75 |   | 0.78 |   |
| Net loan charge-off experience (annualized) to average mortgage loans  held for investment            |   | 0.05                |   | 0.09 |   | 0.05 |   | 0.03 |   | 0.01 |   |
| Ratio of allowance for loan losses to annualized net charge-offs                                      |   | 14.34               | x      | 8.87 | x | 16.94 | x | 30.13 | x | 64.4 | x |
|                                                                                                  |   |                |   |   |   |   |   |   |   |   |   |
| **Capital Data:**                                                                                     |   |                |   |   |   |   |   |   |   |   |   |
| Tier I Capital (to risk weighted assets)                                                              |   | 11.50               | %      | 11.26 | % | 10.96 | % | 11.28 | % | 11.53 | % |
| Total Risk Based Capital (to risk weighted assets)                                                    |   | 13.02               |   | 12.81 |   | 12.47 |   | 12.79 |   | 13.08 |   |
| Tier I Capital (average assets)                                                                       |   | 7.60                |   | 7.28 |   | 7.18 |   | 7.68 |   | 7.97 |   |
| Tangible equity to tangible managed assets                                                            |   | 5.91                |   | 5.75 |   | 5.71 |   | 5.89 |   | 5.87 |   |
| Tangible equity to managed receivables                                                                |   | 8.75                |   | 8.25 |   | 7.78 |   | 7.96 |   | 8.13 |   |
| Purchase of treasury stock                                                                            |   | $                   | 20     |   | $ | 86 |   | $ | 147 |   | $ | 113 |   | $ | 125 |   |
|                                                                                                  |   |                |   |   |   |   |   |   |   |   |   |
| **Other Data:**                                                                                       |   |                |   |   |   |   |   |   |   |   |   |
| Mortgage loan originations                                                                            |   | $                   | 8,211  |   | $ | 8,747 |   | $ | 9,449 |   | $ | 11,343 |   | $ | 9,328 |   |
| Total managed assets *(4)*                                                                            |   | 26,690              |   | 25,982 |   | 26,053 |   | 26,135 |   | 25,856 |   |
| Total managed receivables *(5)*                                                                       |   | 17,775              |   | 17,846 |   | 18,848 |   | 19,053 |   | 18,354 |   |
| Earnings to combined fixed charges and preferred stock dividends –  continuing operations: *(6)* |   |                |   |   |   |   |   |   |   |   |   |
| Excluding interest on deposits                                                                        |   | 18.92               | x      | 15.77 | x | 13.25 | x | 19.66 | x | 20.67 | x |
| Including interest on deposits                                                                        |   | 4.33                | x      | 3.75 | x | 3.36 | x | 3.89 | x | 3.77 | x |
| Full-service retail bank offices                                                                      |   | 90                  |   | 90 |   | 85 |   | 85 |   | 84 |   |

 

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*(1)**      **Theefficiency ratio is calculated by dividing general and administrative expensesby the sum of net interest income and non-interest income.*

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

*(3)**      **Used in thecalculation of common book value and tangible common book value ratios.*

*(4)**      **Managedassets are the sum of total assets and off-balance sheet managed receivables.*

*(5)**      **Managedreceivables are the sum of on-balance sheet loans and off-balance sheet managedreceivables.*

*(6)**      **Forpurposes of computing the ratio of earnings to combined fixed charges, earningsrepresent net income plus applicable income taxes and fixed charges of aconsolidated subsidiary. Fixed charges represent interest expense on long-termdebt and one-third (the portion deemed to be representative of the interestfactor) of rents.*

 

26

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**Forward Looking Statements**

 

This Report contains certain forward-lookingstatements, which are based on management’s current expectations. Theseforward-looking statements include information concerning possible or assumedfuture results of operations, trends, financial results and business plans,including those relating to earnings growth; revenue growth; origination volumein the Company’s mortgage business; interest and non-interest income levels;fees from product sales; credit performance on loans made by the Company;tangible capital generation; margins on sales or securitizations of loans; marketshare; expense levels; results from new business initiatives in both the retailbanking and mortgage businesses; and other business operations and strategies.For these statements, GreenPoint claims the protection of the safe harbor forforward-looking statements contained in the Private Securities LitigationReform Act of 1995 to the extent provided by applicable law. Forward-lookingstatements involve inherent risks and uncertainties. We caution you that anumber of important factors could cause actual results to differ materiallyfrom those contained in any forward-looking statement. Such factors include,but are not limited to: prevailing economic conditions; changes in interestrates, loan demand, real estate values, and competition, which can materiallyaffect origination levels, interest and non-interest income levels, gain onsale results in the Company’s mortgage business and other aspects of ourfinancial performance; the level of defaults, losses and prepayments on loansmade by the Company, whether held in portfolio, sold in the whole loansecondary markets or securitized, which can materially affect charge-offlevels, required loan loss and representation and warranty reserve levels, andthe Company’s periodic valuation of its retained interests fromsecuritizations; changes in accounting principles, policies, and guidelines;adverse changes or conditions in capital or financial markets, which canadversely affect the ability of the Company to sell or securitize loanoriginations on a timely basis or at prices which are acceptable to theCompany, as well as other aspects of our financial performance; actions byrating agencies and the affects of these actions on the Company’s businesses,operations and funding requirements; changes in any applicable law, rule,regulation or practice with respect to tax or legal issues, whether of generalapplicability or specific to the Company and its subsidiaries; other economic,competitive, governmental, regulatory, and technological factors affecting theCompany’s operations, pricing, products and services; and the risk factors orother uncertainties described from time to time in the Company’s filings withthe Securities and Exchange Commission, including the Risk Factors sectionincluded in the Annual Report on Form 10-K filed on March 10, 2004 on page 9.The forward-looking statements are made as of the date of this Report, and theCompany assumes no obligation to update the forward-looking statements or toupdate the reasons why actual results could differ from those projected in theforward-looking statements.

 

**General**

 

GreenPointFinancial Corp. (the “Corporation”, “Company” or “GreenPoint”), a $24 billionasset bank holding company, consists of two primary businesses — a New Yorkretail bank and a national mortgage business. The retail bank is a New YorkState chartered savings bank and is the second largest thrift depository in theGreater New York area with $13 billion in deposits in 90 branches servingmore than 475,000 households. GreenPoint Mortgage (“GPM”), headquartered inNovato, California, originates a wide variety of exclusively “A” quality loans.This includes agency qualifying loans and Jumbo A loans, and GreenPoint’sspecialty Alternative A mortgages.

 

27

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**Overview OfFirst Quarter 2004 Financial Results**

 

•                  As described more fully in Note 2 of theConsolidated Financial Statements, on February 16, 2004 an Agreement and Planof Merger between North Fork and GreenPoint was announced.

 

•                  Net income from continuing operations forthe first quarter of 2004 was $0.94 per diluted share, or $113 million, adecrease of 4% compared to the first quarter of 2003.

 

•                  Retail banking initiatives maintained thestrong momentum established during 2003. Core deposits grew 18% over the firstquarter of 2003 and banking fee income increased 54%.

 

•                  Total mortgage loan originations for thefirst quarter of 2004 were $8.2 billion, a decrease of 12% from the $9.3billion originated during the first quarter of 2003. Applications receivedincreased 24% over the fourth quarter of 2003 reflecting sharply lower interestrates during much of the first quarter versus the fourth quarter of 2003.

 

•                  Mortgage sales and securitizations totaled$7.1 billion resulting in realized gains of $121 million, compared with salesand securitizations of $8.8 billion and a gain of $124 million in thecomparative quarter a year ago.

 

•                  The average margin earned on loan sales was169 basis points, up from 132 basis points in the fourth quarter of 2003 and141 basis points in the year ago quarter.

 

•                  Asset quality in the mortgage portfolioremained very strong as mortgage loan charge-offs of $1.3 million representedjust 5 basis points (on an annualized basis) of the mortgage loans held forinvestment portfolio.

 

•                  Net interest income was $174.7 in the firstquarter, flat versus the $174.8 in the year ago period. The net interest marginexpanded 11 basis points to 3.30% from 3.19% in the fourth quarter of 2003. Netinterest margin for the first quarter of 2003 was 3.51%.

 

•                  GreenPoint continued to maintain a strongcapital position with a leverage ratio of 7.60%, a Tier 1 risk-based ratio of11.50% and a total risk-based capital ratio of 13.02%.

 

•                  Net income from the discontinuedmanufactured housing business was $0.1 million, reflecting performance in linewith the expectations established when the business was discontinued.

 

 

**Business SegmentResults**

 

The Company consists of two primary continuingbusinesses – a banking business and a mortgage business. The banking businessincludes the results of the retail banking segment and a balance sheetmanagement segment. The Company evaluates the performance of its businesssegments based on income before income taxes. The accounting policies of thesegments are the same as described in Note 1 “Summary of Significant AccountingPolicies”. However, the preparation of business line results requiresmanagement to establish methodologies to allocate funding costs (charges) andbenefits (credits), expenses and other financial elements to each line ofbusiness as described below. These internal transfers are eliminated in the“Other” segment as shown in the accompanying table.

 

The Retail Banking unit consistsof 90 full service banking offices serving the Greater New York area. TheRetail Bank attracts deposits within its market area by offering a variety ofdeposit instruments including demand and NOW accounts, money market and savingsaccounts, certificates of deposit and retirement savings plans. The Retail Bankgenerates banking fees such as ATM service charges, debit card fees, NSFservice charges, overdraft fees, monthly maintenance charges, safe depositrental fees, official check fees and check replacement fees as well as incomefrom annuity and insurance sales commissions. The Retail Bank also generatesnet interest income via the internal transfer of deposits to the Balance SheetManagement unit for which the Retail Bank unit receives credit (“interestincome”) based on the anticipated length of time that an average deposit isexpected to remain with the bank using market rates to calculate the credits.Expenses under the direct control of the Retail Bank and allocated expensessuch as benefits, ESOP and occupancy are incurred by the unit.

 

28

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The Balance Sheet ManagementSegment is responsible for developing and maintaining the majority of theCompany’s interest earning asset portfolio. This includes the held forinvestment mortgage portfolio, mortgage-backed securities and otherinvestments. Balance Sheet Management is also responsible for the interestexpense on GreenPoint’s borrowings and debt, and interest expense onintercompany borrowings. Balance Sheet Management is charged for the depositsit receives by means of a matched funds transfer pricing system. Credit lossesare charged to the Balance Sheet Management Segment in an amount equal to netcharge-offs. Expenses under the direct control of the unit and allocatedexpenses such as benefits, ESOP and occupancy are incurred by the unit.

