UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file Number 0-22516
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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 834-1711
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS
Common Stock $0.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [x] YES [ ] NO
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 21, 1997: Common stock par value $0.01 per share,
$2,117,587.
This figure is based on the closing price by the New York Stock Exchange
("NYSE") for a share of the registrant's common stock on March 21, 1997, which
was $55.00 as reported in the Wall Street Journal on March 24, 1997. The
number of shares of the registrant's Common Stock issued and outstanding as of
March 21, 1997 was 47,152,976 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on May 2, 1997 and the Annual Report to Stockholders
for fiscal 1996 are incorporated herein by reference - Parts II and III.
TABLE OF CONTENTS
Page No.
PART I
ITEM 1. BUSINESS 1
Description of the Business 1
Mortgage Banking Services 1
Consumer Branch Network 1
Competition 2
Lending Activities 2
Delinquent Loans and Foreclosed Assets 9
Allowance for Possible Loan Losses 12
Environmental Issues 15
Interest Rate Risk Management 15
Securities Investment Activities 15
Sources of Funds 18
Subsidiary Activities 20
Savings Bank Life Insurance 21
Personnel 21
Federal Taxation 21
State and Local Taxation 23
Bank Regulation and Supervision 23
Holding Company Regulation and Supervision 28
ITEM 2. PROPERTIES 30
ITEM 3. LEGAL PROCEEDINGS 30
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 30
ITEM 4A. EXECUTIVE OFFICERS 31
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 33
ITEM 6. SELECTED FINANCIAL DATA 33
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 33
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 33
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 33
ITEM 11. EXECUTIVE COMPENSATION 33
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 33
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 34
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K 35
PART I
ITEM 1. BUSINESS
Description of Business
GreenPoint Financial Corp. (the "Company") is a bank holding company organized
in August 1993 under the laws of the state of Delaware and registered under the
Bank Holding Company Act of 1956.
The Company provides a variety of financial services primarily through its bank
subsidiary, GreenPoint Bank (the "Bank") including GreenPoint Mortgage Corp.
("GPMC"), its mortgage banking subsidiary, and to a lesser extent through its
community development subsidiary, GreenPoint Community Development Corp.
("GPCDC"). As part of the Company's long term business plans, the Company
intends to continue to explore a variety of alternative strategic investment
options to complement its existing business strengths, including possible
acquisitions of other thrift institutions, acquisitions of other financial
institutions or financial services companies or their assets, or expanding into
other banking, mortgage, real estate or consumer finance related businesses.
The Bank was organized in 1868 as a New York State chartered savings bank. The
Bank and its wholly owned subsidiary GPMC, a national home mortgage banking
company, are primarily engaged in the business of mortgage lending throughout
the United States, with loans receivable of $7.3 billion, representing
approximately 55% of total assets at December 31, 1996. The Bank continues to
attract retail deposits from the general public and invests those deposits,
together with funds generated from operations, in mortgage loans and marketable
securities. The Bank's revenues are derived principally from interest on its
loan portfolio and investment securities. The Bank's primary sources of funds
are deposits, principal and interest payments from loans, and interest from
investment securities.
GPCDC is a for-profit community development subsidiary organized in 1993.
Complementing the Bank's leadership in lending in low- and moderate-income
areas and to minorities, GPCDC's focus is primarily on special lending
programs, development opportunities and assistance, consulting and other
activities that promote the objective of greater access to affordable housing
for low- and moderate-income persons residing in the areas served by the
Company.
MORTGAGE BANKING SERVICES
The Company specializes in a limited documentation mortgage loan product ("No
Doc" and "Low Doc" loans) which serves a particular niche of borrowers willing
to pay a premium, in the form of higher interest rates and loan fees, and
provide larger down payments in exchange for more expedient loan processing by
virtue of providing less income and asset information as compared to loans
underwritten in conformance with Federal National Mortgage Association ("FNMA")
standards. As a result of this strategy combined with strict appraisal
requirements, the Company has achieved higher interest margins and levels of
net interest income compared to typical FNMA conforming loans which, in turn,
has resulted in a high level of profitability despite traditionally higher
levels of loan delinquencies.
During 1996, the Company successfully expanded its mortgage lending program to
include new markets in Chicago, Boston, Philadelphia, Washington, D.C., and
Miami. Through the expansion of the mortgage lending program, the Company has
more than doubled mortgage loan originations to $2.4 billion, compared to $1.0
billion in 1995.
CONSUMER BRANCH NETWORK
The Consumer Branch Network ("Branch Network") consists of 76 full-service
banking offices, with 80 ATMs, located in the New York City metropolitan area
and offers a variety of financial services to meet the needs of the communities
it serves. Among the services offered by the Branch Network are traditional
time, savings and checking accounts, annuity products, Savings Bank Life
Insurance, safe deposit services and student loans.
COMPETITION
The Company faces significant competition both in making loans and in
attracting deposits. The New York City metropolitan area has a high density of
financial institutions, many of which are branches of significantly larger
institutions which have greater financial resources than the Company, and all
of which are competitors of the Company to varying degrees. The Company's
competition for loans comes principally from savings banks, commercial banks,
savings and loan associations, mortgage banking companies and credit unions.
Its most direct competition for deposits has historically come from savings and
loan associations, savings banks, commercial banks and credit unions. The
Company faces additional competition for deposits from non-depository
competitors such as the mutual fund industry, securities and brokerage firms
and insurance companies. Competition may also increase as a result of the
lifting of restrictions on the interstate operations of financial institutions.
The Company's focus on one-to four-family residential lending and No Doc and
Low Doc loans has allowed it to develop a significant market presence in the
one-to four-family residential loan market. Due to the Company's current
presence in these markets and its limited lending focus, no assurance can be
given that the Company will be able to sustain the growth it has achieved in
the past in the event loan demand in these markets declines which, in turn, may
negatively impact its interest rate margin, interest rate spread and net
income. Further, in the event other financial institutions establish lending
programs which target the one-to four-family lending similar to the Company's
No Doc and Low Doc programs, such intensified competition may result in the
Company's inability to sustain its previous growth in such lending or result in
a decline in the Company's market share. The Company's narrow lending focus on
these specialized markets may also place the Company in a less favorable
position to increase its market share in other types of lending as compared to
an institution with a broader based lending focus and expertise in other types
of lending.
