**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

----

**FORM 10-Q**

 

**ý**** Quarterly Report Pursuant to Section 13 or 15(d) of the**

**SecuritiesExchange Act of 1934**

** **

----

 

**For the Quarter Ended**

**September 30, 2001**

** **

**OR**

 

**o**** Transition Report Pursuant to Section 13 or 15(d) of the**

**SecuritiesExchange Act of 1934**

 

**0-22516**

**Securities and ExchangeCommission File Number**

 

**GreenPoint Financial Corp.**

(Exact name of registrant as specified inits charter)

 

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

 

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

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

 

As of November 1, 2001 there were 100,141,012 shares of commonstock outstanding.

 

**GreenPoint Financial Corp.**

 

**FORM 10-Q**

 

**For the Quarter Ended**

**September 30, 2001**

 

**TABLE OF CONTENTS**

 
| **PART I - FINANCIAL INFORMATION**                                                                                                      |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                    |   |
| Item 1 -     Financial  Statements                                                                                  |   |
|                                                                                                                                    |   |
| Consolidated  Statements of Financial Condition (unaudited) as of September 30, 2001 and  December 31, 2000                             |   |
|                                                                                                                                    |   |
| Consolidated  Statements of Income (unaudited) for the quarters and nine month periods  ended September 30, 2001 and 2000               |   |
|                                                                                                                                    |   |
| Consolidated  Statements of Comprehensive Income (unaudited) for the quarters and nine  month periods ended September 30, 2001 and 2000 |   |
|                                                                                                                                    |   |
| Consolidated  Statements of Changes in Stockholders' Equity (unaudited) for the nine months  ended September 30, 2001 and 2000          |   |
|                                                                                                                                    |   |
| Consolidated  Statements of Cash Flows (unaudited) for the nine months ended September 30,  2001 and 2000                               |   |
|                                                                                                                                    |   |
| Notes  to the Unaudited Consolidated Financial Statements                                                                               |   |
|                                                                                                                                    |   |
|                                                                                                                                    |   |
| Item  2 -     Management's Discussion and  Analysis of Financial Condition and Results of Operations                |   |
|                                                                                                                                    |   |
| Item  3 -     Quantitative and Qualitative  Disclosure about Market Risk                                            |   |
|                                                                                                                                    |   |
|                                                                                                                                    |   |
| **PART II – OTHER INFORMATION**                                                                                                    |   |
|                                                                                                                                    |   |
| Item 1 -     Legal Proceedings                                                                                      |   |
|                                                                                                                                    |   |
| Item 6 -     Exhibits and Reports on Form 8-K                                                                       |   |
|                                                                                                                                    |   |

 

**GREENPOINT FINANCIAL CORP. ANDSUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**

**(Unaudited)**

 
|                                                                                       |     | **Sept. 30,** |   | **Dec. 31,** |   |
|--------------------------------------------------------------------------------------------|----------|---------------|--------|--------------|--------|
| ***(In  millions, except share amounts)***                                                 |     | **2001**      |   | **2000**     |   |
| **ASSETS**                                                                                 |     |          |   |         |   |
| Cash and due from banks                                                                    |     | $             | 168    |         | $      | 140 |   |
| Money market investments                                                                   |     | 32            |   | 171          |   |
| Loans receivable held for sale                                                             |     | 4,344         |   | 1,981        |   |
| Federal Home Loan Bank of New York stock                                                   |     | 210           |   | 96           |   |
| Securities available for sale                                                              |     | 1,344         |   | 2,678        |   |
| Securities available for sale-pledged to creditors                                         |     | 1,973         |   | 388          |   |
| Retained interests in securitizations                                                      |     | 188           |   | 159          |   |
| Securities held to maturity (fair value of $3 and $3,  respectively)                       |     | 3             |   | 3            |   |
| Loans receivable held for investment:                                                      |     |          |   |         |   |
| Mortgage loans                                                                             |     | 9,801         |   | 8,116        |   |
| Other loans                                                                                |     | 521           |   | 580          |   |
| Deferred loan fees and unearned discount                                                   |     | 15            |   | (9           | )      |
| Allowance for possible loan losses                                                         |     | (113          | )      | (113         | )      |
| Loans receivable held for investment, net                                                  |     | 10,224        |   | 8,574        |   |
| Other interest-earning assets                                                              |     | 138           |   | 128          |   |
| Accrued interest receivable                                                                |     | 101           |   | 87           |   |
| Banking premises and equipment, net                                                        |     | 130           |   | 131          |   |
| Servicing assets                                                                           |     | 195           |   | 197          |   |
| Goodwill, net                                                                              |     | 805           |   | 864          |   |
| Other assets                                                                               |     | 142           |   | 168          |   |
| Total assets                                                                               |     | $             | 19,997 |         | $      | 15,765 |   |
|                                                                                       |     |          |   |         |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                              |     |          |   |         |   |
| **Liabilities:**                                                                           |     |          |   |         |   |
| Deposits:                                                                                  |     |          |   |         |   |
| N.O.W. and checking                                                                        |     | $             | 595    |         | $      | 577 |   |
| Savings                                                                                    |     | 1,181         |   | 1,213        |   |
| Variable rate savings                                                                      |     | 1,984         |   | 1,872        |   |
| Money market                                                                               |     | 836           |   | 629          |   |
| Term certificates of deposit                                                               |     | 6,155         |   | 6,885        |   |
| Total deposits                                                                             |     | 10,751        |   | 11,176       |   |
| Notes payable                                                                              |     | 1             |   | 2            |   |
| Mortgagors’ escrow                                                                    |     | 105           |   | 90           |   |
| Federal funds purchased and securities sold under  agreements to repurchase                |     | 3,246         |   | 350          |   |
| Federal Home Loan Bank of New York advances                                                |     | 2,550         |   | 1,000        |   |
| Senior bank notes                                                                          |     | 134           |   | 138          |   |
| Subordinated bank notes                                                                    |     | 150           |   | 150          |   |
| Guaranteed preferred beneficial interest in Company’s  junior subordinated debentures |     | 200           |   | 200          |   |
| Liability under recourse exposure                                                          |     | 71            |   | 132          |   |
| Other liabilities                                                                          |     | 485           |   | 477          |   |
| Total liabilities                                                                          |     | 17,693        |   | 13,715       |   |
| Commitments and contingencies                                                              |     |          |   |         |   |
| **Stockholders’ equity:**                                                             |     |          |   |         |   |
| Preferred stock ($0.01 par value; 50,000,000 shares  authorized; none issued)              |     | ---           |   | ---          |   |
| Common stock ($0.01 par value; 220,000,000 shares  authorized; 110,261,164 shares issued)  |     | 1             |   | 1            |   |
| Additional paid-in capital                                                                 |     | 873           |   | 862          |   |
| Unallocated Employee Stock Ownership Plan (ESOP) shares                                    |     | (96           | )      | (100         | )      |
| Unearned stock plans shares                                                                |     | (1            | )      | (2           | )      |
| Retained earnings                                                                          |     | 1,732         |   | 1,532        |   |
| Accumulated other comprehensive income, net                                                |     | 40            |   | 17           |   |
| Treasury stock, at cost (9,229,743 shares and 10,155,750  shares, respectively)            |     | (245          | )      | (260         | )      |
| Total stockholders’ equity                                                            |     | 2,304         |   | 2,050        |   |
| Total liabilities and stockholders’ equity                                            |     | $             | 19,997 |         | $      | 15,765 |   |
|                                                                                       |     |          |   |         |   |
| *(See accompanying notes to the unaudited consolidated financial  statements)*             | * * |

 

**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF INCOME**

**(Unaudited)**

 

 
|                                                                           |   | **Quarter Ended** |   | **Nine Months Ended** |   |
|--------------------------------------------------------------------------------|--------|-------------------|--------|-----------------------|--------|
|                                                                           |   | **September 30,** |   | **September 30,**     |   |
| ***(In millions, except per share amounts)***                                  |   | **2001**          |   | **2000**              |   | **2001** |   | **2000** |   |
| **Interest income:**                                                           |   |              |   |                  |   |   |   |   |   |
| Mortgage loans held for investment                                             |   | $                 | 203    |                  | $      | 178 |   | $ | 568 |   | $ | 549 |   |
| Securities                                                                     |   | 60                |   | 38                    |   | 178 |   | 111 |   |
| Loans held for sale                                                            |   | 72                |   | 51                    |   | 177 |   | 126 |   |
| Money market investments                                                       |   | ---               |   | 4                     |   | 4 |   | 22 |   |
| Other                                                                          |   | 23                |   | 27                    |   | 67 |   | 78 |   |
| Total interest income                                                          |   | 358               |   | 298                   |   | 994 |   | 886 |   |
| **Interest expense:**                                                          |   |              |   |                  |   |   |   |   |   |
| Deposits                                                                       |   | 108               |   | 130                   |   | 351 |   | 380 |   |
| Other borrowed funds                                                           |   | 63                |   | 18                    |   | 137 |   | 51 |   |
| Long-term debt                                                                 |   | 10                |   | 7                     |   | 31 |   | 23 |   |
| Total interest expense                                                         |   | 181               |   | 155                   |   | 519 |   | 454 |   |
| Net interest income                                                            |   | 177               |   | 143                   |   | 475 |   | 432 |   |
| Provision for loan losses                                                      |   | (8                | )      | (9                    | )      | (18 | ) | (24 | ) |
| Net interest income after provision for loan losses                            |   | 169               |   | 134                   |   | 457 |   | 408 |   |
| **Non-interest income:**                                                       |   |              |   |                  |   |   |   |   |   |
| Income from fees and commissions:                                              |   |              |   |                  |   |   |   |   |   |
| Loan servicing fees                                                            |   | 29                |   | 34                    |   | 92 |   | 102 |   |
| Banking services fees and commissions                                          |   | 11                |   | 9                     |   | 33 |   | 28 |   |
| Other fees and commissions                                                     |   | 5                 |   | 5                     |   | 15 |   | 12 |   |
| Total income from fees and commissions                                         |   | 45                |   | 48                    |   | 140 |   | 142 |   |
| Net gain on sales of loans                                                     |   | 114               |   | 82                    |   | 298 |   | 190 |   |
| Change in valuation of retained interests                                      |   | (13               | )      | (21                   | )      | (45 | ) | (40 | ) |
| Net gain on securities                                                         |   | 4                 |   | 1                     |   | 16 |   | 3 |   |
| Other income                                                                   |   | (1                | )      | ---                   |   | (1 | ) | (2 | ) |
| Total non-interest income                                                      |   | 149               |   | 110                   |   | 408 |   | 293 |   |
| **Non-interest expense:**                                                      |   |              |   |                  |   |   |   |   |   |
| General and administrative expenses:                                           |   |              |   |                  |   |   |   |   |   |
| Salaries and benefits                                                          |   | 63                |   | 54                    |   | 179 |   | 158 |   |
| Employee Stock Ownership and stock plans expense                               |   | 7                 |   | 5                     |   | 19 |   | 12 |   |
| Net expense of premises and equipment                                          |   | 23                |   | 20                    |   | 66 |   | 59 |   |
| Federal deposit insurance premiums                                             |   | ---               |   | 1                     |   | 1 |   | 2 |   |
| Other administrative expenses                                                  |   | 39                |   | 29                    |   | 105 |   | 89 |   |
| Total general and administrative expenses                                      |   | 132               |   | 109                   |   | 370 |   | 320 |   |
| Other real estate owned operating income                                       |   | ---               |   | ---                   |   | (1 | ) | (1 | ) |
| Goodwill amortization                                                          |   | 19                |   | 19                    |   | 59 |   | 59 |   |
| Restructuring charge and non-recurring personnel expense                       |   | ---               |   | 5                     |   | --- |   | 5 |   |
| Total non-interest expense                                                     |   | 151               |   | 133                   |   | 428 |   | 383 |   |
| Income before income taxes                                                     |   | 167               |   | 111                   |   | 437 |   | 318 |   |
| Income taxes related to earnings                                               |   | 64                |   | 44                    |   | 170 |   | 128 |   |
| Net income                                                                     |   | $                 | 103    |                  | $      | 67 |   | $ | 267 |   | $ | 190 |   |
| Basic earnings per share                                                       |   | $                 | 1.15   |                  | $      | 0.75 |   | $ | 3.01 |   | $ | 2.10 |   |
| Diluted earnings per share                                                     |   | $                 | 1.12   |                  | $      | 0.74 |   | $ | 2.93 |   | $ | 2.07 |   |
|                                                                           |   |              |   |                  |   |   |   |   |   |
| *(See accompanying notes to the unaudited consolidated financial  statements)* |   |

 

**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

**(Unaudited)**

 

 
|                                                                           |     | **Quarter Ended** |   | **Nine Months Ended** |   |
|--------------------------------------------------------------------------------|----------|-------------------|--------|-----------------------|--------|
|                                                                           |     | **September 30,** |   | **September 30,**     |   |
| ***(In millions)***                                                            |     | **2001**          |   | **2000**              |   | **2001** |   | **2000** |   |
|                                                                           |     |              |   |                  |   |   |   |   |   |
| Net income                                                                     |     | $                 | 103    |                  | $      | 67 |   | $ | 267 |   | $ | 190 |   |
| Other comprehensive income, before tax:                                        |     |              |   |                  |   |   |   |   |   |
| Unrealized gain on securities:                                                 |     |              |   |                  |   |   |   |   |   |
| Unrealized holding gain arising during period                                  |     | 37                |   | 29                    |   | 56 |   | 33 |   |
| Less: reclassification adjustment for gains included in  net income            |     | (4                | )      | (1                    | )      | (16 | ) | (3 | ) |
| Other comprehensive income, before tax                                         |     | 33                |   | 28                    |   | 40 |   | 30 |   |
| Income tax expense related to items of other  comprehensive income             |     | (14               | )      | (12                   | )      | (17 | ) | (12 | ) |
| Other comprehensive income, net of tax                                         |     | 19                |   | 16                    |   | 23 |   | 18 |   |
| **Total comprehensive  income, net of tax**                                    |     | $                 | 122    |                  | $      | 83 |   | $ | 290 |   | $ | 208 |   |
|                                                                           |     |              |   |                  |   |   |   |   |   |
| *(See accompanying notes to the unaudited consolidated  financial statements)* | * * |

 

 

**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY**

**(Unaudited)**

 
|                                                                           |     | **Nine Months Ended** |   |
|--------------------------------------------------------------------------------|----------|-----------------------|--------|
|                                                                           |     | **September 30,**     |   |
| ***(In  millions)***                                                           |     | **2001**              |   | **2000** |   |
| **Common stock**                                                               |     |                  |   |   |   |
| Balance at beginning of period                                                 |     | $                     | 1      |   | $ | 1 |   |
| Balance at end of period                                                       |     | 1                     |   | 1 |   |
| **Additional paid-in capital**                                                 |     |                  |   |   |   |
| Balance at beginning of period                                                 |     | 862                   |   | 858 |   |
| Reissuance of treasury stock                                                   |     | (14                   | )      | (6 | ) |
| Amortization of ESOP shares committed to be released                           |     | 13                    |   | 6 |   |
| Amortization of stock plans shares                                             |     | 1                     |   | 1 |   |
| Tax benefit for vested stock plans shares                                      |     | 11                    |   | 2 |   |
| Balance at end of period                                                       |     | 873                   |   | 861 |   |
| **Unallocated ESOP shares**                                                    |     |                  |   |   |   |
| Balance at beginning of period                                                 |     | (100                  | )      | (105 | ) |
| Amortization of ESOP shares committed to be released                           |     | 4                     |   | 4 |   |
| Balance at end of period                                                       |     | (96                   | )      | (101 | ) |
| **Unearned stock plans shares**                                                |     |                  |   |   |   |
| Balance at beginning of period                                                 |     | (2                    | )      | (3 | ) |
| Amortization of stock plans shares                                             |     | 1                     |   | 1 |   |
| Balance at end of period                                                       |     | (1                    | )      | (2 | ) |
| **Retained earnings**                                                          |     |                  |   |   |   |
| Balance at beginning of period                                                 |     | 1,532                 |   | 1,408 |   |
| Net income                                                                     |     | 267                   |   | 190 |   |
| Dividends declared                                                             |     | (67                   | )      | (68 | ) |
| Balance at end of period                                                       |     | 1,732                 |   | 1,530 |   |
| **Accumulated other comprehensive income, net**                                |     |                  |   |   |   |
| Balance at beginning of period                                                 |     | 17                    |   | (12 | ) |
| Net change in accumulated other comprehensive income, net                      |     | 23                    |   | 18 |   |
| Balance at end of period                                                       |     | 40                    |   | 6 |   |
| **Treasury stock, at cost**                                                    |     |                  |   |   |   |
| Balance at beginning of period                                                 |     | (260                  | )      | (160 | ) |
| Reissuance of treasury stock                                                   |     | 42                    |   | 9 |   |
| Purchase of treasury stock                                                     |     | (27                   | )      | (68 | ) |
| Balance at end of period                                                       |     | (245                  | )      | (219 | ) |
| **Total stockholders’ equity**                                            |     | $                     | 2,304  |   | $ | 2,076 |   |
|                                                                           |     |                  |   |   |   |
| *(See accompanying notes to the unaudited consolidated financial  statements)* | * * |