 

The Mortgage Banking segmentspecializes in originating “A” quality loans, including agency qualifying loansand Jumbo A loans, Alternative A mortgage loans, and home equity products. Theloans are originated in the national market primarily through the Company’snetwork of registered mortgage brokers, but also through correspondent lendersand in-house mortgage brokers. The Mortgage Bank sells the majority of itsloans to the secondary market generating gain on sale of loan income, and alsotransfers a portion of its loans to Balance Sheet Management recording internalgain on sale of loan income. The Mortgage Bank also generates revenue from theservicing of loans both in externally owned portfolios as well as the BalanceSheet Management portfolio from which it receives internal fee income. Theremaining source of revenue for the Mortgage Bank is derived from interestearned on loans pending sale. To fund its balance sheet (largely the warehouseof loans awaiting sale and secondarily the asset value of mortgage servicingrights), the Mortgage Bank is charged interest expense on intercompanyborrowing by means of a matched funds transfer pricing system.

 

In the segment footnote (Note12), the “Other” column represents the elimination of the intercompany gain onsale of mortgage loans and the servicing income derived from the Balance SheetManagement Segment. The Company does not employ cost transfer methodology forsupport units. As such, “Other” includes the expenses from unallocated overheadunits of the Company including Executive, Finance, Legal, Auditing, GeneralServices, Corporate Communications, Information Systems, Risk Management andHuman Resources.

 

**Banking Business**

** **
|                                                 |   | **Quarter  Ended  March 31,** |   |
|------------------------------------------------------|--------|-------------------------------|--------|
| **(In millions)**                                    |   | **2004**                      |   | **2003** |   |
| Net interest income                                  |   | $                             | 138.9  |   | $ | 125.6 |   |
| Provision for loan losses                            |   | (1.3                          | )      | (0.3 | ) |
| Net interest income after provision for  loan losses |   | 137.6                         |   | 125.3 |   |
| Non-interest income:                                 |   |                          |   |   |   |
| Banking fees and commissions                         |   | 22.4                          |   | 14.5 |   |
| Other income                                         |   | 4.5                           |   | 4.1 |   |
| Net gain on sale of securities                       |   | 0.5                           |   | 1.2 |   |
| Total non-interest income                            |   | 27.4                          |   | 19.8 |   |
| Non-interest expense                                 |   | 40.1                          |   | 34.1 |   |
| Segment income before taxes                          |   | $                             | 124.9  |   | $ | 111.0 |   |
| Total Assets                                         |   | $                             | 17,541 |   | $ | 16,573 |   |

 

TheBanking Business includes the results of the Retail Banking and Balance SheetManagement segments. The Banking Business operates similar to a traditionalthrift with the Retail Bank gathering low cost deposits and the Balance SheetManagement segment managing an earning asset portfolio that consists primarilyof mortgage loans and mortgage backed securities. Revenue is generated in theform of net interest income and Retail Banking fee income. For the quarterended March 31, 2004, the Banking Business earned $125 million pretax, an increaseof 13% from the previous year. The increase was due largely to an increase innet interest income in the Balance Sheet Management unit as a result of ahigher average balance of earning assets.

 

29

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For the quarter ended March 31, 2004, the Retail Banking segment earned$38 million pretax, a decrease of 3% from the previous year. Retail Banking’snet interest income for the first quarter of 2004 was $55 million, a decreaseof $4 million or 6% below the first quarter of 2003. The average balance ofcore deposits increased by $1.5 billion partly offset by the strategic run-offof $1.0 billion average balance of time deposits. The average spread on RetailBanking deposits declined despite a 55 basis point reduction in the cost ofdeposits as the rate credited to Retail Banking declined at a faster pace.Non-interest income in the Retail Banking segment was $22 million for thefirst quarter of 2004, an increase of 57% from the previous year. Non-interest expenseof $40 million increased $6 million from 2003. The increase in bothnon-interest income and expense was primarily due to the Company bringing theBroker/Dealer sales of insurance and investment products in-house in 2004 andthe de novo branch expansion. Previously, Retail Banking recognized net incomefrom the Broker/Dealer business in non-interest income. For the quarter endedMarch 31, 2004, Retail Banking earned $6 million on insurance and investmentproducts with $3 million of expense compared to $3 million of net income in thefirst quarter of 2003.

 

For the quarter ended March 31, 2004, the Balance Sheet ManagementSegment earned pre-tax net income of $87 million, an increase of $15 million or21% over the first quarter of 2003 attributable to the increase in net interestincome. Balance Sheet Management’s net interest income benefited from theeffects of leveraging as the average balance of loans held for investment,mortgage-backed and investment securities increased by $314 million, $1.7billion and $295 million, respectively. These increases were partially offsetby an 67 basis point decline in the yield. The average balance of borrowingsfor the first quarter was $7.3 billion with an average cost of 2.85%, a declineof 30 basis points compared to the first quarter of 2003.

 

**Mortgage Banking**

** **
|                                      |   | **Quarter  Ended  March 31,** |   |
|-------------------------------------------|--------|-------------------------------|--------|
|                                      |   |                          |
| **(In millions)**                         |   | **2004**                      |   | **2003** |   |
| Net interest income                       |   | $                             | 35.8   |   | $ | 49.2 |   |
| Non-interest income:                      |   |                          |   |   |   |
| Loan servicing fees                       |   | (11.6                         | )      | 1.5 |   |
| Other income                              |   | 2.4                           |   | (0.7 | ) |
| Net gain on sale of loans                 |   | 132.9                         |   | 139.0 |   |
| Change in valuation of retained interests |   | (0.4                          | )      | (0.7 | ) |
| Total non-interest income                 |   | 123.3                         |   | 139.1 |   |
| Non-interest expense                      |   | 66.3                          |   | 65.3 |   |
| Segment income before taxes               |   | $                             | 92.8   |   | $ | 123.0 |   |
| Total Assets                              |   | $                             | 5,097  |   | $ | 5,462 |   |

 

Forthe quarter ended March 31, 2004, the Mortgage segment earned $93 millionpretax, a decrease of 25% from the previous year. Mortgage Banking net interestincome was $36 million in the quarter down $13 million from 2003. The lowerlevel of net interest income resulted from a decrease in both the averagebalance and yield of loans-held-for-sale. The lower average balance reflectedthe slow down in year-over-year mortgage originations. Mortgage Bankingoriginated $8.2 billion in loans in the quarter compared with $9.3 billion in2003 and had sales of $7.1 billion compared to $8.8 billion in the previousyear. The net gain on sale of loans income of $133 million decreased from $139million in 2003 due to the decline in sales volume, partially offset by anincrease in the average sales margin to 162 bps from 141 bps in 2003. Loanservicing fees of $(12) million decreased from $2 million in 2003 due tointernal and external impairment of $16 million on the value of mortgageservicing rights recognized in the first quarter of 2004 resulting from therecent high level of loan prepayments.

 

30

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**Net Interest Income**

 

Netinterest income on a fully taxable-equivalent basis was $178 million for thequarter ended March 31, 2004, unchanged versus the $176 million a year ago. Thenet interest margin declined from 3.51% to 3.30%.

 

The slight increase in net interest income reflected increases inaverage earning assets funded by strong growth in core deposit balances. Higheraverage earning assets were offset by the narrower net interest marginresulting from declining interest rates during much of the previous year.Premium amortization on the held for investment mortgage portfolio and themortgage-backed securities portfolio totaled $10 million in the first quarterof 2004 compared with $16 million a year ago.

 

*Average interest-earning assets*

 

Averageearning assets increased by $1.5 billion, or 7% to $21.5 billion in the firstquarter of 2004 from $20.0 billion a year ago. The increase reflectedgrowth in loans held for investment and a higher balance of investmentsecurities. Average mortgage loans held for sale decreased $769 million fromthe first quarter of 2003, reflecting the drop in origination volume followingthe rise in interest rates in late 2003. The average balance of securitiesincreased $2.0 billion to $6.9 billion.

 

A decline in the level of market interest rates through much of 2003resulted in a decline in the yield on average earning assets of 63 basis pointscompared to a year ago. Interest income on mortgages held for investment andheld for sale decreased by a combined $32 million, or 13%, to $211 million forthe quarter from $242 billion a year ago. The decrease reflects a decline inthe average yield on the portfolios of 64 and 84 basis points, respectively.

 

Interest income on securities increased by $20 million to $73 millionfor the quarter from $53 million in the comparable quarter due to a higheraverage balance of investment securities in 2004.

 

*Average interest-bearing liabilities*

 

Theaverage balance of core deposits increased from $6.7 billion to $8.2 billion.The growth in these core balances was a primary contributor to the strength ofthe Company’s net interest income. The average balance of savings and moneymarket accounts increased by a combined $426 million while the average balanceof demand deposit and NOW accounts increased $1.1 billion or 53%. The growth indemand and NOW deposit balances resulted from the continued success ofGreenPoint’s free checking, new branching and small business banking programs.In the declining interest rate environment, the average rate paid on coredeposits declined to 1.08%, from 1.42% reported in the first quarter of 2003.

 

The average balance of term certificates of deposit (“CD”) declined$1.0 billion. CD balances were allowed to run off, as market pricing requiredoffering rates above those available from alternative wholesale fundingsources, in order to retain balances.

 

The average balance of borrowed funds increased$649 million. The average rate paid on borrowed funds declined from 3.15% to2.85% reflecting the overall decline in market interest rates.

 

31

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**Average Consolidated Balance Sheet, Interest and Rates – ContinuingOperations**