LENDING ACTIVITIES
LENDING PROGRAMS. The Company's lending activities have historically emphasized
and continue to emphasize the origination of real estate loans which are
underwritten with primary reliance placed upon a borrower's level of equity in
the property securing the loan or level of down payment, as compared to other
lending institutions which may rely more heavily upon a borrower's demonstrated
ability to repay the loan and independently verified income levels. These
equity-based loans are offered in two programs: (1) loans which are
underwritten without qualification of a borrower's income level or independent
verification of a borrower's income or financial assets as represented by such
borrower ("No Doc loans") or (2) loans which are similarly underwritten but
which require a borrower to demonstrate annual income of 50% of the loan amount
which the Company verifies by reviewing tax return information submitted by
the borrower ("Low Doc loans"). The Company also requires borrowers to have
satisfactory credit histories in the case of No Doc or Low Doc loans. As
compared to the loans the Company originates in accordance with FNMA
underwriting guidelines and procedures ("FNMA conforming loans"), No Doc and
Low Doc loans involve a higher degree of risk as there is limited verified
knowledge of the borrower's level of income or ability to service the
indebtedness which, in turn, may result in a higher rate of default. In
recognition of the increased risks associated with No Doc and Low Doc loans,
the Company requires borrowers to have a higher equity position in the property
securing the loan. The Company does not originate such loans with loan to value
ratios in excess of 75%. The Company's No Doc lending program accounted for
93.4% of total originations.
As compared to other lending institutions which rely more heavily upon a
borrower's income and demonstrated ability to repay the loan, the Company may
be more susceptible to increases in loan delinquencies in periods of economic
recession and to loan losses in periods of declining real estate market values.
In recognition of the risks associated with this lending strategy, the Company
has established strict appraisal standards, whereby all appraisals are required
to conform either to FNMA, FHLMC, federal or ftate appraisal standards and are
either: 1) conducted or reviewed by in-house appraisers who are state
certified real estate appraisers and are subject to two additional levels of
review by senior management; or are 2) conducted by two separate independent
appraisers or appraisal services, one of which is commissioned directly by the
Company from a list of appraisers which the Company has specifically approved.
LOAN ORIGINATIONS. The Company originates both adjustable rate mortgage ("ARM")
loans and fixed rate loans, the amounts of which are dependent upon customer
demand and market rates of interest. Loan originations are primarily obtained
from the Company's network of registered mortgage brokers, licensed mortgage
bankers, attorneys and other real estate professionals participating in its
three conduit programs and, to a lesser extent, from existing or past customers
and members of the local communities located in the Company's lending area.
For the year ended December 31, 1996, the Company originated $2.4 billion of
mortgage loans.
The Company's Advantage Program is a structured program in which registered
mortgage brokers, licensed mortgage bankers, attorneys and other real estate
professionals, are eligible to participate upon approval by the Company. As of
December 31, 1996, there were 967 Advantage Program members.
The Company's Lender Associate Program consists of 1,867 approved mortgage
brokers operating in 47 states. These brokers are generally small to mid-sized
mortgage originators which rely on the Company to fund loans at closing. Each
broker is screened by the Company and is approved only if the Lender Associate
Program requirements are satisfied.
The Company's Correspondent Program is a closed loan purchase program
consisting of 180 approved correspondents operating in 47 states. These
correspondents include mid-sized to large mortgage bankers and other financial
institutions.
For the year ended December 31, 1996, the Company originated $2.1 billion of
loans through these programs, or 89.8% of total loan originations.
The types of loans that the Company may originate are subject to federal and
state laws and regulations. Interest rates charged by the Company on loans are
affected principally by the demand for such loans and the supply of money
available for lending purposes and the rates offered by its competitors. These
factors are, in turn, affected by general and economic conditions, monetary
policies of the federal government, including the Federal Reserve Board
("FRB"), legislative tax policies and governmental budgetary matters.
LOANS HELD FOR INVESTMENT PORTFOLIO COMPOSITION. The majority of the Company's
loan portfolio consists of fixed and ARM loans secured by one-to four-family
residences and to a lesser extent, multi-family residential loans, commercial
real estate loans and other loans held for investment.
The following tables set forth the composition of the loans receivable held for
investment, in dollar amounts and in percentages of the respective portfolios
at the dates indicated.
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------------
1996 1995 1994
-------------------- ------------------- -------------------
Percent Percent Percent
Amounts of Total Amounts of Total Amounts of Total
--------- --------- -------- --------- -------- ---------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Loans receivable held for investment:
Mortgage loans:
One-to four-family $ 6,394.4 85.9% $5,135.4 85.2% $4,933.9 85.7
Multi-family 545.5 7.3 475.9 7.9 456.9 7.9
Commercial 467.9 6.3 376.8 6.3 349.7 6.1
Home equity loans 16.2 0.2 4.7 0.1 10.1 0.2
Total mortgage loans held for investment 7,424.0 99.7 5,992.8 99.5 5,750.6 99.9
Other loans:
Loans secured by depositors' funds 23.5 0.3 29.5 0.5 7.7 0.1
Home improvement loans --- --- 0.1 --- 0.1 ---
Total other loans 23.5 0.3 29.6 0.5 7.8 0.1
Total loans receivable held for investment 7,447.5 100.0% 6,022.4 100.0% 5,758.4 100.0%
Less:
Deferred loan origination fees and unearned
discount 48.2 58.3 61.3
Allowance for possible loan losses 105.0 105.5 103.0
Loans receivable held for investment, net $ 7,294.3 $5,858.6 $5,594.1
</TABLE>
<TABLE>
<CAPTION>
At December 31, At June 30,
-------------------- ----------------------------------------
1993 1993 1992
-------------------- ------------------- -------------------
Percent Percent Percent
Amounts of Total Amounts of Total Amounts of Total
--------- --------- -------- --------- -------- ---------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Loans receivable held for investment:
Mortgage loans:
One-to four-family $4,770.8 85.4% $4,564.6 84.7% $4,169.6 82.6%
Multi-family 456.8 8.2 460.7 8.5 491.9 9.7
Commercial 328.1 5.9 339.1 6.3 359.5 7.1
Home equity loans 19.9 0.4 22.3 0.4 23.7 0.5
Total mortgage loans held for investment 5,575.6 99.9 5,386.7 99.9 5,044.7 99.9
Other loans:
Loans secured by depositors' funds 7.2 0.1 7.0 0.1 6.9 0.1
Home improvement loans 0.2 --- 0.2 --- 0.3 ---
Total other loans 7.4 0.1 7.2 0.1 7.2 0.1
Total loans receivable held for investment 5,583.0 100.0% 5,393.9 100.0% 5,051.9 100.0%
Less:
Deferred loan origination fees and unearned
discount 59.4 56.5 50.9
Allowance for possible loan losses 147.0 136.5 130.5
Loans receivable held for investment, net $5,376.6 $5,200.9 $4,870.5
</TABLE>
The following table sets forth the composition of the Company's loans
receivable held for sale, at the dates indicated.