 

 

**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
|                                                                           |     | **Nine Months Ended** |   |
|--------------------------------------------------------------------------------|----------|-----------------------|--------|
|                                                                           |     | **September 30,**     |   |
| ***(In  millions)***                                                           |     | **2001**              |   | **2000** |   |
| **Cash flows from operating activities:**                                      |     |                  |   |   |   |
| Net income                                                                     |     | $                     | 267    |   | $ | 190 |   |
| Adjustments to reconcile net income to net cash used in  operating activities: |     |                  |   |   |   |
| Provision for loan losses                                                      |     | 18                    |   | 24 |   |
| Depreciation and amortization                                                  |     | 85                    |   | 83 |   |
| ESOP and stock plans expense                                                   |     | 19                    |   | 12 |   |
| Capitalization of servicing assets                                             |     | (43                   | )      | (70 | ) |
| Amortization and impairment of servicing assets                                |     | 45                    |   | 34 |   |
| (Increase) decrease in assets associated with operating  activities:           |     |                  |   |   |   |
| Loans receivable held for sale:                                                |     |                  |   |   |   |
| Loan originations                                                              |     | (18,524               | )      | (9,339 | ) |
| Proceeds from loan sales                                                       |     | 16,160                |   | 8,596 |   |
| Other                                                                          |     | (1                    | )      | 84 |   |
| Retained interests in securitizations                                          |     | (26                   | )      | (14 | ) |
| Accrued interest receivable                                                    |     | (14                   | )      | (13 | ) |
| Other assets                                                                   |     | 16                    |   | 55 |   |
| Increase (decrease) in liabilities associated with  operating activities:      |     |                  |   |   |   |
| Liabilities under recourse exposure                                            |     | (61                   | )      | 23 |   |
| Other liabilities                                                              |     | 107                   |   | (293 | ) |
| Other, net                                                                     |     | (19                   | )      | (25 | ) |
| Net cash used in operating activities                                          |     | (1,971                | )      | (653 | ) |
| **Cash flows from investing activities:**                                      |     |                  |   |   |   |
| Net change in:                                                                 |     |                  |   |   |   |
| Loans receivable held for investment                                           |     | (1,679                | )      | 519 |   |
| Premises and equipment                                                         |     | (25                   | )      | (24 | ) |
| Available for sale securities:                                                 |     |                  |   |   |   |
| Proceeds from maturities                                                       |     | 791                   |   | 591 |   |
| Proceeds from sales                                                            |     | 1,958                 |   | 526 |   |
| Purchase of securities                                                         |     | (4,257                | )      | (1,479 | ) |
| Principal repayments                                                           |     | 1,202                 |   | 177 |   |
| Federal Home Loan Bank Stock: purchases                                        |     | (114                  | )      | (5 | ) |
| Other, net                                                                     |     | 19                    |   | 11 |   |
| Net cash (used in) provided by investing activities                            |     | (2,105                | )      | 316 |   |
| **Cash flows from financing activities:**                                      |     |                  |   |   |   |
| Net change in:                                                                 |     |                  |   |   |   |
| Domestic deposits                                                              |     | (425                  | )      | (253 | ) |
| Mortgagors’ escrow accounts                                               |     | 15                    |   | 18 |   |
| Notes payable                                                                  |     | (1                    | )      | --- |   |
| Securities sold under agreements to repurchase                                 |     | 2,896                 |   | 150 |   |
| Federal Home Loan Bank advances                                                |     | 1,550                 |   | 175 |   |
| Cash dividends paid                                                            |     | (67                   | )      | (68 | ) |
| Treasury stock purchased                                                       |     | (27                   | )      | (68 | ) |
| Exercise of stock options                                                      |     | 28                    |   | 3 |   |
| Retirement of long term debt                                                   |     | (4                    | )      | (59 | ) |
| Net cash provided by (used in) financing activities                            |     | 3,965                 |   | (102 | ) |
| Net decrease in cash and cash equivalents                                      |     | (111                  | )      | (439 | ) |
| Cash and cash equivalents at beginning of period                               |     | 311                   |   | 1,232 |   |
| Cash and cash equivalents at end of period                                     |     | $                     | 200    |   | $ | 793 |   |
| **Non-cash activities:**                                                       |     |                  |   |   |   |
| Additions to other real estate owned, net                                      |     | $                     | (12    | ) | $ | (12 | ) |
| Unsettled trades                                                               |     | $                     | ---    |   | $ | --- |   |
| **Supplemental disclosure of cash flow information:**                          |     |                  |   |   |   |
| Cash paid for income taxes                                                     |     | $                     | 68     |   | $ | 68 |   |
| Interest paid                                                                  |     | $                     | 508    |   | $ | 394 |   |
|                                                                           |     |                  |   |   |   |
| *(See accompanying notes to the unaudited consolidated financial  statements)* | * * |

 

**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

 

**1.       Summary of SignificantAccounting Policies**

 

**Basis of Presentation**

The unauditedconsolidated financial statements of GreenPoint Financial Corp. andSubsidiaries (“GreenPoint” or the “Company”) are prepared in accordance withgenerally accepted accounting principles for interim financial information. Inthe opinion of management, all adjustments (consisting only of normal recurringaccruals) necessary for a fair statement of the Company's interim financial conditionas of the dates indicated and the results of operations for the periodspresented have been included. Certain reclassifications have been made to theprior period financial statements to conform to the current periodpresentation. The results of operations for the interim periods shown are notnecessarily indicative of results that may be expected for the entire year.

 

The unauditedconsolidated interim financial statements presented should be read inconjunction with the consolidated financial statements and notes included inthe Company's Annual Report to shareholders for the year ended December 31,2000.

 

**Accounting for Loan Sales**

The Companysells loans both in the whole loan market as well as through varioussecuritization vehicles.

 

When the Companysells mortgages or manufactured housing loans on a whole loan basis, in somecases it retains the servicing rights related to the loans. In instances wherethe Company does not retain the servicing rights to the loans, the gain or losson the sale is equal to the difference between the proceeds received and thebook basis of the loans sold. In instances where the Company does retain theservicing rights, the gain or loss also depends in part on the fair valueattributed to the servicing rights.

 

When the Company securitizes manufacturedhousing loans and mortgages it may retain servicing rights and one or moreretained interests. In addition, the Company may sell loans under recoursearrangements, which may be in the form of a corporate guarantee issued byGreenPoint Bank (the “Bank”) and backed by a letter of credit or a creditdefault swap. In calculating the gain or loss on the sale, the Companyallocates the cost basis of the loans sold between the assets sold, and theretained interests and servicing rights based on their relative fair values atthe date of sale. The liabilities associated with these guarantees are reportedseparately as liability under recourse exposure. A gain or loss is recognizedas the difference between the cash proceeds from the sale and the allocatedcost basis of the assets sold, less the estimated fair value of the corporateguarantee.

 

**Retained Interests inSecuritizations**

Retained interests in securitizationsinclude interest-only strips, subordinated certificates and transferorinterests and the recorded liabilities for limited recourse provided onmortgage loans and recourse provided on manufactured housing loans securitizedand sold.

 

During the fourth quarter of 2000, theCompany adopted the Emerging Issues Task Force Issue No. 99-20 “Recognition ofInterest Income and Impairment on Purchased and Retained Beneficial Interestsin Securitized Financial Assets” under which interest income and expense onretained interests are recognized using the effective yield method. The Companyclassifies its retained interests in securitizations as available for sale andcarries these securities at fair value. Generally, if the fair value ofretained interests declines below its carrying amount (excluding unrealizedgains), the change in valuation is recognized in the consolidated statement ofincome and is classified as a change in valuation of retained interests.Unrealized gains are reported, net of applicable taxes, in accumulated othercomprehensive income, as a separate component of stockholders’ equity.

 

On a quarterly basis, GreenPoint reviewsthe adequacy of the liability under recourse exposure based on management’sbest estimate of future cash flows associated with the recourse arrangements.The change in valuation is recognized in the consolidated statement of incomeas a change in valuation of retained interests.

 

To obtain fair values, quoted marketprices are used if available. Because market quotes are generally not availablefor retained interests, the Company generally estimates fair value based uponthe present value of estimated future cash flows using assumptions ofprepayments, defaults, loss severity rates, and discount rates that the Companybelieves market participants would use for similar assets and liabilities.

 

**Servicing Assets**

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

 

The Company stratifies its servicingassets based on the risk characteristics of the underlying loan pools and theassets are evaluated for impairment based on the risk characteristics. Avaluation allowance is recognized through a charge to current earnings forservicing assets that have an amortized balance in excess of the current fairvalue.

 

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

 

**2.       Stock Incentive Plan**

 

For the nine months ended September 30,2001, the Company granted options to purchase 1,634,500 shares of the Company’scommon stock to certain officers and directors, at an average exercise price of$36.15. These awards vest over one to three years on the anniversary dates ofthe awards.

 

 

**3.     LoansReceivable Held for Sale**

 

The followingtable sets forth the composition of the Company's loans receivable held forsale, at the dates indicated.

 
|                                                 |   | **Sept. 30,** |   | **Dec. 31,** |   |
|------------------------------------------------------|--------|---------------|--------|--------------|--------|
| ***(In  millions)***                                 |   | **2001**      |   | **2000**     |   |
| **Loans receivable held for sale:**                  |   |          |   |         |   |
| Residential mortgage loans                           |   | $             | 3,299  |         | $      | 1,572 |   |
| Home equity lines of credit                          |   | 371           |   | 178          |   |
| Manufactured housing loans                           |   | 480           |   | 101          |   |
| Manufactured housing land/home loans                 |   | 172           |   | 118          |   |
| Guaranteed student loans                             |   | 2             |   | 2            |   |
| Deferred loan origination fees and unearned discount |   | 20            |   | 10           |   |
| Loans receivable held for sale                       |   | $             | 4,344  |         | $      | 1,981 |   |

 

 

## **4.       RecourseArrangements, Retained Interests in Securitizations and Servicing Assets**

 

GreenPointsecuritizes manufactured housing loans and mortgages and may enter intorecourse arrangements in the form of the retention of subordinated interests orthe issuance of a corporate guarantee. In addition, when GreenPoint securitizesand sells manufactured housing loans and mortgages, it may retain servicingassets. 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**

GreenPoint has established liabilities for limited recourseprovided on mortgage loans and recourse provided on manufactured housing loansthat have been securitized or sold. The investors and thesecuritization trusts have no recourse to GreenPoint's other assets for failureof debtors to pay when due, except for the retained interests related to bothmortgage and manufactured housing securitizations and the liability under thecorporate guarantee related to the manufactured housing securitizations.

 

GreenPoint has loans sold with recourse with the following principalbalances, maximum recourse exposures and recorded liabilities:

 
|                                 |   |          |   | **September 30, 2001** |   |          |   |
|--------------------------------------|--------|---------------|--------|------------------------|--------|---------------|--------|
|                                 |   |          |   | **Maximum**            |   |          |   |
|                                 |   | **Principal** |   | **Recourse**           |   | **Recorded**  |   |
| ***(In millions)***                  |   | **Balance**   |   | **Exposure (1)**       |   | **Liability** |   |
| Manufactured housing securitizations |   | $             | 4,740  |                   | $      | 826           |   | $ | 67 |   |
| Manufactured housing sales           |   | 306           |   | 306                    |   | 3             |   |
| Mortgage securitizations (2)         |   | 1,339         |   | 144                    |   | ---           |   |
| Mortgage sales (3)                   |   | 760           |   | 744                    |   | 1             |   |
|                                      |        |               |        |                        |        |               |        |  |  |  |

 
|                                 |   |          |   | **December 31, 2000** |   |          |   |
|--------------------------------------|--------|---------------|--------|-----------------------|--------|---------------|--------|
|                                 |   |          |   | **Maximum**           |   |          |   |
|                                 |   | **Principal** |   | **Recourse**          |   | **Recorded**  |   |
| ***(In millions)***                  |   | **Balance**   |   | **Exposure (1)**      |   | **Liability** |   |
| Manufactured housing securitizations |   | $             | 5,057  |                  | $      | 899           |   | $ | 121 |   |
| Manufactured housing sales           |   | 334           |   | 334                   |   | 10            |   |
| Mortgage securitizations (2)         |   | 1,744         |   | 125                   |   | ---           |   |
| Mortgage sales (3)                   |   | 1,175         |   | 1,152                 |   | 1             |   |
|                                      |        |               |        |                       |        |               |        |  |  |  |

----

*(1)  Represents the maximum recourse exposurerelating to recourse arrangements in the form of the retention of subordinatedinterests or the issuance of a corporate guarantee.*

*(2)  The net present value of expected cashoutflows on the mortgage securitization recourse arrangements is reflected inthe valuation of the mortgage retained interests.*

*(3)  The recourse arrangements under the mortgagesale transactions represent a risk sharing arrangement in which GreenPoint hastransferred the first 2% of losses to the purchaser.*

 

In addition to the recourse arrangementsdescribed in the table above, at September 30, 2001 and December 31, 2000,GreenPoint has provided representations and warranties on mortgage loans withremaining principal balances of $10.0 billion and $6.7 billion, respectively.GreenPoint has established liabilities related to representations andwarranties for mortgage loans of $13 million and $7 million, which is includedin other liabilities, at September 30, 2001 and December 31, 2000,respectively.

 

The following presents quantitative information about delinquencies onloans sold with recourse:

 
|                                                     |   | **Sept.  30,**            |   | **Dec.  31,** |   | **Sept.  30,** |   | **Dec.  31,** |   |
|----------------------------------------------------------|--------|---------------------------|--------|---------------|--------|----------------|--------|---------------|--------|
|                                                     |   | **2001**                  |   | **2000**      |   | **2001**       |   | **2000**      |   |
| ***(In millions)***                                      |   | **Manufactured  Housing** |   | **Mortgage**  |   |
| Principal  balance of loans                              |   | $                         | 5,046  |          | $      | 5,391          |   | $             | 2,099  |   | $ | 2,919 |   |
| Principal  balance of loans 90 days or more past due (1) |   | 222                       |   | 182           |   | 65             |   | 29            |   |
|                                                          |        |                           |        |               |        |                |        |               |        |  |  |  |  |

 

*(1)  Manufactured housing past due loans includerepossessed inventory.*

 

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

The activity in the recorded liability for manufactured housingsecuritizations and sales is summarized as follows:

 

 
|                                                 |   | **At and  for the** |   | **At and  for the**    |   |
|------------------------------------------------------|--------|---------------------|--------|------------------------|--------|
|                                                 |   | **Quarter  Ended**  |   | **Nine  Months Ended** |   |
|                                                 |   | **September  30,**  |   | **September  30,**     |   |
| ***(In millions)***                                  |   | **2001**            |   | **2000**               |   | **2001** |   | **2000** |   |
| **Liability  for Recourse Exposure**                 |   |                |   |                   |   |   |   |   |   |
| Balance at  beginning of period                      |   | $                   | 87     |                   | $      | 44 |   | $ | 131 |   | $ | 32 |   |
| Provisions  charged to income at securitization/sale |   | ---                 |   | ---                    |   | --- |   | 1 |   |
| Letter of credit  draws and other charges            |   | (28                 | )      | (8                     | )      | (102 | ) | (12 | ) |
| Change in  valuation of retained interests           |   | 11                  |   | 19                     |   | 41 |   | 34 |   |
| Balance at end  of period                            |   | $                   | 70     |                   | $      | 55 |   | $ | 70 |   | $ | 55 |   |

 

 

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

 
|                                       |   | **At and  for the Quarter Ended** |   | **At and  for the Nine Months Ended** |   |
|--------------------------------------------|--------|-----------------------------------|--------|---------------------------------------|--------|
|                                       |   | **September  30,**                |   | **September  30,**                    |   |
|                                       |   | **2001**                          |   | **2000**                              |   | **2001** |   | **2000** |   | **2001** |   | **2000** |   | **2001** |   | **2000** |   |
|                                       |   | **Manufactured**                  |   |                                  |   |   |   | **Manufactured** |   |   |   |   |   |
| ***(In millions)***                        |   | **Housing**                       |   | **Mortgage**                          |   | **Housing** |   | **Mortgage** |   |
| **Retained  Interests in Securitizations** |   |                              |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at  beginning of period            |   | $                                 | 55     |                                  | $      | 13 |   | $ | 135 |   | $ | 100 |   | $ | 46 |   | $ | 53 |   | $ | 113 |   | $ | 72 |   |
| Additions from  securitizations            |   | ---                               |   | 26                                    |   | 2 |   | 14 |   | 13 |   | 37 |   | 17 |   | 33 |   |
| Interest and  other income                 |   | 6                                 |   | (1                                    | )      | 6 |   | 5 |   | 10 |   | (1 | ) | 18 |   | 14 |   |
| Cash received                              |   | (4                                | )      | (2                                    | )      | (7 | ) | (7 | ) | (14 | ) | (8 | ) | (20 | ) | (15 | ) |
| Unrealized gain  (loss)                    |   | 3                                 |   | 3                                     |   | (6 | ) | 1 |   | 7 |   | 2 |   | 2 |   | 9 |   |
| Change in  valuation of retained interests |   | (2                                | )      | (2                                    | )      | --- |   | --- |   | (4 | ) | (6 | ) | --- |   | --- |   |
| Sales of  subordinated certificates        |   | ---                               |   | ---                                   |   | --- |   | --- |   | --- |   | (40 | ) | --- |   | --- |   |
| Balance at end  of period                  |   | $                                 | 58     |                                  | $      | 37 |   | $ | 130 |   | $ | 113 |   | $ | 58 |   | $ | 37 |   | $ | 130 |   | $ | 113 |   |

 

On a quarterly basis, GreenPoint reviews retained interests forimpairment based on management’s best estimate of the fair value of future cashflows associated with the retained interests. GreenPoint also reviews the adequacy of the value of therecorded liability on a quarterly basis, based on management’s best estimate offuture cash flows associated with the corporate guarantee.