 
|                                                             |   | **Quarter  Ended**   |   |
|------------------------------------------------------------------|--------|----------------------|--------|
|                                                             |   | **March 31,  2004**  |   | **March 31,  2003** |   |
| **(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)*                         |   | $                    | 10,063 |   | $ | 155.4 |   | 6.18 | % | $ | 9,749 |   | $ | 166.3 |   | 6.82 | % |
| Other loans *(2)*                                                |   | 25                   |   | 0.5 |   | 7.09 |   | 20 |   | 0.4 |   | 7.71 |   |
| Loans held for sale *(2)*                                        |   | 4,324                |   | 55.3 |   | 5.12 |   | 5,093 |   | 75.9 |   | 5.96 |   |
| Securities *(3)*                                                 |   | 6,884                |   | 73.0 |   | 4.24 |   | 4,835 |   | 53.3 |   | 4.42 |   |
| Other interest-earning assets                                    |   | 243                  |   | 4.3 |   | 7.15 |   | 340 |   | 4.0 |   | 4.74 |   |
| Total interest-earning assets                                    |   | 21,539               |   | 288.5 |   | 5.36 |   | 20,037 |   | 299.9 |   | 5.99 |   |
| Non-interest earning assets *(4)*                                |   | 1,215                |   |   |   |   |   | 1,132 |   |   |   |   |   |
| Total assets                                                     |   | $                    | 22,754 |   |   |   |   |   | $ | 21,169 |   |   |   |   |   |
|                                                             |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities and Stockholders’ Equity:**                   |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                    |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                        |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Savings                                                          |   | $                    | 1,548  |   | 2.1 |   | 0.54 |   | $ | 1,359 |   | 3.0 |   | 0.90 |   |
| Demand deposits and N.O.W.                                       |   | 3,092                |   | 9.5 |   | 1.24 |   | 2,016 |   | 7.7 |   | 1.54 |   |
| Money market and variable rate savings                           |   | 3,574                |   | 10.4 |   | 1.17 |   | 3,337 |   | 12.8 |   | 1.55 |   |
| Total core deposits                                              |   | 8,214                |   | 22.0 |   | 1.08 |   | 6,712 |   | 23.5 |   | 1.42 |   |
| Wholesale money market deposits                                  |   | 206                  |   | 0.7 |   | 1.45 |   | 41 |   | 0.1 |   | 1.49 |   |
| Term certificates of deposit                                     |   | 4,132                |   | 26.8 |   | 2.61 |   | 5,148 |   | 39.1 |   | 3.08 |   |
| Total deposits                                                   |   | 12,552               |   | 49.5 |   | 1.59 |   | 11,901 |   | 62.7 |   | 2.14 |   |
| Borrowed funds                                                   |   | 7,314                |   | 52.5 |   | 2.85 |   | 6,665 |   | 52.7 |   | 3.15 |   |
| Senior notes                                                     |   | 355                  |   | 0.9 |   | 1.01 |   | —— |   | —— |   | —— |   |
| Subordinated bank notes                                          |   | 150                  |   | 3.5 |   | 9.36 |   | 150 |   | 3.5 |   | 9.36 |   |
| Other long term debt                                             |   | 200                  |   | 4.6 |   | 9.16 |   | 200 |   | 4.6 |   | 9.16 |   |
| Total interest-bearing liabilities                               |   | 20,571               |   | 111.0 |   | 2.15 |   | 18,916 |   | 123.5 |   | 2.62 |   |
| Other liabilities *(5)*                                          |   | 305                  |   |   |   |   |   | 339 |   |   |   |   |   |
| Total liabilities                                                |   | 20,876               |   |   |   |   |   | 19,255 |   |   |   |   |   |
| Stockholders’ equity                                        |   | 1,878                |   |   |   |   |   | 1,914 |   |   |   |   |   |
| Total liabilities and stockholders’ equity                  |   | $                    | 22,754 |   |   |   |   |   | $ | 21,169 |   |   |   |   |   |
| Net interest income/interest rate spread *(6)*                   |   |                 |   | $ | 177.5 |   | 3.21 | % |   |   | $ | 176.4 |   | 3.37 | % |
| Net interest-earning assets/net interest margin *(7)*            |   | $                    | 968    |   |   |   | 3.30 | % | $ | 1,121 |   |   |   | 3.51 | % |
| Ratio of interest-earning assets to interest-earning liabilities |   | 1.05                 | x      |   |   |   |   | 1.06 | x |   |   |   |   |

 

----

*(1)**      **Netinterest income is calculated on a taxable-equivalent basis.*

*(2)**      **Incomputing the average balances and average yield on loans, non-accruing loanshave been included.*

*(3)**      **The averageyield does not give effect to changes in fair value that are reflected as acomponent of stockholders’ equity.*

*(4)**      **Includesgoodwill, banking premises and equipment, servicing assets, deferred taxassets, accrued interest receivable, and other miscellaneous non-interestearning assets.*

*(5)**      **Includesaccrued interest payable, accounts payable and other miscellaneous non-interestbearing obligations of the Company.*

*(6)**      **Netinterest rate spread represents the difference between the average yield oninterest-earning assets and the average cost of interest-bearing liabilities.*

*(7)**      **Netinterest margin represents net interest income divided by averageinterest-earning assets.*

 

32

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**Rate/Volume Analysis**

 

The following table presents the effects ofchanges in interest rates and changes in volume of interest-earning assets andinterest-bearing liabilities on the Company’s interest income on a taxequivalent basis and interest expense during the periods indicated. The changesattributable to the combined impact of volume and rate have been allocatedproportionately to volume and rate.

 
|                                     |   | **Quarter  Ended March 31, 2004  Compared to  Quarter Ended March 31, 2003  Increase/(Decrease)** |   |
|------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|
|                                     |   | **Due to**                                                                                        |   |   |   |
| **(In millions)**                        |   | **Average  Volume**                                                                               |   | **Average  Rate** |   | **Net  Change** |   |
| Mortgage loans held for investment *(1)* |   | $                                                                                                 | 5.3    |   | $ | (16.2 | ) | $ | (10.9 | ) |
| Other loans *(1)*                        |   | 0.1                                                                                               |   | —— |   | 0.1 |   |
| Loans held for sale                      |   | (10.7                                                                                             | )      | (9.9 | ) | (20.6 | ) |
| Securities                               |   | 21.9                                                                                              |   | (2.2 | ) | 19.7 |   |
| Other interest-earning assets            |   | (1.3                                                                                              | )      | 1.6 |   | 0.3 |   |
| Total interest earned on assets          |   | 15.3                                                                                              |   | (26.7 | ) | (11.4 | ) |
| Savings                                  |   | 0.4                                                                                               |   | (1.3 | ) | (0.9 | ) |
| Demand deposits and N.O.W.               |   | 3.5                                                                                               |   | (1.7 | ) | 1.8 |   |
| Money market and variable rate savings   |   | 0.9                                                                                               |   | (3.3 | ) | (2.4 | ) |
| Wholesale money market deposits          |   | 0.4                                                                                               |   | 0.2 |   | 0.6 |   |
| Term certificates of deposit             |   | (7.1                                                                                              | )      | (5.2 | ) | (12.3 | ) |
| Borrowed funds                           |   | 4.9                                                                                               |   | (5.1 | ) | (0.2 | ) |
| Senior notes                             |   | 0.9                                                                                               |   | — |   | 0.9 |   |
| Subordinated bank notes                  |   | —                                                                                            |   | — |   | — |   |
| Other long term debt                     |   | —                                                                                            |   | — |   | — |   |
| Total interest paid on liabilities       |   | 3.9                                                                                               |   | (16.4 | ) | (12.5 | ) |
| Net change in net interest income        |   | $                                                                                                 | 11.4   |   | $ | (10.3 | ) | $ | 1.1 |   |

 

----

*(1)**      **Incomputing the volume and rate components of net interest income for loans,non-accrual loans have been included.*

 

**Provision for Loan Losses**

 

Net mortgage loan charge-offs for the quarterended March 31, 2004, which equaled the provision for loan loss for thecontinuing operations, were $1 million and represented only 5 basis points onan annualized basis of the portfolio of loans held for investment.

 

33

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**Non-Interest Income**

 

The following table summarizes the componentsof non-interest income:

 
|                                      |   | **Quarter  Ended  March 31,** |   |
|-------------------------------------------|--------|-------------------------------|--------|
|                                      |   |                          |
| **(In millions)**                         |   | **2004**                      |   | **2003** |   |
| Income from fees and commissions:         |   |                          |   |   |   |
| Loan servicing income                     |   | $                             | (5.9   | ) | $ | 5.8 |   |
| Banking services fees and commissions     |   | 22.4                          |   | 14.5 |   |
| Fees, commissions and other income        |   | 6.9                           |   | 3.4 |   |
| Total income from fees and commissions    |   | 23.4                          |   | 23.7 |   |
| Net gain on sales of mortgage loans       |   | 120.7                         |   | 124.3 |   |
| Change in valuation of retained interests |   | (0.4                          | )      | (0.7 | ) |
| Net gain on sale of securities            |   | 0.5                           |   | 1.2 |   |
| Total non-interest income                 |   | $                             | 144.2  |   | $ | 148.5 |   |

 

Non-interest income was $144 million for thequarter, a decline of $4 million from $148 million a year ago. The decrease wasdue to a $10 million impairment charge of loan servicing rights and a $4million reduction in gain on sale of mortgage loans, offset by an increase of$8 million in banking services fees and commissions. The gain on sale of loansis described in further detail in the following section.

 

For the quarter ended March 31, 2004, loan servicing income was $(6)million, compared to $6 million in the previous year. The revenue was earned ona servicing portfolio of $34.4 billion at March 31, 2004 and $28.1 billionat March 31, 2003. The decrease reflected net servicing impairment of $10million in the first quarter of 2004 compared with no servicing impairment inthe year ago quarter. The servicing impairment recognized in the first quarterof 2004 was due to a drop in interest rates late in the quarter to a historical40 year low.

 

As more fully described in Note 5, GreenPoint makes certain assumptionsin valuing its mortgage servicing assets. The projected average life of theservicing asset portfolio decreased during the quarter ended March 31, 2004 ascompared to 2003. This decline was due to higher prepayment assumptions on theexisting loans as well as a change in the mix of loans that carry higherprepayment assumptions.

 

Banking services fees andcommissions are the fees generated from the Retail Bank deposit accounts suchas ATM service charges, debit card fees, NSF service charges, overdraft fees,monthly maintenance charges, safe deposit rental fees, official check fees andannuity and insurance sales commissions. For the quarter ended March 31, 2004,banking services fees and commissions were $22 million compared to $14 millionin the previous period. ATM fee income was flat at approximately $2 million forboth quarterly periods. Deposit related fee income increased to $7 million in2004 from $4 million in 2003. Service charge and banking services income was$6 million and $5 million in 2004 and 2003 in the respective quarterlyperiods. Income from investment services increased to $6 million at March 31,2004 from $2 million in the year ago period. The increase is attributable tothe Company opening a registered Broker/Dealer on January 2, 2004 to replacethe agented program. As a result the net activities are reported differently inthe financial statements. Previously the net commissions were earned on thesale of products with no direct expenses associated with the activity.Beginning in the first quarter of 2004 the Company reported larger commissions,since we do not share them with the agent, and the expenses associated with theBroker/Dealer employees. In the first quarter of 2004, investment service feeincome would have been approximately $3 million lower under the oldarrangement.

 

**Gain on Sale of Loans**

 

GreenPointsells those loans it does not place in its portfolio through either (1) wholeloan sales, which involves selling pools of loans to individual purchasers, or(2) securitization, which involves the private placement or public offering ofpass-through asset-backed securities. This approach allows GreenPoint tocapitalize on favorable conditions in either the securitization or whole loansale market when loans are sold.

 

During each of the last two years most mortgage loans were sold aswhole loan sales. These sales are completed with no direct credit enhancementfrom GreenPoint, but do include certain standard representations and warranties,which permit the purchaser to return the loan to the Company if certaindeficiencies exist in the loan documentation. Whole loan sales may eitherretain, or transfer to the buyer, the right to service the loans.