<TABLE>
<CAPTION>
At December 31, At June 30,
---------------------------------- ----------------
1996 1995 1994 1993 1993 1992
------- ------- ------- ------- ------- -------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Loans receivable held for sale:
Performing residential mortgage loans $ 0.3 $168.2 $ 0.5 $ --- $ --- $ ---
Guaranteed student loans 4.5 6.9 10.6 13.7 14.5 15.3
Non-performing residential mortgage loans --- --- --- 72.1 80.0 ---
Valuation allowance --- --- --- (20.0) (20.0) ---
Loans receivable held for sale, net $ 4.8 $175.1 $ 11.1 $ 65.8 $ 74.5 $ 15.3
</TABLE>
LOAN SALES AND SERVICING. Prior to 1991, the Company was actively engaged in
the sale of its No Doc and Low Doc loans in the secondary market (primarily to
FNMA). Due in part to FNMA's curtailment of purchases of No Doc and Low Doc
loans and the Company's decision in 1996 to portfolio new loan production
rather than sell loans in the secondary market, the Company's portfolio of
loans serviced for others has decreased from $2.3 billion at June 30, 1992, to
$1.0 billion at December 31, 1996. This decrease, in conjunction with increased
prepayment activity resulting from the lower interest rate environment, has
resulted in a decrease in gross servicing fee income from $23.1 million for
fiscal 1992 to $8.7 million for the year ended December 31, 1996. The net
servicing asset represents the present value of the portion of the future
servicing fee income expected to be received by the Company in excess of normal
servicing fee income, based on prepayment assumptions, net of any required
recourse reserve. The net excess servicing asset is amortized against servicing
fee income, the rate of which is evaluated annually and adjusted as a charge to
operations to the extent actual prepayments exceed estimated prepayments. As of
December 31, 1996, the Company's net excess servicing asset was $5.0 million.
LOAN MATURITY AND REPRICING
The following table shows the contractual maturities of the Company's loan
portfolio, including loans receivable held for sale, at December 31, 1996. The
table does not include prepayments or scheduled principal amortization.
Prepayments and scheduled principal amortization on mortgage loans totaled
$806.6 million for the year ended December 31, 1996.
<TABLE>
<CAPTION>
At December 31, 1996
-------------------------------------------------------------------
Mortgage Loans
---------------------------------------
One-to Four- Other Total Loans
Family Multi-Family Commercial Loans Receivable
----------- ------------ ------------ ------------ ------------
(In millions)
<S> <C> <C> <C> <C> <C>
Amounts due (1):
Within one year $ 3.3 $ 0.8 $ 0.8 $ 9.9 $ 14.8
One to five years 90.3 35.2 39.6 17.9 183.0
Over five years 6,046.1 461.2 391.0 --- 6,898.3
Total amounts due $6,139.7 $ 497.2 $ 431.4 $ 27.8 $7,096.1
</TABLE>
(1) Does not include non-accrual loans.
The following table sets forth, at December 31, 1996, the dollar amount of all
fixed rate loans contractually due and adjustable rate loans repricing after
December 31, 1997.
Due or Repricing After December 31, 1997
----------------------------------------
Fixed Adjustable Total
---------- ---------- ----------
(In millions)
Mortgage loans (1):
One-to four-family $4,102.2 $ 240.5 $4,342.7
Multi-family 424.3 56.9 481.2
Commercial 328.4 85.5 413.9
Other loans (1) 17.9 --- 17.9
Total loans receivable $4,872.8 $ 382.9 $5,255.7
______________
(1) Does not include non-accrual loans.
One-to Four-Family Mortgage Loans. The Company offers first mortgage loans
secured by one-to four-family residences, including condominiums. The Company
does not offer loans secured by cooperative units or interests therein.
The Company currently offers fixed rate one-to four-family mortgage loans and
one-to four-family ARM loans through three loan programs: (1) No Doc loans, (2)
Low Doc loans and (3) loans underwritten and made in amounts in accordance with
FNMA guidelines ("FNMA conforming" or "Full Doc" loans). No Doc and Low Doc
loans, with the exception of loans secured by condominiums, are offered in
amounts up to 75% of the lower of the appraised value or purchase price of the
property. No Doc and Low Doc loans secured by condominiums are made in amounts
up to 70% of the lower of the appraised value or purchase price of the property
for loans involving the purchase of the property, and up to 65% of the
appraised value of the property for loans to refinance existing mortgage loans.
The maximum loan amount of a No Doc or Low Doc loan is $1.0 million. The
Company requires No Doc loan applicants to complete a FNMA conforming
application and request the submission of income and asset information.
Although the Company reserves the right to verify such income and asset
information, the Company generally does not verify such information through
other sources. The Company additionally obtains credit reports on all
borrowers to ascertain the credit history of the borrower. Loans originated
under the Company's Low Doc loan program involves the same procedures and
information applicable to No Doc loans with the additional requirements that
the borrower provide tax return information and meet certain income to loan
ratios.
The Company offers fixed rate mortgage loans with terms of 10 to 30 years
secured by owner-occupied one-to four-family residences. Interest rates charged
on fixed rate loans are competitively priced on a regular basis and are
periodically determined based on market conditions. For the year ended December
31, 1996, the Company originated $1.5 billion of fixed rate loans, which
primarily consisted of one-to four-family residential mortgage loans.
The Company currently offers ARM loans secured by one-to four-family
residential properties with interest rates that adjust every year with terms of
up to 30 years. The interest rates on ARM loans fluctuate based upon a spread
above the applicable index rate used by the Company and are generally
subject to limitations on interest rate increases of 2% per year and a
limitation on the aggregate adjustment of 6% above the index at the time
of commitment over the term of the loan. The Company's ARM loans also have
interest rate floors which limit the minimum amount to which the interest rate
payable on its ARM loans may decline. Depending on the type of loan, such
interest rate floors currently range from a minimum of 100 basis points below
to a minimum of 450 basis points over the index rate used at origination. The
Company offers ARM loans at fully indexed rates and with initial interest rates
below the current fully indexed rate. As of December 31, 1996, the initial
discounted rate on these loans was 200 to 300 basis points below the Company's
fully indexed rate, which was 9.25%. For the year ended December 31, 1996, the
Company originated $0.8 billion of ARM loans, which primarily consisted of
one-to four-family residential loans. At December 31, 1996, 33.9% of the
Company's one-to four-family residential mortgage loans consisted of ARM loans.
The volume and types of ARM loans originated by the Company have been affected
by such market factors as the level of interest rates, competition, consumer
preferences and the availability of funds. The Company will continue to offer
ARM loans, however, there can be no assurance that in the future the Company
will be able to originate a sufficient volume of ARM loans to increase or
maintain the proportion that these loans bear to total loans. The retention of
ARM loans, as opposed to fixed rate residential mortgage loans, in the
Company's loan portfolio serves to reduce the Company's exposure to increases
in interest rates. However, ARM loans generally pose credit risks different
from the risks inherent in fixed rate loans, primarily because as interest
rates rise, the underlying payments of the borrower rise, thereby increasing
the potential for default. In particular, the Company's loans which bear
initial discounted interest rates involve greater risks of default due to the
greater potential increase in the borrower's payment after the first year of
the loan.
