**UNITEDSTATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

 

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

 

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**For the Quarterly Period Ended**

**March 31,2003**

 

**OR**

 

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

 

**0-22516**

**Securities and Exchange Commission File Number**

 

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

 

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

 

Indicateby check mark whether the registrant is an accelerated filer (as defined inRule 12b-2 of the Exchange Act).  ý**Yes**    o  **No**

 

Asof April 30, 2003, there were 93,182,374 shares of common stock outstanding.

 

 

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**GreenPointFinancial Corp.**

**FORM 10-Q**

**For theQuarterly Period Ended**

**March 31,2003**

 

**TABLE OFCONTENTS**

 
| **PART I  – FINANCIAL INFORMATION**                                                                                    |
|-----------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                        |
| Item  1 - Financial Statements                                                                                              |
|                                                                                                                        |
| Consolidated Statements of Financial  Condition (unaudited) as of March 31, 2003 and December 31, 2002                      |
|                                                                                                                        |
| Consolidated Statements of Income  (unaudited) for the quarter ended March 31, 2003 and 2002                                |
|                                                                                                                        |
| Consolidated Statements of  Comprehensive Income (unaudited) for the quarter ended March 31, 2003 and  2002                 |
|                                                                                                                        |
| Consolidated Statements of  Changes in Stockholders’ Equity (unaudited) for the quarter ended March 31,  2003 and 2002 |
|                                                                                                                        |
| Consolidated Statements of Cash  Flows (unaudited) for the quarter ended March 31, 2003 and 2002                            |
|                                                                                                                        |
| Notes to the Unaudited Consolidated  Financial Statements                                                                   |
|                                                                                                                        |
| Item 2 - Management’s Discussion and Analysis  of Financial Condition and Results of Operations                        |
|                                                                                                                        |
| Item  3 - Quantitative and Qualitative Disclosures about Market Risk                                                        |
|                                                                                                                        |
| Item  4 - Controls and Procedures                                                                                           |
|                                                                                                                        |
| **PART  II – OTHER INFORMATION**                                                                                       |
|                                                                                                                        |
| Item 1 - Legal Proceedings                                                                                                  |
|                                                                                                                        |
| Item 6 - Exhibits and Reports on Form 8-K                                                                                   |

 

2

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**GreenPoint Financial Corp. andSubsidiariesPart I – Item 1. Financial Statements**

 

**Consolidated St****atements ofFinancial Condition**

**(Unaudited)**

 
| **(In millions, except share  amounts)**                                                   |   | **March 31,  2003** |   | **Dec. 31,  2002** | ** ** |
|--------------------------------------------------------------------------------------------|--------|---------------------|--------|--------------------|------------|
| **ASSETS**                                                                                 |   |                |   |               |       |
| Cash and due from banks                                                                    |   | $                   | 274    |               | $          | 277 |   |
| Money market investments:                                                                  |   |                |   |               |       |
| Interest-bearing deposits in other banks                                                   |   | 22                  |   | 21                 |       |
| Federal funds sold and securities purchased  under agreements to resell                    |   | 11                  |   | 71                 |       |
| Total cash and cash equivalents                                                            |   | 307                 |   | 369                |       |
| Securities:                                                                                |   |                |   |               |       |
| Securities available for sale                                                              |   | 3,511               |   | 2,006              |       |
| Securities available for sale-pledged to  creditors                                        |   | 2,209               |   | 2,087              |       |
| Retained interests in securitizations available  for sale                                  |   | 78                  |   | 108                |       |
| Federal Home Loan Bank of New York stock                                                   |   | 240                 |   | 300                |       |
| Securities held to maturity (fair value of $3  and $3, respectively)                       |   | 3                   |   | 3                  |       |
| Total securities                                                                           |   | 6,041               |   | 4,504              |       |
| Loans receivable held for sale                                                             |   | 5,042               |   | 5,595              |       |
| Loans receivable held for investment (net of  allowance for loan losses of $78)            |   | 9,607               |   | 9,901              |       |
| Other interest-earning assets                                                              |   | 140                 |   | 141                |       |
| Accrued interest receivable                                                                |   | 85                  |   | 87                 |       |
| Banking premises and equipment, net                                                        |   | 174                 |   | 168                |       |
| Servicing assets                                                                           |   | 109                 |   | 117                |       |
| Goodwill (net of accumulated amortization and  impairment of $788)                         |   | 395                 |   | 395                |       |
| Other assets                                                                               |   | 499                 |   | 537                |       |
| Total assets                                                                               |   | $                   | 22,399 |               | $          | 21,814 |   |
|                                                                                       |   |                |   |               |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                              |   |                |   |               |       |
| **Liabilities:**                                                                           |   |                |   |               |       |
| Deposits:                                                                                  |   |                |   |               |       |
| N.O.W. and checking                                                                        |   | $                   | 2,294  |               | $          | 1,877 |   |
| Savings                                                                                    |   | 1,398               |   | 1,323              |       |
| Variable rate savings                                                                      |   | 2,293               |   | 2,296              |       |
| Money market                                                                               |   | 1,169               |   | 991                |       |
| Total core deposits                                                                        |   | 7,154               |   | 6,487              |       |
| Term certificates of deposit                                                               |   | 5,053               |   | 5,309              |       |
| Total deposits                                                                             |   | 12,207              |   | 11,796             |       |
| Borrowings:                                                                                |   |                |   |               |       |
| Securities sold under agreements to repurchase                                             |   | 2,100               |   | 2,000              |       |
| Other short term borrowings                                                                |   | 740                 |   | 285                |       |
| Federal Home Loan Bank of New York advances                                                |   | 4,200               |   | 4,600              |       |
| Subordinated bank notes                                                                    |   | 150                 |   | 150                |       |
| Guaranteed preferred beneficial interest in  Company’s junior subordinated debentures |   | 200                 |   | 200                |       |
| Total borrowings                                                                           |   | 7,390               |   | 7,235              |       |
| Mortgagors’ escrow                                                                    |   | 76                  |   | 68                 |       |
| Liability under recourse exposure                                                          |   | 290                 |   | 301                |       |
| Other liabilities                                                                          |   | 533                 |   | 490                |       |
| Total liabilities                                                                          |   | 20,496              |   | 19,890             |       |
| 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                                                                 |   | 912                 |   | 907                |       |
| Unallocated Employee Stock Ownership Plan (ESOP)  shares                                   |   | (88                 | )      | (89                | )          |
| Unearned stock plans shares                                                                |   | —              |   | —             |       |
| Retained earnings                                                                          |   | 1,664               |   | 1,563              |       |
| Accumulated other comprehensive income, net                                                |   | 15                  |   | 24                 |       |
| Treasury stock, at cost (16,567,378 shares and  13,953,333 shares, respectively)           |   | (601                | )      | (482               | )          |
| Total stockholders’ equity                                                            |   | 1,903               |   | 1,924              |       |
| Total liabilities and stockholders’ equity                                            |   | $                   | 22,399 |               | $          | 21,814 |   |

 

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

 

3

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**Consolidated Statemen****ts of Income**

**(Unaudited)**

 
|                                                         |   | **Quarter Ended  March 31,** | ** ** |
|--------------------------------------------------------------|--------|------------------------------|------------|
| **(In millions, except per share  amounts)**                 |   | **2003**                     |       | **2002** |   |
| **Interest income:**                                         |   |                         |       |   |   |
| Mortgage loans held for investment                           |   | $                            | 166.7      |   | $ | 194.8 |   |
| Loans held for sale                                          |   | 75.9                         |       | 59.3 |   |
| Securities                                                   |   | 52.1                         |       | 56.0 |   |
| Other                                                        |   | 3.6                          |       | 7.5 |   |
| Total interest income                                        |   | 298.3                        |       | 317.6 |   |
| **Interest expense:**                                        |   |                         |       |   |   |
| Deposits                                                     |   | 62.7                         |       | 78.5 |   |
| Other borrowed funds                                         |   | 52.7                         |       | 49.3 |   |
| Long-term debt                                               |   | 8.1                          |       | 10.4 |   |
| Total interest expense                                       |   | 123.5                        |       | 138.2 |   |
| Net interest income                                          |   | 174.8                        |       | 179.4 |   |
| Provision for loan losses                                    |   | (0.3                         | )          | (0.4 | ) |
| Net interest income after provision for loan  losses         |   | 174.5                        |       | 179.0 |   |
| **Non-interest income:**                                     |   |                         |       |   |   |
| Income from fees and commissions:                            |   |                         |       |   |   |
| Loan servicing fees                                          |   | 5.8                          |       | 5.2 |   |
| Banking services fees and commissions                        |   | 14.5                         |       | 12.6 |   |
| Fees, commissions and other income                           |   | 3.4                          |       | 2.6 |   |
| Total income from fees and commissions                       |   | 23.7                         |       | 20.4 |   |
| Net gain on sales of loans                                   |   | 124.3                        |       | 90.0 |   |
| Change in valuation of retained interests                    |   | (0.7                         | )          | — |   |
| Net gain on sale of securities                               |   | 1.2                          |       | 1.8 |   |
| Total non-interest income                                    |   | 148.5                        |       | 112.2 |   |
| **Non-interest expense:**                                    |   |                         |       |   |   |
| General and administrative expenses:                         |   |                         |       |   |   |
| Salaries and benefits                                        |   | 61.6                         |       | 49.3 |   |
| Employee Stock Ownership and stock plans expense             |   | 6.1                          |       | 6.0 |   |
| Net expense of premises and equipment                        |   | 20.9                         |       | 18.0 |   |
| Federal deposit insurance premiums                           |   | 0.5                          |       | 0.5 |   |
| Other administrative expenses                                |   | 31.5                         |       | 26.9 |   |
| Total general and administrative expenses                    |   | 120.6                        |       | 100.7 |   |
| Other real estate owned operating expense  (income)          |   | 0.2                          |       | (0.5 | ) |
| Total non-interest expense                                   |   | 120.8                        |       | 100.2 |   |
| Income from continuing operations before income  taxes       |   | 202.2                        |       | 191.0 |   |
| Income taxes related to earnings from continuing  operations |   | 75.3                         |       | 70.5 |   |
| Net income from continuing operations                        |   | 126.9                        |       | 120.5 |   |
| **Discontinued operations:**                                 |   |                         |       |   |   |
| Net income from disposal of discontinued  business           |   | 0.3                          |       | 1.5 |   |
| **Net income**                                               |   | $                            | 127.2      |   | $ | 122.0 |   |
|                                                         |   |                         |       |   |   |
| **Basic earnings per share:**                                |   |                         |       |   |   |
| Net income from continuing operations                        |   | $                            | 1.50       |   | $ | 1.36 |   |
| Net income from discontinued operations                      |   | —                       |       | 0.01 |   |
| Net income                                                   |   | $                            | 1.50       |   | $ | 1.37 |   |
| **Diluted earnings per share:**                              |   |                         |       |   |   |
| Net income from continuing operations                        |   | $                            | 1.47       |   | $ | 1.32 |   |
| Net income from discontinued operations                      |   | —                       |       | 0.01 |   |
| Net income                                                   |   | $                            | 1.47       |   | $ | 1.33 |   |
| **Dividends declared per share**                             |   | $                            | 0.31       |   | $ | 0.25 |   |

 

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

 

4

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**Consolidated Stateme****nts of Comprehensive Income**

**(Unaudited)**

 
|                                                                |   | **Quarter Ended  March 31,** | ** ** |
|---------------------------------------------------------------------|--------|------------------------------|------------|
| **(In millions)**                                                   |   | **2003**                     |       | **2002** |   |
|                                                                |   |                         |       |   |   |
| Net income                                                          |   | $                            | 127.2      |   | $ | 122.0 |   |
| Other comprehensive income, before tax:                             |   |                         |       |   |   |
| Unrealized losses on securities:                                    |   |                         |       |   |   |
| Unrealized holding losses arising during period                     |   | (13.8                        | )          | (32.7 | ) |
| Less: reclassification adjustment for gains  included in net income |   | (1.2                         | )          | (1.8 | ) |
| Other comprehensive loss, before tax                                |   | (15.0                        | )          | (34.5 | ) |
| Income tax benefit related to items of other  comprehensive income  |   | 6.2                          |       | 14.6 |   |
| Other comprehensive loss, net of tax                                |   | (8.8                         | )          | (19.9 | ) |
| **Total comprehensive income, net  of tax**                         |   | $                            | 118.4      |   | $ | 102.1 |   |

 

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

 

5

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**Consolidated Statement****s of Changes In Stockholders’ Equity**

**(Unaudited)**

 
|                                                       |   | **Quarter Ended  March 31,** | ** ** |
|------------------------------------------------------------|--------|------------------------------|------------|
| **(In millions)**                                          |   | **2003**                     |       | **2002** |   |
| **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                             |   | 907                          |       | 877 |   |
| Reissuance of treasury stock                               |   | (2                           | )          | (2 | ) |
| Amortization of ESOP shares committed to be  released      |   | 6                            |       | 7 |   |
| Tax benefit for vested stock plans shares                  |   | 1                            |       | 3 |   |
| Balance at end of period                                   |   | 912                          |       | 885 |   |
| **Unallocated ESOP shares**                                |   |                         |       |   |   |
| Balance at beginning of period                             |   | (89                          | )          | (95 | ) |
| Amortization of ESOP shares committed to be  released      |   | 1                            |       | 2 |   |
| Balance at end of period                                   |   | (88                          | )          | (93 | ) |
| **Unearned stock plans shares**                            |   |                         |       |   |   |
| Balance at beginning of period                             |   | —                       |       | (1 | ) |
| Amortization of stock plans shares                         |   | —                       |       | — |   |
| Balance at end of period                                   |   | —                       |       | (1 | ) |
| **Retained earnings**                                      |   |                         |       |   |   |
| Balance at beginning of period                             |   | 1,563                        |       | 1,148 |   |
| Net income                                                 |   | 127                          |       | 122 |   |
| Dividends declared                                         |   | (26                          | )          | (22 | ) |
| Balance at end of period                                   |   | 1,664                        |       | 1,248 |   |
| **Accumulated other comprehensive income, net**            |   |                         |       |   |   |
| Balance at beginning of period                             |   | 24                           |       | 11 |   |
| Net change in accumulated other comprehensive  income, net |   | (9                           | )          | (20 | ) |
| Balance at end of period                                   |   | 15                           |       | (9 | ) |
| **Treasury stock, at cost**                                |   |                         |       |   |   |
| Balance at beginning of period                             |   | (482                         | )          | (285 | ) |
| Reissuance of treasury stock                               |   | 6                            |       | 18 |   |
| Purchase of treasury stock                                 |   | (125                         | )          | (13 | ) |
| Balance at end of period                                   |   | (601                         | )          | (280 | ) |
| **Total stockholders’ equity**                        |   | $                            | 1,903      |   | $ | 1,751 |   |