 

34

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Gain on sale and the gain on sale marginsinclude the net impact of the valuation of mortgage loans held for sale andinterest rate lock commitments, the impact of the valuation of derivativesutilized to manage the exposure to interest rate risk associated with mortgageloan commitments and mortgage loans held for sale, and the impact ofadjustments related to liabilities established for representations andwarranties made in conjunction with the loan sale. The following table summarizesloans sold and average margins earned:

 

 
|                                 |   | **Quarter  Ended  March 31,** |   |
|--------------------------------------|--------|-------------------------------|--------|
|                                 |   |                          |
| **(In millions)**                    |   | **2004**                      |   | **2003** |   |
| **Whole loan – Mortgage:**      |   |                          |   |   |   |
| Whole loan sales:                    |   |                          |   |   |   |
| Specialty products                   |   | $                             | 2,694  |   | $ | 2,821 |   |
| Home equity / Seconds                |   | 504                           |   | 138 |   |
| Agency / Jumbo                       |   | 3,912                         |   | 5,843 |   |
| Total whole loan sales               |   | $                             | 7,110  |   | $ | 8,802 |   |
|                                 |   |                          |   |   |   |
| Gain on sale                         |   | $                             | 120.3  |   | $ | 123.8 |   |
|                                 |   |                          |   |   |   |
| Margins on whole loan sales:         |   |                          |   |   |   |
| Specialty products                   |   | 2.59                          | %      | 2.89 | % |
| Home equity / Seconds                |   | 2.02                          | %      | 1.23 | % |
| Agency / Jumbo                       |   | 1.04                          | %      | 0.69 | % |
| Average margin                       |   | 1.69                          | %      | 1.41 | % |
|                                 |   |                          |   |   |   |
| **Securitizations – Mortgage:** |   |                          |   |   |   |
| Loans securitized                    |   | $                             | 18     |   | $ | 34 |   |
| Gain on sale *(2)*                   |   | $                             | 0.4    |   | $ | 0.5 |   |
| Average margin                       |   | 2.03                          | %      | 1.59 | % |

 

----

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

*(2) Includes draws from prior period securitizations.*

 

Gain on sale from whole loan sales andsecuritizations of mortgage loans decreased $4 million for the first quarter of2004 versus a year ago. The gain from whole loans sales decreased due to thelower volume of loans sold.

 

The Company sold mortgage loans totaling $7.1 billion in 2004, adecrease of $1.7 billion, or 19%, from the balance of loans sold in 2003. Thelower volume of loans sold corresponded with the lower origination volumeexperienced in first quarter of 2004. The average margin earned on loan saleswas 1.69% in the quarter, an increase from the 1.41% earned in the year agoquarter. The higher margin reflected, in part, a higher proportion of specialtyloan sales during the quarter. During the first quarter of 2004, agency andjumbo mortgage sales totaled 55% of total mortgages sold compared with 66% inthe 2003 quarter, while higher-spread specialty products totaled 38% ofmortgages sold in the quarter, compared with 32% a year ago. Specialty productmargins declined in the quarter to 2.59% from the 2.89% earned in 2003 whileAgency/Jumbo margins increased to 1.04% from 0.69%. The slightly narrower salesmargins on specialty products reflect, in part, an increase in competition asmore mortgage originators compete in the specialty product market. Goingforward, the gain on mortgage sales will fluctuate with the level of marketinterest rates and the secondary market demand for mortgage-backed investments.

 

35

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**Representation and Warranty Liabilities**

 

The Company has established a liability tocover losses associated with repurchases and indemnifications of mortgage loanssold, made under representations and warranties. On a quarterly basis,management reassesses the adequacy of the liability based on the most recenthistoric trends and future expectations. Additions to the liability are madewhen loans are sold.

 

The liability related to representations and warranties for mortgageloans totaled $66 million and $61 million at March 31, 2004 and December31, 2003, respectively. The activity in the liability is summarized in thetable in Note 5.

 

Losses charged against the representation and warranty liabilitytotaled $6 million in the first quarter of 2004, compared with $9 millionin the first quarter of 2003. These losses included indemnifications of $3million and $2 million in the first quarter of 2004 and 2003,respectively. The balance of the losses represented charges incurred on therepurchase, valuation and subsequent disposition of outstanding loans. Loanrepurchases totaled $36 million in the quarter ended March 31, 2004, comparedto $51 million in the first quarter of 2003. Loans were repurchased at theirface value and losses on subsequent dispositions were charged against therepresentation and warranty liability.

 

**Non-Interest Expense**

 

The following is a summary of the componentsof non-interest expense:

 
|                                              |   | **Quarter  Ended  March 31,** |   |
|---------------------------------------------------|--------|-------------------------------|--------|
|                                              |   |                          |
| **(In millions)**                                 |   | **2004**                      |   | **2003** |   |
| Salaries and benefits                             |   | $                             | 63.8   |   | $ | 61.6 |   |
| Employee Stock Ownership and stock plans  expense |   | 8.9                           |   | 6.1 |   |
| Net expense of premises and equipment             |   | 23.5                          |   | 20.9 |   |
| Advertising                                       |   | 5.2                           |   | 4.4 |   |
| Federal deposit insurance premiums                |   | 0.5                           |   | 0.5 |   |
| Other administrative expenses                     |   | 32.6                          |   | 27.1 |   |
| Total general and administrative expenses         |   | 134.5                         |   | 120.6 |   |
| Other real estate owned operating income          |   | —                        |   | 0.2 |   |
| Total non-interest expense                        |   | $                             | 134.5  |   | $ | 120.8 |   |

 

Total general and administrative expense increased $14 million to$135 million from $121 million for the quarter ended March 31, 2003.

 

Salaries and benefits increased $2 million dollars due to additionalcosts in the Broker/Dealer that had previously been netted from banking fees,in addition to increased staffing costs associated with the retail bank *de novo* branch expansion.

 

Employee Stock Ownership and stock plans expense increased $3 milliondue to a rise in the price of the Company’s stock.

 

Premises and equipment expenses increased $3 million primarily due tothe retail bank *de novo* branchexpansion and depreciation associated with the installation of a new mortgageloan origination system in July 2003.

 

Other administrative expenses were $33 million for the quarter endedMarch 31, 2004, an increase of 20% or $6 million compared to the firstquarter a year ago. The increase was primarily due to a new offshorecontracting expense of $2 million, increased insurance expense of $1 millionand an increase of $2 million in retail banking costs associated with the risein the number of deposit accounts in both existing branches and *de novo* branches.

 

36

----

 

**Income Tax Expense**

 

Income tax expense decreased $5 million, or6%, to $71 million for the first quarter of 2004, versus the comparable perioda year ago. The decrease for the first quarter is due to lower pre-tax incomeoffset by a rise in the effective tax rate from 37.3% to 38.6%.

 

**Loan Originations**

 

The following table summarizes loanorigination activity for each of the reported periods:

 
|                         |   | **Quarter  Ended  March 31,** |   |
|------------------------------|--------|-------------------------------|--------|
|                         |   |                          |
| **(In millions)**            |   | **2004**                      |   | **2003** |   |
| **Mortgage:**                |   |                          |   |   |   |
| Total applications received  |   | $                             | 18,307 |   | $ | 18,389 |   |
| Loans originated:            |   |                          |   |   |   |
| Specialty products *(1)*     |   | $                             | 2,772  |   | $ | 2,760 |   |
| Home equity / Seconds        |   | 874                           |   | 528 |   |
| Agency/Jumbo                 |   | 4,565                         |   | 6,040 |   |
| Total loans originated *(2)* |   | $                             | 8,211  |   | $ | 9,328 |   |

 

----

*(1)**      **Specialtyproducts include: Alt A, No Doc and A minus programs.*

*(2)**      **Total loansoriginated include correspondent purchases for the held for investmentportfolio, which totaled $450 million and $437 million for the quarter endedMarch 31, 2004 and 2003, respectively.*

 
|                                 |   | **March 31,** |   |
|--------------------------------------|--------|---------------|--------|
| **(In millions)**                    |   | **2004**      |   | **2003** |   |
|                                 |   |          |   |   |   |
| Pipeline *(1)*                       |   | $             | 9,488  |   | $ | 8,997 |   |
|                                 |   |          |   |   |   |
| Interest rate lock commitments *(2)* |   | $             | 2,634  |   | $ | 2,723 |   |
|                                 |   |          |   |   |   |
| Loans held for sale                  |   | $             | 4,601  |   | $ | 5,042 |   |

 

----

*(1)**      **Thepipeline represents applications received but not yet funded. Of this amount,at March 31, 2004 approved applications totaled approximately $5.3 billion.*

*(2)**      **Represents commitments tolend where the terms are guaranteed to the borrower for a specific period oftime.*

 

Total loan originations during the quarterfor the mortgage business were $8.2 billion, down from $9.3 billion in thefirst quarter a year ago. Specialty product originations were $2.8 billion,flat versus the comparable period a year ago. Agency/Jumbo originationsdecreased from $6.0 billion to $4.6 billion in the first quarter versus a yearago. The change in loan origination product mix for the quarter ended March 31,2004 versus a year ago, reflects the strong demand for mortgage refinancingduring the first quarter of 2003.

 

**Non-Performing Assets**

 

Non-performingassets consist of non-accruing loans and other real estate owned. Totalnon-performing assets were $263 million at March 31, 2004 compared to $285million at December 31, 2003. The non-accrual loans held for sale primarilyrepresent loans that have been repurchased pursuant to representation andwarranty commitments.  Estimated futurelosses on these loans are measured as part of the representation and warrantyliability (see Note 5).

 

GreenPoint attempts to convert non-performing assets tointerest-earning assets as quickly as possible, while minimizing potentiallosses on the conversion.