The Company also originates ARM loans secured by first mortgages on
non-owner-occupied one-to four-family properties pursuant to the same
underwriting guidelines applicable to similarly situated owner-occupied one-to
four-family properties but in amounts which are limited to 70% of the lower of
the appraised value or purchase price for loans involving the purchase of the
property and up to 65% of the appraised value of the property for loans
involving the refinancing of an existing mortgage. Additionally, the Company
requires the submission of rental information and considers such information in
arriving at its underwriting determination. The Company charges higher
origination fees and rates of interest with respect to these loans as compared
to its other one-to four-family ARM loans secured by owner-occupied properties
and imposes penalties for early repayment.
The Company currently offers ARM loans secured by second mortgages on one-to
four-family, owner-occupied residences. The Company currently originates such
second mortgage loans only when the Company holds the existing mortgage on the
property securing the loan. The Company previously originated fixed rate second
mortgage loans and second mortgage loans secured by properties where the
Company did not hold the first mortgage. The underwriting standards and
procedures applicable to these loans are the same as its one-to four-family
first mortgage loans, except such loans are offered in amounts up to $150,000
with terms up to 20 years.
The Company also offers home equity lines of credit which are secured by
mortgages on one-to four-family properties. The underwriting standards
applicable to these loans are the same as other one-to four-family loans except
such loans are offered with terms up to 15 years in amounts, including any
balance of the first mortgage, up to 65% of the appraised value of the property
with a maximum loan amount of $125,000. As of December 31, 1996, loans drawn
against home equity lines of credit totaled $16.2 million, or 0.2%, of total
loans held for investment.
The Company's mortgage loans generally include due-on-sale clauses which
provide the Company with the contractual right to deem the loan immediately due
and payable in the event that the borrower transfers ownership of the property
without the Company's consent. It is the Company's policy to enforce
due-on-sale provisions within the applicable regulations and guidelines imposed
by federal and state laws and secondary market purchasers.
MULTI-FAMILY LENDING. The Company offers fixed rate and ARM loans secured by
residential properties with five or more units and other mixed use properties
(primarily residential properties with business or retail space) located in the
Company's primary lending area. As of December 31, 1996, the Company had 4,981
of such loans with an average loan balance of $109,507. Multi-family loans are
generally made with terms of 5 to 25 years in amounts up to a maximum of $3.0
million. These loans are made in amounts up to 70% of the appraised value or
purchase price of the property for loans to purchase the property and up to 65%
of the appraised value of the property for loans to refinance an existing
mortgage. The Company's multi-family loans are underwritten pursuant to the
same standards and procedures applicable to its one-to four-family No Doc and
Low Doc loans; however, the Company additionally requires the submission of
documentation regarding rental and vacancy levels, rental income, property
expense statements and tax return information. The Company verifies rental
income of the property but does not verify the borrower's personal income
levels. The Company imposes penalties for early repayment on all
non-owner-occupied multi-family properties and owner-occupied multi-family
properties with seven units or more.
COMMERCIAL REAL ESTATE LENDING. The Company also originates commercial real
estate loans located in the Company's primary lending area. The Company's
commercial real estate loans are offered in the same amounts and under the same
terms and underwriting guidelines applicable to its multi-family loans. The
Company imposes penalties for early repayments on its commercial real estate
loans. As of December 31, 1996, the Company had 3,440 of such loans with an
average loan balance of $136,035. The largest commercial real estate loans in
the Company's portfolio at December 31, 1996 were two loans with an outstanding
balance of $4.4 million secured by non-residential buildings located in New
York.
STUDENT LOANS AND OTHER LENDING. The Company also originates student loans
guaranteed by federal and New York State agencies and personal savings loans
collateralized by a borrower's existing savings account balance at the Bank.
With the exception of student loans which the Company generally sells in the
secondary market upon the borrower's commencement of repayment of the loan,
these other loans are originated for retention. The Company does not
currently originate or purchase any other types of business or consumer loans
such as loans secured by automobiles, unsecured business loans or credit card
loans.
LOAN APPROVAL, AUTHORITY AND UNDERWRITING. Due to the Company's emphasis on an
equity-based lending strategy and reliance upon the value of the property
securing a loan to reduce the potential risk of principal loss to the Company,
particularly with respect to its No Doc and Low Doc loan programs, the Company
has established a comprehensive in-house appraisal system which currently
utilizes 41 staff appraisers, 36 of whom are licensed or certified by New York
State, of which 7 are certified in New Jersey and 1 certified in all states. The
Company also utilizes independent appraisers for most of its National Mortgage
production. The Company's appraisal system involves a three-tier review for
every mortgage loan originated by the Company, consisting of an appraisal
conducted or reviewed by a certified appraiser, which is then reviewed by the
Company's underwriting personnel and finally by management's Executive Mortgage
Loan Committee for loans originated by the Bank, and an underwriting manager
for loans originated by GPMC.
Pursuant to the Bank's loan approval policies, all mortgage loans are
approved by the Executive Mortgage Loan Committee. Additionally, all one-to
four-family mortgage loans exceeding $1.0 million and commercial loans
exceeding $3.0 million, require the approval of the Executive Vice President.
Mortgage loans in excess of $1.0 million would require an additional appraisal
conducted by an outside appraiser. The Bank also limits the maximum loan
amount to any one individual or business entity to $15.0 million. The Board of
Directors is provided a listing of loans approved by the Executive Mortgage
Loan Committee on a monthly basis. GPMC loans are subject to various approval
requirements depending on the size of the loans. Loans greater than $650,000
are approved by the Director of Credit Administration. In recent years, the
Company has made no loans in excess of $4.4 million.
DELINQUENT LOANS AND FORECLOSED ASSETS
The Company's collection procedures utilize automated collection letters and
telephone contact with borrowers to obtain repayment. For delinquent mortgage
loans with monthly payments of $2,000 or less, delinquency notices are sent
when a loan becomes 15 days past due with a second notice being sent after the
loan is 30 days past due. On or about the 40th day of delinquency a notice is
sent informing the borrower that a breach has occurred indicating the date
foreclosure will commence. After 60 days a default letter is sent requesting
payment of the arrears to avoid acceleration of the loan. In the event payment
is not received by the 90th day of delinquency, the Company refers the loan to
its attorneys and a certified letter is sent informing the borrower that
foreclosure action has commenced. With respect to delinquent mortgage loans
with monthly payments in excess of $2,000, the same procedures generally apply
except that the notices are sent at earlier dates of delinquency, and such
loans are referred to the Company's attorney for foreclosure upon the loan
becoming 60 days past due. During the period of delinquency additional
telephone contacts with the borrower are made to make definite payment
arrangements, determine the reason for the arrears and refer borrowers to a
financial counselor.