 

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

 

6

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**Consolidated Statements****of Cash Flows**

**(Unaudited)**

 
|                                                                               |   | **Quarter Ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------|--------|------------------------------|------------|
| **(In millions)**                                                                  |   | **2003**                     |       | **2002** |   |
| **Cash flows from operating activities:**                                          |   |                         |       |   |   |
| Net income                                                                         |   | $                            | 127        |   | $ | 122 |   |
| Adjustments to reconcile net income to net cash  used in operating activities:     |   |                         |       |   |   |
| Depreciation and amortization                                                      |   | 8                            |       | 8 |   |
| Gain on sale of securities                                                         |   | 1                            |       | 3 |   |
| ESOP and stock plans expense                                                       |   | 8                            |       | 8 |   |
| Capitalization of servicing assets                                                 |   | (1                           | )          | (8 | ) |
| Amortization and impairment of servicing assets                                    |   | 9                            |       | 19 |   |
| (Increase) decrease in assets associated with  operating activities:               |   |                         |       |   |   |
| Loans receivable held for sale:                                                    |   |                         |       |   |   |
| Loan originations                                                                  |   | (9,328                       | )          | (6,526 | ) |
| Proceeds from loan sales                                                           |   | 9,822                        |       | 7,270 |   |
| Other                                                                              |   | 59                           |       | (73 | ) |
| Retained interests in securitizations                                              |   | 28                           |       | 18 |   |
| Accrued interest receivable                                                        |   | 2                            |       | (1 | ) |
| Other assets                                                                       |   | 45                           |       | (2 | ) |
| Increase (decrease) in liabilities associated  with operating activities:          |   |                         |       |   |   |
| Liabilities under recourse exposure                                                |   | (11                          | )          | (68 | ) |
| Other liabilities                                                                  |   | 43                           |       | 434 |   |
| Other, net                                                                         |   | 10                           |       | 1 |   |
| Net cash provided by operating activities                                          |   | 822                          |       | 1,205 |   |
| **Cash flows from investing activities:**                                          |   |                         |       |   |   |
| Net change in:                                                                     |   |                         |       |   |   |
| Loans receivable held for investment                                               |   | 279                          |       | 143 |   |
| Premises and equipment                                                             |   | (14                          | )          | (9 | ) |
| Available for sale securities:                                                     |   |                         |       |   |   |
| Proceeds from maturities                                                           |   | 796                          |       | 51 |   |
| Proceeds from sales                                                                |   | 787                          |       | 304 |   |
| Purchase of securities                                                             |   | (4,130                       | )          | (2,763 | ) |
| Principal repayments                                                               |   | 898                          |       | 538 |   |
| Purchases of Federal Home Loan Bank Stock                                          |   | 60                           |       | 18 |   |
| Other, net                                                                         |   | 12                           |       | 7 |   |
| Net cash used in investing activities                                              |   | (1,312                       | )          | (1,711 | ) |
| **Cash flows from financing activities:**                                          |   |                         |       |   |   |
| Net change in:                                                                     |   |                         |       |   |   |
| Domestic deposits                                                                  |   | 411                          |       | 121 |   |
| Mortgagors’ escrow accounts                                                   |   | 8                            |       | 23 |   |
| Proceeds from Securities sold under agreements  to repurchase and other borrowings |   | 16,044                       |       | 46,524 |   |
| Repayments of Securities sold under agreements  to repurchase and other borrowings |   | (15,489                      | )          | (46,043 | ) |
| Proceeds from advances from Federal Home Loan  Bank                                |   | 61,960                       |       | 60,790 |   |
| Repayments of advances from Federal Home Loan  Bank                                |   | (62,360                      | )          | (60,990 | ) |
| Cash dividends paid                                                                |   | (26                          | )          | (22 | ) |
| Treasury stock purchased                                                           |   | (125                         | )          | (13 | ) |
| Exercise of stock options                                                          |   | 5                            |       | 16 |   |
| Net cash provided by financing activities                                          |   | 428                          |       | 406 |   |
| Net decrease in cash and cash equivalents                                          |   | (62                          | )          | (100 | ) |
| Cash and cash equivalents at beginning of period                                   |   | 369                          |       | 357 |   |
| Cash and cash equivalents at end of period                                         |   | $                            | 307        |   | $ | 257 |   |
| **Non-cash activities:**                                                           |   |                         |       |   |   |
| Additions to other real estate owned, net                                          |   | $                            | (12        | ) | $ | (6 | ) |
| Unsettled trades                                                                   |   | $                            | —     |   | $ | (484 | ) |
| **Supplemental disclosure of cash flow information:**                              |   |                         |       |   |   |
| Cash paid for income taxes                                                         |   | $                            | 20         |   | $ | 38 |   |
| Interest paid                                                                      |   | $                            | 126        |   | $ | 151 |   |

 

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

 

7

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**NotesTo T****he UnauditedConsolidated Financial Statements**

 

**NOTE 1     Summary of Significant Accounting Policies**

 

**Basis of Presentation**

 

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

 

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

 

Theseunaudited consolidated interim financial statements presented should be read inconjunction with the consolidated financial statements and notes included inthe Company’s Annual Report to shareholders for the year ended December 31,2002.

 

**Accounting for Loan Sales**

 

GreenPointsells loans both in the whole loan market and through various securitizationvehicles.

 

WhenGreenPoint has sold mortgages on a whole loan basis, in some cases it hasretained the servicing rights related to the loans. In instances whereGreenPoint 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 GreenPoint does retain theservicing rights, the gain or loss also depends in part on the fair valueattributed to the servicing rights.

 

GreenPointhas sold mortgages subject to various representations and warranties. Upon loansale, GreenPoint establishes a loss reserve for estimated losses to be incurredunder these agreements. Additions to the representation and warranty reserve arereported as reduction to gain on sale of loans.

 

WhenGreenPoint has securitized certain mortgages, in some cases it has retained theservicing rights and one or more retained interests. In calculating the gain orloss on the sale, GreenPoint allocates the cost basis of the loans sold betweenthe assets sold, and the retained interests and servicing rights based on theirrelative fair values at the date of sale. A gain or loss is recognized as thedifference between the cash proceeds from the sale and the allocated cost basisof the assets sold.

 

**Retained Interests**

 

Retainedinterests include interest-only strips, subordinated certificates, transferorinterests, demand notes and the recorded liabilities for limited recourseprovided on mortgage loans and recourse provided on manufactured housing loanssecuritized and sold.

 

GreenPointclassifies its retained interest assets as available for sale and carries thesesecurities at fair value. Generally, if the fair value of retained interestsdeclines below its amortized cost basis, the change in valuation is recognizedin the consolidated statement of income and is classified as a change invaluation of retained interests. Unrealized gains are reported, net ofapplicable taxes, in accumulated other comprehensive income, as a separatecomponent of stockholders’ equity.

 

GreenPointreviews the adequacy of the liability under recourse exposure based onmanagement’s best estimate of future cash flows associated with the recoursearrangement. The change in valuation is recognized in the consolidatedstatement of income and is classified as discontinued operations.

 

Toobtain fair values, quoted market prices are used, if available. Because marketquotes are generally not available for retained interests, GreenPoint generallyestimates fair value based upon the present value of estimated future cashflows using assumptions of prepayments, defaults, loss severity rates, anddiscount rates that GreenPoint believes market participants would use forsimilar assets and liabilities.

 

8

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**Servicing Assets**

 

Servicingassets are carried at the lower of cost or fair value based on defined riskstrata and are amortized in proportion to and over the expected servicingperiod.

 

GreenPointstratifies its servicing assets based on the risk characteristics of theunderlying loan pools and the assets are evaluated for impairment based on therisk characteristics. A valuation allowance is recognized through a charge tocurrent earnings for servicing assets that have an amortized balance in excessof the current fair value.

 

Thefair value of servicing assets is determined by calculating the present valueof estimated future net servicing cash flows, using assumptions of prepayments,defaults, servicing costs and discount rates that GreenPoint believes marketparticipants would use for similar assets.

 

**Goodwill Amortization**

 

Goodwill,which is attributable to the retail banking segment, is carried at its January1, 2002 book value and is tested, at least annually, for impairment.

 

# **Stock-Based Compensation Plans**

 

TheCompany adopted the disclosure approach under Statement of Financial AccountingStandards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), asamended by Statement of Financial Accounting Standards No. 148, “Accounting forStock-Based Compensation – Transition and Disclosure”. Under these standardsthe Company discloses in the notes to the financial statements the pro formaeffects on net income and earnings per share, determined as if the fairvalue-based method had been applied in measuring compensation cost. The Companycontinues to apply APB Opinion No. 25, “Accounting for Stock Issued toEmployees” (“APB 25”) in accounting for its plans. Accordingly, no compensationcost has been recognized for the Company’s stock option plans.

 

Thefollowing table illustrates the effect on net income and earnings per share ifthe Company had applied the fair value recognition provisions of FASB StatementNo. 123, “Accounting for Stock-Based Compensation”, to stock-based employeecompensation.

 
|                                                                                                                         |   | **Quarter Ended**   | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|------------|
| **(In millions)**                                                                                                            |   | **March 31,  2003** |       | **March 31,  2002** |   |
|                                                                                                                         |   |                |       |   |   |
| Net income as reported                                                                                                       |   | $                   | 127.2      |   | $ | 122.0 |   |
| Deduct: Total stock-based employee compensation  expense determined under fair value based method net of related tax effects |   | (2.3                | )          | (2.1 | ) |
| Proforma net income                                                                                                          |   | $                   | 124.9      |   | $ | 119.9 |   |
|                                                                                                                         |   |                |       |   |   |
| Earnings per share:                                                                                                          |   |                |       |   |   |
| Basic – as reported                                                                                                     |   | $                   | 1.50       |   | $ | 1.37 |   |
| Basic – pro forma                                                                                                       |   | $                   | 1.48       |   | $ | 1.35 |   |
| Diluted – as reported                                                                                                   |   | $                   | 1.47       |   | $ | 1.33 |   |
| Diluted – pro forma                                                                                                     |   | $                   | 1.45       |   | $ | 1.31 |   |

 

9

----

 

**NOTE 2****               ****Loans Receivable**

 

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

 
| **(In millions)**                     |   | **March 31,  2003** | ** ** | **Dec. 31,  2002** | ** ** |
|---------------------------------------|--------|---------------------|------------|--------------------|------------|
| Conventional first  mortgage loans:   |   |                |       |               |       |
| Residential one-to four-family        |   | $                   | 4,238      |               | $          | 5,062 |   |
| Commercial property                   |   | 69                  |       | 78                 |       |
| Second mortgage and home equity loans |   | 682                 |       | 404                |       |
| Other                                 |   | 1                   |       | 1                  |       |
| Total loans receivable held for sale  |   | 4,990               |       | 5,545              |       |
| Net deferred loan origination costs   |   | 52                  |       | 50                 |       |
| Loans receivable held for sale, net   |   | $                   | 5,042      |               | $          | 5,595 |   |

 

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

 
| **(In millions)**                                         |   | **March 31,  2003** | ** ** | **Dec. 31,  2002** | ** ** |
|-----------------------------------------------------------|--------|---------------------|------------|--------------------|------------|
| Conventional first  mortgage loans:                       |   |                |       |               |       |
| Residential one-to four-family                            |   | $                   | 8,291      |               | $          | 8,666 |   |
| Residential multi-family                                  |   | 295                 |       | 319                |       |
| Commercial property                                       |   | 721                 |       | 620                |       |
| Second mortgage and home equity loans                     |   | 271                 |       | 267                |       |
| Manufactured housing loans                                |   | 7                   |       | 9                  |       |
| Other                                                     |   | 57                  |       | 60                 |       |
| Total loans receivable held for investment                |   | 9,642               |       | 9,941              |       |
| Net deferred loan origination costs and purchase  premium |   | 43                  |       | 38                 |       |
| Allowance for loan losses                                 |   | (78                 | )          | (78                | )          |
| Loans receivable held for investment, net                 |   | $                   | 9,607      |               | $          | 9,901 |   |

 

10

----

 

**NOTE 3****               ****Securities Available for Sale**

 

The amortized cost and estimated fair value ofsecurities available for sale at March 31, 2003 and December 31, 2002 aresummarized as follows:

 
|                                                  |   | **March 31,  2003** |   |
|-------------------------------------------------------|--------|---------------------|--------|
| **(In millions)**                                     |   | **Amortized  Cost** |   | **Gross  Unrealized  Gains** |   | **Gross  Unrealized  Losses** |   | **Fair  Value** |   |
| U.S. Government and  Federal Agency Obligations:      |   |                |   |   |   |   |   |   |   |
| U.S. Treasury  notes/bills                            |   | $                   | 30     |   | $ | 1 |   | $ | — |   | $ | 31 |   |
| Agency notes                                          |   | 122                 |   | — |   | — |   | 122 |   |
| Mortgage-backed  securities                           |   | 320                 |   | 15 |   | — |   | 335 |   |
| Collateralized  mortgage obligations                  |   | 4,842               |   | 18 |   | (9 | ) | 4,851 |   |
| Trust certificates  collateralized by GNMA securities |   | 4                   |   | — |   | — |   | 4 |   |
| Corporate bonds                                       |   | 122                 |   | — |   | (4 | ) | 118 |   |
| Municipal bonds                                       |   | 56                  |   | 4 |   | — |   | 60 |   |
| Equity securities                                     |   | 202                 |   | 2 |   | (5 | ) | 199 |   |
| Total securities  available for sale                  |   | $                   | 5,698  |   | $ | 40 |   | $ | (18 | ) | $ | 5,720 |   |

 
|                                                  |   | **December  31, 2002** | ** ** |
|-------------------------------------------------------|--------|------------------------|------------|
| **(In millions)**                                     |   | **Amortized  Cost**    |       | **Gross  Unrealized  Gains** |   | **Gross  Unrealized  Losses** |   | **Fair  Value** |   |
| U.S. Government and  Federal Agency Obligations:      |   |                   |       |   |   |   |   |   |   |
| U.S. Treasury  notes/bills                            |   | $                      | 6          |   | $ | — |   | $ | — |   | $ | 6 |   |
| Agency notes                                          |   | 107                    |       | — |   | — |   | 107 |   |
| Mortgage-backed  securities                           |   | 388                    |       | 18 |   | — |   | 406 |   |
| Collateralized  mortgage obligations                  |   | 3,197                  |       | 29 |   | (7 | ) | 3,219 |   |
| Trust certificates  collateralized by GNMA securities |   | 4                      |       | — |   | — |   | 4 |   |
| Corporate bonds                                       |   | 122                    |       | — |   | (4 | ) | 118 |   |
| Municipal bonds                                       |   | 56                     |       | 4 |   | — |   | 60 |   |
| Equity securities                                     |   | 177                    |       | 3 |   | (7 | ) | 173 |   |
| Total securities  available for sale                  |   | $                      | 4,057      |   | $ | 54 |   | $ | (18 | ) | $ | 4,093 |   |

 

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

 

Thefollowing describes the balances associated with recourse arrangements, thebalances and activity in the corresponding retained interests, the balances andactivity in servicing assets and the economic assumptions used in valuing theretained interests and servicing assets.