 

During the quarter ended September 30,2001, GreenPoint recorded a $13 million charge to adjust its manufacturedhousing retained interests to fair value. The charge consisted of $11 millionto adjust its manufactured housing corporate guarantee liability and $2 millionto adjust its manufactured housing interest-only strip to fair value. Thecharge reflected losses during the quarter primarily resulting from the timingof the sales of repossessed units.

 

**ValuationAssumptions**

The key economic assumptions used inestimating the fair value of retained interests and the assumptions used inestimating the fair value of the entire portfolio of retained interests atSeptember 30, 2001 were as follows:

 
|                                   |   | **Estimate  of Fair Value at** |   |
|----------------------------------------|--------|--------------------------------|--------|
|                                   |   | **September  30, 2001**        |   |
|                                   |   | **Manufactured**               |   |   |   |
|                                   |   | **Housing**                    |   | **Mortgage** |   |
| Weighted average life (in years)       |   | 4.3                            |   | 1.2 |   |
| Weighted average prepayment rate *(1)* |   | 13.3                           | %      | 49.1 | % |
| Weighted average default rate          |   | 4.1                            | %      | N/A |   |
| Loss severity rate                     |   | 64.0                           | %      | N/A |   |
| Weighted average loss rate             |   | 2.6                            | %      | 1.3 | % |
| Asset cash flows discounted at         |   | 13.7                           | %      | 12.7 | % |
| Liability cash flows discounted at     |   | 6.5                            | %      | --- |   |

----

*(1)Excludes weighted average default rate.*

 

**Servicing Assets**

On a quarterly basis, GreenPoint reviews capitalized servicing rightsfor impairment. This review is performed based on risk strata, which aredetermined on a disaggregated basis given the predominant risk characteristicsof the underlying loans. For manufactured housing loans, the predominant riskcharacteristics are loan type and interest rate type. For mortgage loans, thepredominant risk characteristics are loan type and interest rate.

 

GreenPoint receives annual servicing fees approximating 1.0% and 0.5%of the principal balances for manufacturing housing loans and mortgage loans,respectively.

 

The activity in servicing assets is summarized as follows:

 
|                                            |   | **At and  for the Quarter Ended** |   | **At and  for the Nine Months Ended** |   |
|-------------------------------------------------|--------|-----------------------------------|--------|---------------------------------------|--------|
|                                            |   | **September  30,**                |   | **September  30,**                    |   |
|                                            |   | **2001**                          |   | **2000**                              |   | **2001** |   | **2000** |   | **2001** |   | **2000** |   | **2001** |   | **2000** |   |
|                                            |   | **Manufactured**                  |   |                                  |   |   |   | **Manufactured** |   |   |   |   |   |
| ***(In millions)***                             |   | **Housing**                       |   | **Mortgage**                          |   | **Housing** |   | **Mortgage** |   |
| **Servicing  Assets**                           |   |                              |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at  beginning of period                 |   | $                                 | 134    |                                  | $      | 134 |   | $ | 78 |   | $ | 67 |   | $ | 142 |   | $ | 126 |   | $ | 60 |   | $ | 55 |   |
| Additions                                       |   | ---                               |   | 13                                    |   | 19 |   | 13 |   | 5 |   | 37 |   | 50 |   | 32 |   |
| Sales                                           |   | ---                               |   | ---                                   |   | (10 | ) | --- |   | --- |   | --- |   | (12 | ) | --- |   |
| Amortization                                    |   | (6                                | )      | (7                                    | )      | (7 | ) | (4 | ) | (19 | ) | (23 | ) | (18 | ) | (11 | ) |
| Balance at end  of period                       |   | 128                               |   | 140                                   |   | 80 |   | 76 |   | 128 |   | 140 |   | 80 |   | 76 |   |
| **Reserve  for impairment of servicing assets** |   |                              |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at  beginning of period                 |   | ---                               |   | ---                                   |   | (9 | ) | --- |   | --- |   | --- |   | (5 | ) | --- |   |
| Additions                                       |   | ---                               |   | ---                                   |   | (4 | ) | --- |   | --- |   | --- |   | (8 | ) | --- |   |
| Balance at end  of period                       |   | ---                               |   | ---                                   |   | (13 | ) | --- |   | --- |   | --- |   | (13 | ) | --- |   |
| **Servicing  assets, net**                      |   | $                                 | 128    |                                  | $      | 140 |   | $ | 67 |   | $ | 76 |   | $ | 128 |   | $ | 140 |   | $ | 67 |   | $ | 76 |   |

 

At September 30, 2001, the estimated fair values of manufacturedhousing and mortgage servicing assets were $160 million and $71 million,respectively.

 

At December 31, 2000, the estimated fair values of manufactured housingand mortgage servicing assets were $169 million and $64 million, respectively.

 

The significant assumptions used in estimating the fair value of theservicing assets were as follows:

 
|                                   |   | **September  30, 2001** |   |
|----------------------------------------|--------|-------------------------|--------|
|                                   |   | **Manufactured**        |   |   |   |
|                                   |   | **Housing**             |   | **Mortgage** |   |
| Weighted average prepayment rate *(1)* |   | 13.5                    | %      | 29.3 | % |
| Weighted average life (in years)       |   | 4.0                     |   | 3.3 |   |
| Weighted average default rate          |   | 3.6                     | %      | N/A |   |
| Cash flows discounted at               |   | 14.0                    | %      | 10.1 | % |

----

*(1)Excludes weighted average default rate.*

 

**5.     Business Segments**

The Companyconsists of three domestic business segments offering unique products andservices. The Mortgage Banking segment is in the business of originating,selling, securitizing, servicing and investing in residential mortgage loans.The Company has historically funded its mortgage portfolio with consumerdeposits raised through its Consumer Banking operations. The Consumer Bankingsegment consists of 74 full service banking offices offering a variety offinancial services to the Greater New York City area. The Manufactured Housingsegment primarily originates, securitizes and services manufactured housingloans. Included in the other category are revenues and expenses from theCompany’s treasury operations, unallocated executive and corporateadministration expenses and GAAP elimination entries recorded in theconsolidation process.

 

Theaccounting policies of the segments are the same as described in Note 1"Summary of Significant Accounting Policies." The Company evaluatesthe performance of its business segments based on income before income taxes.Expenses under the direct control of each business segment and the expense ofpremises and equipment incurred to support business operations are allocatedaccordingly, by segment. The expenses relating to the executive, strategicplanning, information systems personnel, finance, audit and human resourcesfunctions of the Company are not allocated to individual operating segments.

 
|                                      |   | **Quarter Ended September 30, 2001** |   |
|-------------------------------------------|--------|--------------------------------------|--------|
|                                      |   |                                 |   |   |   | **Manufactured** |   | **Segment** |   |   |   | **Consolidated** |   |
| ***(In millions)***                       |   | **Mortgage**                         |   | **Consumer** |   | **Housing** |   | **Totals** |   | **Other *(1)*** |   | **Totals** |   |
| Net interest income                       |   | $                                    | 85     |   | $ | 48 |   | $ | 12 |   | $ | 145 |   | $ | 32 |   | $ | 177 |   |
| Income from fees and commissions          |   | ---                                  |   | 11 |   | 5 |   | 16 |   | --- |   | 16 |   |
| Loan servicing fees                       |   | 3                                    |   | --- |   | 26 |   | 29 |   | --- |   | 29 |   |
| Net gain on sale of loans                 |   | 114                                  |   | --- |   | --- |   | 114 |   | --- |   | 114 |   |
| Segment gain (loss) before taxes          |   | 166                                  |   | 22 |   | (16 | ) | 172 |   | (5 | ) | 167 |   |
| Significant non-cash items:               |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization             |   | 4                                    |   | 13 |   | 10 |   | 27 |   | 1 |   | 28 |   |
| ESOP and stock plans expense              |   | 3                                    |   | 1 |   | 1 |   | 5 |   | 2 |   | 7 |   |
| Change in valuation of retained interests |   | ---                                  |   | --- |   | (13 | ) | (13 | ) | --- |   | (13 | ) |
|                                      |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Total Assets                              |   | $                                    | 13,786 |   | $ | 11,168 |   | $ | 1,741 |   | $ | 26,695 |   | $ | (6,698 | ) | $ | 19,997 |   |

 
|                                      |   | **Quarter Ended September 30, 2000** |   |
|-------------------------------------------|--------|--------------------------------------|--------|
|                                      |   |                                 |   |   |   | **Manufactured** |   | **Segment** |   |   |   | **Consolidated** |   |
| ***(In millions)***                       |   | **Mortgage**                         |   | **Consumer** |   | **Housing** |   | **Totals** |   | **Other *(1)*** |   | **Totals** |   |
| Net interest income                       |   | $                                    | 59     |   | $ | 60 |   | $ | 12 |   | $ | 131 |   | $ | 12 |   | $ | 143 |   |
| Income from fees and  commissions         |   | 4                                    |   | 10 |   | 3 |   | 17 |   | (3) |   | 14 |   |
| Loan servicing fees                       |   | 6                                    |   | --- |   | 28 |   | 34 |   | --- |   | 34 |   |
| Net gain on sale of loans                 |   | 52                                   |   | --- |   | 30 |   | 82 |   | --- |   | 82 |   |
| Segment gain (loss) before taxes          |   | 83                                   |   | 36 |   | (3 | ) | 116 |   | (5 | ) | 111 |   |
| Significant non-cash items:               |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization             |   | 3                                    |   | 12 |   | 9 |   | 24 |   | 3 |   | 27 |   |
| ESOP and stock plans expense              |   | 2                                    |   | 1 |   | 1 |   | 4 |   | 1 |   | 5 |   |
| Change in valuation of retained interests |   | ---                                  |   | --- |   | (21 | ) | (21 | ) | --- |   | (21 | ) |
|                                      |   |                                 |   |   |   |   |   |   |   |   |   |   |   |
| Total Assets                              |   | $                                    | 9,955  |   | $ | 11,773 |   | $ | 1,574 |   | $ | 23,302 |   | $ | (7,977 | ) | $ | 15,325 |   |

----

*(1)  Representsunallocated corporate amounts and eliminations.*

*(2)  For the purpose of internal managementreporting, the Company records intersegment funds transfers and eliminatesthese transfers on a consolidated basis for GAAP reporting. Intersegment assetsand liabilities eliminated for consolidation purposes were $10.7 billion and$11.2 billion for the quarters ended September 30, 2001 and 2000, respectively.Net interest income corresponding to the assumed funds transfers is allocatedaccordingly.*

 
|                                      |   | **Nine Months Ended September 30, 2001** |   |
|-------------------------------------------|--------|------------------------------------------|--------|
|                                      |   |                                     |   |   |   | **Manufactured** |   | **Segment** |   |   |   | **Consolidated** |   |
| ***(In millions)***                       |   | **Mortgage**                             |   | **Consumer** |   | **Housing** |   | **Totals** |   | **Other *(1)*** |   | **Totals** |   |
| Net interest income                       |   | $                                        | 218    |   | $ | 151 |   | $ | 30 |   | $ | 399 |   | $ | 76 |   | $ | 475 |   |
| Income from fees and commissions          |   | 1                                        |   | 33 |   | 14 |   | 48 |   | --- |   | 48 |   |
| Loan servicing fees                       |   | 9                                        |   | --- |   | 83 |   | 92 |   | --- |   | 92 |   |
| Net gain on sale of loans                 |   | 287                                      |   | --- |   | 11 |   | 298 |   | --- |   | 298 |   |
| Segment gain (loss) before taxes          |   | 418                                      |   | 77 |   | (43 | ) | 452 |   | (15 | ) | 437 |   |
| Significant non-cash items:               |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization             |   | 11                                       |   | 41 |   | 29 |   | 81 |   | 4 |   | 85 |   |
| ESOP and stock plans expense              |   | 8                                        |   | 3 |   | 4 |   | 15 |   | 4 |   | 19 |   |
| Change in valuation of retained interests |   | ---                                      |   | --- |   | (45 | ) | (45 | ) | --- |   | (45 | ) |
|                                      |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Total Assets                              |   | $                                        | 13,786 |   | $ | 11,168 |   | $ | 1,741 |   | $ | 26,695 |   | $ | (6,698 | ) | $ | 19,997 |   |

 
|                                      |   | **Nine Months Ended September 30, 2000** |   |
|-------------------------------------------|--------|------------------------------------------|--------|
|                                      |   |                                     |   |   |   | **Manufactured** |   | **Segment** |   |   |   | **Consolidated** |   |
| ***(In millions)***                       |   | **Mortgage**                             |   | **Consumer** |   | **Housing** |   | **Totals** |   | **Other *(1)*** |   | **Totals** |   |
| Net interest income                       |   | $                                        | 177    |   | $ | 176 |   | $ | 34 |   | $ | 387 |   | $ | 45 |   | $ | 432 |   |
| Income from fees and commissions          |   | 1                                        |   | 29 |   | 7 |   | 37 |   | 1 |   | 38 |   |
| Loan servicing fees                       |   | 16                                       |   | --- |   | 86 |   | 102 |   | --- |   | 102 |   |
| Net gain on sale of loans                 |   | 119                                      |   | --- |   | 71 |   | 190 |   | --- |   | 190 |   |
| Segment gain (loss) before taxes          |   | 221                                      |   | 105 |   | 1 |   | 327 |   | (9 | ) | 318 |   |
| Significant non-cash items:               |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization             |   | 11                                       |   | 37 |   | 27 |   | 75 |   | 8 |   | 83 |   |
| ESOP and stock plans expense              |   | 5                                        |   | 3 |   | 5 |   | 13 |   | (1 | ) | 12 |   |
| Change in valuation of retained interests |   | ---                                      |   | --- |   | (40 | ) | (40 | ) | --- |   | (40 | ) |
|                                      |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Total Assets                              |   | $                                        | 9,955  |   | $ | 11,773 |   | $ | 1,574 |   | $ | 23,302 |   | $ | (7,977 | ) | $ | 15,325 |   |

----

*(1)  Representsunallocated corporate amounts and eliminations.*

*(2)  For the purpose of internal managementreporting, the Company records intersegment funds transfers and eliminatesthese transfers on a consolidated basis for GAAP reporting. Intersegment assetsand liabilities eliminated for consolidation purposes were $10.7 billion and$11.2 billion for the nine months ended September 30, 2001 and 2000,respectively. Net interest income corresponding to the assumed funds transfersis allocated accordingly.*

 

**6.     HedgingActivities**

 

On January 1, 2001, GreenPoint adopted Statement of FinancialAccounting Standards No. 133, Accounting for Derivative and Hedging Activities(“SFAS 133”), as subsequently amended by Statement of Financial AccountingStandards No. 138, Accounting for Certain Derivative Instruments and CertainHedging Activities (an amendment of FASB Statement No. 133), in accounting forits derivative financial instruments. A transition adjustment was recognized asa cumulative effect of a change in accounting principle in the consolidatedstatement of income at January 1, 2001. The transition adjustment did not havea material impact on the consolidated statement of income.