The Company discontinues accruing interest and charges-off the accrued interest
on all delinquent mortgage loans upon the loan becoming 90 days past due. The
Company generally does not restructure the original terms of delinquent loans
by modifying the interest rate paid or capitalizing past due interest.
The Company attempts to accommodate the needs of its borrowers who find
themselves in difficult circumstances and minimize its potential losses upon
foreclosure by emphasizing the use of forbearance agreements. These forbearance
agreements generally provide that the Company will agree to delay foreclosure
proceedings if the borrower agrees to repay any accrued interest and principal
arrears over a period of up to 36 months in addition to paying the principal
and interest due in accordance with the original terms of the loan. The
forbearance agreements typically provide that in the event the borrower is not
current with payments under the forbearance agreement or any payments due under
the original mortgage note, the Company may resume its foreclosure action. As
of December 31, 1996, the Company had $67.5 million of loans, or 19.0%, of
total non-performing loans subject to such forbearance agreements, the
substantial majority of which were one-to four-family mortgage loans.
Historically, the Company has relied solely on its collection and foreclosure
process to reduce its level of non-performing loans. This process, combined
with the Company's low loan to value ratios, has in the past protected the
Company from high loan losses. Due to increases in the cost of holding other
real estate owned, the Company continues to investigate alternative methods for
reducing non-performing loans that may result in a higher present value
received by the Company.
Based upon the Company's loan-to-value policies, the Company does not believe
that the overall risk of loss associated with its current loan portfolio and
non-performing assets is excessive. However, the Company's underwriting
determinations rely heavily upon the market value of the properties securing
the loans and, consequently, no assurances can be given that declines
in real estate values in the Company's primary lending area will not result in
unanticipated principal losses to the Company or that declines in the
regional economy will not result in increased delinquencies or increases in
foreclosure-related expenses and expenses related to its other real estate.
At December 31, 1996, 1995, 1994 and 1993, loans delinquent 90 days or more
were as follows:
At December 31,
----------------------------------------------
1996 1995
---------------------- ----------------------
90 days or more
----------------------------------------------
Principal Principal
Numbers of Balance of Number of Balance of
Loans Loans Loans Loans
---------- ---------- ---------- ----------
(Dollars in millions)
Mortgage loans:
One-to four-family 2,559 $ 242.7 2,737 $ 254.3
Multi-family 430 46.0 533 57.9
Commercial real estate 271 35.2 358 46.8
Home equity loans 7 0.5 16 0.8
Total mortgage loans 3,267 324.4 3,644 359.8
Other loans 168 0.1 --- ---
Total loans 3,435 $ 324.5 3,644 $ 359.8
Delinquent loans to total loans 4.36% 5.81%
At December 31,
----------------------------------------------
1994 1993(1)
---------------------- ----------------------
90 days or more
----------------------------------------------
Principal Principal
Numbers of Balance of Number or Balance of
Loans Loans Loans Loans
---------- ---------- ---------- ----------
(Dollars in millions)
Mortgage loans:
One -to four-family 2,438 $ 220.9 4,664 $ 467.8
Multi-family 619 68.6 871 93.1
Commercial real estate 413 56.8 473 65.0
Home equity loans 14 0.7 26 1.2
Total mortgage loans 3,484 347.0 6,034 627.1
Other loans 46 0.3 64 0.5
Total loans 3,530 $ 347.3 6,098 $ 627.6
Delinquent loans to total loans 6.02% 11.11%
(1) Includes non-performing mortgage loans held for sale, net of charge-offs
and valuation reserves.
The following table sets forth information regarding all non-accrual loans,
including loans in forbearance, loans which are 90 days or more delinquent but
on which the Company is accruing interest and other real estate owned at the
dates indicated.
<TABLE>
<CAPTION>
At December 31, At June 30,
------------------------------------------- --------------------------
1996 1995 1994 1993 1993 1992
-------- -------- -------- ------------- ------------- -----------
(Dollars in mILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual mortgage loans $ 356.0 $ 402.1 $ 391.9 $ 678.3(1) $ 635.4(1) $ 622.7
Non-accrual other loans (2) 0.1 --- --- --- --- ---
Other loans 90 days or more delinquent
and still accruing --- --- 0.3 0.5 0.4 0.8
Total non-performing loans (3) 356.1 402.1 392.2 678.8 635.8 623.5
Other real estate owned, net (4) 28.6 29.2 54.0 74.8 72.6 46.9
Total non-performing assets $ 384.7 $ 431.3 $ 446.2 $ 753.6 $ 708.4 $ 670.4
Non-performing loans to total loans 4.78% 6.49% 6.80% 12.02%(1)(5) 11.63%(1)(5) 12.30%
Non-performing assets to total assets 2.89% 2.94% 6.42% 10.21%(1)(5) 10.99%(1)(5) 11.40%
</TABLE>
______________
(1) Includes net non-performing mortgage loans held for sale.
(2) Excluding certain other loans delinquent 90 days or more, such as
guaranteed student loans, on which principal and interest are guaranteed by
the U.S. government and certain other loans on which delinquent principal and
interest may be deducted from the borrower's deposit account balances.
(3) As of December 31, 1996, non-accrual loans included 2,936 one-to
four-family loans, with an aggregate balance of $270.7 million, 460
multi-family loans with an aggregate balance of $48.3 million, 290 commercial
real estate loans with an aggregate balance of $36.5 million, 172 other loans
with an aggregate balance of $0.1 million and 7 home equity loans with an
aggregate balance of $0.5 million.
(4) Net of related valuation allowance of $1.3 million, $2.2 million, $5.1
million, $14.4 million, $19.5 million and, $11.7 million for foreclosed real
estate at December 31, 1996, 1995, 1994, 1993 and June 30, 1993 and 1992,
respectively.
(5) Excluding the effect of charge-offs and the $20 million valuation
allowance relating to the portfolio of non-performing mortgage loans held for
sale, the Company's ratio of non-performing loans to total loans and
non-performing assets to total assets would have been 12.61% and 10.70% at
December 31, 1993 and 12.27% and 11.58%, at June 30, 1993, respectively.
The following table sets forth information regarding the effect of non-accrual
loans on interest if all non-accrual loans had been performing in accordance
with their original terms.