 

37

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The following table sets forth informationregarding all non-accrual loans, including loans in forbearance, loans whichare 90 days or more delinquent but on which the Company is accruing interestand other real estate owned at the dates indicated.

 
| **(In millions)**                                                             |   | **March 31,  2004** |   | **Dec. 31,  2003** |   |
|-------------------------------------------------------------------------------|--------|---------------------|--------|--------------------|--------|
| Non-accrual mortgage loans held for  investment                               |   | $                   | 146    |               | $      | 158 |   |
| Non-accrual other loans *(1)*                                                 |   | —              |   | —             |   |
| Total non-accrual loans held for investment                                   |   | 146                 |   | 158                |   |
| Non-accrual loans held for sale                                               |   | 92                  |   | 103                |   |
| Total non-performing loans                                                    |   | 238                 |   | 261                |   |
| Other real estate owned, net *(2)*                                            |   | 25                  |   | 24                 |   |
| Total non-performing assets                                                   |   | $                   | 263    |               | $      | 285 |   |
|                                                                          |   |                |   |               |   |
| Total non-performing assets – discontinued  business                     |   | 6                   |   | 6                  |   |
|                                                                          |   |                |   |               |   |
| Other loans 90 days or more delinquent and  still accruing                    |   | $                   | 2      |               | $      | 3 |   |
|                                                                          |   |                |   |               |   |
| Non-accruing loans held for investment to  mortgage loans held for investment |   | 1.44                | %      | 1.60               | %      |
| Non-accruing loans held for sale to  mortgage loans held for sale             |   | 1.99                | %      | 2.15               | %      |
| Non-performing assets to total assets                                         |   | 1.10                | %      | 1.24               | %      |

 

----

*(1)**      **Excluding certain other loans delinquent 90 days or more,such as guaranteed student loans, on which, principal and interest areguaranteed by the U.S. government and certain other loans on which delinquentprincipal and interest may be deducted from the borrower’s deposit accountbalances.*

*(2)**      **Net of related valuation allowance of $1.2 million forforeclosed real estate at March 31, 2004 and December 31, 2003, respectively.*

 

**Loan ServicingPortfolio**

 

The following table summarizes the dollaramount of mortgage loans serviced for GreenPoint and for others:

 
| **(In millions)**                   |   | **March 31,  2004** |   | **Dec. 31,  2003** |   |
|-------------------------------------|--------|---------------------|--------|--------------------|--------|
| **Mortgage:**                       |   |                |   |               |   |
| Serviced for GreenPoint *(1)*       |   | $                   | 11,254 |               | $      | 12,113 |   |
| Serviced for others (third parties) |   | 23,176              |   | 19,836             |   |
| **Total loan servicing portfolio**  |   | $                   | 34,430 |               | $      | 31,949 |   |

 

----

*(1)**      **Includes held for sale and certain loans held forinvestment at end of period.*

 

38

----

 

**Allowance for Possible Loan Losses**

 

The Companyhas a policy for establishment and review of the adequacy of the allowance forloan losses. 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 policy is further described in the Critical Accounting Policiessection of the Company’s Annual Report on Form 10-K.

 
|                                                                                       |   | **Quarter  Ended  March 31,** |   |
|--------------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                                       |   |                          |
| **(In millions)**                                                                          |   | **2004**                      |   | **2003** |   |
| Balance at beginning of period                                                             |   | $                             | 77.7   |   | $ | 77.7 |   |
| Provision (benefit) charged to income:                                                     |   |                          |   |   |   |
| Continuing                                                                                 |   | 1.3                           |   | 0.3 |   |
| Discontinued                                                                               |   | (0.1                          | )      | 0.1 |   |
| Total provision charged to income                                                          |   | 1.2                           |   | 0.4 |   |
| Loans charged-off:                                                                         |   |                          |   |   |   |
| Mortgage loans held for investment                                                         |   | (1.3                          | )      | (0.4 | ) |
| Manufactured housing loans held for  investment                                            |   | (1.2                          | )      | (1.6 | ) |
| Total charge-offs                                                                          |   | (2.5                          | )      | (2.0 | ) |
| Recoveries:                                                                                |   |                          |   |   |   |
| Mortgage loans held for investment                                                         |   | —                        |   | 0.1 |   |
| Manufactured housing loans held for  investment                                            |   | 1.3                           |   | 1.5 |   |
| Total recoveries                                                                           |   | 1.3                           |   | 1.6 |   |
| Net charge-offs:                                                                           |   |                          |   |   |   |
| Continuing                                                                                 |   | (1.3                          | )      | (0.3 | ) |
| Discontinued                                                                               |   | 0.1                           |   | (0.1 | ) |
| Total net charge-offs                                                                      |   | (1.2                          | )      | (0.4 | ) |
| Balance at end of period                                                                   |   | $                             | 77.7   |   | $ | 77.7 |   |
|                                                                                       |   |                          |   |   |   |
| **Asset Quality Ratios – Continuing  Operations**                                     |   |                          |   |   |   |
| Net loan charge-off experience (annualized)  to average mortgage loans held for investment |   | 0.05                          | %      | 0.01 | % |
| Allowance for loan losses to mortgage loans  held for investment                           |   | 0.74                          | %      | 0.78 | % |
| Allowance for loan losses to non-performing  loans held for investment                     |   | 51.3                          | %      | 46.4 | % |

 

In determining the adequacy of the allowance for loan losses forGreenPoint’s mortgage loans held for investment, management completes ananalysis of the loan portfolio prior to the end of each quarterly reportingperiod. The analysis stratifies GreenPoint’s mortgage loans held for investmentportfolio into three categories: first mortgages, second mortgages and homeequity loans. The first mortgage and second mortgage categories are furtherstratified into one-to-four family, multi-family, and commercial loan strata.The analysis calculates the expected losses as a percentage of loansoutstanding in each loan stratum based upon the current delinquency statuswithin each stratum. A more complete discussion on the Company’s estimate forthe allowance for loan loss is included in the Critical Accounting Policiessection of the Company’s Annual Report on Form 10-K.

 

Due to inherent limitations in using modelingtechniques and historical loss percentages, GreenPoint also maintains anunallocated allowance for first mortgage loans. This allowance addressesshort-term changes in the first mortgage loan’s historical real estate ownedperformance, delinquency trends, loan products, national real estate values andportfolio growth. The analysis also encompasses an assessment of changes in themacro-economic environment. At the end of each quarter, management determinesthe adequacy of the unallocated reserve to address these risks.

 

39

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**Capital Ratios**

 

The Company and the Bank are subject tovarious regulatory capital requirements administered by the federal and statebanking agencies. The Board of Governors of the Federal Reserve Systemestablishes minimum capital requirements for the consolidated bank holdingcompany, as well as for the Bank.

 

Under capital adequacyguidelines and the regulatory framework for prompt corrective action, the Bankmust meet specific capital guidelines that involve quantitative measures of itsassets, liabilities, and certain off balance sheet items as calculated underregulatory accounting practices. These guidelines require minimum ratios ofrisk-based capital to risk adjusted assets of 4% for Tier 1 capital and 8% fortotal capital. The Federal Reserve Board also has guidelines for a leverageratio that is designed to complement the risk-based capital ratios indetermining the overall capital adequacy of banks and bank holding companies. Aminimum leverage ratio of Tier 1 capital to average total assets of 3% isrequired for banks and bank holding companies, with an additional 100 to 200basis points required for all but the highest rated institutions. Managementbelieves, as of March 31, 2004, that the Company and the Bank meet all capitaladequacy requirements to which it is subject.

 

FDICIA, among other things, identifies fivecapital categories for insured depository institutions (well capitalized,adequately capitalized, undercapitalized, significantly undercapitalized andcritically undercapitalized) and requires federal banking regulatory agenciesto implement systems for “prompt corrective action” for insured depositoryinstitutions that do not meet minimum capital requirements based on thesecategories. As of March 31, 2004 the Bank was well capitalized based onthe prompt corrective action guidelines.

 

The most recent notification from the FDIC categorized the Bank as wellcapitalized under the regulatory framework for prompt corrective action. To becategorized as well capitalized, the Bank must maintain minimum Tier 1 capital,total capital and leverage ratios of 6%, 10% and 5%, respectively. There havebeen no conditions or events since that notification that management believeshave changed the Company’s or Bank’s category.

 

The Company’s Total Capital andTier 1 Capital (to risk weighted assets) increased from 12.81% and 11.26%,respectively, at December 31, 2003 to 13.02% and 11.50%, respectively at March31, 2004. The Company’s ratio of period-end stockholders’ equity to endingtotal assets at March 31, 2004 was 8.17% compared to 8.00% at December 31,2003.

 
|                                      |   |       |   |      |   | **Required  for Capital  Adequacy Purposes** |   |
|-------------------------------------------|--------|------------|--------|-----------|--------|----------------------------------------------|--------|
|                                      |   | **Actual** |   |      |
| **(In millions)**                         |   | **Amount** |   | **Ratio** |   | **Amount**                                   |   | **Ratio** |   |
| **As of March 31, 2004**                  |   |       |   |      |   |                                         |   |   |   |
| Total Capital (to Risk Weighted Assets):  |   |       |   |      |   |                                         |   |   |   |
| Company                                   |   | $          | 1,953  |      | 13.02  | %                                            | $      | 1,200 |   | 8.00 | % |
| Bank                                      |   | 2,121      |   | 14.18     |   | 1,196                                        |   | 8.00 |   |
| Tier 1 Capital (to Risk Weighted Assets): |   |       |   |      |   |                                         |   |   |   |
| Company                                   |   | $          | 1,726  |      | 11.50  | %                                            | $      | 600 |   | 4.00 | % |
| Bank                                      |   | 1,893      |   | 12.66     |   | 598                                          |   | 4.00 |   |
| Tier 1 Capital (to Average Assets):       |   |       |   |      |   |                                         |   |   |   |
| Company                                   |   | $          | 1,726  |      | 7.60   | %                                            | $      | 908 |   | 4.00 | % |
| Bank                                      |   | 1,893      |   | 8.34      |   | 908                                          |   | 4.00 |   |
|                                      |   |       |   |      |   |                                         |   |   |   |
| **As of December 31, 2003**               |   |       |   |      |   |                                         |   |   |   |
| Total Capital (to Risk Weighted Assets):  |   |       |   |      |   |                                         |   |   |   |
| Company                                   |   | $          | 1,875  |      | 12.81  | %                                            | $      | 1,171 |   | 8.00 | % |
| Bank                                      |   | 2,092      |   | 14.35     |   | 1,166                                        |   | 8.00 |   |
| Tier 1 Capital (to Risk Weighted Assets): |   |       |   |      |   |                                         |   |   |   |
| Company                                   |   | $          | 1,647  |      | 11.26  | %                                            | $      | 585 |   | 4.00 | % |
| Bank                                      |   | 1,864      |   | 12.79     |   | 583                                          |   | 4.00 |   |
| Tier 1 Capital (to Average Assets):       |   |       |   |      |   |                                         |   |   |   |
| Company                                   |   | $          | 1,647  |      | 7.28   | %                                            | $      | 905 |   | 4.00 | % |
| Bank                                      |   | 1,864      |   | 8.24      |   | 905                                          |   | 4.00 |   |

 

40

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**Stock RepurchaseProgram**

 

In September 2003, the Company’s Board ofDirectors authorized a new share repurchase program of up to 5%, orapproximately 6.8 million, of its outstanding shares. There are approximately2.8 million shares remaining in the current repurchase authorization. Therepurchase will be at the Company’s discretion, based on ongoing assessments ofthe capital needs of the business and the market valuation of its stock. Therepurchased shares are being held in treasury.