 

The Bank uses interest rate swaps and futures contracts to manage theinterest rate risk associated with its fixed rate manufactured housing loansand interest rate lock commitments prior to securitization. The notionalamounts of these contracts were $164 million and $175 million at September 30,2001 and December 31, 2000, respectively. The interest rate swaps and futurescontracts designated as fair value hedging instruments to manage the interestrate risk associated with fixed rate manufactured housing loans had notionalvalues of $86 million and $95 million at September 30, 2001 and January 1,2001, respectively. The net gain representing the amount of hedgeineffectiveness during the nine months ended September 30, 2001 was $1.4million and is included in other non-interest income.

 

 

GreenPointenters into mandatory commitments to deliver mortgage whole loans to variousinvestors and to issue private securities and Fannie and Freddie Mac securities(“forward delivery commitments”). The forward delivery commitments are used tomanage the interest rate risk associated with mortgage loans and interest ratelock commitments made by GreenPoint to mortgage borrowers. The notional amountsof these contracts were $1.2 billion and $941 million at September 30, 2001 andDecember 31, 2000, respectively. The forward delivery commitments designated asfair value hedging instruments to manage the interest rate risk associated withmortgage loans had notional values of $470 million and $752 million atSeptember 30, 2001 and January 1, 2001, respectively. The net loss representingthe amount of hedge ineffectiveness during the nine months ended September 30,2001 was $1.4 million and is included in other non-interest income.

 

**7.     Impact of Recent Accounting Pronouncements**

 

OnJuly 20, 2001, the Financial Accounting Standards Board (“the FASB”) issuedStatement of Financial Accounting Standards No. 141, “Business Combinations”(“SFAS 141”). This statement addresses financial accounting and reporting forbusiness combinations and supersedes APB Opinion No. 16, “BusinessCombinations” and Statement of Financial Accounting Standards No. 38,“Accounting for Preacquisition Contingencies of Purchased Enterprises”. Allbusiness combinations in the scope of SFAS 141 are to be accounted for usingone method, the purchase method. The provisions of SFAS 141 apply to allbusiness combinations initiated after June 30, 2001. SFAS 141 also applies toall business combinations accounted for using the purchase method for which thedate of acquisition is July 1, 2001, or later. Management of the Companyanticipates that the adoption of SFAS 141 will not have a significant effect onthe Company’s earnings or financial position.

 

On July 20, 2001, the FASB issued Statement of Financial AccountingStandards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). Thisstatement addresses financial accounting and reporting for acquired goodwilland other intangible assets and supersedes APB Opinion No. 17, “IntangibleAssets”. SFAS 142 addresses how intangible assets that are acquiredindividually or with a group of other assets (but not those acquired in abusiness combination) should be accounted for in financial statements upontheir acquisition. SFAS 142 also addresses how goodwill and other intangibleassets should be accounted for after they have been initially recognized in thefinancial statements. Goodwill and intangible assets that have indefiniteuseful lives will not be amortized, but rather will be tested at least annuallyfor impairment. Intangible assets that have finite useful lives will continueto be amortized over their useful lives, but without the constraint of anarbitrary ceiling. The provisions of SFAS 142 are required to be appliedstarting with fiscal years beginning after December 15, 2001. SFAS 142 isrequired to be applied at the beginning of an entity’s fiscal year and to beapplied to all goodwill and other intangible assets recognized in its financialstatements at that date. Impairment losses for goodwill and indefinite-livedintangible assets that arise due to the initial application of SFAS 142(resulting from a transitional impairment test) are to be reported as a changein accounting principle. Goodwill and intangible assets acquired after June 30,2001, will be subject immediately to the nonamortization and amortizationprovisions of SFAS 142.

 

Management is in the process of assessing the impact of the adoption ofthe SFAS 142 transitional impairment test on the Company’s earnings andfinancial position. Management believes the impairment test will result in therecognition of some impairment of the goodwill arising from the 1998acquisition of the manufactured housing finance business of Bank AmericaHousing Services. The remaining book balance of that goodwill at September 30,2001 was approximately $398 million. The amount of the impairment has not yetbeen determined. Management estimates the adoption of the nonamortizationprovision of SFAS 142 will increase the Company’s full-year net income byapproximately $48 million.

 

OnAugust 16, 2001, the FASB issued Statement of Financial Accounting StandardsNo. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). Thisstatement requires entities to record the fair value of a liability for anasset retirement obligation in the period in which it is incurred. When theliability is initially recorded, the entity capitalizes a cost by increasingthe carrying amount of the related long-lived asset. Over time, the liabilityis accreted to its present value each period, and the capitalized cost isdepreciated over the useful life of the related asset. Upon settlement of theliability, an entity either settles the obligation for its recorded amount orincurs a gain or loss upon settlement. SFAS 143 is effective for fiscal yearsbeginning after June 15, 2002. Management of the Company anticipates that theadoption of SFAS 143 will not have a significant effect on the Company’searnings or financial position.

 

 

On October 3, 2001, the FASB issued Statement of Financial AccountingStandards No. 144, “Accounting for the Impairment or Disposal of Long-LivedAssets” (“SFAS 144”). This statement replaces Statement of Financial AccountingStandards No. 121 “Accounting for the Impairment of Long-Lived Assets and forLong-Lived Assets to Be Disposed Of.” SFAS 144 requires long-lived assets to bemeasured at the lower of carrying amount or fair value less cost to sell,whether reported in continuing operations or in discontinued operations.Therefore, discontinued operations will no longer be measured at net realizablevalue or include amounts for operating losses that have not yet occurred. SFAS144 also broadens the reporting of discontinued operations to include allcomponents of an entity with operations that can be distinguished from the restof the entity and that will be eliminated from the ongoing operations of theentity in a disposal transaction. The provisions of SFAS 144 are effective forfinancial statements issued for fiscal years beginning after December 15, 2001and, generally, are to be applied prospectively. Management of the Companyanticipates that the adoption of SFAS 144 will not have a significant effect onthe Company’s earnings or financial position.

 

**8.       Stock Repurchase Program**

 

In February2001, the Company’s Board of Directors authorized a new share repurchaseprogram of up to 5%, or approximately five million, of its outstanding shares.The repurchase will be at the Company’s discretion, based on ongoingassessments of the capital needs of the business and the market valuation ofits stock.

 

As ofSeptember 30, 2001, the Company repurchased 312,400 shares under this program,at a cost of approximately $11 million. The repurchased shares are being heldin treasury.

 

**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**Item 2 - Management’s Discussion and Analysis of**

**Financial Condition and Results of Operations**

 
|                                                                     |   | **Quarter Ended** |    | **Nine Months Ended** |    |
|--------------------------------------------------------------------------|--------|-------------------|---------|-----------------------|---------|
|                                                                     |   | **Sept. 30,**     |    | **June 30,**          |    | **March 31,** |   | **Dec. 31,** |   | **Sept. 30,** |   | **September 30,** |   |
|                                                                     |   | **2001**          |    | **2001**              |    | **2001** |   | **2000** |   | **2000** |   | **2001** |   | **2000** |   |
| **Performance Ratios (Annualized)**                                      |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| Return on average assets                                                 |   | 2.11              | %       | 1.94                  | %       | 1.94 | % | 0.59 | % | 1.74 | % | 2.00 | % | 1.65 | % |
| Return on average equity                                                 |   | 18.46             |    | 16.02                 |    | 15.10 |   | 4.42 |   | 13.21 |   | 16.56 |   | 12.63 |   |
| Net interest margin                                                      |   | 4.01              |    | 3.87                  |    | 3.96 |   | 4.11 |   | 4.17 |   | 3.94 |   | 4.19 |   |
| Net interest spread during  period                                       |   | 3.63              |    | 3.45                  |    | 3.50 |   | 3.64 |   | 3.71 |   | 3.52 |   | 3.76 |   |
| Operating expense to average  assets                                     |   | 2.69              |    | 2.74                  |    | 2.91 |   | 2.72 |   | 2.81 |   | 2.77 |   | 2.77 |   |
| Total non-interest expense to  operating revenue                         |   | 46.2              |    | 49.2                  |    | 50.2 |   | 72.1 |   | 52.3 |   | 48.4 |   | 52.7 |   |
| Efficiency ratio *(1)*                                                   |   | 40.3              |    | 42.5                  |    | 43.1 |   | 60.9 |   | 42.8 |   | 41.9 |   | 44.1 |   |
| Average interest-earning assets  to average interest-bearing liabilities |   | 1.10              |  x | 1.10                  |  x | 1.10 | x  | 1.11 |  x | 1.10 |  x | 1.10 | x  | 1.10 | x  |
|                                                                     |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| **Per Share Data:**                                                      |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| Common book value                                                        |   | $                 | 25.11   |                  | $       | 24.11 |   | $ | 23.56 |   | $ | 22.77 |   | $ | 22.91 |   | N/A |   | N/A |   |
| Tangible common book value                                               |   | 16.33             |    | 15.09                 |    | 14.25 |   | 13.17 |   | 13.17 |   | N/A |   | N/A |   |
| Shares used in calculations –  (in thousands):                      |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| Average *(2)*                                                            |   | 91,892            |    | 91,212                |    | 90,475 |   | 90,279 |   | 91,061 |   | 91,206 |   | 91,715 |   |
| Period – end *(3)*                                                  |   | 91,755            |    | 91,426                |    | 90,755 |   | 90,024 |   | 90,596 |   | --- |   | --- |   |
| Total                                                                    |   | 101,031           |    | 101,063               |    | 100,583 |   | 100,105 |   | 101,351 |   | --- |   | --- |   |
|                                                                     |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| **Asset Quality Ratios:**                                                |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| Non-performing loans to total  loans held for investment                 |   | 1.89              | %       | 2.03                  | %       | 2.15 | % | 2.27 | % | 2.21 | % |   |   |   |   |
| Non-performing assets to total  assets                                   |   | 1.02              |    | 1.04                  |    | 1.15 |   | 1.33 |   | 1.32 |   |   |   |   |   |
| Allowance for loan losses to  non-performing loans                       |   | 58.03             |    | 59.21                 |    | 60.53 |   | 57.27 |   | 58.31 |   |   |   |   |   |
| Allowance for loan losses to  loans held for investment                  |   | 1.09              |    | 1.20                  |    | 1.30 |   | 1.30 |   | 1.29 |   |   |   |   |   |
|                                                                     |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| **Capital Ratios:**                                                      |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| Company:                                                                 |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| Leverage capital                                                         |   | 8.80              | %       | 9.20                  | %       | 9.59 | % | 9.39 | % | 9.55 | % |   |   |   |   |
| Risk-based capital:                                                      |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| Tier I                                                                   |   | 9.79              |    | 9.43                  |    | 9.24 |   | 9.17 |   | 9.69 |   |   |   |   |   |
| Total                                                                    |   | 11.36             |    | 11.02                 |    | 10.91 |   | 10.94 |   | 10.48 |   |   |   |   |   |
| Bank:                                                                    |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| Leverage capital                                                         |   | 8.71              |    | 9.09                  |    | 9.36 |   | 9.27 |   | 9.49 |   |   |   |   |   |
| Risk-based capital:                                                      |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| Tier I                                                                   |   | 9.69              |    | 9.31                  |    | 9.00 |   | 9.03 |   | 9.63 |   |   |   |   |   |
| Total                                                                    |   | 11.25             |    | 10.89                 |    | 10.67 |   | 10.80 |   | 10.42 |   |   |   |   |   |
| Tangible equity to tangible  managed assets                              |   | 5.60              |    | 5.27                  |    | 5.17 |   | 5.10 |   | 5.39 |   |   |   |   |   |
| Tangible equity to managed  receivables                                  |   | 6.72              |    | 6.46                  |    | 6.45 |   | 6.19 |   | 6.49 |   |   |   |   |   |
|                                                                     |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| **Other Data:**                                                          |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| Total managed assets *(4)*                                               |   | $                 | 26,890  |                  | $       | 26,614 |   | $ | 25,197 |   | $ | 23,784 |   | $ | 22,923 |   |   |   |   |   |
| Total managed receivables *(5)*                                          |   | 21,720            |    | 21,042                |    | 19,496 |   | 18,866 |   | 18,301 |   |   |   |   |   |
| Earnings to combined fixed  charges and preferred stock dividends *(6)*: |   |              |    |                  |    |   |   |   |   |   |   |   |   |   |   |
| Excluding interest on deposits                                           |   | 13.51             | x  | 11.95                 | x       |  11.20 | x  | 3.86 | x | 13.55 | x | 12.24 | x | 12.34 | x |
| Including interest on deposits                                           |   | 2.39              | x  | 2.07                  |  x | 1.94 | x  | 1.25 | x | 1.80 | x | 2.12 | x | 1.78 | x |
|                                                                          |        |                   |         |                       |         |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

** **

----

*(1)  The efficiencyratio is calculated by dividing general and administrative expenses by the sumof net interest income and non-interest income.*

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

*(3)  Used incalculation of Common book value and Tangible common book value ratios.*

*(4)  Managed assets isthe sum of total assets and off-balance sheet managed receivables.*

*(5)  Managed receivablesis the sum of on-balance sheet loans and off-balance sheet managed receivables.*

*(6)  For purposes ofcomputing the ratio of earnings to combined fixed charges and preferred stockdividend requirements, earnings represent net income plus applicable incometaxes, fixed charges and preferred stock dividend requirements 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.*

 

**1.       GENERAL**

 

GreenPoint Financial Corp. (the"Company" or "GreenPoint") is a leading national specialtyhousing finance company with three principal businesses. GreenPoint MortgageFunding, Inc. (“GPM”), a national mortgage banking company headquartered inNovato, California, is the leading national lender in non-conformingresidential mortgages, specializing in alternative A ("Alt A")residential mortgages. GreenPoint Credit, LLC ("GPC"), headquarteredin San Diego, California, is a leading national lender and servicer in themanufactured housing finance industry. GreenPoint Bank (the “Bank”), a New YorkState chartered savings bank, has approximately $10.8 billion in deposits in 74branches serving more than 400,000 households in the Greater New York Cityarea.

 

**Forward Looking Statements**

 

This Quarterly report on Form 10Q 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 (on both a GAAP and cash basis);revenue growth; origination volume in both the Company’s mortgage andmanufactured housing finance businesses; non-interest income levels, includingfees from product sales; credit performance on loans made by the Company;tangible capital generation; margins on sales or securitizations of loans;market share; expense levels; and other business operations and strategies. Forthese 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: risks and uncertainties related to acquisitions andrelated integration and restructuring activities; prevailing economicconditions; changes in interest rates, loan demand, real estate values, andcompetition, which can materially affect origination levels in the Company’smortgage and manufactured housing finance businesses; the level of defaults,losses and prepayments on loans made by the Company, whether held in portfolioor sold in the secondary markets, which can materially affect the Company’squarterly valuation of its retained interests from securitizations; changes inaccounting principles, policies, and guidelines; adverse changes or conditionsin capital or financial markets, which could adversely affect the ability ofthe Company to sell or securitize mortgage and manufactured housingoriginations on a timely basis or at prices which are acceptable to theCompany; actions by rating agencies and the affects of these actions on theCompany’s businesses and operations; changes in any applicable law, rule,regulation or practice with respect to tax or legal issues; and other economic,competitive, governmental, regulatory, and technological factors affecting theCompany’s operations, pricing, products and services. The forward-lookingstatements are made as of the date of this Report, and the Company assumes noobligation to update the forward-looking statements or to update the reasonswhy actual results could differ from those projected in the forward-lookingstatements.

 

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

 

**2.       OPERATINGRESULTS**

 

**Overview of consolidatedresults:**

 

•        Net income for the third quarter of 2001was $103 million, an increase of 54% over the third quarter of 2000. Net incomeper diluted share was $1.12 for the quarter, an increase of 51% over the thirdquarter of 2000.

•        Total loan originations for the thirdquarter of 2001 were $7.0 billion, an increase of 110% from the third quarterof 2000, and flat compared to the prior quarter. Mortgage originations for thesame period were $6.8 billion, an increase of 138% from the third quarter of2000, and approximately equal to the second quarter of 2001. Manufacturedhousing loan originations were $252 million, an increase of 11% from the secondquarter of 2001 and a decrease of 49% from a year ago.

•        GPM sold certain whole loan mortgages of$5.1 billion, recording a gain of $112 million. GPM did notsecuritize any home equity lines of credit during the third quarter. Draws on previously securitized homeequity lines of credit totaling $60 million resulted in a gain of $2 million.