Year Ended December 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(In millions)
Interest Income
As originally contracted $ 45.1 $ 50.8 $ 72.3
As recognized (22.9) (33.7) (40.3)
Reduction of interest income $ 22.2 $ 17.1 $ 32.0
At December 31, 1996, the Company's net other real estate owned totaled $28.6
million and was held directly by the Company and by subsidiaries of the Company
which were formed for the purpose of holding and maintaining certain other real
estate. See "Subsidiary Activities." At such date, net other real estate owned
was comprised of 220 one-to four-family properties with an aggregate carrying
value of $17.5 million, 39 multi-family properties with an aggregate carrying
value of $4.0 million and 87 commercial real estate properties with an
aggregate carrying value of $8.4 million. The Company or an independent
inspector generally conducts monthly external inspections on all properties
securing loans in foreclosure and generally conducts external appraisals on all
properties prior to taking ownership of the property. Based upon such
inspections and appraisals, the Company will charge off any loan principal it
deems necessary at such times. The Company or an independent inspector conducts
weekly inspections of its foreclosed real estate and periodically adjusts its
valuation allowance for possible declines in the value of other real estate
owned. The Company's valuation allowance for other real estate owned at
December 31, 1996 totaled $1.3 million, or 4.3% of the aggregate gross value of
other real estate owned. The Company is currently offering for sale
substantially all real estate owned as a result of foreclosure through brokers
and through its own personnel.
The Company's policies permit the financing of the sale of its foreclosed real
estate on substantially the same terms applicable to its other real estate
mortgage loans with the exception that the Company may loan up to 85% of the
lesser of the appraised value or sales price of the foreclosed property.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is maintained through provisions for
possible loan losses based on management's on-going comprehensive evaluation of
the risk inherent in its loan portfolio in consideration of the trends in its
loan portfolio, the national and regional economies and the real estate
markets covering the Company's portfolio. The Company's loan loss allowance
determinations also incorporate factors and analyses which consider the
potential principal loss associated with the loan, costs of acquiring the
property securing the loan through foreclosure or deed in lieu thereof, the
periods of time involved with the acquisition and sale of such property, costs
and expenses associated with maintaining and holding the property until sale,
and the costs associated with the Company's inability to utilize funds for
other income producing activities during the estimated holding period of the
property. In this regard, on at least a quarterly basis, the Company conducts:
a review of the amount and frequency of delinquent loans which become
non-performing and the average period of time for such loans to become
non-performing; a review of the amount and frequency of non-accrual loans that
are transferred to other real estate owned and the costs and average periods
of time associated with such transfer; a review of the historical holding
periods of foreclosed properties; a review of historical principal loss
experience of sales of its foreclosed properties; and, based on recent sales
activity, an analysis of the average estimated principal loss on loans in its
portfolio. Through these analyses the Company attempts to maintain an allowance
for possible loan losses sufficient to fund, in the aggregate, future net cash
flow shortfalls related to the resolution of problem loans (both known and
unknown but reasonably estimable) in its loan portfolio. The Company believes
that, based on its loan underwriting criteria, including its lower
loan-to-value ratio requirements, and historical charge-off activity, which has
historically been below other savings institutions, the Company's current level
of allowance for possible loan losses is adequate.
The following table sets forth the Company's allowance for possible loan losses
at the dates and for the periods indicated. The balances below represent
general loan loss reserves and are not allocable to specific loans in the
Company's portfolio.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, December 31, Year Ended June 30,
----------------------------------------------------------------------
1996 1995 1994 1993 1993 1992
---------- ---------- ---------- ----------- ----------- --------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C> <C>
Balance beginning of period $ 105.5 $ 103.0 $ 147.0 $ 136.5 $ 130.5 $ 83.8
Provisions charged to income 15.7 9.5 32.3 25.3 63.6 59.9
Transfer from (to) allowance for
loans held for sale --- --- 11.6 --- (20.0) ---
Loans charged-off:
Mortgage loans held for investment (4.7) (5.3) (15.3) (9.4) (5.6) (4.2)
Other loans (0.2) --- --- --- --- ---
Mortgage loans held for sale --- --- (4.9) --- (20.0) ---
Bulk sale charge-off of
non-performing loans --- --- (56.1) --- --- ---
Net loan foreclosure costs (12.6) (10.2) (16.8) (6.1) (12.0) (9.0)
Total charge-offs (17.5) (15.5) (93.1) (15.5) (37.6) (13.2)
Recoveries 1.3 8.5(2) 5.2 0.7 --- ---
Balance end of period $ 105.0 $ 105.5 $ 103.0 $ 147.0 $ 136.5 $ 130.5
Ratio of net charge-offs during the
period to average loans outstanding
during the period 0.25% 0.12% 1.54% 0.27% 0.71% 0.27%
Ratio of allowance for possible
loan losses to total loans
receivable at the end of the period 1.41% 1.75% 1.79% 2.63%(1) 2.52%(1) 2.58%
Ratio of allowance for possible loan
losses to total non-performing
loans at the end of the period 29.48% 26.24% 26.26% 23.45% 23.70% 20.94%
</TABLE>
(1) Excludes $52.1 million and $60.0 million, net, of non-performing mortgage
loans held for sale at December 31, 1993 and June 30, 1993, respectively.
(2) Includes a $6.1 million recovery of 1994's bulk sale charge off.
The following table sets forth the Company's allocation of the allowance for
possible loan losses by loan category and the percent of loans in each category
to total loans held for investment at December 31, 1996, 1995, 1994, 1993 and
June 30, 1993 and 1992. The entire allowance for possible loan losses is a
general valuation allowance applicable to the entire loan portfolio, and the
portion of the allowance for possible loan losses allocated to each loan
category has been estimated for presentation purposes and does not represent a
limitation on the total allowance available to each loan category.
<TABLE>
<CAPTION>
At December 31, At June 30,
----------------------------------------------------------------- ----------------------------------
1996 1995 1994 1993 1993 1992
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Percentage Percentage Percentage Percentage Percentage Percentage
of Loans of Loans of Loans of Loans of Loans of Loans
in in in in in in
Category Category Category Category Category Category
to to to to to to
Total Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ ------- ------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loan Category:Mortgage loans:
One-to-four family $ 75.5 85.9% $ 72.5 85.2% $ 66.5 85.7% $ 99.1 85.4% $ 87.3 84.7% $ 83.4 82.6%
Multi-family residential 16.0 7.3 18.2 7.9 19.8 7.9 26.2 8.2 27.0 8.5 25.8 9.7
Commercial 13.2 6.3 14.6 6.3 16.4 6.1 21.1 5.9 21.6 6.3 20.6 7.1
Home equity loans from
lines of credit 0.3 0.2 0.2 0.1 0.3 0.2 0.6 0.4 0.6 0.4 0.7 0.5
Other loans --- 0.3 --- 0.5 --- 0.1 --- 0.1 --- 0.1 --- 0.1
Total allowance for
possible loan losses $105.0 100.0% $105.5 100.0% $103.0 100.0% $147.0 100.0% $136.5 100.0% $130.5 100.0%
</TABLE>
ENVIRONMENTAL ISSUES
The Company encounters certain environmental risks in its lending activities.