 

Shares repurchased and cost for the quarterended March 31, 2004 and 2003 are summarized as follows:

 
|                         |   | **Quarter  Ended  March 31,** |   |
|------------------------------|--------|-------------------------------|--------|
|                         |   |                          |
| **(Dollars in millions)**    |   | **2004**                      |   | **2003** |   |
|                         |   |                          |   |   |   |
| Number of shares repurchased |   | 540,000                       |   | 4,294,200 |   |
| Cost of repurchases          |   | $                             | 20     |   | $ | 125 |   |
|                              |        |                               |        |  |  |  |  |

 

**Supplemental Performance Measurements –Tangible****Earnings**

 

Tangible earnings is a non-GAAP measurement that GreenPointdefines as net income from continuing operations less a charge related to theEmployee Stock Ownership Plan (“ESOP”). The excluded expense, unlike otherexpenses incurred by the Company, does not reduce GreenPoint’s tangiblecapital, thereby enabling the Company to increase shareholder value through thegrowth of earning assets, increases in cash dividends and additionalrepurchases of the Company’s stock.

 

 
|                                                   |   | **Quarter  Ended**  |   |
|--------------------------------------------------------|--------|---------------------|--------|
|                                                   |   | **March 31,  2004** |   | **Dec. 31,  2003** |   | **Sept. 30,  2003** |   | **June 30,  2003** |   | **March 31,  2003** |   |
| Net income from continuing operations                  |   | $                   | 112.5  |   | $ | 113.5 |   | $ | 101.1 |   | $ | 129.8 |   | $ | 126.9 |   |
| Add back:                                              |   |                |   |   |   |   |   |   |   |   |   |
| Employee Stock Ownership and stock plans  expense      |   | 8.9                 |   | 6.9 |   | 6.9 |   | 6.7 |   | 6.1 |   |
| Cash earnings from continuing operations               |   | $                   | 121.4  |   | $ | 120.4 |   | $ | 108.0 |   | $ | 136.5 |   | $ | 133.0 |   |
|                                                   |   |                |   |   |   |   |   |   |   |   |   |
| Diluted earnings per share from continuing  operations |   | $                   | 0.94   |   | $ | 0.95 |   | $ | 0.82 |   | $ | 1.03 |   | $ | 0.98 |   |
| Effect of employee stock plans expense                 |   | 0.07                |   | 0.05 |   | 0.06 |   | 0.05 |   | 0.05 |   |
| Cash earnings per share *(1)*                          |   | $                   | 1.01   |   | $ | 1.00 |   | $ | 0.88 |   | $ | 1.08 |   | $ | 1.03 |   |
|                                                   |   |                |   |   |   |   |   |   |   |   |   |
| **Performance Ratios (Annualized)**                    |   |                |   |   |   |   |   |   |   |   |   |
| Cash earnings return on average assets                 |   | 2.13                | %      | 2.12 | % | 1.88 | % | 2.46 | % | 2.51 | % |
| Cash earnings return on average equity                 |   | 25.84               |   | 26.57 |   | 23.36 |   | 28.87 |   | 27.80 |   |
| Cash earnings return on tangible equity                |   | 33.20               |   | 34.66 |   | 29.44 |   | 36.95 |   | 35.58 |   |

 

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*(1)**      **Based onthe weighted average shares used to calculate diluted earnings per share.*

 

**ConsolidatedStatement of Financial Condition**

 

Total assets of $23.8 billion at March 31,2004 increased from $23.0 billion at December 31, 2003. The balance sheetreflects growth in the securities portfolio of $719 million and growth in thebalance of loans held for investment of $227 million. This was partially offsetby a decrease in loans receivable held for sale of $163 million.

 

Core deposits increased $393 million sinceyear-end 2003, reflecting the continued success of a variety of initiatives toattract checking accounts. This growth was offset in part by a decline of $357million in higher-cost term certificates of deposit. Market borrowingsincreased $370 million since year-end 2003, reflecting the net additionalfunding needed.

 

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**RiskManagement**

 

TheCompany has a Corporate Risk Oversight Committee, which monitors and supervisesthe wide variety of risks encountered in the course of business. The Committeeis chaired by the President and Chief Operating Officer and includes the headsof its two businesses, the Chief Financial Officer, the Head of Risk Managementand the General Counsel. The Committee meets periodically to review creditrisk, including both on-balance sheet and off-balance sheet exposure, marketrisk and operating and business risks which include, but are not limited to,legal and systems risks. These individual types of risks are also analyzed andmonitored by separate committees comprised of experts within the business unitsand on the corporate staff. Liquidity, Capital and Credit Risk Management aredescribed fully below. The Market Risk analysis is included in Part I — Item 3.

 

**Liquidity RiskManagement**

 

TheBank’s primary sources of funding from financing activities include depositgathering, advances from the FHLB, short and long-term borrowings underrepurchase agreements and overnight and term Federal Funds purchases. Cashflows related to operating activities primarily consist of cash disbursed tofund loan originations and cash received from loan sales and securitizations.Cash flows related to investing activities include purchases of securities andloans receivable held for investment, funds received from loan and securitiesprincipal and interest payments, and sales and maturities of mortgage-backedand other investment securities. While maturities and scheduled amortization ofloans and securities are a predictable source of funds, the amount of principalprepayments on loans and mortgage-backed securities can only be estimated, asthey tend to fluctuate with various exogenous factors including the generallevel, and direction, of interest rates.

 

Funds provided from financing activitiestotaled $358 million for the quarter ended March 31, 2004. At March 31,2004, total borrowings were $8.3 billion, up $370 million from $7.9 billion atDecember 31, 2003. Membership in the FHLB allows the Bank to secure advances inproportion to its investment in FHLB stock. At March 31, 2004, the Bank had$4.3 billion in outstanding FHLB term advances. The Bank’s ability to securefurther advances from the FHLB is based on the market value of the pledged loanportfolio. At March 31, 2004, based on the then current market value of thepledged portfolio, the Bank had additional FHLB borrowing capacity of$13 million. The Bank also uses its mortgage-backed and other investmentsecurities as collateral under short and long-term repurchase agreements. As ofMarch 31, 2004 the Bank had $2.2 billion in outstanding repurchase agreements,which was a decrease of $1.2 billion from December 31, 2003. At March 31, 2004the Company had un-pledged securities eligible as collateral for repurchaseagreements of $4.1 billion. The Bank also secures overnight and term funding inthe Federal Funds market. At March 31, 2004 the Bank had $1.1 billion ofovernight purchased Federal Funds.

 

Deposits continue to be the primary fundingsource for the Company. Deposit balances experienced a net $31 millionincrease in the first quarter of 2004. Lower-cost core deposits increased by$393 million offset by a decrease in higher cost certificates of deposit andwholesale money market deposits of $362 million. The decline in certificate ofdeposit balances resulted from management’s decision to utilize lower costalternative funding sources rather than pay higher priced retail rates. Timedeposits maturing within one year totaled $2.2 billion at March 31, 2004.Consistent with historical trends, a substantial portion of these deposits areexpected to be renewed. To the extent these deposits are not renewed, fundingis expected to be provided through continued growth in core deposits (checking,savings and money market deposits) and through alternative financing sources.

 

The Company and the Bank have received bothshort-term and long-term debt ratings from three recognized credit ratingfirms. These ratings allow the Company and the Bank to access the wholesaledebt markets, thereby providing the Company with additional flexibility inaccessing and utilizing the most cost effective and appropriate means formeeting its funding needs. As of March 31, 2004 the Bank had a medium term noteshelf with $2.8 billion in available capacity.

 

Funds used in investing activities totaled$911 million at March 31, 2004, primarily resulting from $2.0  billion ofinvestment securities purchases. These investments were partially offset bycash flows from maturities and sales of investment securities (primarilymortgage-backed securities), which totaled $1.3 billion.

 

42

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Funds provided by operating activitiestotaled $578 million at March 31, 2004. The significant loan origination andsale activity in 2003 reflects the continued strong market for mortgageoriginations and the continued high level of demand for these assets in thesecondary market. At March 31, 2004 the Company had outstanding mortgage loancommitments of $9.5 billion. As of March 31, 2004 there were $257 millionof outstanding mortgage-backed and other securities commitments. The Companyanticipates that through the use of internally generated cash flow, the capitalmarkets to securitize and sell its mortgage loan commitments, and otheravailable financing alternatives that it will have sufficient funds availableto meet its current loan and securities commitments.

 

The Company’s most liquid assets are cash and cash equivalents,including money market investments. The level of these assets is dependent uponthe Company’s operating, financing, lending, and investing activities duringany given period. Cash and cash equivalents, including money marketinvestments, totaled $360 million at March 31, 2004 compared to $335 million atDecember 31, 2003.

 

# **Credit Risk Management**

# ** **

Duringthe first quarter of 2004, the Company originated mortgage loans for its ownportfolio and for disposition in the secondary markets in the form of wholeloan sales and securitizations. In the fourth quarter of 2002, GreenPoint beganto originate small business loans through its branch system, which are placedin its portfolio. Outstanding small business loans were $4 million and $4million, at March 31, 2004 and December 31, 2003, respectively. As of December31, 2001, the Company discontinued originating manufactured housing loans.

 

In general, whole loan mortgage sales transfer the credit risk to thepurchasers. Loans are sold without recourse to GreenPoint Mortgage, except forthe specified representations and warranties in the sales agreement. Theserepresentations and warranties state that if certain deficiencies exist in theloan documentation when the loan was sold, then the purchaser has the option ofreturning the purchased loan to the Company. Risk management monitors theCompany’s loss performance on repurchases and indemnifications on previouslysold loans.

 

In contrast, for loans placed in the portfolio, or for loanssecuritized, the Company retains all or much of the credit risk. The Companyhas a residual interest in its securitizations. If the loans perform worse thanexpected, then it could negatively impact the value of the Company’s retainedinterests. The initial value of these retained interests is determined at thetime that the securitization is closed using a net present value analysis offuture cash flows. These cash flows are based on assumptions related toprepayments and losses on the collateral, overcollateralization requirements,and the spread between the interest rates on the loans and on the certificates.Any difference between the actual cash flows and the assumptions used in theinitial net present value analysis could positively or negatively impact thevalue of the Company’s retained interests. The risk to the Company is that thevalue of the retained interests will be less than the initial value, resultingin a reduction of the value on the Company’s books, also known as impairment.Impairment in the value of the retained interests could reduce the Company’sincome in the period that it occurs.

 

GreenPoint Bank and GreenPoint Mortgagemaintain underwriting policies, procedures and approval authorities appropriateto their businesses. The chief credit executive in GreenPoint Mortgage reportsdirectly to the chief executive of the business, outside of the productionorganization. The chief credit executive in the small business banking groupwithin GreenPoint Bank reports directly to the head of the small businessbanking group. With respect to mortgage loans originated for whole loan sale tothe secondary markets, where credit risk is transferred, underwriting criteriaare established to meet the investor requirements. An executive-level RiskManagement Division determines the criteria required for loans, which will betransferred to GreenPoint’s portfolio or sold through securitizations. InGreenPoint Bank, a sophisticated scoring system is one of the tools beingutilized in the underwriting process.