 

**Recourse Arrangements**

 

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

 

11

----

 

GreenPointhas loans sold with recourse with the following principal balances, maximumrecourse exposures and recorded liabilities.

 
|                                 |   | **March 31, 2003**     | ** ** |
|--------------------------------------|--------|------------------------|------------|
| **(In millions)**                    |   | **Principal  Balance** |       | **Maximum  Recourse  Exposure (1)** |   | **Recorded  Liability** |   |
| Manufactured housing securitizations |   | $                      | 4,057      |   | $ | 601 |   | $ | 284 |   |
| Manufactured housing sales           |   | 252                    |       | 252 |   | 5 |   |
| Mortgage securitizations (2)         |   | 620                    |       | 79 |   | — |   |
| Mortgage sales (3)                   |   | 270                    |       | 265 |   | 1 |   |
|                                      |        |                        |            |  |  |  |  |  |  |  |

 
|                                 |   | **December 31, 2002**  | ** ** |
|--------------------------------------|--------|------------------------|------------|
| **(In millions)**                    |   | **Principal  Balance** |       | **Maximum  Recourse  Exposure (1)** |   | **Recorded  Liability** |   |
| Manufactured housing securitizations |   | $                      | 4,202      |   | $ | 621 |   | $ | 295 |   |
| Manufactured housing sales           |   | 258                    |       | 258 |   | 5 |   |
| Mortgage securitizations (2)         |   | 829                    |       | 108 |   | — |   |
| Mortgage sales (3)                   |   | 323                    |       | 317 |   | 1 |   |
|                                      |        |                        |            |  |  |  |  |  |  |  |

 

----

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

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

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

 

Manufacturedhousing securitization letter of credit exposure is as follows:

 
| **(In millions)**                   |   | **March 31,  2003** | ** ** | **Dec. 31,  2002** | ** ** |
|-------------------------------------|--------|---------------------|------------|--------------------|------------|
| Letters of credit outstanding       |   | $                   | 598        |               | $          | 617 |   |
| Projected letter of credit draws    |   | (312                | )          | (326               | )          |
| Remaining letter of credit exposure |   | $                   | 286        |               | $          | 291 |   |

 

AtMarch 31, 2003, GreenPoint has six manufactured housing securitizations with principalbalances of $1.7 billion, which have projected letter of credit drawsequal to the maximum recourse exposure for those securitizations. GreenPointrecords a liability based on the net present value of the projected letter ofcredit draws. At March 31, 2003, the projected draws exceed the recordedliability by $28 million, representing future interest expense.

 

Inthe third quarter of 2002, GreenPoint agreed to issue additional letters ofcredit totaling $52 million in favor of a surety provider on four of itsoutstanding securitizations. Additionally, GreenPoint agreed to exercise itsoptional termination right and retire each transaction insured by the suretyprovider when the underlying loans in each securitization total 10% of theoriginal loan balance. The exercise of this option is a standard and expectedoperating procedure in the securitization markets, and its projected financialstatement impact is included in the projected operating results of thediscontinued business. In exchange, the surety provider agreed to amendservicer termination provisions, which, prior to their amendment, would haveenabled the surety provider to transfer the servicing of certain loans to athird party.

 

Consistentwith this agreement, an additional liability under recourse exposure wasrecorded to recognize the additional draws that could arise from the newletters of credit. The balances and corresponding liability relating tomanufactured housing securitizations included in this note reflect the impactof the agreement. Additionally, the servicing asset valuation and the projectedoperating results have been adjusted to reflect the amended servicingtermination provisions.

 

12

----

 

Thefollowing presents quantitative information about delinquencies on loans soldwith recourse:

 
|                                                     |   | **March 31,  2003**      |   | **Dec. 31,  2002** |   | **March 31,  2003** |   | **Dec. 31,  2002** |   |
|----------------------------------------------------------|--------|--------------------------|--------|--------------------|--------|---------------------|--------|--------------------|--------|
| **(In millions)**                                        |   | **Manufactured Housing** |   | **Mortgage**       |   |
| Principal balance of loans                               |   | $                        | 4,309  |               | $      | 4,460               |   | $                  | 890    |   | $ | 1,152 |   |
| Principal balance of loans 90 days or more past  due (1) |   | 210                      |   | 220                |   | 56                  |   | 62                 |   |
|                                                          |        |                          |        |                    |        |                     |        |                    |        |  |  |  |  |

 

----

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

 

Inaddition to the recourse arrangements described in the tables above, GreenPointhas established liabilities related to representations and warranties formortgage loans of $32 million and $29 million, at March 31, 2003 and December31, 2002, respectively.

 

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

## ** **

Theactivity in the recorded liability for manufactured housing securitizations andsales is summarized as follows:

 
|                                      |   | **At and for  the  Quarter Ended  March 31,** | ** ** |
|-------------------------------------------|--------|-----------------------------------------------|------------|
| **(In millions)**                         |   | **2003**                                      |       | **2002** |   |
| **Liability for Recourse Exposure**       |   |                                          |       |   |   |
| Balance at beginning of period            |   | $                                             | 300        |   | $ | 467 |   |
| Interest expense                          |   | 5                                             |       | 7 |   |
| Letter of credit draws and other charges  |   | (17                                           | )          | (78 | ) |
| Change in valuation of retained interests |   | 1                                             |       | 3 |   |
| Balance at end of period                  |   | $                                             | 289        |   | $ | 399 |   |

 

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

 
|                                       |   | **At and for the Quarter Ended  March 31,** |
|--------------------------------------------|--------|---------------------------------------------|
|                                       |   | **2003**                                    |   | **2002** |   | **2003** |   | **2002** |   |
| **(In millions)**                          |   | **Manufactured  Housing**                   |   | **Mortgage** |   |
| **Retained Interests in  Securitizations** |   |                                        |   |   |   |   |   |   |   |
| Balance at beginning of period             |   | $                                           | 4 |   | $ | 1 |   | $ | 104 |   | $ | 130 |   |
| Additions from securitizations             |   | —                                      |   | — |   | — |   | 6 |   |
| Interest and other income                  |   | —                                      |   | 2 |   | 2 |   | 5 |   |
| Cash received                              |   | —                                      |   | (3 | ) | (29 | ) | (13 | ) |
| Change in unrealized gain                  |   | —                                      |   | — |   | (1 | ) | (2 | ) |
| Change in valuation of retained interests  |   | (1                                          | ) | — |   | (1 | ) | — |   |
| Balance at end of period                   |   | $                                           | 3 |   | $ | — |   | $ | 75 |   | $ | 126 |   |

 

Ona quarterly basis, GreenPoint reviews retained interests for impairment basedon management’s best estimate of the fair value of future cash flows associatedwith the retained interests. GreenPoint also reviews the adequacy of the valueof the recorded liability on a quarterly basis, based on management’s bestestimate of future cash flows associated with the corporate guarantee.

 

Theincrease in cash received for mortgage retained interests was primarily due toGreenPoint’s exercise of its optional clean-up call provisions for six mortgagesecuritizations during the quarter ended March 31, 2003.

 

13

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**Valuation Assumptions**

 

There were no new securitizations recorded duringthe quarter ended March 31, 2003. The key economic assumptions used inestimating the fair value of the entire portfolio of retained interests atMarch 31, 2003 and December 31, 2002 were as follows:

 
|                                 |   | **Estimate of Fair Value at** |   |
|--------------------------------------|--------|-------------------------------|--------|
|                                 |   | **March 31,  2003**           |   | **Dec. 31,  2002** |   | **March 31,  2003** |   | **Dec. 31,  2002** |   |
|                                 |   | **Manufactured  Housing**     |   | **Mortgage** |   |
| Weighted average life (in years)     |   | 4.9                           |   | 4.9 |   | 0.8 |   | 0.9 |   |
| Weighted average prepayment rate (1) |   | 8.2                           | %      | 8.2 | % | 56.4 | % | 52.6 | % |
| Weighted average default rate        |   | 6.1                           | %      | 6.3 | % | N/A |   | N/A |   |
| Loss severity rate                   |   | 90.8                          | %      | 86.6 | % | N/A |   | N/A |   |
| Weighted average loss rate           |   | 5.6                           | %      | 5.5 | % | 3.5 | % | 3.3 | % |
| Cumulative loss (2)                  |   | 27.4                          | %      | 27.0 | % | 2.7 | % | 3.0 | % |
| Asset cash flows discounted at       |   | 14.0                          | %      | 14.0 | % | 8.4 | % | 9.3 | % |
| Liability cash flows discounted at   |   | 6.6                           | %      | 6.6 | % | — |   | — |   |

 

----

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

*(2)**                              **Remaining net lossesdivided by outstanding principal balance.*

 

**Servicing Assets**

 

Ona quarterly basis, GreenPoint reviews capitalized servicing rights forimpairment. This review is performed based on risk strata, which are determinedon a disaggregated basis given the predominant risk characteristics of theunderlying 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.

 

Theactivity in servicing assets is summarized as follows:

 
|                                            |   | **At and for the Quarter Ended  March 31,** | ** ** |
|-------------------------------------------------|--------|---------------------------------------------|------------|
|                                            |   | **2003**                                    |       | **2002** |   | **2003** |   | **2002** |   |
| **(In millions)**                               |   | **Manufactured  Housing**                   |       | **Mortgage** | ** ** |
| **Servicing Assets**                            |   |                                        |       |   |   |   |   |   |   |
| Balance at beginning of period                  |   | $                                           | 101        |   | $ | 127 |   | $ | 112 |   | $ | 86 |   |
| Additions                                       |   | —                                      |       | 3 |   | 20 |   | 12 |   |
| Sales                                           |   | —                                      |       | — |   | (20 | ) | (7 | ) |
| Amortization                                    |   | (2                                          | )          | (7 | ) | (7 | ) | (8 | ) |
| Balance at end of period                        |   | 99                                          |       | 123 |   | 105 |   | 83 |   |
| **Reserve for impairment of  servicing assets** |   |                                        |       |   |   |   |   |   |   |
| Balance at beginning of period                  |   | (69                                         | )          | (67 | ) | (27 | ) | (23 | ) |
| Recoveries (additions)                          |   | —                                      |       | (4 | ) | 1 |   | — |   |
| Balance at end of period                        |   | (69                                         | )          | (71 | ) | (26 | ) | (23 | ) |
| Servicing assets, net                           |   | $                                           | 30         |   | $ | 52 |   | $ | 79 |   | $ | 60 |   |

 

Theestimated fair values of manufactured housing servicing assets were $38 millionand $52 million at March 31, 2003 and 2002, respectively, and $38 millionat December 31, 2002.

 

Theestimated fair values of mortgage servicing assets were $82 million and $62million at March 31, 2003 and 2002, respectively, and $90 million at December31, 2002.

 

Serviceradvances receivable totaled $98 million and $85 million at March 31, 2003 andDecember 31, 2002, respectively.

 

14

----

 

Thesignificant assumptions used in estimating the fair value of the servicingassets at March 31, 2003 and December 31, 2002 were as follows:

 
|                             |   | **March 31,  2003**       |       | **Dec. 31,  2002** |       | **March 31,  2003** |   | **Dec. 31,  2002** |   |
|----------------------------------|--------|---------------------------|------------|--------------------|------------|---------------------|--------|--------------------|--------|
|                             |   | **Manufactured  Housing** | ** ** | **Mortgage**       | ** ** |
| Weighted average prepayment rate |   | 7.4                       | %(1)       | 7.4                | %(1)       | 28.4                | %(2)   | 25.4               | %(2)   |
| Weighted average life (in years) |   | 5.1                       |       | 5.1                |       | 4.3                 |   | 4.6                |   |
| Weighted average default rate    |   | 5.1                       | %          | 5.2                | %          | N/A                 |   | N/A                |   |
| Cash flows discounted at         |   | 14.0                      | %          | 14.0               | %          | 10.0                | %      | 10.2               | %      |

 

----

*(1)**                              **Excludes weighted average default rate.*

*(2)**                              **Includes weighted average default rate.*

 

**NOTE 5****               ****Derivative Financial Instruments**

 

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 $4.2 billion and $3.2 billion at March 31, 2003and December 31, 2002, respectively. The forward delivery commitmentsdesignated as fair value hedges associated with mortgage loans had notionalvalues of $2.6 billion and $2.4 billion at March 31, 2003 and December 31,2002, respectively. The notional amounts of forward delivery commitments usedto manage the interest rate risk associated with interest rate lock commitmentson mortgage loans were $1.6 billion and $833 million at March 31, 2003 andDecember 31, 2002, respectively. The amount of hedge ineffectiveness for thethree months ended March 31, 2003 and 2002 was a gain of $2 million and a lossof $1 million, respectively, and is included in gain on sale of loans.

 

Thenotional amounts of derivatives do not represent amounts exchanged by theparties and, thus, are not a measure of the Company’s exposure through its useof derivatives. The amounts exchanged are determined by reference to thenotional amounts and the other terms of the derivatives.

 

Therisks inherent in derivatives are the potential inability of a counterpart tomeet the terms of its contract and the risk associated with changes in the fairvalues of the contracts due to movements in the underlying interest rates. Thecurrent credit exposure of derivatives is represented by the fair value ofcontracts with a positive fair value at the reporting date. At March 31, 2003and December 31, 2002, the receivable on contracts with a positive fair valuewas $1 million for both periods. To reduce credit risk, management may deem itnecessary to obtain collateral.