•        GPC did not securitize or sellmanufactured housing assets during the third quarter of 2001, as a result ofthe September 11th events. (A securitization of $425 million wasclosed on October 2, 2001 and the resulting gain of approximately $14 millionwill be included in the fourth quarter results.) The securitization sale gainfor the third quarter of 2000 was $30 million.

•        A $13 million charge was recorded inconnection with the valuation of manufactured housing retained interests. Thecharge reflected losses during the quarter as a result of the timing of salesof repossessed units. New repossession activity and severity met expectations,however the problems facing this industry have not disappeared and our businessremains vulnerable to a slowing economy.

•        Asset quality in the mortgage loanportfolio improved further over 2000. Non-performing loans decreased 1% to $195million, and total non-performing assets decreased 3% to $204 million atSeptember 30, 2001.

•        GreenPoint continues to maintain astrong capital position with a leverage ratio of 8.80%, a Tier 1 risk-basedratio of 9.79% and a total risk-based capital ratio of 11.36% at September 30,2001.

•        The events of September 11thcaused some short-term, minor service disruptions in the consumer banking andmortgage businesses, but did not have a material impact on GreenPoint’soperations or financial results.

 

**Business Segment Results:**

 

•        Pre-tax income for the Mortgage Bankingsegment was $166 million and $418 million for the quarter and nine months endedSeptember 30, 2001, an increase of 100% and 89% over the respective periods ayear ago. The increase is primarily the result of increased gain on sale ofmortgage loans due to higher origination volumes along with better marketpricing.

•        The Consumer Banking segment reportedpre-tax income of $22 million and $77 million for the quarter and nine monthsended September 30, 2001, a decline of 39% and 27%, respectively, over the sameperiods a year ago. The decrease was due to lower net interest income as thespread between rates paid on deposits and the Company’s internal transfer pricerate narrowed with the decline in market interest rates. This was partiallyoffset by growth in fee revenues of $2 and $3 million for the quarter and ninemonth periods, respectively.

•        Loss before income taxes for theManufactured Housing segment was $16 million and $43 million for the quarterand nine months ended September 30, 2001, compared with a $3 million loss inthe quarter and a $1 million profit in the nine month period a year ago. Theincreased loss is primarily attributable to lower gain on sale of loans due tolower origination volumes. These origination volumes are the result of tighterunderwriting standards and higher risk-based loan pricing.

 

**Supplemental PerformanceMeasurements -****Core Cash Earnings**

 

Core cash earnings is anon-GAAP measurement that is defined as net income excluding non-recurringitems and certain non-cash charges related to goodwill and the Employee StockOwnership Plan (“ESOP”). The non-cash expenses, unlike other expenses incurredby the Company, do not reduce GreenPoint’s tangible capital thereby enablingthe Company to increase shareholder value through the growth of earning assets,increases in cash dividends and additional repurchases of the Company’s stock.

 
|                                              |   | **Quarter Ended** |   | **Nine Months Ended** |   |
|---------------------------------------------------|--------|-------------------|--------|-----------------------|--------|
|                                              |   | **Sept. 30,**     |   | **June 30,**          |   | **March 31,** |   | **Dec. 31,** |   | **Sept. 30,** |   | **September 30,** |   |
| ***(In millions)***                               |   | **2001**          |   | **2001**              |   | **2001** |   | **2000** |   | **2000** |   | **2001** |   | **2000** |   |
| Net  income                                       |   | $                 | 103    |                  | $      | 86 |   | $ | 78 |   | $ | 23 |   | $ | 67 |   | $ | 267 |   | $ | 190 |   |
| Non-recurring  items, net of tax *(1)*            |   | ---               |   | ---                   |   | --- |   | --- |   | 3 |   | --- |   | 3 |   |
| Core  net income                                  |   | 103               |   | 86                    |   | 78 |   | 23 |   | 70 |   | 267 |   | 193 |   |
| Add  back:                                        |   |              |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Goodwill  amortization                            |   | 19                |   | 20                    |   | 20 |   | 19 |   | 19 |   | 59 |   | 59 |   |
| Employee  Stock Ownership and stock plans expense |   | 7                 |   | 6                     |   | 6 |   | 5 |   | 5 |   | 19 |   | 12 |   |
| Core  cash earnings                               |   | $                 | 129    |                  | $      | 112 |   | $ | 104 |   | $ | 47 |   | $ | 94 |   | $ | 345 |   | $ | 264 |   |
|                                              |   |              |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Core  cash earnings per share (2)                 |   | $                 | 1.41   |                  | $      | 1.23 |   | $ | 1.15 |   | $ | 0.53 |   | $ | 1.04 |   | $ | 3.78 |   | $ | 2.89 |   |
|                                              |   |              |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| **Performance Ratios (Annualized)**               |   |              |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Core cash earnings return on  average assets      |   | 2.65              | %      | 2.52                  | %      | 2.58 | % | 1.23 | % | 2.45 | % | 2.58 | % | 2.29 | % |
| Core cash earnings return on  average equity      |   | 23.15             |   | 20.80                 |   | 20.05 |   | 9.17 |   | 18.62 |   | 21.37 |   | 17.57 |   |
| Core cash earnings return on  tangible equity     |   | 37.31             |   | 34.47                 |   | 34.92 |   | 16.01 |   | 33.08 |   | 35.60 |   | 31.66 |   |
| Core return on average assets                     |   | 2.11              |   | 1.94                  |   | 1.94 |   | 0.59 |   | 1.81 |   | 2.00 |   | 1.67 |   |
| Core return on average equity                     |   | 18.46             |   | 16.02                 |   | 15.10 |   | 4.42 |   | 13.79 |   | 16.56 |   | 12.82 |   |

----

*(1)  Non-recurringitems include restructuring charge and non-recurring personnel expense, net oftax.*

*(2)  Based on theweighted average shares used to calculate diluted earnings per share.*

 

 

**Net Interest Income**

 

Net interest income on a tax-equivalent basis increased by $34 millionand $44 million for both the quarter and nine months ended September 30, 2001versus the comparable periods in 2000. Net interest income in both periodsbenefited from an increase in average earning assets, which included anincrease in mortgage loans held for investment, loans held for sale andinvestment securities. The net interest margin was 4.01% and 3.94% for thequarter and nine months ended September 30, 2001, down from 4.17% and 4.19%,respectively, for the comparable 2000 periods.

 

Averageearning assets increased by $4.1 billion in the quarter ended September 30,2001. The increase reflected growth in loans held for sale and higher mortgageloans held for investment due to higher origination volume, and higherinvestment securities. The yield on interest-earning assets and rates paid oninterest-bearing liabilities declined in both the quarterly and year-to-datecomparison due to declining market interest rates.

 

 

**Average Balance Sheets and Interest Yield/Cost**

 

The following table sets forth certain information relating to theCompany’s average statements of financial condition (unaudited) and statementsof income (unaudited) for the quarter ended September 30, 2001 and 2000, andreflects the average yield on assets and average cost of liabilities for theperiods indicated. Such annualized yields and costs are derived by dividingincome or expense by the average balance of assets or liabilities,respectively, for the periods shown. Average balances are derived from averagedaily balances. Average balances and yields include non-accrual loans. Theyields and costs include fees that are considered adjustments to yields.Interest and yields are presented on a taxable-equivalent yield basis.

 
|                                                                                       |   | **Quarter Ended**        |         |
|--------------------------------------------------------------------------------------------|--------|--------------------------|--------------|
|                                                                                       |   | **September 30, 2001**   |         | **September 30, 2000** |   |
|                                                                                       |   | **Average Balance** |         |   |   | **Average Yield/ Cost** |   | **Average Balance** |   |   |   | **Average Yield/ Cost** |   |
| ***(Taxable-equivalent  interest and rates, in millions) (1)***                            |   |                     | **Interest** |   |   |   | **Interest** |   |   |
| **Assets:**                                                                                |   |                     |         |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                                   |   |                     |         |   |   |   |   |   |   |   |   |   |   |
| Mortgage loans held for investment (2)                                                     |   | $                        | 9,966        |   | $ | 202 |   | 8.13 | % | $ | 8,219 |   | $ | 179 |   | 8.69 | % |
| Other loans (2)                                                                            |   | 526                      |         | 13 |   | 9.59 |   | 605 |   | 15 |   | 9.92 |   |
| Loans held for sale                                                                        |   | 3,578                    |         | 72 |   | 7.97 |   | 2,192 |   | 51 |   | 9.28 |   |
| Money market investments (3)                                                               |   | 62                       |         | --- |   | 3.61 |   | 255 |   | 4 |   | 6.63 |   |
| Securities (4)                                                                             |   | 3,665                    |         | 61 |   | 6.55 |   | 2,286 |   | 41 |   | 7.18 |   |
| Other interest-earning assets                                                              |   | 328                      |         | 13 |   | 15.79 |   | 456 |   | 11 |   | 9.57 |   |
| Total interest-earning assets                                                              |   | 18,125                   |         | 361 |   | 7.95 |   | 14,013 |   | 301 |   | 8.58 |   |
| Non-interest earning assets (5)                                                            |   | 1,424                    |         |   |   |   |   | 1,408 |   |   |   |   |   |
| Total assets                                                                               |   | $                        | 19,549       |   |   |   |   |   | $ | 15,421 |   |   |   |   |   |
|                                                                                       |   |                     |         |   |   |   |   |   |   |   |   |   |   |
| **Liabilities and Stockholders’ Equity:**                                             |   |                     |         |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                              |   |                     |         |   |   |   |   |   |   |   |   |   |   |
| Savings                                                                                    |   | $                        | 1,197        |   | 6 |   | 2.01 |   | $ | 1,273 |   | 7 |   | 2.11 |   |
| N.O.W.                                                                                     |   | 268                      |         | 1 |   | 0.98 |   | 280 |   | --- |   | 0.98 |   |
| Money market and variable rate savings                                                     |   | 2,761                    |         | 21 |   | 2.96 |   | 2,411 |   | 22 |   | 3.42 |   |
| Term certificates of deposit                                                               |   | 6,248                    |         | 80 |   | 5.07 |   | 7,098 |   | 100 |   | 5.66 |   |
| Mortgagors’ escrow                                                                    |   | 106                      |         | --- |   | 1.70 |   | 111 |   | 1 |   | 1.73 |   |
| Other borrowed funds                                                                       |   | 5,482                    |         | 63 |   | 4.48 |   | 1,173 |   | 18 |   | 6.29 |   |
| Senior bank notes                                                                          |   | 134                      |         | 3 |   | 7.04 |   | 150 |   | 3 |   | 6.99 |   |
| Subordinated bank notes                                                                    |   | 150                      |         | 3 |   | 9.36 |   | --- |   | --- |   | --- |   |
| Guaranteed preferred beneficial interest in Company’s junior  subordinated debentures |   | 200                      |         | 4 |   | 9.16 |   | 200 |   | 4 |   | 9.16 |   |
| Total interest-bearing liabilities                                                         |   | 16,546                   |         | 181 |   | 4.32 |   | 12,696 |   | 155 |   | 4.87 |   |
| Other liabilities (6)                                                                      |   | 768                      |         |   |   |   |   | 696 |   |   |   |   |   |
| Total liabilities                                                                          |   | 17,314                   |         |   |   |   |   | 13,392 |   |   |   |   |   |
| Stockholders’ equity                                                                  |   | 2,235                    |         |   |   |   |   | 2,029 |   |   |   |   |   |
| Total liabilities and stockholders’ equity                                            |   | $                        | 19,549       |   |   |   |   |   | $ | 15,421 |   |   |   |   |   |
| Net interest income/interest rate spread (7)                                               |   |                     |         | $ | 180 |   | 3.63 | % |   |   | $ | 146 |   | 3.71 | % |
| Net interest-earning assets/net interest margin (8)                                        |   | $                        | 1,579        |   |   |   | 4.01 | % | $ | 1,317 |   |   |   | 4.17 | % |
| Ratio of interest-earning assets to interest-earning liabilities                           |   | 1.10 x                   |         |   |   |   |   | 1.10 x |   |   |   |   |   |

----

*(1)  Net interestincome is calculated on a taxable-equivalent basis.*

*(2)  In computing theaverage balances and average yield on loans, non-accruing loans have beenincluded.*

*(3)  Includesinterest-bearing deposits in other banks, federal funds sold and securitiespurchased under agreements to resell.*

*(4)  The average yielddoes not give effect to changes in fair value that are reflected as a componentof stockholders’ equity.*

*(5)  Includes goodwill,banking premises and equipment, servicing assets, deferred tax assets, accruedinterest receivable, and other miscellaneous non-interest earning assets.*

*(6)  Includes accruedinterest payable, accounts payable and other miscellaneous non-interest bearingobligations of the Company.*

*(7)  Net interest ratespread represents the difference between the average yield on interest-earningassets and the average cost of interest-bearing liabilities.*

*(8)  Net interestmargin represents net interest income divided by average interest-earning assets.*

 

**Average Balance Sheets and Interest Yield/Cost**

 

The following table sets forth certain information relating to theCompany’s average statements of financial condition (unaudited) and statementsof income (unaudited) for the nine months ended September 30, 2001 and 2000,and reflects the average yield on assets and average cost of liabilities forthe periods indicated. Such annualized yields and costs are derived by dividingincome or expense by the average balance of assets or liabilities, respectively,for the periods shown. Average balances are derived from average dailybalances. Average balances and yields include non-accrual loans. The yields andcosts include fees that are considered adjustments to yields. Interest andyields are presented on a taxable-equivalent yield basis.

 
|                                                                                       |   | **Nine Months Ended**  |    |
|--------------------------------------------------------------------------------------------|--------|------------------------|---------|
|                                                                                       |   | **September 30, 2001** |    | **September 30, 2000** |   |
|                                                                                       |   |                   |    |   |   | **Average** |   |   |   |   |   | **Average** |   |
|                                                                                       |   | **Average**            |    |   |   | **Yield/** |   | **Average** |   |   |   | **Yield/** |   |
| ***(Taxable-equivalent  interest and rates, in millions) (1)***                            |   | **Balance**            |    | **Interest** |   | **Cost** |   | **Balance** |   | **Interest** |   | **Cost** |   |
| **Assets:**                                                                                |   |                   |    |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                                   |   |                   |    |   |   |   |   |   |   |   |   |   |   |
| Mortgage loans held for investment (2)                                                     |   | $                      | 8,990   |   | $ | 567 |   | 8.42 | % | $ | 8,447 |   | $ | 549 |   | 8.67 | % |
| Other loans (2)                                                                            |   | 545                    |    | 40 |   | 9.71 |   | 620 |   | 47 |   | 10.06 |   |
| Loans held for sale                                                                        |   | 2,931                  |    | 177 |   | 8.07 |   | 1,847 |   | 126 |   | 9.06 |   |
| Money market investments (3)                                                               |   | 106                    |    | 4 |   | 5.07 |   | 473 |   | 22 |   | 6.23 |   |
| Securities (4)                                                                             |   | 3,484                  |    | 178 |   | 6.80 |   | 2,192 |   | 117 |   | 7.15 |   |
| Other interest-earning assets                                                              |   | 314                    |    | 36 |   | 15.31 |   | 391 |   | 32 |   | 10.80 |   |
| Total interest-earning assets                                                              |   | 16,370                 |    | 1,002 |   | 8.16 |   | 13,970 |   | 893 |   | 8.52 |   |
| Non-interest earning assets (5)                                                            |   | 1,442                  |    |   |   |   |   | 1,420 |   |   |   |   |   |
| Total assets                                                                               |   | $                      | 17,812  |   |   |   |   |   |   | $ | 15,390 |   |   |   |   |   |
|                                                                                       |   |                   |    |   |   |   |   |   |   |   |   |   |   |
| **Liabilities and Stockholders’ Equity:**                                             |   |                   |    |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                              |   |                   |    |   |   |   |   |   |   |   |   |   |   |
| Savings                                                                                    |   | $                      | 1,207   |   | 18 |   | 2.01 |   | $ | 1,319 |   | 21 |   | 2.13 |   |
| N.O.W.                                                                                     |   | 272                    |    | 2 |   | 0.98 |   | 290 |   | 2 |   | 0.98 |   |
| Money market and variable rate savings                                                     |   | 2,654                  |    | 64 |   | 3.21 |   | 2,425 |   | 62 |   | 3.38 |   |
| Term certificates of deposit                                                               |   | 6,497                  |    | 266 |   | 5.47 |   | 7,113 |   | 294 |   | 5.52 |   |
| Mortgagors’ escrow                                                                    |   | 105                    |    | 1 |   | 1.68 |   | 110 |   | 1 |   | 1.68 |   |
| Other borrowed funds                                                                       |   | 3,689                  |    | 137 |   | 4.90 |   | 1,078 |   | 51 |   | 6.26 |   |
| Senior bank notes                                                                          |   | 135                    |    | 7 |   | 7.04 |   | 180 |   | 9 |   | 6.96 |   |
| Subordinated bank notes                                                                    |   | 150                    |    | 10 |   | 9.36 |   | --- |   | --- |   | --- |   |
| Guaranteed preferred beneficial interest in Company’s junior  subordinated debentures |   | 200                    |    | 14 |   | 9.16 |   | 200 |   | 14 |   | 9.16 |   |
| Total interest-bearing liabilities                                                         |   | 14,909                 |    | 519 |   | 4.64 |   | 12,715 |   | 454 |   | 4.76 |   |
| Other liabilities (6)                                                                      |   | 750                    |    |   |   |   |   | 666 |   |   |   |   |   |
| Total liabilities                                                                          |   | 15,659                 |    |   |   |   |   | 13,381 |   |   |   |   |   |
| Stockholders’ equity                                                                  |   | 2,153                  |    |   |   |   |   | 2,009 |   |   |   |   |   |
| Total liabilities and stockholders’ equity                                            |   | $                      | 17,812  |   |   |   |   |   |   | $ | 15,390 |   |   |   |   |   |
| Net interest income/interest rate spread (7)                                               |   |                   |    |   | $ | 483 |   |   | 3.52 | % |   |   | $ | 439 |   | 3.76 | % |
| Net interest-earning assets/net interest margin (8)                                        |   | $                      | 1,461   |   |   |   |   | 3.94 | % | $ | 1,255 |   |   |   | 4.19 | % |
| Ratio of interest-earning assets to interest-earning liabilities                           |   | 1.10                   | x  |   |   |   |   | 1.10 | x  |   |   |   |   |