 

Oversight of the appraiser approval andappraisal review process is conducted 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 mortgage loans being originated meet the Company’sunderwriting standards, and that required operating procedures are followed.Loans are selected monthly on a pre and post funding basis for review by qualitycontrol analysts and staff appraisers. A quality control process has also beenestablished for the small business loans being originated by GreenPoint withmonthly reviews on a post-funding basis.

 

43

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Risk Management personnel monitor closely theperformance of all loans on which the Company retains credit risk. Onsecuritization or sale, expectations are set on the default, recovery andvoluntary prepayment rates. Each pool of loans is reviewed monthly to ensurethat performance is meeting those expectations. In the event performance doesnot meet expectations, the assumptions are revised. Final responsibility forthese judgments resides with executive management, independent of the businessunit.

 

Risk Management reviews monthly thedelinquency and loss trends for all of the mortgage, manufactured housing, andsmall business loans serviced by the Company, whether or not it retains creditexposure. These reviews are intended to identify significant changes in creditquality which may indicate changes to the Company’s exposures or to theefficacy of its underwriting of loans sold to other investors. Such changescould prompt adjustments to the Company’s underwriting criteria or servicingprocedures. Risk Management also reviews the characteristics and performance ofloans in GreenPoint’s owned portfolio that are serviced by third parties on amonthly basis.

 

GreenPoint’s mortgage loan originationactivity is geographically diversified throughout the United States. TheCompany tracks economic and housing market trends to identify areas forexpansion and as an early warning mechanism. The Company also closely monitorstrends in delinquent and non-performing loans through cycles in the economy andin the real estate market. These economic and performance trends are analyzedin the ongoing fine-tuning of lending practices.

 

The Company uses various collectionstrategies to maintain contact with the borrowers in order to obtain repayment.Collection activities for GreenPoint Mortgage are centralized in a servicingunit in Columbus, Georgia. GreenPoint Credit’s collection activities werecentralized during 2002 in a servicing center in Atlanta, Georgia in order totarget delinquent accounts more effectively utilizing more advanced technology.Remarketing activities for GreenPoint Credit remain decentralized among severalregional offices in order to repossess and liquidate collateral moreeffectively, thereby minimizing the loss severity. Collection efforts for GreenPointBank’s business banking loans are handled in a collaborative manner by thecredit analysts in New York and the servicing center in Columbus, Georgia.

 

The Company has set forth a policy forestablishment and review of the adequacy of the allowance for loan losses inorder to provide for estimated costs related to the problem loans. Managementbelieves that the allowance for loan losses is adequate. However, suchdetermination is susceptible to the effect of future unanticipated changes ingeneral economic and market conditions that may affect the financialcircumstances of borrowers and/or residential real estate values within theCompany’s lending areas. The Company has also established a liability to coverlosses associated with repurchases and indemnifications of sold loans due torepresentations and warranties. This liability was sized using historical lossdata associated with loan sales and additional reserves are set aside as thevolume of sold loans increases.

 

44

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**GreenPoint Financial Corp. and Subsidiaries**

**Part I – Item 3. Quantitative and QualitativeDisclosures about Market Risk**

 

**Overview**

 

TheCompany’s market risk exposure is limited solely to interest rate risk.Interest rate risk is defined as the sensitivity of the Company’s current andfuture earnings to changes in the level of market interest rates. Part of theCompany’s interest rate risk resides on the balance sheet, as the maturity andrepricing characteristics of its assets do not match those of its liabilities.Additionally, a significant source of the Company’s revenue, the proceeds fromthe sale of mortgage loans, depends on the volume of loan originations, whichis sensitive to the level and direction of market interest rates.

 

**Market Risk Management Process**

 

Managementof interest rate risk is conducted within policies and limits approved by theBoard of Directors. These policies and limits set forth the maximum risks toearnings and market value that the Board of Directors deems prudent. Inaddition, they govern permissible investments and off-balance sheettransactions, and maximum counterparty exposure limits. The formulation andimplementation of any Risk Management strategy involves numerous day-to-daydecisions involving the acquisition or divestiture of loans and investmentsecurities, reinvestment of cash flows, the selection of funding instrumentsand maturities and the use of off-balance sheet instruments. Together, theseincremental decisions result in a strategy that is represented by the interestrate risk position. The performance of the positions and strategies is formallyreviewed by the Asset and Liability Management Committee (“ALCO”) in thecontext of the outlook for interest rates and general business conditions, aswell as for compliance with established risk tolerances and policies. 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**

 

Interestrate risk inherent on the balance sheet is managed taking into account therisks to earnings in the Company’s main businesses. Most importantly, theCompany’s mortgage origination business is sensitive to the level of interestrates. In a low or declining interest rate environment mortgage volumes tend toincrease as demand for home purchases and mortgage refinancing increases,leading to growth in mortgage banking revenues. Conversely, high or risingrates subdue mortgage demand, leading to less revenue.

 

These dynamics tend to be partly offset bythe sensitivity of retail banking revenues to changes in the level of interestrates. Typically in a high rate environment, spreads earned on retail depositsincrease, as rates paid on those deposits increase more slowly than marketrates in general. Additionally, the balance sheet is normally positioned toallow for higher net interest income and wider net interest margins as ratesrise. This is known as an asset sensitive balance sheet position, and providesa further offset to the interest rate cyclicality of mortgage banking revenue.

 

The interest rate sensitivity of the Company’s balance sheet originateswith the cash flow characteristics of its loan portfolios and deposit products.Management alters the overall balance sheet sensitivity through adjustments tothe securities investment portfolio and the maturities of market borrowings, aswell as various deposit pricing and derivatives strategies.

 

**Interest Rate Risk Measurement**

 

Theprincipal tool used to measure balance sheet sensitivity at any point in time,and to assess the impact of potential business and rate risk managementstrategies, is a simulation of net interest income. The simulation gives effectto management assumptions concerning the repricing of assets and liabilities,as well as business volumes under a variety of hypothetical interest ratescenarios. These hypothetical scenarios incorporate parallel yield curve shiftsin interest rates of plus or minus 100 and 200 basis points. In addition,non-parallel yield curve flattening and steepening scenarios are modeled.

 

Management also estimates the sensitivity of the market value of equityto supplement the net interest income simulations in the management of marketrisk. The market value sensitivity model measures the expected change in themarket value of the Company’s assets and liabilities resulting from a large,instantaneous change in the level of interest rates. The net impact of thechanging market values of assets and liabilities represents a measure of thechange in the market value of the Company’s equity.

 

45

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Management uses the net interest income simulations as the primary toolin assessing the impacts of business and investment decisions on the Company’smarket risk profile. The simulations reflect changes in net interest incomeonly during the period over which the simulations are conducted. By modelingthe cash flows over the entire lives of the assets and liabilities, the marketsensitivity model captures the longer-term consequences of balance sheetdecisions. As such, management views maintaining market sensitivity at prudentlevels, and within Board-approved limits, as a constraint on its businessdecisions and tactics.

 

The most crucial management assumptions inthe net interest income simulation and the market value sensitivity modelconcern prepayments on the Company’s mortgage loan portfolio and the pricing ofretail deposits in various interest rate environments. As interest ratesdecline, mortgage prepayments tend to increase, reducing loan portfolio growthand lowering the portfolio’s average yield. Management’s assumptions are guided by analyzing the prepaymentperformance of the Company’s portfolio in past rate cycles as well as publiclyavailable research on the prepayment behavior of similar mortgage assets.

 

Rates on non-maturity deposits rise and fallwith market rates, but tend to move less than proportionately. Rates offered onretail certificates of deposit tend to move in close concert with market rates,though history suggests they increase less rapidly as market rates rise.Extensive historical analysis shows that the Company’s deposit volumes arerelatively insensitive to interest rate movements within the range encompassedby the scenarios.

 

The following table presents the results of the net interest incomesimulations under a variety of hypothetical interest rate scenarios, based onthe Company’s balance sheet positions at March 31, 2004. The results areexpressed as the percentage change in pretax net interest income from the basescenario in which interest rates are unchanged. The change in income ismeasured over a period of twelve months.

 

 
| **Net Interest Income Simulations** |   | **Short-term  Rate Changes:** |   |
|-------------------------------------|--------|-------------------------------|--------|
| **Yield Curve**                     |   | **-200 bps**                  |   | **-100 bps** |   | **+100 bps** |   | **+200 bps** |   |
| March 31, 2004                      |   |                          |   |   |   |   |   |   |   |
| -150 bps                            |   | (15.4                         | )%     | (10.2 | )% | (0.8 | )% | 1.1 | % |
| Parallel                            |   | (9.8                          | )      | (2.4 | ) | 4.1 |   | 4.5 |   |
| +150 bps                            |   | (4.6                          | )      | 3.3 |   | 7.7 |   | 8.3 |   |
| December 31, 2003                   |   |                          |   |   |   |   |   |   |   |
| -150 bps                            |   | (13.3                         | )%     | (9.4 | )% | (0.8 | )% | 0.5 | % |
| Parallel                            |   | (7.8                          | )      | (0.7 | ) | 2.8 |   | 2.9 |   |
| +150 bps                            |   | (2.8                          | )      | 4.6 |   | 5.4 |   | 5.9 |   |

 

The columns represent 100 and 200 basis point changes–down and up–inthe level of interest rates over a twelve-month time span. The rows indicatechanges in the shape of the yield curve over the same time period. The parallelrow corresponds to changes in rate levels in which the yield curve retains itsshape. In the -150 basis point scenarios, the yield curve flattens, and in the+150 basis point simulations the curve steepens. For example, a paralleldownward shift of 200 basis points would reduce net interest income by 9.8%from what would be earned if rates remained constant. However, a decline of 200basis points accompanied by a 150 basis point steeper curve, would reduce netinterest income by only 4.6% over the unchanged scenario. (As of March 31, 2004and December 31, 2003 not all rates could fall 200 basis points withoutreaching zero. In these scenarios rates are reduced until they reach zero.These scenarios are retained to allow for historical comparisons.)

 

Management views the changes in the simulation results between the endof 2003 and at March 31, 2004 as relatively minor. At the end of both periodsthe Company was asset sensitive, in that net interest income would benefit fromrising interest rates almost irrespective of any change in yield curve slope.Risks to net interest income in the event of declining rates and/or aflattening yield curve were deemed acceptable. These interest rate scenarioswould likely be accompanied by a strong market for residential mortgageorigination, and the revenues arising from greater levels of mortgage bankingactivities would mitigate or exceed the pressures on net interest income.