 

**NOTE 6****               ****Stock Incentive Plans**

 

Forthe quarter ended March 31, 2003, the Company granted options to purchase1,354,200 shares of the Company’s common stock to certain officers, at anexercise price of $45.78. These awards vest at various intervals over threeyears, on the anniversary dates of the awards.

 

15

----

 

**NOTE 7****               ****Discontinued Operations**

 

Theassets and liabilities from discontinued operations at March 31, 2003 andDecember 31, 2002 were as follows:

 
| **(In millions)**                       |   | **March 31,  2003** | ** ** | **Dec. 31,  2002** |   |
|-----------------------------------------|--------|---------------------|------------|--------------------|--------|
| **Assets:**                             |   |                |       |               |   |
| Cash, cash equivalents and securities   |   | $                   | 34         |               | $      | 34 |   |
| Retained interests in securitizations   |   | 3                   |       | 4                  |   |
| Loans receivable held for investment    |   | 41                  |       | 44                 |   |
| Servicing assets                        |   | 30                  |       | 32                 |   |
| Other assets                            |   | 244                 |       | 243                |   |
| Total assets                            |   | $                   | 352        |               | $      | 357 |   |
| Liabilities:                            |   |                |       |               |   |
| Liability under recourse exposure       |   | $                   | 289        |               | $      | 300 |   |
| Other liabilities and allocated capital |   | 63                  |       | 57                 |   |
| Total liabilities and equity            |   | $                   | 352        |               | $      | 357 |   |

 

Netincome from discontinued operations was $0.3 million and $1.5 million for thethree months ended March 31, 2003 and 2002, respectively.

 

Thenotional value of swaps related to specific manufactured housingsecuritizations was $620 million and $639 million at March 31, 2003 andDecember 31, 2002, respectively.

 

Duringthe quarter ended March 31, 2002, GreenPoint originated manufactured housingloans totaling $91 million. These loans related to commitments outstandingat December 31, 2001 and were recorded at their estimated fair value. Theseloans were sold during the second and third quarters of 2002 at a sales price,which approximated their previously estimated fair value.

 

**NOTE 8****               ****Business Segments**

 

TheCompany consists of three domestic business segments offering unique productsand services. The Mortgage Banking segment specializes in Alt A and NoDocmortgage loan products which are primarily obtained from the Company’s networkof registered mortgage brokers. The Retail Banking segment consists of 84 fullservice banking offices offering a variety of financial services to the GreaterNew York area. The Balance Sheet Management segment includes earnings from theheld for investment mortgage portfolios and other corporate investmentactivities.

 

Theaccounting policies of the segments are the same as described in Note 1“Summary of Significant Accounting Policies”. The Company evaluates theperformance of its business segments based on income before income taxes.Expenses under the direct control of each business segment and the expense ofpremises and equipment incurred to support business operations are allocatedaccordingly, by segment. Credit losses are charged to the asset managementsegment in an amount equal to net charge-offs. The expenses relating toadministrative units of the Company such as executive, finance and audit arenot allocated to individual operating segments.

 

16

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

 
|                                                 |   | **Quarter Ended March 31, 2003**  |   |
|------------------------------------------------------|--------|-----------------------------------|--------|
| **(In millions)**                                    |   | **Balance  Sheet  Management(1)** |   | **Retail  Banking** |   | **Sub-total  Banking** |   | **Mortgage  Banking** |   | **Segment  Totals** |   | **Other(4)** |   | **Consolidated  Continuing  Operations** |   |
| Net interest income                                  |   | $                                 | 82.0   |   | $ | 57.0 |   | $ | 139.0 |   | $ | 40.4 |   | $ | 179.4 |   | $ | — |   | $ | 179.4 |   |
| Provision for loan losses                            |   | (0.4                              | )      | — |   | (0.4 | ) | — |   | (0.4 | ) | — |   | (0.4 | ) |
| Net interest income after provision for loan  losses |   | 81.6                              |   | 57.0 |   | 138.6 |   | 40.4 |   | 179.0 |   | — |   | 179.0 |   |
| Non-interest income:                                 |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan servicing fees                                  |   | —                            |   | — |   | — |   | 5.5 |   | 5.5 |   | (0.3 | ) | 5.2 |   |
| Banking fees and commissions                         |   | —                            |   | 12.6 |   | 12.6 |   | — |   | 12.6 |   | — |   | 12.6 |   |
| Other income                                         |   | 3.1                               |   | 0.3 |   | 3.4 |   | (0.8 | ) | 2.6 |   | — |   | 2.6 |   |
| Net gain on sale of loans                            |   | —                            |   | — |   | — |   | 101.9 |   | 101.9 |   | (11.9 | ) | 90.0 |   |
| Change in valuation of retained interests            |   | —                            |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Net gain on securities                               |   | 1.8                               |   | — |   | 1.8 |   | — |   | 1.8 |   | — |   | 1.8 |   |
| Total non-interest income                            |   | 4.9                               |   | 12.9 |   | 17.8 |   | 106.6 |   | 124.4 |   | (12.2 | ) | 112.2 |   |
| Non-interest expense:                                |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                                         |   | —                            |   | 2.3 |   | 2.3 |   | 3.5 |   | 5.8 |   | 1.1 |   | 6.9 |   |
| ESOP and stock plans expense                         |   | —                            |   | 1.1 |   | 1.1 |   | 3.5 |   | 4.6 |   | 1.4 |   | 6.0 |   |
| Other expenses                                       |   | 0.4                               |   | 22.8 |   | 23.2 |   | 47.9 |   | 71.1 |   | 16.2 |   | 87.3 |   |
| Total non-interest expense                           |   | 0.4                               |   | 26.2 |   | 26.6 |   | 54.9 |   | 81.5 |   | 18.7 |   | 100.2 |   |
| Segment income (loss) before taxes                   |   | $                                 | 86.1   |   | $ | 43.7 |   | $ | 129.8 |   | $ | 92.1 |   | $ | 221.9 |   | $ | (30.9 | ) | $ | 191.0 |   |
| Total Assets                                         |   | $                                 | 15,651 |   | $ | 479 | (2) | $ | 16,130 |   | $ | 4,494 |   | $ | 20,624 |   | $ | 448 | (3) | $ | 21,072 | * * |

 

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

*(2)**                              **Retail Banking segmentexcludes intercompany funds transfers. Intersegment assets and liabilitieseliminated for consolidation purposes were $12.2 billion and $10.8 billion forthe quarter ended March 31, 2003 and 2002, respectively.*

*(3)**                              **Includes the assets ofthe discontinued business segment.*

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

*(5)**                              **Intersegment revenues, inthe mortgage banking segment, for the quarter ended March 31, 2003 and 2002were $10.4 million and $12.2 million.*

 

17

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**NOTE 9****               ****Earnings Per Share**

 
|                                                                                                                 |   | **Quarter  Ended  March 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|------------|
| **(In millions, except per share  amounts)**                                                                         |   | **2003**                      |       | **2002** |   |
|                                                                                                                 |   |                          |       |   |   |
| Net income from continuing operations                                                                                |   | $                             | 126.9      |   | $ | 120.5 |   |
| Net income from discontinued operations                                                                              |   | 0.3                           |       | 1.5 |   |
| Net income                                                                                                           |   | $                             | 127.2      |   | $ | 122.0 |   |
|                                                                                                                 |   |                          |       |   |   |
| Weighted average number of common shares  outstanding during each period – basic                                |   | 84,698,000                    |       | 88,782,000 |   |
| Effect of dilutive securities – stock options                                                                   |   | 1,520,000                     |       | 2,564,000 |   |
| Weighted average number of common shares and  common stock equivalents outstanding during each period – diluted |   | 86,218,000                    |       | 91,346,000 |   |
|                                                                                                                 |   |                          |       |   |   |
| **Basic earnings per share:**                                                                                        |   |                          |       |   |   |
| Net income from continuing operations                                                                                |   | $                             | 1.50       |   | $ | 1.36 |   |
| Net income from discontinued operations                                                                              |   | —                        |       | 0.01 |   |
| Net income                                                                                                           |   | $                             | 1.50       |   | $ | 1.37 |   |
|                                                                                                                 |   |                          |       |   |   |
| **Diluted earnings per share:**                                                                                      |   |                          |       |   |   |
| Net income from continuing operations                                                                                |   | $                             | 1.47       |   | $ | 1.32 |   |
| Net income from discontinued operations                                                                              |   | —                        |       | 0.01 |   |
| Net income                                                                                                           |   | $                             | 1.47       |   | $ | 1.33 |   |

 

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*(1)**                              **Options to purchase1,407,200 shares of common stock at prices between $45.78 and $50.10 per sharewere outstanding at March 31, 2003, but were not included in the computation ofdiluted earnings per share because the options’ exercise prices were greaterthan the average market price of the common shares for the quarter ended March31, 2003.*

*(2)**                              **There were no optionsoutstanding at March 31, 2002 that were not included in the computation ofdiluted earnings per share because the options’ exercise prices were less thanthe average market price of the common shares for the quarter ended March 31,2002.*

 

18

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** **

**GreenPointFinancial Corp. and SubsidiariesPart I – Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

 
|                                                                                       |   | **Quarter Ended**   |    |
|--------------------------------------------------------------------------------------------|--------|---------------------|---------|
| **(Dollars in millions, except per  share data)**                                          |   | **March 31,  2003** |    | **Dec. 31,  2002** |   | **Sept. 30,  2002** |   | **June 30,  2002** |   | **March 31,  2002** |   |
| **Performance Ratios – Continuing Operations  (Annualized):**                         |   |                |    |   |   |   |   |   |   |   |   |
| Return on average assets                                                                   |   | 2.40                | %       | 2.28 | % | 2.38 | % | 2.45 | % | 2.51 | % |
| Return on average equity                                                                   |   | 26.52               |    | 27.05 |   | 27.32 |   | 27.53 |   | 27.50 |   |
| Net interest margin                                                                        |   | 3.51                |    | 3.64 |   | 3.85 |   | 4.06 |   | 4.03 |   |
| Net interest spread                                                                        |   | 3.37                |    | 3.52 |   | 3.72 |   | 3.91 |   | 3.88 |   |
| Operating expense to average assets                                                        |   | 2.28                |    | 2.17 |   | 1.91 |   | 2.05 |   | 2.10 |   |
| Total non-interest expense to operating revenue                                            |   | 27.0                |    | 26.4 |   | 23.2 |   | 23.5 |   | 23.3 |   |
| Efficiency ratio (1)                                                                       |   | 37.3                |    | 37.6 |   | 33.8 |   | 34.6 |   | 34.5 |   |
| Average interest-earning assets to average  interest-bearing liabilities                   |   | 1.06                |  x | 1.05 | x | 1.05 | x | 1.06 | x | 1.05 | x |
|                                                                                       |   |                |    |   |   |   |   |   |   |   |   |
| **Per Share Data:**                                                                        |   |                |    |   |   |   |   |   |   |   |   |
| Basic earnings per share – continuing operations                                      |   | $                   | 1.50    |   | $ | 1.49 |   | $ | 1.44 |   | $ | 1.39 |   | $ | 1.36 |   |
| Diluted earnings per share – continuing  operations                                   |   | 1.47                |    | 1.46 |   | 1.41 |   | 1.35 |   | 1.32 |   |
| Book value per common share                                                                |   | 22.50               |    | 22.07 |   | 21.35 |   | 20.45 |   | 19.15 |   |
| Tangible book value per common share                                                       |   | 17.83               |    | 17.53 |   | 16.94 |   | 16.09 |   | 14.82 |   |
| Dividends per share                                                                        |   | 0.31                |    | 0.25 |   | 0.25 |   | 0.25 |   | 0.25 |   |
| Shares used in calculations (in thousands):                                                |   |                |    |   |   |   |   |   |   |   |   |
| Average (2)                                                                                |   | 86,218              |    | 88,158 |   | 89,905 |   | 90,968 |   | 91,346 |   |
| Period-end (3)                                                                             |   | 84,586              |    | 87,177 |   | 89,415 |   | 90,609 |   | 91,372 |   |
| Total shares outstanding (shares issued less  treasury stock purchased)                    |   | 93,694              |    | 96,308 |   | 98,362 |   | 99,402 |   | 100,119 |   |
|                                                                                       |   |                |    |   |   |   |   |   |   |   |   |
| **Asset Quality Ratios – continuing operations:**                                     |   |                |    |   |   |   |   |   |   |   |   |
| Non-accruing loans held for investment to  mortgage loans held for investment              |   | 1.67                | %       | 1.61 | % | 1.57 | % | 1.60 | % | 1.67 | % |
| Non-accruing loans held for sale to mortgage  loans held for sale                          |   | 1.87                |    | 1.18 |   | 0.99 |   | 0.95 |   | 0.78 |   |
| Non-performing assets to total assets                                                      |   | 1.23                |    | 1.12 |   | 1.02 |   | 1.02 |   | 0.98 |   |
| Allowance for loan losses to non-performing loans  held for investment                     |   | 46.4                |    | 46.6 |   | 48.4 |   | 47.5 |   | 45.5 |   |
| Allowance for loan losses to mortgage loans held  for investment                           |   | 0.78                |    | 0.75 |   | 0.76 |   | 0.76 |   | 0.76 |   |
| Net loan charge-off experience (annualized) to  average mortgage loans held for investment |   | 0.01                |    | 0.04 |   | 0.02 |   | 0.01 |   | 0.02 |   |
| Ratio of allowance for loan losses to annualized  net charge-offs                          |   | 64.4                | x       | 20.8 | x | 42.8 | x | 57.3 | x | 43.1 | x |
|                                                                                       |   |                |    |   |   |   |   |   |   |   |   |
| **Capital Data:**                                                                          |   |                |    |   |   |   |   |   |   |   |   |
| Tier I Capital (to risk weighted assets)                                                   |   | 11.53               | %       | 11.43 | % | 11.66 | % | 12.07 | % | 11.42 | % |
| Total Risk Based Capital (to risk weighted  assets)                                        |   | 13.08               |    | 12.96 |   | 13.25 |   | 13.77 |   | 13.09 |   |
| Tier I Capital to average assets                                                           |   | 7.97                |    | 7.51 |   | 7.86 |   | 8.05 |   | 7.82 |   |
| Tangible equity to tangible managed assets                                                 |   | 5.87                |    | 5.98 |   | 5.68 |   | 5.90 |   | 5.40 |   |
| Tangible equity to managed receivables                                                     |   | 8.13                |    | 7.69 |   | 7.27 |   | 7.51 |   | 7.17 |   |
| Purchase of treasury stock                                                                 |   | $                   | 125     |   | $ | 93 |   | $ | 72 |   | $ | 72 |   | $ | 13 |   |
|                                                                                       |   |                |    |   |   |   |   |   |   |   |   |
| **Other Data:**                                                                            |   |                |    |   |   |   |   |   |   |   |   |
| Mortgage loan originations                                                                 |   | $                   | 9,328   |   | $ | 9,985 |   | $ | 9,730 |   | $ | 7,041 |   | $ | 6,434 |   |
| Total managed assets (4)                                                                   |   | 25,856              |    | 25,595 |   | 26,456 |   | 24,620 |   | 25,642 |   |
| Total managed receivables (5)                                                              |   | 18,354              |    | 19,555 |   | 20,338 |   | 18,990 |   | 19,024 |   |
| Earnings to combined  fixed charges: (6)                                                   |   |                |    |   |   |   |   |   |   |   |   |
| Excluding interest on deposits                                                             |   | 20.67               | x       | 20.61 | x | 19.09 | x | 15.92 | x | 16.52 | x |
| Including interest on deposits                                                             |   | 3.77                | x       | 3.58 | x | 3.49 | x | 3.28 | x | 3.09 | x |
| Full-service consumer bank offices                                                         |   | 84                  |    | 81 |   | 75 |   | 74 |   | 74 |   |