----

*(1)  Net interestincome is calculated on a taxable-equivalent basis.*

*(2)  In computing theaverage balances and average yield on loans, non-accruing loans have beenincluded.*

*(3)  Includesinterest-bearing deposits in other banks, federal funds sold and securitiespurchased under agreements to resell.*

*(4)  The average yielddoes not give effect to changes in fair value that are reflected as a componentof stockholders’ equity.*

*(5)  Includes goodwill,banking premises and equipment, servicing assets, deferred tax assets, accruedinterest receivable, and other miscellaneous non-interest earning assets.*

*(6)  Includes accruedinterest payable, accounts payable and other miscellaneous non-interest bearingobligations of the Company.*

*(7)  Net interest ratespread represents the difference between the average yield on interest-earningassets and the average cost of interest-bearing liabilities.*

*(8)  Net interestmargin represents net interest income divided by average interest-earningassets.*

 

**Rate/Volume Analysis**

 

The followingtable presents the effects of changes in interest rates and changes in volumeof interest-earning assets and interest-bearing liabilities on the Company’sinterest income on a tax equivalent basis and interest expense during theperiods indicated. Information is provided in each category on changes (i)attributable to changes in volume (changes in volume multiplied by prior rate),(ii) changes attributable to changes in rate (changes in rate multiplied byprior volume), and (iii) the net change. The changes attributable to the combinedimpact of volume and rate have been allocated proportionately to volume andrate.

 
|                                                                                  |   | **Quarter Ended Sept.  30, 2001** |   | **Nine Months Ended  Sept. 30, 2001** |   |
|---------------------------------------------------------------------------------------|--------|-----------------------------------|--------|---------------------------------------|--------|
|                                                                                  |   | **Compared to**                   |   | **Compared to**                       |   |
|                                                                                  |   | **Quarter Ended Sept.  30, 2000** |   | **Nine Months Ended  Sept. 30, 2000** |   |
|                                                                                  |   | **Increase/(Decrease)**           |   | **Increase/(Decrease)**               |   |
|                                                                                  |   | **Due to**                        |   | **Due to**                            |   |
|                                                                                  |   | **Average**                       |   | **Average**                           |   | **Net** |   | **Average** |   | **Average** |   | **Net** |   |
| ***(In millions)***                                                                   |   | **Volume**                        |   | **Rate**                              |   | **Change** |   | **Volume** |   | **Rate** |   | **Change** |   |
| Mortgage loans held for  investment (1)                                               |   | $                                 | 36     |                                  | $      | (13 | ) | $ | 23 |   | $ | 35 |   | $ | (17 | ) | $ | 18 |   |
| Other loans (1)                                                                       |   | (2                                | )      | ---                                   |   | (2 | ) | (5 | ) | (2 | ) | (7 | ) |
| Loans held for sale                                                                   |   | 29                                |   | (8                                    | )      | 21 |   | 67 |   | (16 | ) | 51 |   |
| Money market investments (2)                                                          |   | (2                                | )      | (2                                    | )      | (4 | ) | (15 | ) | (3 | ) | (18 | ) |
| Securities                                                                            |   | 23                                |   | (3                                    | )      | 20 |   | 66 |   | (5 | ) | 61 |   |
| Other interest-earning assets                                                         |   | (4                                | )      | 6                                     |   | 2 |   | (7 | ) | 11 |   | 4 |   |
| Total interest earned on assets                                                       |   | 80                                |   | (20                                   | )      | 60 |   | 141 |   | (32 | ) | 109 |   |
| Savings                                                                               |   | (1                                | )      | ---                                   |   | (1 | ) | (2 | ) | (1 | ) | (3 | ) |
| N.O.W.                                                                                |   | ---                               |   | 1                                     |   | 1 |   | --- |   | --- |   | --- |   |
| Money market and variable rate  savings                                               |   | 3                                 |   | (4                                    | )      | (1 | ) | 6 |   | (4 | ) | 2 |   |
| Term certificates of deposit                                                          |   | (11                               | )      | (9                                    | )      | (20 | ) | (25 | ) | (3 | ) | (28 | ) |
| Mortgagors’ escrow                                                               |   | (1                                | )      | ---                                   |   | (1 | ) | --- |   | --- |   | --- |   |
| Other borrowed funds                                                                  |   | 50                                |   | (5                                    | )      | 45 |   | 99 |   | (13 | ) | 86 |   |
| Senior bank notes                                                                     |   | ---                               |   | ---                                   |   | --- |   | (2 | ) | --- |   | (2 | ) |
| Subordinated bank notes                                                               |   | 3                                 |   | ---                                   |   | 3 |   | 10 |   | --- |   | 10 |   |
| Guaranteed preferred beneficial  interest in Company's junior subordinated debentures |   | ---                               |   | ---                                   |   | --- |   | --- |   | --- |   | --- |   |
| Total interest paid on  liabilities                                                   |   | 43                                |   | (17                                   | )      | 26 |   | 86 |   | (21 | ) | 65 |   |
| Net change in net interest  income                                                    |   | $                                 | 37     |                                  | $      | (3 | ) | $ | 34 |   | $ | 55 |   | $ | (11 | ) | $ | 44 |   |

----

*(1)  In computing thevolume and rate components of net interest income for loans, non-accrual loanshave been included.*

*(2)  Includesinterest-bearing deposits in other banks, federal funds sold and securitiespurchased under agreements to resell.*

 

**Provision for loan losses**

 

The provision for loan losses was $8million for the third quarter of 2001 and $18 million for the first nine monthsof 2001, down from $9 million and $24 million, respectively for the comparable2000 periods. The decrease is primarily attributable to a change in the timingof charge-offs on the manufactured housing loan portfolio to conform to recentchanges in regulatory standards. Had this policy change not occurred, netcharge-offs for the nine months ended September 30, 2001 would have beenapproximately $4 million higher. For the quarter ended September 30 2001,charge-offs under both the old and new policies were the same. Charge-offs forthe quarter and nine months ended September 30, 2001 on the residentialmortgage portfolio were essentially unchanged versus a year ago. The provisionequaled net charge-offs for all periods.

 

**Non-Interest Income**

 

The followingtable summarizes the components of non-interest income:

 
|                                                                   |   | **Quarter Ended** |   | **Nine Months Ended** |   |
|------------------------------------------------------------------------|--------|-------------------|--------|-----------------------|--------|
|                                                                   |   | **September 30,** |   | **June 30,**          |   |
| ***(In millions)***                                                    |   | **2001**          |   | **2000**              |   | **2001** |   | **2000** |   |
| Income from fees and commissions:                                      |   |              |   |                  |   |   |   |   |   |
| Loan servicing fees                                                    |   | $                 | 29     |                  | $      | 34 |   | $ | 92 |   | $ | 102 |   |
| Banking services fees and commissions                                  |   | 11                |   | 9                     |   | 33 |   | 28 |   |
| Other                                                                  |   | 5                 |   | 5                     |   | 15 |   | 12 |   |
| Total income from fees and commissions                                 |   | 45                |   | 48                    |   | 140 |   | 142 |   |
| Net gain on sales of mortgage loans                                    |   | 114               |   | 52                    |   | 287 |   | 119 |   |
| Net gain on sales of manufactured housing assets                       |   | ---               |   | 30                    |   | 11 |   | 71 |   |
| Change in valuation of retained interests – Manufactured  Housing |   | (13               | )      | (21                   | )      | (45 | ) | (40 | ) |
| Net gain on securities                                                 |   | 4                 |   | 1                     |   | 16 |   | 3 |   |
| Other income                                                           |   | (1                | )      | ---                   |   | (1 | ) | (2 | ) |
| Total non-interest income                                              |   | $                 | 149    |                  | $      | 110 |   | $ | 408 |   | $ | 293 |   |

 

Non-interest income was$149 million and $408 million in the third quarter and nine months endedSeptember 30, 2001, up from $110 million and $293 million in the comparableperiods a year ago. The results for the quarter and nine months reflect ahigher gain on sale of mortgage loans partly offset by a lower gain on sale ofmanufactured housing assets.

 

Income from fees andcommissions was $45 million and $140 million in the third quarter and ninemonths ended September 30, 2001, unchanged from the comparable quarter and ninemonth period a year ago. Loan servicing fees fell by $5 million and $10 milliondue to a $3 million and $8 million write-down in the value of mortgageservicing rights for the quarter and nine months ended September 30, 2001.

 

 

*Gain onsale of loans:*

 

The following table is asummary of loans sold and average margins for the reported periods:

 
|                                              |   | **Quarter  Ended** |   |     |   |     |   | **Nine  Months Ended** |   |
|---------------------------------------------------|--------|--------------------|--------|----------|--------|----------|--------|------------------------|--------|
|                                              |   | **September  30,** |   |     |   |     |   | **September  30,**     |   |
| ***(In millions)***                               |   | **2001**           |   | **2000** |   | **2001** |   | **2000**               |   |
| **Whole  loan – Mortgage:**                  |   |               |   |     |   |     |   |                   |   |
| Sales                                             |   | $                  | 5,099  |     | $      | 2,162    |   | $                      | 11,938 |   | $ | 5,088 |   |
| Gain on sale                                      |   | $                  | 112    |     | $      | 39       |   | $                      | 271    |   | $ | 92 |   |
| Average margin                                    |   | 2.21               | %      | 1.79     | %      | 2.27     | %      | 1.81                   | %      |
| **Securitizations  – Mortgage:**             |   |               |   |     |   |     |   |                   |   |
| Sales                                             |   | $                  | 60     |     | $      | 408      |   | $                      | 535    |   | $ | 857 |   |
| Gain on sale                                      |   | $                  | 2      |     | $      | 13       |   | $                      | 16     |   | $ | 27 |   |
| Average margin                                    |   | 3.07               | %      | 3.12     | %      | 2.99     | %      | 3.09                   | %      |
| **Securitizations  – Manufactured Housing:** |   |               |   |     |   |     |   |                   |   |
| Sales                                             |   | $                  | ---    |     | $      | 680      |   | $                      | 272    |   | $ | 1,989 |   |
| Gain on sale                                      |   | $                  | ---    |     | $      | 30       |   | $                      | 11     |   | $ | 71 |   |
| Average margin                                    |   | ---                | %      | 4.49     | %      | 4.08     | %      | 3.56                   | %      |

 

Gain on sale of mortgageloans increased for the quarter, principally due to a higher volume of loanssold along with better market pricing. The Company did not securitize and sellmanufactured housing assets for the quarter ended September 30, 2001.

 

**Non-Interest Expense**

 

The followingis a summary of the components of non-interest expense:

 
|                                                     |   | **Quarter Ended** |   | **Nine Months Ended** |   |
|----------------------------------------------------------|--------|-------------------|--------|-----------------------|--------|
|                                                     |   | **September 30,** |   | **September 30,**     |   |
| ***(In millions)***                                      |   | **2001**          |   | **2000**              |   | **2001** |   | **2000** |   |
| Salaries and benefits                                    |   | $                 | 63     |                  | $      | 54 |   | $ | 179 |   | $ | 158 |   |
| Employee Stock Ownership and stock plans expense         |   | 7                 |   | 5                     |   | 19 |   | 12 |   |
| Net expense of premises and equipment                    |   | 23                |   | 20                    |   | 66 |   | 59 |   |
| Advertising                                              |   | 3                 |   | 2                     |   | 7 |   | 5 |   |
| Federal deposit insurance premiums                       |   | ---               |   | 1                     |   | 1 |   | 2 |   |
| Other administrative expenses                            |   | 36                |   | 27                    |   | 98 |   | 84 |   |
| Total general and administrative expenses                |   | 132               |   | 109                   |   | 370 |   | 320 |   |
| Other real estate owned operating income, net            |   | ---               |   | ---                   |   | (1 | ) | (1 | ) |
| Goodwill amortization                                    |   | 19                |   | 19                    |   | 59 |   | 59 |   |
| Restructuring charge and non-recurring personnel expense |   | ---               |   | 5                     |   | --- |   | 5 |   |
| Total non-interest expense                               |   | $                 | 151    |                  | $      | 133 |   | $ | 428 |   | $ | 383 |   |

 

Total non-interest expense was $151million and $428 million for the third quarter and nine months ended September30, 2001, an increase of 14% and 12%, respectively, over the same periods ayear ago. Salaries and benefits increased $9 million and $21 million,respectively, principally due to additional staff and incentive commissionsrelated to the higher mortgage volume. Employee stock ownership and stock plansexpense increased $2 million and $7 million, respectively, due to a higheraverage stock price versus the same period a year ago. Premises and equipmentexpenses increased $3 million in the quarterly and $7 million in theyear-to-date period due to the relocation of the GPM headquarters to Novato,California. The increase in other administrative expenses reflects highervolume-related costs at GPM.

 

**Income Tax Expense**

 

Total income tax expense increased $20 million, or 45%, to $64million for the third quarter of 2001 and $42 million, or 33% to $170 millionfor the nine months ended September 30, 2001 versus the comparable periods ayear ago. The effective tax rate declined from 40% in the third quarter of 2000and 40.3% for the first nine months of 2000 to 38.44% and 38.84%, respectivelyin the third quarter and nine months ended September 30, 2001.

 

**Loan Originations**

 

The followingtable summarizes loan origination activity for each of the reported periods:

 
|                                            |   | **Quarter  Ended** |   | **Nine  Months Ended** |   |
|-------------------------------------------------|--------|--------------------|--------|------------------------|--------|
|                                            |   | **September  30,** |   | **September  30,**     |   |
| ***(In millions)***                             |   | **2001**           |   | **2000**               |   | **2001** |   | **2000** |   |
| **Mortgage:**                                   |   |               |   |                   |   |   |   |   |   |
| Total  applications received                    |   | $                  | 13,433 |                   | $      | 6,189 |   | $ | 37,106 |   | $ | 16,360 |   |
| Loans  originated:                              |   |               |   |                   |   |   |   |   |   |
| Specialty  products (1)                         |   | $                  | 3,236  |                   | $      | 1,631 |   | $ | 8,589 |   | $ | 4,137 |   |
| Home equity /  Seconds                          |   | 397                |   | 570                    |   | 1,220 |   | 1,704 |   |
| Agency / Jumbo                                  |   | 3,159              |   | 658                    |   | 8,048 |   | 1,601 |   |
| Total loans  originated                         |   | $                  | 6,792  |                   | $      | 2,859 |   | $ | 17,857 |   | $ | 7,442 |   |
| Commitments to  originate loans (end of period) |   | $                  | 7,170  |                   | $      | 3,177 |   | $ | 7,170 |   | $ | 3,177 |   |
| Loans held for  sale (end of period)            |   | $                  | 3,703  |                   | $      | 1,520 |   | $ | 3,703 |   | $ | 1,520 |   |

----

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

 
| **Manufactured  Housing:**           |   |   |   |   |   |   |   |   |   |
|--------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Total loans  originated              |   | $      | 252    |   | $      | 491    |   | $      | 667    |   | $ | 1,897 |   |
| Loans held for  sale (end of period) |   | $      | 641    |   | $      | 348    |   | $      | 641    |   | $ | 348 |   |

 

Total loanoriginations during the quarter for the mortgage and manufactured housingbusinesses were $7.0 billion and $18.5 billion, respectively, up from $3.4billion and $9.3 billion, respectively during the third quarter and nine monthsended September 30, 2000. The growth in mortgage originations reflectedcontinued strength in specialty, agency and jumbo mortgage originations,attributable to declining interest rates and increased market share. Thedecline in manufactured housing originations resulted from lower industryvolumes, tightened underwriting standards and risk based pricing initiatives.