Under federal and state environmental laws, lenders may become liable for costs
of cleaning up hazardous materials found on property securing its loans. In
addition, the existence of hazardous materials may make it unattractive for a
lender to foreclose on such properties. Although environmental risks are
usually associated with loans secured by commercial real estate, risks also may
be substantial for loans secured by residential real estate if environmental
contamination makes security property unsuitable for use. This could also have
a negative effect on nearby property values. The Company attempts to control
its risk by training its appraisers, underwriters and members of its Executive
Mortgage Loan Committee to be cognizant of signs indicative of environmental
hazards. Prior to foreclosure, the Company additionally conducts environmental
risk assessments on one-to four-family properties, where the Company has an
indication of an environmental problem, and on multi-family and commercial
properties, which are used for activities which have a greater degree of
environmental risk, such as dry cleaning establishments and other industrial
uses. The Company additionally conducts housing and building code violation
searches on all multi-family properties prior to foreclosure to assess any
potential environmental problems. The Company currently does not make loans
secured by gasoline stations, automobile repair facilities or properties on
which it is known that gasoline tanks are located. As of December 31, 1996, the
Company had 25 loans with an aggregate balance of $2.8 million secured by gas
stations, 87 loans aggregating $9.4 million secured primarily by automobile
repair facilities or parking facilities, and 138 loans aggregating $21.6
million secured by factories, warehouses and other industrial buildings. At
that date, the Company's other real estate owned included four warehouse or
industrial properties with an aggregate carrying value of $0.4 million, all of
which were held by a subsidiary of the Company. No gas stations or parking
facilities were owned by the Company as of December 31, 1996. The Company has
been named as a defendant in several legal complaints involving alleged
ingesting of lead based paint, chips or dust by infant plaintiffs. See
Item 3 - "Legal Proceedings."
The Company believes its procedures regarding the assessment of environmental
risk are adequate and, as of December 31, 1996, the Company was unaware of any
environmental issues which would subject it to any material liability at this
time. However, no assurance can be given that the values of properties securing
loans in the Company's portfolio will not be adversely affected by unforeseen
environmental risks.
INTEREST RATE RISK MANAGEMENT
Interest rate risk arises in the ordinary course of the Company's business, as
the repricing characteristics of its mortgage loans do not necessarily match
those of its deposit liabilities. The resulting interest rate risk is managed
by careful attention to the mix of asset maturities and deposit offerings and
by adjustments to the Company's investment portfolio and the use of off balance
sheet instruments such as interest rate swaps and options. The investment
strategies are designed and implemented (within policies and limits approved by
the Board of Directors) by the Asset and Liability Management Committee,
("ALCO") comprised of the Chief Executive Officer, the Vice Chairman and other
Senior Management Officers.
The Company entered into interest rate swap contracts to manage interest rate
risk. The notional amount of these instruments are not reflected in the
Company's balance sheet. At December 31, 1996, the notional amount of these
contracts approximates $300.0 million. These contracts have a term of
approximately 3 years, under which the Company pays an average fixed rate of
6.33% and receives an average variable rate of 5.52%.
SECURITIES INVESTMENT ACTIVITIES
The Board of Directors sets the securities investment policies of the Company
and the Bank. These policies contain guidelines and limits regarding the
credit quality, liquidity and market risk of the securities portfolios.
The Company's investment policy permits investments in various types of
marketable investments including U.S. Treasury obligations, securities of
various federal agencies, mortgage-backed securities, corporate debt
securities, money market instruments, banker's acceptances, commercial paper
and municipal obligations.
The Company's money market investments consist of interest-bearing deposits in
other banks, federal funds sold and securities purchased under agreements to
resell ("reverse repurchase agreements"). Under these reverse repurchase
agreements the Company advances cash at a negotiated rate of interest which is
repaid the following business day. These agreements generally bear a higher
rate of interest than federal funds sold and are collateralized by securities
having market values of at least 102% of the amount of the funds advanced which
are held by a third party custodian.
The Company has, through a third party agent bank/custodian, a securities
lending program whereby the Company receives a fee for lending its U.S.
government securities to securities dealers. The securities are collateralized
by other U.S. government and federal agency securities having a market value of
at least 102% of the loaned securities which are held by the third party
bank/custodian. Pursuant to this program, the third party agent bank
indemnifies the Company for losses related to borrower default, market risk and
delivery failures.
The Company designates securities as held to maturity or available for sale.
Securities held for indefinite periods of time for use in asset/liability
management are classified as available for sale and are carried at fair value
with unrealized gains or losses excluded from earnings and reported as a
separate component of stockholders' equity, net of tax.
The table below sets forth certain information regarding the carrying and
market values of the Company's money market investments, securities available
for sale and held to maturity.
<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------
1996 1995 1994
-------------------- -------------------- --------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
--------- --------- --------- --------- --------- ---------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Money market investments (1) $ 494.1 $ 494.1 $1,550.7 $1,550.7 $ 265.0 $ 265.0
Investment securities:
Securities available for sale:
Government and Federal agency obligations
U.S. Treasury notes/bills $1,944.3 $1,928.4 $1,352.3 $1,356.3 $ --- $ ---
Agency discount notes/Asset backed
securities 66.4 66.4 2,417.0 2,417.0 --- ---
Mortgage-backed securities 1,881.0 1,857.9 1,668.8 1,693.8 --- ---
Collateralized mortgage obligation 32.4 32.4 --- --- --- ---
Trust certificates collateralized
by GNMA securities 409.8 406.5 430.3 428.8 --- ---
Other 63.9 63.8 0.6 0.6 --- ---
Total securities available for sale $4,397.8 $4,355.4 $5,869.0 $5,896.5 $ --- $ ---
Securities held to maturity:
U.S. government and agencies $ --- $ -- $ --- $ --- $ 703.3 $ 698.2
Mortgage-backed securities --- --- --- --- 28.4 29.1
Tax-exempt municipals 0.6 0.6 0.7 0.7 0.7 0.6
Financial 3.4 3.4 3.6 3.7 3.5 3.5
Other --- --- --- --- 0.8 0.8
Total securities held to maturity $ 4.0 $ 4.0 $ 4.3 $ 4.4 $ 736.7 $ 732.2
</TABLE>
(1) Consists of interest-bearing deposits in other banks, federal funds sold
and securities purchased under resale agreements.
The table below sets forth certain information regarding the amortized cost,
weighted average yields and maturities of the Company's money market
investments and debt securities at December 31, 1996. There were no securities
(exclusive of obligations of the U.S. government and federal agencies) issued
by any one entity with a total carrying value in excess of 10% of stockholders'
equity at December 31, 1996.