 

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

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

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

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

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

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

 

19

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**ForwardLooking Statements**

 

This Quarterly Report on Form 10-Q contains certainforward-looking statements, which are based on management’s currentexpectations. These forward-looking statements include information concerningpossible or assumed future results of operations, trends, financial results andbusiness plans, including those relating to earnings growth; revenue growth;origination volume in the Company’s mortgage business; non-interest incomelevels, including fees from product sales; credit performance on loans made bythe Company; tangible capital generation; margins on sales or securitizationsof loans; market share; expense levels; results from new business initiativesin the retail banking business; and other business operations and strategies.For these statements, GreenPoint claims the protection of the safe harbor forforward-looking statements contained in the Private Securities LitigationReform Act of 1995 to the extent provided by applicable law. Forward-lookingstatements involve inherent risks and uncertainties. We caution you that anumber of important factors could cause actual results to differ materiallyfrom those contained in any forward-looking statement. Such factors include,but are not limited to: risks and uncertainties related to acquisitions,divestitures and terminating business segments, including related integrationand restructuring activities; prevailing economic conditions; changes ininterest rates, loan demand, real estate values, and competition, which canmaterially affect origination levels and gain on sale results in the Company’smortgage business; the level of defaults, losses and prepayments on loans madeby the Company, whether held in portfolio, sold in the whole loan secondary marketsor securitized, which can materially affect charge-off levels, required loanloss reserve levels and the Company’s periodic valuation of its retainedinterests from securitizations; changes in accounting principles, policies, andguidelines; adverse changes or conditions in capital or financial markets,which can adversely affect the ability of the Company to sell or securitizeloan originations 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, operations and funding requirements; changes in anyapplicable law, rule, regulation or practice with respect to tax or legalissues; other economic, competitive, governmental, regulatory, andtechnological factors affecting the Company’s operations, pricing, products andservices; and the risk factors or other uncertainties described from time totime in the Company’s filings with the Securities and Exchange Commission,including the Risk Factors section included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2002 filed with the Securitiesand Exchange Commission on March 28, 2003. The forward-looking statements aremade as of the date of this report, and the Company assumes no obligation toupdate the forward-looking statements or to update the reasons why actualresults could differ from those projected in the forward-looking statements.

 

The Company regularly explores opportunities foracquisitions of and holds discussions with financial institutions and relatedbusinesses, and also regularly explores opportunities for acquisitions ofliabilities and assets of financial institutions and other financial servicesproviders. The Company routinely analyzes its lines of business and from timeto time may increase, decrease or terminate one or more activities.

 

**General**

 

GreenPointFinancial Corp. (the “Corporation”, “Company” or “GreenPoint”), a $22 billionasset bank holding company consists of two primary businesses – a New York retailbank and a national mortgage business. The retail bank is a New York Statechartered savings bank and is the second largest thrift depository in theGreater New York area with $12 billion in deposits in 84 branches serving morethan 400,000 households. GreenPoint Mortgage (“GPM”), headquartered in Novato,California, originates a wide variety of exclusively “A” quality loans. Thisincludes agency qualifying loans and Jumbo A loans, and GreenPoint’s specialtyAlternative A mortgages.

 

20

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**Overview Of First Quarter 2003 Financial Results**

 

•                       Net income from continuing operations forthe first quarter of 2003 was $1.47 per diluted share, or $127 million, anincrease of 11% over the first quarter of 2002. The results reflect thestrength and complementary nature of the Company’s mortgage and retail bankingbusinesses. Core deposit growth and a substantial increase in mortgage bankingrevenues more than offset the reduced net interest margin which resulted from adecline in interest rates.

 

**•**        Retailbanking initiatives led to a growth in core deposits and a growth in fee incomeover the first quarter of 2002. The Company opened seven new branches in 2002and three additional branches in the first quarter of 2003.

 

**•**        Themortgage banking business continued to experience a high level of originationsas the favorable interest rate environment provided an ideal climate forcontinued growth. Total mortgage loan originations for the first quarter of2003 were $9.3 billion, an increase of 45% over the $6.4 billion originatedduring the first quarter of 2002.

 

**•**        Mortgagesales and securitizations totaled $8.8 billion resulting in realized gains of$124 million, compared with sales and securitizations of $5.6 billion and again of $90 million in the comparative quarter a year ago.

 

**•**        Thegain on sale of specialty loans was 289 basis points, up from 240 basis pointsin the fourth quarter of 2002.

 

**•**        Netinterest income from continuing operations totaled $175 million, a decrease of3% from the $179 million in the first quarter of 2002. The net interest marginwas 3.51%, decreasing from 4.03% in the first quarter of 2002.

 

**•**        Assetquality in the mortgage portfolio remained strong. Non-accruing loans held forinvestment were 1.67% of mortgage loans held for investment, compared with1.61% at the end of 2002 and flat versus the first quarter a year ago.

 

**•**        GreenPointcontinues to maintain a strong capital position with a leverage ratio of 7.97%,a Tier 1 risk-based ratio of 11.53% and a total risk-based capital ratio of13.08% at March 31, 2003.

 

**•**        OnFebruary 11, 2003 GreenPoint increased the quarterly dividend distribution pershare 25% from $0.25 to $0.3125, which represents an annualized distribution of$1.25 per share.

 

**•**        Netincome from the discontinued manufactured housing business was $0.3 million,reflecting a performance consistent with management’s most recent projections.

 

21

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**Business Segment Results**

 

TheCompany consists of two primary continuing businesses – a banking business anda mortgage business. The banking business includes the results of the retailbanking segment and the balance sheet management segment. The retail bankingsegment represents the results of the activities of 84 full service bankingoffices operating in the greater New York area and the balance sheet managementsegment includes earnings from the held for investment mortgage portfolio andother corporate investment activities. The sub-total defined as the totalbanking business represents the results of the Company’s traditional bankingoperations as distinguished from its mortgage banking operations. Following isan analysis of the results of the two primary businesses.

 

**Banking Business**

 
|                                                 |   | **Quarter Ended  March 31,** | ** ** |
|------------------------------------------------------|--------|------------------------------|------------|
| **(In millions)**                                    |   | **2003**                     |       | **2002** | ** ** |
| Net interest income                                  |   | $                            | 125.6      |   | $ | 139.0 |   |
| Provision for loan losses                            |   | (0.3                         | )          | (0.4 | )  |
| Net interest income after provision for loan  losses |   | 125.3                        |       | 138.6 |   |
| Non-interest income:                                 |   |                         |       |   |   |
| Banking fees and commissions                         |   | 14.5                         |       | 12.6 |   |
| Other income                                         |   | 4.1                          |       | 3.4 |   |
| Net gain on securities                               |   | 1.2                          |       | 1.8 |   |
| Total non-interest income                            |   | 19.8                         |       | 17.8 |   |
| Non-interest expense                                 |   | 34.1                         |       | 26.6 |   |
| Net income before income taxes                       |   | $                            | 111.0      |   | $ | 129.8 |   |
| Total Assets                                         |   | $                            | 16,573     |   | $ | 16,130 |   |

 

Thebanking business reported pre-tax income of $111 million for the first quarterof 2003, a decrease of 14% from the $130 million reported for the first quartera year ago. The results included pre-tax income of $40 million from the retailbanking segment, a 10% decrease from a year ago, and $72 million from thebalance sheet management segment, a decrease of 17% from a year ago. Thedecrease from a year ago quarter was primarily the result of lower interestrates, which reduced the net interest income in the balance sheet managementsegment and increased costs primarily associated with the *de novo* branching program.

 

**Mortgage Banking**

 
|                                      |   | **Quarter Ended  March 31,** | ** ** |
|-------------------------------------------|--------|------------------------------|------------|
| **(In millions)**                         |   | **2003**                     |       | **2002** | ** ** |
| Net interest income                       |   | $                            | 49.2       |   | $ | 40.4 |   |
| Non-interest income:                      |   |                         |       |   |   |
| Loan servicing fees                       |   | 1.5                          |       | 5.5 |   |
| Other income                              |   | (0.7                         | )          | (0.8 | ) |
| Net gain on sale of loans                 |   | 139.0                        |       | 101.9 |   |
| Change in valuation of retained interests |   | (0.7                         | )          | — |   |
| Total non-interest income                 |   | 139.1                        |       | 106.6 |   |
| Non-interest expense                      |   | 65.3                         |       | 54.9 |   |
| Net income before income taxes            |   | $                            | 123.0      |   | $ | 92.1 |   |
| Total Assets                              |   | $                            | 5,462      |   | $ | 4,494 |   |

 

Themortgage banking business reported pre-tax income of $123 million, an increaseof 34% from the $92 million reported in the first quarter of 2002. Net interestincome increased $9 million, or 22% due to a higher average balance of loansheld for sale and net gain on sale of mortgage loans increased $37 million or36% due to an increase in origination volume from the year ago period.Non-interest expense increased $10 million to $65 million versus the firstquarter a year ago. The increase reflects higher costs associated with thehigher level of mortgage originations.

 

22

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**Net Interest Income**

 

Netinterest income on a fully taxable-equivalent basis, decreased by $6 million,or 3%, to $176 million for the quarter ended March 31, 2003. Net interestmargin declined to 3.51% from 4.03% in the comparable quarter a year ago,primarily due to the low interest rate environment.

 

Averageearning assets increased by $1.9 billion, or 11% to $20.0 billion in thequarter from $18.1 billion a year ago. The increase from the prior year firstquarter reflected growth in loans held for sale due to higher originationvolume, and higher investment securities. The yield on interest-earning assetsand rates paid on interest-bearing liabilities decreased due to decliningmarket interest rates from a year ago.

 

Thegrowth in average earning assets was funded in part by a substantial growth incore deposits as the average balance increased 35% over the comparable quartera year ago. The growth resulted from the continued success of the Company’ssales culture, checking programs, *de novo*branching program and small business banking initiative.

 

23

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**Average Consolidated BalanceSheet, Interest and Rates**

 

Thefollowing table sets forth certain information relating to the continuingoperations of the Company’s average statements of financial condition(unaudited) and statements of income (unaudited) for the quarter endedMarch 31, 2003 and 2002, and reflects the average yield on assets andaverage cost of liabilities for the periods indicated. Such annualized yieldsand costs are derived by dividing income or expense by the average balance ofassets or liabilities, respectively, for the periods shown. Average balancesare derived from average daily balances. Average balances and yields includenon-accrual loans. The yields and costs include fees that are consideredadjustments to yields. Interest and yields are presented on ataxable-equivalent yield basis.