 

**Loan Servicing Portfolio**

 

The followingtable summarizes the dollar amount of loans serviced for GreenPoint and forothers:

 
|                                                |   | **Sept. 30,** |   | **Dec.31,** |   |
|-----------------------------------------------------|--------|---------------|--------|-------------|--------|
| ***(In millions)***                                 |   | **2001**      |   | **2000**    |   |
| **Mortgage:**                                       |   |          |   |        |   |
| Serviced for GreenPoint (1)                         |   | $             | 14,478 |        | $      | 11,658 |   |
| Serviced for others (third parties)                 |   | 9,414         |   | 6,674       |   |
| Total mortgage loan servicing portfolio             |   | 23,892        |   | 18,332      |   |
| **Manufactured Housing:**                           |   |          |   |        |   |
| Serviced for GreenPoint (2)                         |   | 6,213         |   | 6,163       |   |
| Serviced for others (third parties)                 |   | 7,084         |   | 8,007       |   |
| Total manufactured housing loan servicing portfolio |   | 13,297        |   | 14,170      |   |
| **Total loan servicing  portfolio**                 |   | $             | 37,189 |        | $      | 32,502 |   |

----

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

*(2) Includes loans held for sale, loans held forinvestment and loans off balance sheet for which there is recourse toGreenPoint.*

 

**Non-Performing Assets:**

 

For the ninemonths ended September 30, 2001, non-performing assets decreased by 3%. Theratio of non-performing loans to loans held for investment fell to 1.89% atSeptember 30, 2001 from 2.27% at December 31, 2000 while the ratio ofnon-performing assets to total assets fell to 1.02% at September 30, 2001 from1.33% at December 31, 2000.

 

Non-performingassets, net of related specific reserves, were as follows:

 
|                               |   | **Sept. 30,** |   | **Dec.31,** |   |
|------------------------------------|--------|---------------|--------|-------------|--------|
| ***(In millions)***                |   | **2001**      |   | **2000**    |   |
| Mortgage loans secured by:         |   |          |   |        |   |
| Residential one-to four-family     |   | $             | 171    |        | $      | 170 |   |
| Residential multi-family           |   | 9             |   | 12          |   |
| Commercial property                |   | 11            |   | 14          |   |
| Other loans                        |   | 4             |   | 1           |   |
| Total non-performing loans (1)     |   | 195           |   | 197         |   |
| Total other real estate owned, net |   | 9             |   | 13          |   |
| Total non-performing assets        |   | $             | 204    |        | $      | 210 |   |

----

*(1)  Includes $3million and $6 million of non-accrual mortgage loans under 90 days past due atSeptember 30, 2001 and December 31, 2000, respectively.*

 

 

**Allowance for Possible Loan Losses:**

 

The followingis a summary of the provision and allowance for possible loan losses:

 
|                           |   | **Quarter Ended** |   | **Nine Months Ended** |   |
|--------------------------------|--------|-------------------|--------|-----------------------|--------|
|                           |   | **September 30,** |   | **September 30,**     |   |
| ***(In millions)***            |   | **2001**          |   | **2000**              |   | **2001** |   | **2000** |   |
| Balance at beginning of period |   | $                 | 113    |                  | $      | 113 |   | $ | 113 |   | $ | 113 |   |
| Provision charged to income    |   | 8                 |   | 9                     |   | 18 |   | 24 |   |
| Charge-offs:                   |   |              |   |                  |   |   |   |   |   |
| Residential mortgage           |   | (1                | )      | (1                    | )      | (4 | ) | (4 | ) |
| Manufactured housing           |   | (11               | )      | (11                   | )      | (28 | ) | (29 | ) |
| Total charge-offs              |   | (12               | )      | (12                   | )      | (32 | ) | (33 | ) |
| Recoveries:                    |   |              |   |                  |   |   |   |   |   |
| Residential mortgage           |   | ---               |   | ---                   |   | --- |   | --- |   |
| Manufactured housing           |   | 4                 |   | 3                     |   | 14 |   | 9 |   |
| Total recoveries               |   | 4                 |   | 3                     |   | 14 |   | 9 |   |
| Balance at end of period       |   | $                 | 113    |                  | $      | 113 |   | $ | 113 |   | $ | 113 |   |
|                                |        |                   |        |                       |        |  |  |  |  |  |  |  |  |  |  |  |  |

 

Net mortgage loan charge-offs were $1 million and $4million, respectively, for the quarter and nine months ended September 30,2001, unchanged versus the comparable periods a year ago. Net charge-offs onthe portfolio of manufactured housing loans held for investment were $7 millionand $14 million, respectively, for the quarter and nine months ended September30, 2001, versus $8 million and $20 million, respectively, for the comparableperiods a year ago.

 

**Capital Ratios**

 

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

 

Undercapital adequacy guidelines and the regulatory framework for prompt correctiveaction, the Bank must meet specific capital guidelines that involvequantitative measures of its assets, liabilities, and certain off balance sheetitems as calculated under regulatory accounting practices. These guidelinesrequire minimum ratios of risk-based capital to risk adjusted assets of 4% forTier 1 capital and 8% for total capital. The Federal Reserve Board also hasguidelines for a leverage ratio that is designed to complement the risk-basedcapital ratios in determining the overall capital adequacy of banks and bankholding companies. A minimum leverage ratio of Tier 1 capital to average totalassets of 3% is required for banks and bank holding companies, with anadditional 100 to 200 basis points required for all but the highest ratedinstitutions. Management believes, as of September 30, 2001, that the Companyand the Bank met all capital adequacy requirements to which they are subject.

 

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

 

**Capital Ratios**

 

TheCompany’s Total Capital and Tier 1 Capital (to risk weighted assets) improvedfrom 10.94% and 9.17%, respectively, at December 31, 2000 to 11.36% and 9.79%,respectively at September 30, 2001. The improvement in the ratios isattributable to the growth in tangible capital resulting from earnings. TheCompany’s ratio of period-end stockholders’ equity to ending total assets atSeptember 30, 2001 was 11.52% compared to 13.00% at December 31, 2000.

 

InOctober of 2001 the FDIC approved a final rule revising the regulatory capitaltreatment of recourse, direct credit substitutes, and residual interests insecuritizations. The final rule is effective for transactions settled on orafter January 1, 2002, with a one-year transition rule for transactions settledbefore that date. For transactions settled before January 1, 2002, banks candelay adoption of any provision until December 31, 2002 if adoption wouldresult in an increased capital charge. The adoption of the new rule will resultin a reduction to GreenPoint’s risk-based capital ratios when fully implementedas of December 31, 2002. However, management expects GreenPoint will remainabove the minimum ratios established for the well-capitalized designation uponfull adoption of the new rule.

 
|                                      |   |       |   |                  |   | **Required for Capital** |   |
|-------------------------------------------|--------|------------|--------|-----------------------|--------|--------------------------|--------|
|                                      |   | **Actual** |   | **Adequacy Purposes** |   |
| ***(In  millions)***                      |   | **Amount** |   | **Ratio**             |   | **Amount**               |   | **Ratio** |   |
| **As of September 30, 2001**              |   |       |   |                  |   |                     |   |   |   |
| Total Capital (to Risk Weighted Assets):  |   |       |   |                  |   |                     |   |   |   |
| Company                                   |   | $          | 1,912  |                  | 11.36  | %                        | $      | 1,347 |   | 8.00 | % |
| Bank                                      |   | 1,894      |   | 11.25                 |   | 1,347                    |   | 8.00 |   |
| Tier 1 Capital (to Risk Weighted Assets): |   |       |   |                  |   |                     |   |   |   |
| Company                                   |   | $          | 1,649  |                  | 9.79   | %                        | $      | 674 |   | 4.00 | % |
| Bank                                      |   | 1,631      |   | 9.69                  |   | 674                      |   | 4.00 |   |
| Tier 1 Capital (to Average Assets):       |   |       |   |                  |   |                     |   |   |   |
| Company                                   |   | $          | 1,649  |                  | 8.80   | %                        | $      | 750 |   | 4.00 | % |
| Bank                                      |   | 1,631      |   | 8.71                  |   | 749                      |   | 4.00 |   |
|                                      |   |       |   |                  |   |                     |   |   |   |
| **As of December 31, 2000**               |   |       |   |                  |   |                     |   |   |   |
| Total Capital (to Risk Weighted Assets):  |   |       |   |                  |   |                     |   |   |   |
| Company                                   |   | $          | 1,629  |                  | 10.94  | %                        | $      | 1,191 |   | 8.00 | % |
| Bank                                      |   | 1,608      |   | 10.80                 |   | 1,191                    |   | 8.00 |   |
| Tier 1 Capital (to Risk Weighted Assets): |   |       |   |                  |   |                     |   |   |   |
| Company                                   |   | $          | 1,366  |                  | 9.17   | %                        | $      | 596 |   | 4.00 | % |
| Bank                                      |   | 1,345      |   | 9.03                  |   | 596                      |   | 4.00 |   |
| Tier 1 Capital (to Average Assets):       |   |       |   |                  |   |                     |   |   |   |
| Company                                   |   | $          | 1,366  |                  | 9.39   | %                        | $      | 582 |   | 4.00 | % |
| Bank                                      |   | 1,345      |   | 9.27                  |   | 580                      |   | 4.00 |   |

 

 

**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**Item 3 - Quantitative and Qualitative Disclosure**

**about Market Risk**

 

 

**Market Risk Management**

 

The Company’s market risk exposure islimited solely to interest rate risk.

 

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

 

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

 

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

 

The Company’s income is affected bychanges in the level of market interest rates based upon mismatches between therepricing of its assets and liabilities. One measure of the sensitivity of netincome to changes in interest rates is provided by the accompanying net gapanalysis, which organizes assets and liabilities according to the time periodin which they reprice or mature. For many of the Company’s assets andliabilities, the maturity or repricing date is not determinable with certainty.For example, the Company’s mortgage and manufactured housing loans and itsmortgage-backed securities can be prepaid before contractual amortizationand/or maturity. Also, repricing of the Company’s non-time deposits is subjectto management’s evaluation of the existing interest rate environment, currentfunding and liquidity needs, and other factors influencing the marketcompetition for such deposits. The amounts in the accompanying table reflectmanagement’s judgment of the most likely repricing schedule; actual resultscould vary from those detailed herein.

 

The difference between assets andliabilities repricing in a given period is one approximate measure of interestrate risk. More assets than liabilities repricing in a period (a positive gap)implies net interest income will rise as interest rates rise, and decline asinterest rates decline. More liabilities than assets repricing in a period (anegative gap) implies net interest income will decline as interest rates rise,and rise as interest rates decline.

 

The use of derivative instruments such asinterest rate swaps and futures is integrated into the Company’s interest raterisk management. The notional amounts of these instruments are not reflected inthe Company’s balance sheet. Where applicable, these instruments are includedin the gap table for purposes of analyzing interest rate risk.

 

The repricing relationships reflected inthe gap table do not consider the impact that rate movements might have onother components of the Bank’s risk profile; for example, an increase ininterest rates, while implying that net interest income will rise in a positivegap period, might also result in higher credit or default risk due to apotentially higher probability of borrowers being unable to pay the contractualpayments on loans. Likewise, a decrease in rates, while implying that netinterest income will rise in a negative gap period, might also result in anincrease in reinvestment risk as funds received from prepayments are reinvestedat lower rates and/or spreads.

 

 

 

**Interest Rate Sensitivity Gap Analysis**

 

The tablebelow depicts the Company’s interest rate sensitivity as of September 30, 2001.Allocations of assets and liabilities, including non-interest bearing sourcesof funds to specific periods, are based upon management’s assessment ofcontractual or anticipated repricing characteristics, adjusted periodically toreflect actual experience. Those gaps are then adjusted for the net effect ofoff-balance sheet financial instruments such as interest rate swaps.

 

During thesecond quarter, ALCO conducted a review of the historical sensitivity of coredeposit pricing and balances to changes in market interest rates. The reviewindicated that core deposit rates and balances were far less sensitive tochanges in market rates than had been previously assumed. Accordingly, the Gaptable below reflects management assumptions based on the results of the recentstatistical analysis.

 
|                                                                                       |   | **Repricing Periods** |   |
|--------------------------------------------------------------------------------------------|--------|-----------------------|--------|
|                                                                                       |   |                  |   | **More than** |   | **More than** |   | **More than** |   |   |   |   |   |
|                                                                                       |   | **Three months**      |   | **three months** |   | **six months** |   | **one year** |   | **More than** |   |   |   |
| ***(In millions)***                                                                        |   | **or less**           |   | **to six months** |   | **to one year** |   | **to three years** |   | **three years** |   | **Total** |   |
| Total loans, net                                                                           |   | $                     | 4,917  |   | $ | 787 |   | $ | 2,310 |   | $ | 3,076 |   | $ | 3,478 |   | $ | 14,568 |   |
| Money market investments *(1)*                                                             |   | 32                    |   | --- |   | --- |   | --- |   | --- |   | 32 |   |
| Securities held to maturity *(2)*                                                          |   | ---                   |   | 2 |   | --- |   | --- |   | 211 |   | 213 |   |
| Securities available for sale                                                              |   | 690                   |   | 400 |   | 479 |   | 666 |   | 1,270 |   | 3,505 |   |
| Other interest-earning assets                                                              |   | 138                   |   | --- |   | --- |   | --- |   | --- |   | 138 |   |
| Total interest-earning assets                                                              |   | 5,777                 |   | 1,189 |   | 2,789 |   | 3,742 |   | 4,959 |   | 18,456 |   |
| Cash and due from banks                                                                    |   | 168                   |   | --- |   | --- |   | --- |   | --- |   | 168 |   |
| Servicing assets                                                                           |   | 11                    |   | 10 |   | 14 |   | 52 |   | 108 |   | 195 |   |
| Goodwill                                                                                   |   | 20                    |   | 19 |   | 38 |   | 153 |   | 575 |   | 805 |   |
| Other non-interest earning  assets                                                         |   | 373                   |   | --- |   | --- |   | --- |   | --- |   | 373 |   |
| Total assets                                                                               |   | $                     | 6,349  |   | $ | 1,218 |   | $ | 2,841 |   | $ | 3,947 |   | $ | 5,642 |   | $ | 19,997 |   |
|                                                                                       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Term certificates of deposit                                                               |   | $                     | 1,362  |   | $ | 1,149 |   | $ | 2,438 |   | $ | 1,081 |   | $ | 125 |   | $ | 6,155 |   |
| Core deposits                                                                              |   | 571                   |   | 113 |   | 276 |   | 737 |   | 2,899 |   | 4,596 |   |
| Total deposits                                                                             |   | 1,933                 |   | 1,262 |   | 2,714 |   | 1,818 |   | 3,024 |   | 10,751 |   |
| Federal funds purchased                                                                    |   | 1,400                 |   | --- |   | --- |   | --- |   | --- |   | 1,400 |   |
| Mortgagors’ escrow                                                                    |   | 3                     |   | 4 |   | 6 |   | 21 |   | 71 |   | 105 |   |
| Securities sold under agreements  to repurchase                                            |   | 246                   |   | --- |   | 300 |   | 900 |   | 400 |   | 1,846 |   |
| Federal Home Loan Bank of New  York advances                                               |   | 500                   |   | --- |   | 100 |   | 1,050 |   | 900 |   | 2,550 |   |
| Long term debt                                                                             |   | ---                   |   | --- |   | 134 |   | --- |   | --- |   | 134 |   |
| Subordinated debt                                                                          |   | ---                   |   | --- |   | --- |   | --- |   | 150 |   | 150 |   |
| Guaranteed preferred beneficial  interest in Company’s junior subordinated debentures |   | ---                   |   | --- |   | --- |   | --- |   | 200 |   | 200 |   |
| Notes payable                                                                              |   | 1                     |   | --- |   | --- |   | --- |   | --- |   | 1 |   |
| Other liabilities                                                                          |   | 557                   |   | --- |   | --- |   | --- |   | (1 | ) | 556 |   |
| Stockholders’ equity                                                                  |   | ---                   |   | --- |   | --- |   | --- |   | 2,304 |   | 2,304 |   |
| Total liabilities and  stockholders’ equity                                           |   | $                     | 4,640  |   | $ | 1,266 |   | $ | 3,254 |   | $ | 3,789 |   | $ | 7,048 |   | $ | 19,997 |   |
| Off balance sheet financial  instruments                                                   |   | $                     | ---    |   | $ | --- |   | $ | --- |   | $ | --- |   | $ | --- |   | $ | --- |   |
| Interest rate sensitivity gap                                                              |   | $                     | 1,709  |   | $ | (48 | ) | $ | (413 | ) | $ | 158 |   | $ | (1,406 | ) |   |   |
| Cumulative gap                                                                             |   | $                     | 1,709  |   | $ | 1,661 |   | $ | 1,248 |   | $ | 1,406 |   | --- |   |   |   |
| Interest rate sensitivity gap as  a percentage of total assets                             |   | 8.55                  | %      | (0.24 | )% | (2.07 | )% | 0.79 | % | (7.03 | )% |   |   |
| Cumulative gap as a percentage  of total assets                                            |   | 8.55                  | %      | 8.31 | % | 6.24 | % | 7.03 | % | --- |   |   |   |
|                                                                                            |        |                       |        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

----

*(1)      Consistsof interest-bearing deposits in other banks, federal funds sold and securitiespurchased under agreements to resell. *

*(2)      Consistsof securities held to maturity and Federal Home Loan Bank of New York stock*

 

As of September 30, 2001, the cumulativevolume of assets maturing or repricing within one year exceeded liabilities by$1,248 million, or 6.24% of total assets.