 

46

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The table below presents the results of the market value sensitivitymodel based on the balance sheet positions at March 31, 2004 and December 31,2003:

 
| **Market Value Sensitivity** |   | **-200 bps** |   | **-100 bps** |   | **+100 bps** |   | **+200 bps** |   |
|------------------------------|--------|--------------|--------|--------------|--------|--------------|--------|--------------|--------|
|                         |   |         |   |         |   |         |   |         |   |
| March 31, 2004               |   | (12.6        | )%     | (4.5         | )%     | (3.2         | )%     | (9.1         | )%     |
| December 31, 2003            |   | (8.9         | )      | (2.0         | )      | (4.6         | )      | (11.1        | )      |

 

The after-tax value sensitivity to a 200 basis point instantaneousincrease in interest rates was (9.1)% at March 31, 2004, versus (11.1)% atDecember 31, 2003. The change reflects the shortening of the Company’s mortgageloans and mortgage-backed securities in response to the decrease in interestrates during the quarter. The shortening, implying shorter durations, increasesthe price sensitivity of those assets to decreases in rates. However,management believes the additional sensitivity to falling rates is anacceptable risk. The position maintains an asset sensitive income position tooffset the potential decline in mortgage banking revenues that could accompanyfurther rate increases.

 

The simulations and market valuesensitivities measure the exposure of net interest income and market value tochanges in interest rates at a particular point of time. The risk position isalways changing. Management continuously monitors the Company’s risk profile asit changes, and alters the rate sensitivity to ensure limits are adhered to,and that the resulting risk profile is appropriate to its views on the likelycourse of interest rates and developments in its core businesses.

 

In addition, the fair value of the mortgage 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.

 

**Derivative FinancialInstruments**

 

Interestrate derivatives are periodically integrated into the Company’s interest ratepositions and, therefore, its simulations. The Company also utilizes derivativeinstruments to manage its exposure to interest rate risk associated withmortgage loans held for sale and mortgage loan commitments. Outstandingbalances are described further in Note 6.

 

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**GreenPoint Financial Corp. and Subsidiaries**

**Part I – Item 4. Controls and Procedures**

 

TheCompany’s management, including its Chief Executive Officer and Chief FinancialOfficer, has evaluated the effectiveness of the Company’s disclosure controlsand procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the SecuritiesExchange Act of 1934) as of March 31, 2004 and, based on its evaluation, hasconcluded that the Company’s disclosure controls and procedures were effectiveas of March 31, 2004. In addition, there has been no change in the Company’sinternal control over financial reporting that occurred during the Company’smost recent fiscal quarter that has materially affected, or is reasonablylikely to materially affect, the Company’s internal control over financialreporting.

 

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**GreenPoint Financial Corp. and Subsidiaries**

**Part II – Item 1. Legal Proceedings**

 

In the ordinary course ofbusiness, the Corporation and its subsidiaries are defendants in or parties toa number of pending and threatened legal actions and proceedings, and are alsoinvolved from 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 all claimsmade against it; however, management believes, based on current knowledge andafter consultation with counsel, that these legal matters and administrativeproceedings and the losses, if any, resulting from the final outcome thereof,will not have a material adverse effect on the Corporation and itssubsidiaries’ financial position, results of operations or liquidity, but cangive no assurance that they will not have such an effect.

 

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**GreenPointFinancial Corp. and Subsidiaries**

**PartII – Item 2. Changes in Securities and Use of Proceeds**

 
| **Period**                                |   | **Total  Number of  Shares  Purchased** |   | **Average  Price  Paid Per  Share** |   | **Total  Number of  Shares  Purchased  as Part of  Publicly  Announced  Programs** |   | **Maximum  Number of  Shares  That May  Yet Be  Purchased  Under the  Program** |   |
|-------------------------------------------|--------|-----------------------------------------|--------|-------------------------------------|--------|------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|
|                                      |   |                                    |   |                                |   |                                                                               |   |                                                                            |   |
| January 1, 2004 – January 31, 2004   |   | 540,000                                 |   | $37.32                              |   | 540,000                                                                            |   | 2,796,630                                                                       |   |
| February 1, 2004 – February 29, 2004 |   | —                                  |   | —                              |   | —                                                                             |   | 2,796,630                                                                       |   |
| March 1, 2004 – March 31, 2004       |   | —                                  |   | —                              |   | —                                                                             |   | 2,796,630                                                                       |   |
| Total                                     |   | 540,000                                 |   | $37.32                              |   | 540,000                                                                            |   |                                                                            |   |

 

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(1)                      On September 9, 2003, the Company announced that its Board of Directorshad authorized management to purchase up to 5%, or approximately 6.8 million ofGreenPoint’s common stock through open market transactions. This repurchaseprogram does not have an expiration date.

 

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**GreenPoint Financial Corp. and Subsidiaries**

**Part II – Item 6. Exhibits and Reports onForm 8-K**

 
| **(a)** |   | **Exhibits**        |
|---------|--------|---------------------|
|    |   |                |
|    |   | **Exhibit Number:** |
|    |   | 12.1                |   | Ratios of Earnings to  Combined Fixed Charges |
|    |   |                |   |   |
|    |   | 31.1                |   | Certification Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 of Thomas S. Johnson, Chairman  and Chief Executive Officer |
|    |   |                |   |   |
|    |   | 31.2                |   | Certification Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 of Jeffrey R. Leeds, Executive  Vice President and Chief Financial Officer |
|    |   |                |   |   |
|    |   | 32.1                |   | Certification Pursuant to 18  U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 of Thomas S. Johnson, Chairman and Chief Executive Officer |
|    |   |                |   |   |
|    |   | 32.2                |   | Certification Pursuant to 18  U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 of Jeffrey R. Leeds, Executive Vice President and Chief Financial  Officer |

 

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**b)       Reportson Form 8-K**

 

On January 5, 2004, GreenPointMortgage Securities Inc. filed a current report on Form 8-K related tothe monthly distribution reported to the holders ofGreenPoint Mortgage-Backed Pass-Through Certificates Series 2003-1 pursuant tothe terms of the Pooling and Servicing Agreement, dated August 1, 2003 amongGreenPoint Mortgage Securities Inc. as sponsor, GreenPoint Mortgage Funding,Inc., as seller and master servicer, and JPMorgan Chase Bank, as trustee.

 

On January9, 2004, GreenPoint Mortgage Securities Inc. (the “Company”) filed acurrent report on Form 8-K in connection with a previously registered offer andsale of the GreenPoint Mortgage-Backed Pass-Through Certificates, Series 2003-1(“Series 2003-1 Certificates”).

 

On January9, 2004, GreenPoint Mortgage Securities Inc. (the “Company”) filed acurrent report on Form 8-K in connection with a previously registered offer andsale of the GreenPoint Home Equity Loan Trust Asset-Backed Notes, Series 2003-1(“Series 2003-1 Notes”).

 

On January20, 2004, GreenPoint Mortgage Securities LLC (the “Registrant”) filed acurrent report on Form 8-K pursuant to the requirements of the SecuritiesExchange Act of 1934, related to the Tax Opinion of McKee Nelson LLP.

 

On January21, 2004, GreenPoint Financial Corp., a Delaware corporation (the “Company”), fileda current report on Form 8-K in connection with the issuance of a press releaseannouncing fourth quarter results for the period ended December 31, 2003.

 

On January23, 2004, GreenPoint Mortgage Securities LLC (the “Company”) filed acurrent report on Form 8-K pursuant to Rule 424(b) under the Securities Act of1933, concurrently with, or subsequent to, the filing of this Form 8-K inconnection with the filing of a prospectus and prospectus supplement with theSecurities and Exchange Commission relating to its GreenPoint Home Equity LoanTrust 2004-1, Home Equity Loan Asset-Backed Notes, Series 2004-1.

 

On January27, 2004, GreenPoint Mortgage Securities LLC (the “Registrant”) filed acurrent report on Form 8-K in connection with the consent to theincorporation by reference in the registration statement (No. 333-108405) ofthe Registrant, and in the Prospectus Supplement of the Registrant (the “ProspectusSupplement”) of our report dated January 21, 2003 on the consolidated financialstatements of Ambac Assurance Corporation and subsidiaries as of December 31,2002 and 2001, and for each of the years in the three-year period endedDecember 31, 2002.

 

OnFebruary 6, 2004, GreenPoint Mortgage Securities Inc. (the “Company”) fileda current report on Form 8-K in connection with a previously registered offerand sale of the GreenPoint Mortgage-Backed Pass-Through Certificates, Series2003-1 (“Series 2003-1 Certificates”).

 

OnFebruary 6, 2004, GreenPoint Mortgage Securities Inc. (the “Company”) fileda current report on Form 8-K in connection with a previously registered offerand sale of the GreenPoint Home Equity Loan Trust Asset-Backed Notes, Series 2003-1(“Series 2003-1 Notes”).

 

OnFebruary 16, 2004, GreenPoint Financial Corp. (the “Company”) filed acurrent report on Form 8-K in connection with the announcement that the Companyand North Fork Bancorporation, Inc. (“North Fork”)had entered into an Agreement and Plan of Merger, dated February 15, 2004 (the“Merger Agreement”). The Merger Agreement has been approved by the Boards ofDirectors of both the Company and North Fork, and is subject to customaryclosing conditions, including regulatory and stockholder approvals.

 

On March5, 2004, GreenPoint Mortgage Securities Inc. (the “Company”) filed acurrent report on Form 8-K in connection with a previously registered offer andsale of the GreenPoint Mortgage-Backed Pass-Through Certificates, Series 2003-1(“Series 2003-1 Certificates”).

 

On March5, 2004, GreenPoint Mortgage Securities Inc. (the “Company”) filed acurrent report on Form 8-K in connection with a previously registered offer andsale of the GreenPoint Home Equity Loan Trust Asset-Backed Notes, Series 2003-1(“Series 2003-1 Notes”).

 

On March5, 2004, GreenPoint Mortgage Securities LLC (the “Company”) filed acurrent report on Form 8-K in connection with a previously registered offer andsale of the GreenPoint Home Equity Loan Trust Asset-Backed Notes, Series 2004-1(“Series 2004-1 Notes”).

 

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On March8, 2004, Greenpoint Financial Corp. (the “Company”) filed a currentreport on Form 8-K in connection with the filing of their consolidated financialstatements as of December 31, 2003, which includes the report of IndependentAuditors of the Company relating thereto. This information also will becontained in, and is being furnished in advance of, the Company’s Annual Reporton Form 10-K for the year ended December 31, 2003.

 

On March17, 2004, GreenPoint Mortgage Securities LLC (the “Registrant”) filed acurrent report on Form 8-K related to the issuance of up to $2,276,908,549 in principal amount of asset-backedsecurities on a delayed or continuous basis pursuant to Rule 415 under theSecurities Act of 1933, as amended, by the registration statement on FormS-3/A) File No. 333-108405) (the “Registration Statement”). The current reporton Form 8-K is being filed to satisfy an undertaking to file copies of certainagreements executed in connection with the issuance of the Notes.

 

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**SIGNATURES**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly 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 May 7, 2004

 

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