 
|                                                                                       |   | **Quarter Ended**    |         |
|--------------------------------------------------------------------------------------------|--------|----------------------|--------------|
|                                                                                       |   | **March 31, 2003**   | ** **   | **March 31, 2002** | ** ** |
| **(Taxable-equivalent  interest and rates, in millions)(1)**                               |   | **Average  Balance** |         | **Interest** |   | **Average  Yield/  Cost** |   | **Average  Balance** |   | **Interest** |   | **Average  Yield/  Cost** | ** ** |
| **Assets:**                                                                                |   |                 |         |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                                   |   |                 |         |   |   |   |   |   |   |   |   |   |   |
| Mortgage loans held for investment (2)                                                     |   | $                    | 9,749        |   | $ | 166.3 |   | 6.82 | % | $ | 10,179 |   | $ | 194.4 |   | 7.64 | % |
| Other loans (2)                                                                            |   | 20                   |         | 0.4 |   | 7.71 |   | 20 |   | 0.4 |   | 8.48 |   |
| Loans held for sale                                                                        |   | 5,093                |         | 75.9 |   | 5.96 |   | 3,554 |   | 59.3 |   | 6.77 |   |
| Securities (3)                                                                             |   | 4,835                |         | 53.3 |   | 4.42 |   | 4,033 |   | 57.5 |   | 5.71 |   |
| Other interest-earning assets                                                              |   | 340                  |         | 4.0 |   | 4.74 |   | 314 |   | 9.2 |   | 11.86 |   |
| Total interest-earning assets                                                              |   | 20,037               |         | 299.9 |   | 5.99 |   | 18,100 |   | 320.8 |   | 7.11 |   |
| Non-interest earning assets (4)                                                            |   | 1,132                |         |   |   |   |   | 1,087 |   |   |   |   |   |
| Total assets                                                                               |   | $                    |  21,169 |   |   |   |   |   | $ |  19,187 |   |   |   |   |   |
|                                                                                       |   |                 |         |   |   |   |   |   |   |   |   |   |   |
| **Liabilities and Stockholders’  Equity:**                                            |   |                 |         |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                              |   |                 |         |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                  |   |                 |         |   |   |   |   |   |   |   |   |   |   |
| Savings                                                                                    |   | $                    | 1,359        |   | 3.0 |   | 0.90 |   | $ | 1,244 |   | 4.5 |   | 1.47 |   |
| Demand deposits and N.O.W.                                                                 |   | 2,016                |         | 7.7 |   | 1.54 |   | 678 |   | 0.7 |   | 0.47 |   |
| Money market and variable rate savings                                                     |   | 3,378                |         | 12.9 |   | 1.55 |   | 3,094 |   | 15.2 |   | 1.99 |   |
| Total core deposits                                                                        |   | 6,753                |         | 23.6 |   | 1.42 |   | 5,016 |   | 20.4 |   | 1.65 |   |
| Term certificates of deposit                                                               |   | 5,148                |         | 39.1 |   | 3.08 |   | 5,728 |   | 58.1 |   | 4.11 |   |
| Total deposits                                                                             |   | 11,901               |         | 62.7 |   | 2.14 |   | 10,744 |   | 78.5 |   | 2.96 |   |
| Mortgagors’ escrow                                                                    |   | 64                   |         | 0.3 |   | 1.74 |   | 84 |   | 0.4 |   | 1.78 |   |
| Borrowed funds                                                                             |   | 6,665                |         | 52.4 |   | 3.15 |   | 5,946 |   | 48.9 |   | 3.30 |   |
| Senior bank notes                                                                          |   | —               |         | — |   | — |   | 134 |   | 2.3 |   | 6.73 |   |
| Subordinated bank notes                                                                    |   | 150                  |         | 3.5 |   | 9.36 |   | 150 |   | 3.5 |   | 9.36 |   |
| Guaranteed preferred beneficial interest in  Company’s junior subordinated debentures |   | 200                  |         | 4.6 |   | 9.16 |   | 200 |   | 4.6 |   | 9.16 |   |
| Total interest-bearing liabilities                                                         |   | 18,980               |         | 123.5 |   | 2.62 |   | 17,258 |   | 138.2 |   | 3.23 |   |
| Other liabilities (5)                                                                      |   | 275                  |         |   |   |   |   | 177 |   |   |   |   |   |
| Total liabilities                                                                          |   | 19,255               |         |   |   |   |   | 17,435 |   |   |   |   |   |
| Stockholders’ equity                                                                  |   | 1,914                |         |   |   |   |   | 1,752 |   |   |   |   |   |
| Total liabilities and stockholders’ equity                                            |   | $                    |  21,169 |   |   |   |   |   | $ |  19,187 |   |   |   |   |   |
| Net interest income/interest rate spread (6)                                               |   |                 |         | $ |  176.4 |   | 3.37 | % |   |   | $ |  182.6 |   | 3.88 | % |
| Net interest-earning assets/net interest margin  (7)                                       |   | $                    | 1,057        |   |   |   | 3.51 | % | $ | 842 |   |   |   | 4.03 | % |
| Ratio of interest-earning assets to  interest-earning liabilities                          |   | 1.06                 | x            |   |   |   |   | 1.05 | x |   |   |   |   |

 

----

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

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

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

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

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

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

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

 

24

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**Rate/Volume Analysis**

 

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

 
|                                                                                       |   | **Quarter Ended March 31,  2003  Compared to  Quarter Ended March 31, 2002  Increase/(Decrease)** | ** ** |
|--------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|------------|
|                                                                                       |   | **Due to**                                                                                        | ** ** |
| **(In  millions)**                                                                         |   | **Average  Volume**                                                                               |       | **Average  Rate** |   | **Net  Change** | ** ** |
| Mortgage loans held for investment (1)                                                     |   | $                                                                                                 | (7.9       | ) | $ | (20.2 | ) | $ | (28.1 | ) |
| Other loans (1)                                                                            |   | —                                                                                            |       | — |   | — |   |
| Loans held for sale                                                                        |   | 23.5                                                                                              |       | (6.9 | ) | 16.6 |   |
| Securities                                                                                 |   | 10.2                                                                                              |       | (14.4 | ) | (4.2 | ) |
| Other interest-earning assets                                                              |   | 0.7                                                                                               |       | (5.9 | ) | (5.2 | ) |
| Total interest earned on assets                                                            |   | 26.5                                                                                              |       | (47.4 | ) | (20.9 | ) |
| Savings                                                                                    |   | 0.4                                                                                               |       | (1.9 | ) | (1.5 | ) |
| Demand deposits and N.O.W.                                                                 |   | 2.9                                                                                               |       | 4.1 |   | 7.0 |   |
| Money market and variable rate savings                                                     |   | 1.3                                                                                               |       | (3.6 | ) | (2.3 | ) |
| Term certificates of deposit                                                               |   | (5.5                                                                                              | )          | (13.5 | ) | (19.0 | ) |
| Mortgagors’ escrow                                                                    |   | (0.1                                                                                              | )          | — |   | (0.1 | ) |
| Borrowed funds                                                                             |   | 5.7                                                                                               |       | (2.2 | ) | 3.5 |   |
| Senior bank notes                                                                          |   | (2.3                                                                                              | )          | — |   | (2.3 | ) |
| Subordinated bank notes                                                                    |   | —                                                                                            |       | — |   | — |   |
| Guaranteed preferred beneficial interest in Company’s  junior subordinated debentures |   | —                                                                                            |       | — |   | — |   |
| Total interest paid on liabilities                                                         |   | 2.4                                                                                               |       | (17.1 | ) | (14.7 | ) |
| Net change in net interest income                                                          |   | $                                                                                                 | 24.1       |   | $ | (30.3 | ) | $ | (6.2 | ) |

 

----

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

 

**Provision for loan losses**

 

Theprovision for loan losses was $0.3 million for the first quarter of 2003, flatto the provision in the year ago quarter. The provision equaled net charge-offsfor all periods.

 

25

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**Non-Interest Income**

 

Thefollowing table summarizes the components of non-interest income:

 
|                                      |   | **Quarter Ended  March 31,** | ** ** |
|-------------------------------------------|--------|------------------------------|------------|
| **(In millions)**                         |   | **2003**                     |       | **2002** |   |
| Income from fees and commissions:         |   |                         |       |   |   |
| Loan servicing fees                       |   | $                            | 5.8        |   | $ | 5.2 |   |
| Banking services fees and commissions     |   | 14.5                         |       | 12.6 |   |
| Fees, commissions and other income        |   | 3.4                          |       | 2.6 |   |
| Total income from fees and commissions    |   | 23.7                         |       | 20.4 |   |
| Net gain on sales of mortgage loans       |   | 124.3                        |       | 90.0 |   |
| Change in valuation of retained interests |   | (0.7                         | )          | — |   |
| Net gain on securities                    |   | 1.2                          |       | 1.8 |   |
| Total non-interest income                 |   | $                            | 148.5      |   | $ | 112.2 |   |

 

Non-interestincome in the first quarter was $149 million, up 32% from the comparable perioda year ago. The increase versus the year ago period was due to a substantialincrease in net gain on sale of mortgage loans. The gain on sale of loans isdescribed in further detail in the following paragraphs.

 

Incomefrom fees and commissions was $24 million for the quarter ended March 31, 2003,versus $20 million in the year ago period. The increase included a $2 millionincrease in banking fees due to an increase in the number of checking accounts.

 

**Gain on sale of loans**

 

Thefollowing table summarizes loans sold and average margins earned:

 
|                                 |   | **Quarter Ended  March 31,** | ** ** |
|--------------------------------------|--------|------------------------------|------------|
| **(In millions)**                    |   | **2003**                     |       | **2002** |   |
| **Whole loan – Mortgage:**      |   |                         |       |   |   |
| Sales                                |   | $                            | 8,802      |   | $ | 5,454 |   |
| Gain on sale                         |   | $                            | 123        |   | $ | 86 |   |
| Average margin                       |   | 1.41                         | %          | 1.58 | % |
| Average margin by product type:      |   |                         |       |   |   |
| Specialty products (1)               |   | 2.89                         | %          | 2.98 | % |
| Home equity / Seconds                |   | 1.23                         | %          | 1.70 | % |
| Agency / Jumbo                       |   | 0.69                         | %          | 0.70 | % |
| **Securitizations – Mortgage:** |   |                         |       |   |   |
| Sales                                |   | $                            | 34         |   | $ | 163 |   |
| Gain on sale (2)                     |   | $                            | 1          |   | $ | 4 |   |
| Average margin                       |   | 1.59                         | %          | 2.32 | % |

 

----

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

*(2)**                              **Includes draws from priorperiod securitizations.*

 

Gainon sale of mortgage loans increased for the quarter ended March 31, 2003,versus the comparable periods a year ago, principally due to a higher volume ofloans sold. The sale margin was 141 basis points compared to 158 basis pointsfor the first quarter of 2002. The lower margin is the result of a change inproduct mix as the prior year included a higher proportion of specialtyproducts sold, and lower margins earned on specialty product and agency loans.As a percentage of total mortgage loans sold, specialty mortgages sold were 32%for the quarter ended March 31, 2003, compared with 38% for thecorresponding period in 2002. The margins on specialty products declined to 289basis points from 298 basis points in the first quarter of 2002 while agency /jumbo margins were essentially unchanged from the prior year’s first quarter.

 

Inthe first quarter of 2003, the Company recognized a gain of $1 million relatedto previously securitized home equity lines of credit. This compared to a $4million gain in the year ago period from securitized home equity lines.

 

26

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**Non-Interest Expense**

 

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

 
|                                             |   | **Quarter Ended  March 31,** | ** ** |
|--------------------------------------------------|--------|------------------------------|------------|
| **(In millions)**                                |   | **2003**                     |       | **2002** | ** ** |
| Salaries and benefits                            |   | $                            | 61.6       |   | $ | 49.3 |   |
| Employee Stock Ownership and stock plans expense |   | 6.1                          |       | 6.0 |   |
| Net expense of premises and equipment            |   | 20.9                         |       | 18.0 |   |
| Advertising                                      |   | 4.4                          |       | 2.9 |   |
| Federal deposit insurance premiums               |   | 0.5                          |       | 0.5 |   |
| Other administrative expenses                    |   | 27.1                         |       | 24.0 |   |
| Total general and administrative expenses        |   | 120.6                        |       | 100.7 |   |
| Other real estate owned operating income, net    |   | 0.2                          |       | (0.5 | ) |
| Total non-interest expense                       |   | $                            | 120.8      |   | $ | 100.2 |   |

 

Totalgeneral and administrative expense increased $20 million to $121 millionfrom $101 million for the quarter ended March 31, 2002. The non-interestexpense increase versus a year ago reflected the increased mortgage originationvolume and higher costs associated with the *denovo* branching program and retail banking promotions. The salariesand benefits expense increase of $12 million to $62 million from $49 million ayear ago is a result of increase incentive compensation that reflected stronggrowth in both businesses.

 

**Income Tax Expense**

 

Incometax expense increased $5 million, or 7%, to $75 million for the first quarterof 2003, versus the comparable period a year ago. The rise in the currentquarter, compared to 2002, is due to higher pre-tax income and an increase inthe effective tax rate from 36.9% to 37.3%.

 

**Loan Originations**

 

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

 
|                                           |   | **Quarter Ended  March 31,** | ** ** |
|------------------------------------------------|--------|------------------------------|------------|
| **(In millions)**                              |   | **2003**                     |       | **2002** | ** ** |
| **Mortgage:**                                  |   |                         |       |   |   |
| Total applications received                    |   | $                            | 18,389     |   | $ | 12,036 |   |
| Loans originated:                              |   |                         |       |   |   |
| Specialty products                             |   | $                            | 2,760      |   | $ | 2,191 |   |
| Home equity / Seconds                          |   | 528                          |       | 618 |   |
| Agency / Jumbo                                 |   | 6,040                        |       | 3,625 |   |
| Total loans originated                         |   | $                            | 9,328      |   | $ | 6,434 |   |
| Commitments to originate loans (end of period) |   | $                            | 8,997      |   | $ | 5,931 |   |
| Loans held for sale (end of period)            |   | $                            | 5,042      |   | $ | 4,175 |   |

 

Totalloan originations during the quarter for the mortgage business were $9.3billion, up from $6.4 billion during the first quarter of 2002. Specialtyproduct originations were $2.8 billion for the quarter, up from $2.2 billion inthe comparable period a year ago. Agency / Jumbo originations increased from$3.6 billion to $6.0 billion for the quarter ended March 31, 2003 versus thesame period a year ago. The change in loan origination product mix reflects thedeclining interest rate environment and strong demand for mortgage refinancing.

 

27

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**Non-Performing Assets:**

 

Non-performingassets consist of non-accruing loans and other real estate owned. GreenPointreports non-accruing loans separately for the held for investment and held forsale portfolios. The ratio of non-accruing loans held for investment tomortgage loans held for investment increased to 1.67% at March 31, 2003 from1.61% at December 31, 2002 and the ratio of non-performing assets to totalassets increased to 1.23% at March 31, 2003 from 1.12% at December 31, 2002.GreenPoint attempts to convert these assets to interest-earning assets asquickly as possible, while minimizing potential losses on conversion.

 

Non-performingloans held for sale represent delinquent loans in the mortgage warehouse thatmostly have been acquired as repurchases against representations andwarranties. These loans increased to $94 million at the end of the firstquarter from $66 million at December 31, 2002. This increase has resulted fromthe substantial growth in loans sold over the past two years. GreenPointmaintains a valuation reserve through which the value of these loans isadjusted to the estimated fair value.