 

The static gap analysis is an incompleterepresentation of interest rate risk. The gap analysis does not provide a clearrepresentation of the risks to income arising from options embedded in theBank’s balance sheet. Specifically, the gap analysis fails to account for thedynamic nature of prepayment risk and the behavior of deposit balances andrates associated with changes in market interest rates and pricing strategies.

 

Accordingly, ALCO makes extensive use ofan earnings simulation model in the formulation of its market risk managementstrategy.

 

The model gives effect to managementassumptions concerning the repricing of assets, liabilities and off-balancesheet financial instruments, as well as new business volumes, under a varietyof hypothetical interest rate scenarios.

 

The most crucial management assumptionsconcern prepayments on the Company's mortgage loan portfolio and the pricing ofconsumer deposits in various interest rate environments. As interest ratesdecline, mortgage prepayments tend to increase, reducing loan portfolio growthand lowering the portfolio's average yield. Rates on non-maturity deposits riseand fall with the general level of interest rates, but tend to move less thanproportionately. Rates offered on consumer certificates of deposits tend tomove in close concert with market rates, though history suggests that theyincrease less rapidly when market rates rise. Analysis shows that the Company'sdeposit volumes are relatively insensitive to interest rate movements withinthe range encompassed by the scenarios.

 

At September 30, 2001, based on this model, the Company'spotential earnings at risk to a gradual, parallel 200 basis point decline inmarket interest rates over the next twelve months, on instruments held forother than trading purposes, was a decline of approximately 5.6% in net incomeover the next 12 months. Conversely, a similar gradual 200 basis point increasein interest rates over the next twelve months would result in a projectedincrease in 2001 net income of 2.3% over what would be earned if rates remainedconstant. GreenPoint does not have significant exposure to such risk oninstruments held for trading purposes.

 

Management has included all derivative and other financialinstruments that have a material effect in calculating the Company’s potentialearnings at risk.

 

These measures of risk represent the Company’s exposure tointerest rate movements at a particular point in time. The risk position isalways changing. ALCO continuously monitors the Company’s risk profile and,when necessary, 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.

 

The Company is exposed to interest rate risk during theaccumulation of mortgage loans prior to sale or securitization. Prior to theclosing of a loan, the Company generally extends an interest rate lockcommitment to the borrower. The Company is exposed to subsequent changes in thelevel of market interest rates, and spreads required by investors. An increasein market interest rates or a widening of spreads will reduce the prices paidby investors and the resultant gain on sale. To mitigate this risk, at the timethe Company extends the interest rate commitment to the borrower, the Companywill enter into mandatory commitments to deliver mortgage whole loans tovarious investors, or to issue private securities and/or Fannie Mae and FreddieMac securities (forward delivery commitments). These commitments effectivelyestablish the price the Company will receive for the related mortgage loanthereby minimizing the risk of subsequent changes in interest rates.

 

During 1998, the Company entered the manufactured housing financebusiness, which introduced additional market risk. The Company is exposed tointerest rate risk during the accumulation of fixed rate manufactured housingloans prior to sale or securitization of those loans. The level of marketinterest rates, and the spread required by investors determines the prices ofthe securities backed by the Company’s manufactured housing loans. A rise inmarket interest rates, or a widening of spreads on manufactured housing-backedsecurities during the accumulation period will reduce the prices paid for thesecurities backed by the Company’s manufactured housing loans and the resultantgain on sale.

 

 

The Company mitigates the risk associated with accumulatingmanufactured housing loans by hedging fixed-rate manufactured housing loanproduction prior to sale or securitization. As the loans are accumulated, theBank enters into hedge transactions using interest rate swaps and Eurodollarfutures. The amount and duration of the hedge position is targeted so that thechange in fair value correlates closely with the change in the fair value ofsecurities backed by manufactured housing loans. The loans and the hedgeposition are monitored throughout the accumulation period. At the time asecuritization is priced, establishing the gain on sale, the hedges areunwound. The gain or loss on the hedge position is included as part of the gainon sale of the securitization.

 

The Company acquired servicing assets as part of the GreenPointCredit acquisition and holds retained interests in the manufactured housingsecuritizations completed in 1999, 2000 and 2001.

 

The fair value of the Company’s servicing assets and retainedinterests from securitizations are directly affected by the level ofprepayments associated with the underlying loans. However, manufactured housingcontracts historically have exhibited far less prepayment sensitivity tochanging interest rate levels than do residential mortgage loans. Much of thisreduced prepayment sensitivity can be attributed to lower borrower equityagainst which to refinance and smaller loan sizes which reduce the incentive torefinance. Thus, in management’s judgment, there is little earnings sensitivitysolely attributable to the effect of changes in general market interest rateson the manufactured housing servicing asset.

 

# **Credit Risk Management**

 

The Company originatesmortgage and manufactured housing loans for its own portfolio and fordisposition in the secondary markets in the form of whole loan sales andsecuritizations. In general, whole loan sales transfer the credit risk to thepurchasers. In contrast, for loans placed in the portfolio, or for loanssecuritized, the Company retains all or much of the credit risk.

 

Both GreenPoint Mortgageand GreenPoint Credit maintain underwriting policies, procedures and approvalauthorities appropriate to their businesses. In both companies, the chiefcredit executive reports directly to the chief executive of the business,outside of the production organization. With respect to loans originated forwhole loan sale to the secondary markets, where credit risk is transferred,underwriting criteria are established to meet the investor requirements. Anindependent, executive-level Risk Management Division determines the criteriarequired for loans which will be transferred to GreenPoint’s portfolio or soldthrough securitizations. Within GreenPoint Credit, sophisticated custom scoringmodels are also used to determine a borrower’s creditworthiness.

 

Oversight of theappraiser approval and appraisal review process is provided independent of theproduction organization. Appraisers are required to meet strict standards forapproval by GreenPoint, and their performance is monitored on a regular basis.With oversight by Risk Management, a comprehensive quality control process isin place in each business unit to ensure that loans being originated meet thecompany’s underwriting standards, and that required operating procedures arefollowed. Loans are selected monthly on a pre and post funding basis for reviewby quality control analysts and staff appraisers.

 

Risk Management personnelmonitor closely the performance of all loans on which the Company retainscredit risk. Upon securitization or sale, expectations are set on the default,recovery and voluntary prepayment rates. Each pool of loans is reviewed monthlyto ensure that performance is meeting those expectations. In the eventperformance does not meet expectations, the assumptions are revised. Finalresponsibility for these judgments resides with executive management,independent of the business unit.

 

Risk Management reviewsmonthly the delinquency and loss trends in all the mortgage and manufacturedhousing 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 credit exposure or to theefficacy of its underwriting of loans sold to other investors. Such changescould prompt adjustments to the Company’s underwriting criteria or servicingprocedures.

 

GreenPoint’s loanorigination activity is geographically diversified throughout the U.S.GreenPoint began originating loans outside of New York State in 1996. TheCompany tracks economic and housing market trends to identify areas forexpansion and as an early warning mechanism. The Company also closely monitorsloan delinquency trends through economic cycles in the broad economy andrelated real estate market trends. These economic and performance trends areanalyzed and results are incorporated in the ongoing fine-tuning of lendingpractices.

 

The Company uses variouscollection strategies and works to maintain contact with borrowers in order toobtain repayment. Collection activities for GreenPoint Mortgage are centralizedin a servicing unit in Columbus, Georgia. GreenPoint Credit’s collectionactivities are decentralized among its 24 regional offices in order torepossess and liquidate collateral more effectively and thereby minimizing lossseverity. In 2000, a centralized collection center was opened in California totarget early stage delinquencies more cost-effectively, thereby allowing theregional offices to focus on more serious delinquencies.

 

The Company has set fortha policy for establishment and review of the adequacy of the allowance for loanlosses in order to provide for estimated costs related to problem loans.Management believes that the allowance for loan losses is adequate. However,such determination is susceptible to the effect of future unanticipated changesin general economic and market conditions that may affect the financialcircumstances of borrowers and/or residential real estate values within theCompany’s lending areas.

**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**PART II - OTHER INFORMATION**

**Item 1 - Legal Proceedings**

 

 

In the ordinary course of business, the Corporation and itssubsidiaries are routinely defendants in or parties to a number of pending andthreatened legal actions and proceedings, in which monetary damages and otherforms of relief are sought. Certain of such actions involve alleged violationsof consumer protection laws, including claims relating to the Corporation’sloan collection efforts, and other federal and state banking laws. Certain ofsuch actions involve claims for punitive damages. Management has establishedwhat it believes to be sufficient allocated reserves to cover any probablelosses stemming from the settlement or payment of any final judgments renderedin any such cases. Accordingly, management believes that these actions andproceedings and the losses, if any, resulting from the final outcome thereof,will not be material in the aggregate to the Corporation’s financial position,results of operations or cash flows.

 

**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

**PART II - OTHER INFORMATION**

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

 

 

**(a)     Exhibits**

 

**Exhibit Number:**

10.13           AMENDMENT NUMBER ONE tothe Employment Agreement (the “Amendment”) dated as of the 7th dayof August, 2001 by and among GreenPoint Financial Corp., a Delaware corporation(the “Company”), GreenPoint Bank, a New York chartered savings bank (the“Bank”) and Bharat B. Bhatt (the “Executive”).

 

10.14           AMENDMENT NUMBER ONE tothe Amended Employment Agreement (the “Amendment”) made effective as of theAugust 7, 2001 by and among GreenPoint Financial Corp. (formerly known as GPFinancial Corp.), a Delaware corporation (the “Company”), GreenPoint Bank(formerly known as The Green Point Savings Bank), a New York chartered savingsbank (the “Bank”) and Thomas S. Johnson (the “Executive”).

 

11.1             Statement Regarding Computation ofPer Share Earnings

 

12.1             Ratios of Earnings to CombinedFixed Charges and Preferred Stock Dividends

 

**(b)     Reportson Form 8-K**

 

 

On July 2, 2001, GreenPoint Mortgage Securities Inc., a subsidiary ofHeadlands Mortgage Company, a wholly owned subsidiary of GreenPoint Bank, fileda current report on Form 8-K for the previously registered offer and sale ofthe GreenPoint Home Equity Loan Trust Asset-Backed Notes, Series 2000-2, ClassA-1, Class A-2 and Class A-3 Home Equity Loan Asset-Backed Notes (the “Series2000-3 Notes”). Included was the Monthly Payment Date Statement distributed toholders of Series 2000-3 Notes dated as of June 15, 2001.

 

On July 11, 2001, GreenPoint Mortgage Securities Inc., a subsidiary ofHeadlands Mortgage Company, a wholly owned subsidiary of GreenPoint Bank, fileda current report on Form 8-K providing for the issuance of the GreenPoint HomeEquity Loan Trust 2001-1 Home Equity Loan Asset-Backed Notes, Series 2001-1.Included was the Monthly Remittance Statement to the Certificateholders datedas of June 15, 2001.

 

On July 17, 2001, GreenPoint Mortgage Securities Inc., a subsidiary ofHeadlands Mortgage Company, a wholly owned subsidiary of GreenPoint Bank, fileda current report on Form 8-K for the previously registered offer and sale ofthe GreenPoint Home Equity Loan Trust Asset-Backed Notes, Series 2000-2, ClassA-1, Class A-2 and Class A-3 Home Equity Loan Asset-Backed Notes (the “Series2000-3 Notes”). Included was the Monthly Payment Date Statement distributed toholders of Series 2000-3 Notes dated June 16, 2001.

 

On July 17, 2001, GreenPoint Mortgage Securities Inc., a subsidiary ofHeadlands Mortgage Company, a wholly owned subsidiary of GreenPoint Bank, fileda current report on Form 8-K for the previously registered offer and sale ofthe GreenPoint Home Equity Loan Trust Asset-Backed Certificates, Series 2001-1(“Series 2001-1 Certificates”). Included was the Monthly Payment Date Statementdistributed to holders of Series 2001-1 Certificates dated July 16, 2001.

 

On July 17, 2001, GreenPoint Mortgage Securities Inc., a subsidiary ofHeadlands Mortgage Company, a wholly owned subsidiary of GreenPoint Bank, fileda current report on Form 8-K for the previously registered offer and sale ofthe GreenPoint Home Equity Loan Trust Asset-Backed Certificates, Series 2001-1(“Series 2001-1 Certificates”). Included was the Monthly Payment Date Statementdistributed to holders of Series 2001-1 Certificates dated July 16, 2001.

 

On July 25, 2001, GreenPoint Credit, LLC, the manufactured housingfinance subsidiary of GreenPoint Bank, filed a current report on Form 8-K thatincluded the following information: (i) a Pooling and Servicing Agreement,dated as of March 1, 2001, between GreenPoint Credit, LLC, as Contract Sellerand Servicer and Bank One, National Association, as Trustee and First UnionNational Bank as Co-Trustee (ii) the Monthly Report for the GreenPoint CreditManufactured Housing Contract Trust Pass-Through Certificates, Series 2001-1.

 

On August 8, 2001, GreenPoint Mortgage Securities Inc., a subsidiary ofHeadlands Mortgage Company, a wholly owned subsidiary of GreenPoint Bank, fileda current report on Form 8-K providing for the issuance of GreenPoint HomeEquity Loan Trust 2001-1 Home Equity Loan Asset Backed Notes, Series 2001-1.Included was the Monthly Remittance Statement to Certificateholders dated as ofJuly 16, 2001.

 

On August 29, 2001, GreenPoint Credit, LLC, the manufactured housingfinance subsidiary of GreenPoint Bank, filed a current report on Form 8-K thatincludes the following information: (i) a Pooling and Servicing Agreement,dated as of March 1, 2001, between GreenPoint Credit, LLC, as Contract Sellerand Servicer and Bank One, National Association, as Trustee and First UnionNational Bank as Co-Trustee (ii) the Monthly Report for the GreenPoint CreditManufactured Housing Contract Trust Pass-Through Certificates, Series 2001-1.

 

On September 28, 2001, GreenPoint Credit, LLC, the manufactured housingfinance subsidiary of GreenPoint Bank, filed a current report on Form 8-K thatincluded the following information: (i) a Pooling and Servicing Agreement,dated March 1, 2001, between GreenPoint Credit, LLC, as Contract Seller andServicer and Bank One, National Association, as Trustee and First UnionNational Bank as Co-Trustee (ii) the Monthly Report for the GreenPoint CreditManufactured Housing Contract Trust Pass-Through Certificates, Series 2001-1.

 

On September 28, 2001,GreenPoint Credit, LLC filed a current report on Form 8-K in order to file thefollowing documents: (i) the opinion of Orrick, Herrington & Sutcliffe LLP(“Orrick”) relating to certain tax matters in connection with the offering ofGreenPoint Credit Manufactured Housing Contract Trust Pass-Through Certificates,Series 2001-2 (the “Publicly Offered Certificates”), which contains Orrick’sconsent to use of its name in the Prospectus Supplement (“ProspectusSupplement”) dated September 26, 2001 together with the related Prospectusdated September 26, 2001; (ii) Consent of KPMG LLP to use their name in the“Experts” section of the Prospectus Supplement; and (iii) ExternalComputational Materials prepared by Salomon Smith Barney, Inc.

 

**GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES**

 

 

**SIGNATURES**

 

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

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

 

DatedNovember 8, 2001