 

Non-performingassets, were as follows:

 
| **(In millions)**                                          |   | **March 31,  2003** |   | **Dec. 31,  2002** |   |
|------------------------------------------------------------|--------|---------------------|--------|--------------------|--------|
| Non-accrual loans receivable held for investment  (1)      |   | $                   | 161    |               | $      | 160 |   |
| Non-accrual loans receivable held for sale                 |   | 94                  |   | 66                 |   |
| Total non-performing loans                                 |   | 255                 |   | 226                |   |
| Total other real estate owned, net                         |   | 21                  |   | 17                 |   |
| Total non-performing assets                                |   | $                   | 276    |               | $      | 243 |   |
|                                                       |   |                |   |               |   |
| Other loans 90 days or more delinquent and still  accruing |   | $                   | 1      |               | $      | 1 |   |

 

----

*(1)**                              **Includes $5 million of non-accrual mortgage loans under 90days past due at both March 31, 2003 and December 31, 2002.*

 

**Loan Servicing Portfolio**

 

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

 
| **(In millions)**                   |   | **March 31,  2003** |   | **Dec. 31,  2002** |   |
|-------------------------------------|--------|---------------------|--------|--------------------|--------|
| **Mortgage:**                       |   |                |   |               |   |
| Serviced for GreenPoint (1)         |   | $                   | 12,991 |               | $      | 14,936 |   |
| Serviced for others (third parties) |   | 15,059              |   | 14,647             |   |
| **Total loan servicing portfolio**  |   | $                   | 28,050 |               | $      | 29,583 |   |

 

----

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

 

28

----

 

**Allowance for Possible LoanLosses:**

 

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

 
|                                                                    |   | **Quarter Ended  March 31,** | ** ** |
|-------------------------------------------------------------------------|--------|------------------------------|------------|
| **(In millions)**                                                       |   | **2003**                     |       | **2002** | ** ** |
| Balance at beginning of period                                          |   | $                            | 77.7       |   | $ | 80.6 |   |
| Provision charged to income:                                            |   |                         |       |   |   |
| Continuing                                                              |   | 0.3                          |       | 0.4 |   |
| Discontinued                                                            |   | 0.1                          |       | — |   |
| Charge-offs:                                                            |   |                         |       |   |   |
| Mortgage                                                                |   | (0.4                         | )          | (0.4 | ) |
| Manufactured housing                                                    |   | (1.6                         | )          | — |   |
| Manufactured housing – transfer to loans receivable  held for sale |   | —                       |       | (2.9 | ) |
| Recoveries:                                                             |   |                         |       |   |   |
| Mortgage                                                                |   | 0.1                          |       | — |   |
| Manufactured housing                                                    |   | 1.5                          |       | — |   |
| Balance at end of period                                                |   | $                            | 77.7       |   | $ | 77.7 |   |

 

Netmortgage loan charge-offs were $0.3 million for the quarter ended March 31,2003, down from $0.4 million in the year ago period.

 

**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 March 31, 2003, that the Company andthe Bank meet all capital adequacy requirements to which it is subject.

 

FDICIA,among other things, identifies five capital categories for insured depositoryinstitutions (well capitalized, adequately capitalized, undercapitalized,significantly undercapitalized and critically undercapitalized) and requiresfederal banking regulatory agencies to implement systems for “prompt correctiveaction” for insured depository institutions that do not meet minimum capitalrequirements based on these categories. As of March 31, 2003, the Bank was wellcapitalized based on the prompt corrective action guidelines.

 

29

----

 

Themost recent notification from the FDIC categorized the Bank as well capitalizedunder the regulatory framework for prompt corrective action. To be categorizedas well capitalized, the Bank must maintain minimum Tier 1 capital, 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.

 

TheCompany’s Total Capital and Tier 1 Capital (to risk weighted assets) improvedfrom 12.96% and 11.43%, respectively, at December 31, 2002 to 13.08% and11.53%, respectively at March 31, 2003. The Company’s ratio of period-endstockholders’ equity to ending total assets at March 31, 2003 was 8.50%compared to 8.82% at December 31, 2002.

 
|                                      |   | **Actual** | ** ** | **Required for Capital  Adequacy Purposes** | ** ** |
|-------------------------------------------|--------|------------|------------|---------------------------------------------|------------|
| **(In millions)**                         |   | **Amount** |       | **Ratio**                                   |       | **Amount** |   | **Ratio** |   |
| **As of March 31, 2003**                  |   |       |       |                                        |       |   |   |   |   |
| Total Capital (to Risk Weighted Assets):  |   |       |       |                                        |       |   |   |   |   |
| Company                                   |   | $          | 1,913      |                                        | 13.08      | % | $ | 1,170 |   | 8.00 | % |
| Bank                                      |   | 1,924      |       | 13.17                                       |       | 1,169 |   | 8.00 |   |
| Tier 1 Capital (to Risk Weighted Assets): |   |       |       |                                        |       |   |   |   |   |
| Company                                   |   | $          | 1,685      |                                        | 11.53      | % | $ | 585 |   | 4.00 | % |
| Bank                                      |   | 1,697      |       | 11.61                                       |       | 585 |   | 4.00 |   |
| Tier 1 Capital (to Average Assets):       |   |       |       |                                        |       |   |   |   |   |
| Company                                   |   | $          | 1,685      |                                        | 7.97       | % | $ | 846 |   | 4.00 | % |
| Bank                                      |   | 1,697      |       | 8.03                                        |       | 845 |   | 4.00 |   |
|                                      |   |       |       |                                        |       |   |   |   |   |
| **As of December 31, 2002**               |   |       |       |                                        |       |   |   |   |   |
| Total Capital (to Risk Weighted Assets):  |   |       |       |                                        |       |   |   |   |   |
| Company                                   |   | $          | 1,924      |                                        | 12.96      | % | $ | 1,188 |   | 8.00 | % |
| Bank                                      |   | 1,905      |       | 12.83                                       |       | 1,188 |   | 8.00 |   |
| Tier 1 Capital (to Risk Weighted Assets): |   |       |       |                                        |       |   |   |   |   |
| Company                                   |   | $          | 1,696      |                                        | 11.43      | % | $ | 594 |   | 4.00 | % |
| Bank                                      |   | 1,678      |       | 11.30                                       |       | 594 |   | 4.00 |   |
| Tier 1 Capital (to Average Assets):       |   |       |       |                                        |       |   |   |   |   |
| Company                                   |   | $          | 1,696      |                                        | 7.51       | % | $ | 904 |   | 4.00 | % |
| Bank                                      |   | 1,678      |       | 7.42                                        |       | 904 |   | 4.00 |   |

 

**Stock Repurchase Program**

 

InFebruary 2003, the Company’s Board of Directors authorized a new sharerepurchase program of up to 5%, or approximately 4.8 million, of itsoutstanding shares. The repurchase will be at the Company’s discretion, basedon ongoing assessments of the capital needs of the business and the marketvaluation of its stock.

 

TheCompany’s previous share repurchase program was completed during the firstquarter. Under this program, the Company repurchased 5 million shares, at acost of approximately $218 million. The repurchased shares are being heldin treasury.

 

Sharesrepurchased and cost for the quarters ended March 31, 2003 and 2002 aresummarized as follows:

 
|                         |   | **Quarter Ended  March 31,** |   |
|------------------------------|--------|------------------------------|--------|
| **(Dollars in millions)**    |   | **2003**                     |   | **2002** |   |
|                         |   |                         |   |   |   |
| Number of shares repurchased |   | 2,862,800                    |   | 294,400 |   |
| Cost of repurchases          |   | $                            | 125    |   | $ | 13 |   |
|                              |        |                              |        |  |  |  |  |

 

30

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**Supplemental Performance Measurements – C****ash Earnings**

 

Cashearnings is a non-GAAP measurement that GreenPoint defines as net income fromcontinuing operations less a non-cash charge related to the Employee StockOwnership Plan (“ESOP”). This non-cash expense, unlike other expenses incurredby the Company, does 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**   |   |
|--------------------------------------------------------|--------|---------------------|--------|
|                                                   |   | **March 31,  2003** |   | **Dec. 31,  2002** |   | **Sept. 30,  2002** |   | **June 30,  2002** |   | **March 31,  2002** |   |
| Net income from  continuing operations                 |   | $                   | 126.9  |   | $ | 128.6 |   | $ | 126.5 |   | $ | 122.6 |   | $ | 120.5 |   |
| Add back:                                              |   |                |   |   |   |   |   |   |   |   |   |
| Employee Stock  Ownership and stock plans expense      |   | 6.1                 |   | 6.9 |   | 6.3 |   | 7.0 |   | 6.0 |   |
| Cash earnings from  continuing operations              |   | $                   | 133.0  |   | $ | 135.5 |   | $ | 132.8 |   | $ | 129.6 |   | $ | 126.5 |   |
|                                                   |   |                |   |   |   |   |   |   |   |   |   |
| Diluted earnings per  share from continuing operations |   | $                   | 1.47   |   | $ | 1.46 |   | $ | 1.41 |   | $ | 1.35 |   | $ | 1.32 |   |
| Effect of employee  stock plans expense                |   | 0.07                |   | 0.08 |   | 0.07 |   | 0.08 |   | 0.06 |   |
| Cash earnings per  share (1)                           |   | $                   | 1.54   |   | $ | 1.54 |   | $ | 1.48 |   | $ | 1.43 |   | $ | 1.38 |   |
|                                                   |   |                |   |   |   |   |   |   |   |   |   |
| **Performance Ratios (Annualized)**                    |   |                |   |   |   |   |   |   |   |   |   |
| Cash earnings return on average assets                 |   | 2.51                | %      | 2.40 | % | 2.50 | % | 2.59 | % | 2.64 | % |
| Cash earnings return on average equity                 |   | 27.80               |   | 28.50 |   | 28.67 |   | 29.11 |   | 28.87 |   |
| Cash earnings return on tangible equity                |   | 35.58               |   | 36.89 |   | 37.43 |   | 37.75 |   | 37.66 |   |

 

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

 

**Consolidated Statement of Financial Condition**

 

Totalassets of $22.4 billion at March 31, 2003 increased from $21.8 billion atDecember 31, 2002. The balance sheet reflects growth in the securitiesportfolio of $1.5 billion. This was partially offset by a decrease in bothloans receivable held for sale and held for investment of $553 million and $294million, respectively.

 

Thebalance of core deposits increased $667 million since year-end 2002, reflectingthe continued success of a variety of initiatives to attract checking accounts.This growth was offset in part by a decline of $256 million in higher-costcertificates of deposit. Market borrowings increased $155 million sinceyear-end 2002, reflecting the net additional funding needed.

 

**Risk Management**

 

TheCompany has a Corporate Risk Oversight Committee which monitors and supervisesthe wide variety of risks encountered in the course of business. The Committeeis chaired by the President and Chief Operating Officer and includes the headsof its two businesses, the Chief Financial Officer, the Head of Risk Managementand the General Counsel. The Committee meets periodically to review creditrisk, including both on-balance sheet and off-balance sheet exposure, marketrisk and operating and business risks which include, but are not limited to,legal and systems risks. These individual types of risks are also analyzed andmonitored by separate committees comprised of experts within the business unitsand on the corporate staff. Liquidity and Credit Risk Management are describedfully below. The Market Risk analysis is included in Part I – Item 3 (page 34).

 

**Liquidity Risk Management**

 

TheBank’s primary sources of funding from financing activities include deposit gathering,advances from the FHLB, short and long-term borrowings under repurchaseagreements and overnight and term Federal Funds purchases. Cash flows relatedto operating activities primarily consist of cash disbursed to fund loanoriginations and cash received from loan sales and securitizations. Cash flowsrelated to investing activities include purchases of securities and loansreceivable held for investment, funds received from loan and securitiesprincipal repayments, and sales and maturities of mortgage-backed and otherinvestment securities. While maturities and scheduled amortization of loans andsecurities are a predictable source of funds, the amount of prepayments onloans and mortgage-backed securities can only be estimated, as they tend to fluctuatewith various exogenous factors including the general level, and direction, ofinterest rates.

 

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Fundsprovided from financing activities totaled $428 million for the quarter endedMarch 31, 2003. At March 31, 2003 total borrowings were $7.4 billion, up$155 million from $7.2 billion at December 31, 2002. Membership in the FHLBallows the Bank to secure advances in proportion to its investment in FHLBstock. At March 31, 2003 the Bank had $2.9 billion in outstanding FHLB termadvances. The Bank’s ability to secure further advances from the FHLB is basedon the market value of the pledged loan portfolio. At March 31, 2002, based onthe then current market value of the pledged portfolio, the Bank had additionalFHLB borrowing capacity of $1.1 billion. The Bank also uses its mortgage-backedand other investment securities as collateral under short and long-termrepurchase agreements. As of March 31, 2003 the Bank had $2.1 billion inoutstanding repurchase agreements, which was an increase of $100 million fromDecember 31, 2002. At March 31, 2003 the company had un-pledged securitieseligible as collateral for repurchase agreements of $2.8 billion. The Bank alsosecures overnight and term funding in the Federal Funds market. At March 31,2003 the Bank had $740 million of overnight purchased Federal Funds.

 

Depositscontinue to be the primary funding source for the Company. Deposit balancesexperienced a net $411 million increase in the first quarter of 2003.Lower-cost core deposits increased by $667 million offset by a decrease inhigher cost certificates of deposit of $256 million. The decline in certificateof deposit balances resulted from management’s decision to utilize lower costalternative funding sources rather than pay higher priced retail rates. Timedeposits maturing within one year totaled $3.5 billion at March 31, 2003.Consistent with historical trends, a substantial portion of these deposits areexpected to be renewed. To the extent these deposits are not renewed, fundingis expected to be provided through continued growth in core deposits (checking,savings and money market deposits) and through alternative financing sources.

 

# **Credit Risk Management**

 

Duringthe first quarter of 2003, the Company originated mortgage loans for its ownportfolio and for disposition in the secondary markets in the form of wholeloan sales and securitizations. In general, whole loan sales transfer thecredit risk to the purchasers. In contrast, for loans placed in the portfolio,or for loans securitized, the Company retains all or much of the credit risk.As of December 31, 2001, the Company discontinued the origination ofmanufactured housing loans. However, it continues to service its manufacturedhousing loan portfolio, including its securitized loan pools. During the fourthquarter of 2002, GreenPoint Bank began to originate small business loansthrough its branch system to its business banking customers for the Bank’sportfolio.

 

GreenPointBank and GreenPoint Mortgage maintain underwriting policies, procedures andapproval authorities appropriate to their businesses. The chief creditexecutive in GreenPoint Mortgage reports directly to the chief executive of thebusiness, outside of the production organization. The chief credit executive inthe small business banking group within GreenPoint Bank reports directly to thehead of the small business banking group. With respect to mortgage loansoriginated for whole loan sale to the secondary markets, where credit risk istransferred, underwriting criteria are established to meet the investorrequirements. An executive-level Risk Management Division determines thecriteria required for loans which will be transferred to GreenPoint’s portfolioor sold through securitizations. With respect to business loans at GreenPointBank, a sophisticated scoring system is one of the tools being utilized in theunderwriting process.

 

Oversightof the appraiser approval and appraisal review process is conducted independentof the production organization. Appraisers are required to meet strictstandards for approval by GreenPoint, and their performance is monitored on aregular basis. With oversight by Risk Management, a comprehensive qualitycontrol process is in place to ensure that mortgage loans being originated meetthe Company’s underwriting standards, and that required operating proceduresare followed. Loans are selected monthly on a pre and post funding basis forreview by quality control analysts and staff appraisers. A quality controlprocess has also been established for the small business loans being originatedby GreenPoint with monthly reviews on a post-funding basis.

 

RiskManagement personnel monitor closely the performance of all loans on which theCompany retains credit risk. On securitization or sale, expectations are set onthe default, recovery and voluntary prepayment rates. Each pool of loans isreviewed monthly to ensure that performance is meeting those expectations. Inthe event performance does not meet expectations, the assumptions are revised.Final responsibility for these judgments resides with executive management,independent of the business unit.

 

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RiskManagement reviews monthly the delinquency and loss trends for all of themortgage, manufactured housing, and small business loans serviced by theCompany, whether or not it retains credit exposure. These reviews are intendedto identify significant changes in credit quality which may indicate changes tothe Company’s exposures or to the efficacy of its underwriting of loans sold toother investors. Such changes could prompt adjustments to the Company’sunderwriting criteria or servicing procedures.

 

GreenPoint’smortgage loan origination activity is geographically diversified throughout theUnited States. The Company tracks economic and housing market trends toidentify areas for expansion and as an early warning mechanism. The Companyalso closely monitors trends in delinquent and non-performing loans throughcycles in the economy and in the real estate market. These economic andperformance trends are analyzed in the ongoing fine-tuning of lendingpractices.

 

TheCompany uses various collection strategies to maintain contact with theborrowers in order to obtain repayment. Collection activities for GreenPointMortgage are centralized in a servicing unit in Columbus, Georgia. GreenPointCredit’s collection activities were centralized during 2002 in a servicingcenter in Atlanta, Georgia in order to target delinquent accounts moreeffectively utilizing more advanced technology. Remarketing activities forGreenPoint Credit remain decentralized among several regional offices in orderto repossess and liquidate collateral more effectively, thereby minimizing the lossseverity. Collection efforts for GreenPoint Bank’s business banking loans arehandled in a collaborative manner by the credit analysts in New York and theservicing center in Columbus, Georgia.

 

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

 

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**GreenPoint Financial Corp. andSubsidiariesPart I – Item 3. Quantitative and Qualitative Disclosuresabout Market Risk**

 

**Market Risk Management**

 

**Overview**

 

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

 

**Market Risk Management Process**

 

Managementof interest rate risk is conducted within policies and limits approved by theBoard of Directors. These policies and limits set forth the maximum risks toearnings and market value that the Board of Directors deems prudent. Inaddition, they govern permissible investments and off-balance sheettransactions, and maximum counterpart exposure limits. The formulation andimplementation of any Risk Management strategy involves numerous day-to-daydecisions involving the acquisition or divestiture of loans and investmentsecurities, reinvestment of cash flows, the selection of funding instrumentsand maturities and the use of off-balance sheet instruments. Together, theseincremental decisions result in a strategy that is represented by the interestrate risk position. The performance of the positions and strategies areformally reviewed by the Asset and Liability Management Committee (“ALCO”) inthe context of the outlook for interest rates and general business conditions,as well as for compliance with established risk tolerances and policies. Thecommittee is chaired by the Chief Financial Officer and includes the Treasurer,the Head of Risk Management and the Company’s Senior Business Unit andFinancial Executives.

 

**Interest Rate Risk Management Strategies**

 

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

 

Thesedynamics tend to be partly offset by the sensitivity of retail banking revenuesto changes in the level of interest rates. Typically in a high rate environment,spreads earned on retail deposits increase, as rates paid on those depositsincrease more slowly than market rates in general. Additionally, the balancesheet is normally positioned to allow for higher net interest income and widernet interest margins as rates rise. This is known as an asset sensitive balancesheet position, and provides a further offset to the interest rate cyclicallyof mortgage banking revenue.

 

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

 

**Interest Rate Risk Measurement**

 

Theprincipal tool used to measure balance sheet sensitivity at any point in time,and to assess the impact of potential business and rate risk managementstrategies, is a simulation of net interest income. The simulation gives effectto management assumptions concerning the repricing of assets and liabilities,as well as business volumes under a variety of hypothetical interest ratescenarios. These hypothetical scenarios incorporate parallel yield curve shiftsin interest rates of plus or minus 100, 200 and 300 basis points. In addition,non-parallel yield curve flattening and steepening scenarios are modeled.

 

Themost crucial management assumptions concern prepayments on the Company’smortgage loan portfolio and the pricing of retail deposits in various interestrate environments. As interest rates decline, mortgage prepayments tend toincrease, reducing loan portfolio growth and lowering the portfolio’s averageyield. Management’s assumptions are guided by analyzing the prepaymentperformance of the Company’s portfolio in past rate cycles as well as publiclyavailable research on the prepayment behavior of similar mortgage assets.

 

34

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Rateson non-maturity deposits rise and fall with market rates, but tend to move lessthan proportionately. Rates offered on retail certificates of deposit tend tomove in close concert with market rates, though history suggests they increaseless rapidly as market rates rise. Extensive historical analysis shows that theCompany’s deposit volumes are relatively insensitive to interest rate movementswithin the range encompassed by the scenarios.

 

Thefollowing table presents the results of the simulations under a variety ofhypothetical interest rate scenarios, based on the Company’s balance sheetposition at March 31, 2003. The results are expressed as the percentage changein pretax net interest income from the base scenario in which interest ratesare unchanged. The change in income is measured over a period of twelve months.

 
|             |   | **Short-term Rate Changes:** |       |
|------------------|--------|------------------------------|------------|
| **Yield  Curve** |   | **-200 bps**                 | ** ** | **+200 bps** | ** ** |
| -150 bps         |   | (17.3                        | )%         | 6.0 | % |
| Parallel         |   | (10.7                        | )%         | 10.1 | % |
| +150 bps         |   | (3.8                         | )%         | 13.5 | % |

 

Thecolumns represent 200 basis point changes—down and up—in the level ofshort-term interest rates over a twelve-month time span. The rows indicatechanges in the shape of the yield curve over the same time period. The parallelrow corresponds to changes in rate levels in which the yield curve retains itsshape. In the -150 basis point scenarios, the yield curve flattens, and in the+150 basis point simulations the curve steepens. For example, a paralleldownward shift of 200 basis points would reduce net interest income by 10.7%from what would be earned if rates remained constant. (As of March 31, 2003 notall rates could fall 200 basis points without reaching zero. In these scenariosrates are reduced until they reach zero. These scenarios are retained to allowfor historical comparisons.) However, a decline of 200 basis points at theshort end of the yield curve, accompanied by a 150 basis point steeper curve,would decrease net interest income by 3.8% over the unchanged scenario.

 

AtMarch 31, 2002 a parallel 200 basis point downward movement in interest rateswas estimated to reduce net interest income by 1.1% from the base case. Aparallel 200 basis point rise in rates was estimated to benefit net interestincome by 0.5%.

 

Thesimulations measure the exposure of net interest income to changes in interestrates at a particular point of time. The risk position is always changing.Management continuously monitors the Company’s risk profile as it changes, andalters the rate sensitivity to ensure limits are adhered to, and that theresulting risk profile is appropriate to its views on the likely course ofinterest rates and developments in its core businesses.

 

Inaddition, the fair value of the mortgage company’s servicing assets andretained interests from securitizations are directly affected by the level ofprepayments associated with the underlying loans. As interest rates decline thevalue of these assets will decline. Conversely as interest rates rise, thevalue of these assets will increase.

 

**Derivative Financial Instruments**

 

Interestrate derivatives, such as interest rate swaps and Eurodollar futures, areperiodically integrated into the Company’s interest rate positions and,therefore, its simulations. The notional amount of these instruments are notincluded in the company’s balance sheet. There were no outstanding derivativefinancial instruments hedging the Company’s interest rate position at March 31,2003.

 

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TheCompany does currently utilize derivative instruments to manage its exposure tointerest rate risk associated with mortgage loan commitments and mortgage loansheld for sale.

 

Priorto the closing of the loan, the Company generally extends an interest rate lockcommitment to the borrower. The Company is exposed to subsequent changes in thelevel of market interest rates, and the spread over Treasuries required byinvestors. An increase in market interest rates or a widening of spreads willreduce the prices paid by investors and the resultant gain on sale. To mitigatethis risk, at the time the Company extends the interest rate lock commitment tothe borrower, the Company will enter into mandatory commitments to delivermortgage whole loans to various investors, or to issue private securitiesand/or Fannie Mae and Freddie Mac securities (forward delivery commitments.)These commitments effectively establish the price the Company will receive forthe related mortgage loan thereby minimizing the risk of subsequent changes ininterest rates. At March 31, 2003, the Company had mandatory forward deliverycommitments outstanding amounting to $4.2 billion.

 

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**GreenPoint Financial Corp. andSubsidiariesPart I – Item 4. Controls and Procedures**

 

**Evaluation of Disclosure Controls and Procedures**

 

TheCompany’s Chief Executive Officer and Chief Financial Officer have determinedthat the Company’s disclosure controls and procedures (as defined in Rules13a-14 and 15d-14 under the Securities Exchange Act of 1934 (“Act”)), which aredesigned to ensure that information required to be disclosed by the Company inthe periodic reports it files under the Act is recorded, processed, summarizedand reported in a timely manner, are effective based on their evaluation ofthese controls and procedures as of a date within 90 days prior to the filingdate of this Quarterly Report on Form 10-Q (“Evaluation Date”).

 

**Changes in Internal Controls**

 

Therewere no significant changes in the Company’s internal controls or in otherfactors that could significantly affect these controls subsequent to theEvaluation Date, including any corrective actions with regard to significantdeficiencies and material weakness.

 

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**GreenPoint Financial Corp. andSubsidiariesPart II – Item 1. Legal Proceedings**

 

Inthe ordinary course of business, the Corporation and its subsidiaries aredefendants in or parties to a number of pending and threatened legal actionsand proceedings, and are also involved from time to time in investigations andadministrative proceedings by governmental agencies. Certain of such actionsand proceedings involve alleged violations of consumer protection laws,including claims relating to the Corporation’s loan origination and collectionefforts, and other federal and state banking laws. Certain of such actions andproceedings include claims for breach of contract, restitution, compensatorydamages, punitive damages and other forms of relief. Due to the difficulty ofpredicting the outcome of such matters, the Corporation can give no assurancethat it will prevail on all claims made against it; however, managementbelieves, based on current knowledge and after consultation with counsel, thatthese legal matters and administrative proceedings and the losses, if any,resulting from the final outcome thereof, will not have a material adverseeffect on the Corporation and its subsidiaries’ financial position, results ofoperations or liquidity, but can give no assurance that they will not have suchan effect.

 

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**GreenPoint Financial Corp. and SubsidiariesPart II – Item 6. Exhibits and Reports on Form 8-K**

 

**(a)****            ****Exhibits**

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

 

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

 

None.

 

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**GreenPointFinancial Corp. and Subsidiaries**

 

**SIGNATURES**

 

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

 
|               | GreenPoint Financial Corp. |
|--------------------|----------------------------|
|               |                       |   |
|               |                       |   |
|               |                       |   |
|               | By:                        | /s/ Thomas S. Johnson |
|               |                       | Thomas S. Johnson |
|               |                       | Chairman of the Board and |
|               |                       | Chief Executive Officer |
|               |                       |   |
|               |                       |   |
|               | By:                        | /s/ Jeffrey R. Leeds |
|               |                       | Jeffrey R. Leeds |
|               |                       | Executive Vice President and |
|               |                       | Chief Financial Officer |
|               |                       |   |
|               |                       |   |
|               | By:                        | /s/ Joseph D. Perillo |
|               |                       | Joseph D. Perillo |
|               |                       | Senior Vice President and |
|               |                       | Controller |
|               |                       |   |
|               |                       |   |
| Dated May 13, 2003 |                       |   |

 

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**GreenPointFinancial Corp. and Subsidiaries**

 

**CERTIFICATIONS**

 

I,Thomas S. Johnson, Chairman and Chief Executive Officer of GreenPoint FinancialCorp., certify that:

 

1.               I have reviewed this quarterly report onForm 10-Q of GreenPoint Financial Corp.;

 

2.               Based on my knowledge, this quarterlyreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

3.               Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periods presentedin this quarterly report;

 

4.               The registrant’s other certifying officersand I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and we have:

 

a)              designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

 

b)             evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing date of this quarterly report (the “Evaluation Date”); and

 

c)              presented in this quarterly report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5.               The registrant’s other certifying officersand I have disclosed, based on our most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent function):

 

a)              all significant deficiencies in the design oroperation of internal controls which could adversely affect the registrant’sability to record, process, summarize and report financial data and haveidentified for the registrant’s auditors any material weaknesses in internal controls;and

 

b)             any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6.               The registrant’s other certifying officersand I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 
| Date:  May 13, 2003 |                                                              |
|--------------------------|-------------------------------------------------------------------|
|                     |                                                              |
|                     | /s/ Thomas S. Johnson                                             |   |
|                     | Thomas S. Johnson                                                 |
|                     | Chairman and  Chief Executive Officer  GreenPoint Financial Corp. |

 

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I,Jeffrey R. Leeds, Executive Vice President and Chief Financial Officer ofGreenPoint Financial Corp., certify that:

 

1.               I have reviewed this quarterly report onForm 10-Q of GreenPoint Financial Corp.;

 

2.               Based on my knowledge, this quarterlyreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

3.               Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periods presentedin this quarterly report;

 

4.               The registrant’s other certifying officersand I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and we have:

 

a)              designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

 

b)             evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing date of this quarterly report (the “Evaluation Date”); and

 

c)              presented in this quarterly report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5.               The registrant’s other certifying officersand I have disclosed, based on our most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent function):

 

a)              all significant deficiencies in the designor operation of internal controls which could adversely affect the registrant’sability to record, process, summarize and report financial data and haveidentified for the registrant’s auditors any material weaknesses in internal controls;and

 

b)             any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6.               The registrant’s other certifying officersand I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 
| Date:  May 13, 2003 |                                                                              |
|--------------------------|-----------------------------------------------------------------------------------|
|                     |                                                                              |
|                     | /s/ Jeffrey R. Leeds                                                              |   |
|                     | Jeffrey R. Leeds                                                                  |
|                     | Executive Vice President and  Chief Executive Officer  GreenPoint Financial Corp. |

 

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