<TABLE>
<CAPTION>
At December 31, 1996
--------------------------------------------------------------------------------------------------------
One Year One to Five to More than
or Less Five Years Ten Years Ten Years Total Securities
---------------- --------------- ------------- --------------- -------------------------------------
Average
Remaining Estim-
AMOR- WEIGHTED AMOR- WEIGHTED AMOR- WEIGHTED AMOR- WEIGHTED YEARS AMOR- ated WEIGHTED
TIZED AVERAGE TIZED AVERAGE TIZED AVERAGE TIZED AVERAGE TO TIZED FAIR AVERAGE
COST YIELD COST YIELD COST YIELD COST YIELD MATURITY COST VALUE YIELD
------- ------ -------- ------- ------ ------- -------- ------ --------- -------- -------- -------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money market investments(1) $ 494.1 6.75% $ --- ---% $ --- ---% $ --- ---% $ --- $ 494.1 $ 494.1 6.75%
Securities available for sale
U.S. Treasury notes/bills 1,143.1 5.47 801.2 5.33 --- --- --- --- 1.58 1,944.3 1,928.4 5.41
Agency discount notes/AsseT
backed securities --- --- 18.0 6.01 48.4 5.75 --- --- 6.11 66.4 66.4 5.82
Mortgage-backed securities --- --- 189.0 5.97 216.7 6.63 1,475.3 6.83 15.89(2) 1,881.0 1,857.9 6.72
Collateralized mortgage
obligations --- --- --- --- --- --- 32.4 6.61 18.73(2) 32.4 32.4 6.61
Trust certificates
collateralized
by GNMA securities --- --- --- --- 409.8 5.97 --- --- 8.90 409.8 406.5 5.97
Other --- --- --- --- --- --- 63.9 5.69 --- 63.9 63.8 5.69
Total securities
available for sale $1,143.1 5.47% $1,008.2 5.46% $674.9 6.17% $1,571.6 6.78% $4,397.8 $4,355.4 6.04%
Securities held to maturitY
Tax exempt municipals $ --- ---% $ --- ---% $ --- ---% $ 0.6 7.50% 11.33 $ 0.6 $ 0.6 7.50%
Financial --- --- 2.2 8.25 0.1 7.77 1.1 8.00 12.41 3.4 3.4 8.16
Total securities held
to maturity $ --- ---% $ 2.2 8.25% $ 0.1 7.77% $ 1.7 7.82% $ 4.0 $ 4.0 8.06%
</TABLE>
(1) Consists of interest-bearing deposits on other banks, federal funds sold,
and securities purchased under resale agreements.
(2) Mortgage-backed securities are presented based upon contractual maturity.
The estimated average life of these securities, taking into account both
scheduled and non-scheduled principal payments is 5.7 years.
During the year ended December 31, 1996, the Company sold available for sale
securities aggregating $3.2 billion, resulting in gross realized gains of $2.7
million and gross realized losses of $2.1 million. There were no sales of
securities during the years ended December 31, 1995 and 1994.
SOURCES OF FUNDS
GENERAL. Deposits, payments on loans and mortgage-backed securities and
maturities and redemptions of investment securities are the primary sources of
the Company's funds for lending, investing and other general purposes. Although
the Company has not had any borrowed funds outstanding during the periods being
reported, the Company has access to confirmed lines of credit from an unrelated
financial institution aggregating $35.0 million.
DEPOSITS. The Company offers a variety of deposit accounts having a range of
interest rates and terms. The Company's deposits consist of various types of
savings, NOW, non-interest bearing checking, money market and certificates of
deposit. The flow of deposits is influenced significantly by general economic
conditions, changes in prevailing interest rates and competition. The Company's
deposits are obtained primarily from the areas served by its consumer branch
network. Management determines the Company's deposit rates based upon market
conditions and local competition. The Company relies primarily on competitive
rates of interest, offering promotional rates, marketing and long-standing
relationships with customers to attract and retain deposits. Certificates
of deposit accounts in excess of $100,000 are not actively solicited by
the Company.
At December 31, 1996, the Company had outstanding $687.8 million in
certificates of deposit in amounts of $100,000 or more, maturing as follows:
Weighted
Amount Average Rate
--------- ------------
(Dollars in millions)
Maturity Period:
Three months or less $ 161.0 4.89%
Over three through six months 133.4 5.09
Over six through twelve months 181.2 5.12
Over twelve months 212.2 5.88
Total $ 687.8 5.29%
The following table sets forth the distribution of the Company's deposit
accounts at the dates indicated and the weighted average nominal interest rates
on each category of deposits presented. Management does not believe that the
use of period end balances instead of average balances results in any material
differences to the information presented.
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------------------------
1996 1995
-------------------------------- ---------------------------------
Weighted Weighted
Percent Average Percent Average
of Total Nominal of Total Nominal
Amount Deposits Rate Amount Deposits Rate
--------- ---------- --------- ---------- ---------- ---------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Account type:
Savings and club $ 1,901.7 16.60% 2.77% $ 2,034.7 15.77% 2.79%
NOW and checking 524.2 4.58 1.86 501.8 3.89 1.89
Variable rate savings 1,853.7 16.19 3.36 1,995.3 15.47 3.52
Money market 561.3 4.90 3.25 635.7 4.93 3.31
Total 4,840.9 42.27 2.88 5,167.5 40.06 2.99
Term certificates of deposit:
Certificates of deposit over $100,000 687.8 6.01 5.29 771.0 5.98 5.72
Certificates of deposit less than
$100,000 with original maturities of:
Six months or less 227.1 1.98 3.83 589.7 4.57 4.87
Six to 12 months 1,811.2 15.82 4.63 2,111.9 16.37 5.20
12 to 30 months 1,702.1 14.86 5.44 1,659.7 12.87 5.88
30 to 48 months 258.9 2.26 6.26 272.3 2.11 5.93
48 to 72 months 695.6 6.07 5.88 944.3 7.32 6.42
72 to 84 months 72.0 0.63 6.56 80.6 0.63 6.80
IRA and Keoghs less than 3 years 1,156.7 10.10 5.08 1,301.3 10.09 5.42
Total term certificates of deposit 6,611.4 57.73 5.17 7,730.8 59.94 5.62
Total deposits $11,452.3 100.00% 4.21% $12,898.3 100.00 4.57%
</TABLE>
At December 31
--------------------------------
1994
--------------------------------
Weighted
Average Percent
Nominal of Total
Amount Deposits Rate
---------- --------- ---------
(Dollars in millions)
Account type:
Savings and club $ 602.2 11.53% 3.15%
NOW and checking 110.1 2.11 2.24
Variable rate savings 1,182.9 22.65 3.25
Money market 427.0 8.17 3.15
Total 2,322.2 44.46 3.16
Term certificates of deposit:
Certificates of deposit over $100,000 238.0 4.56 5.83
Certificates of deposit less than
$100,000 with original maturities of:
Six months or less 158.1 3.03 3.92
Six to 12 months 374.0 7.16 4.43
12 to 30 months 865.2 16.55 4.70
30 to 48 months 37.0 0.71 5.62
48 to 72 months 872.4 16.70 6.81
72 to 84 months 39.1 0.75 6.14
IRA and Keoghs less than 3 years 317.5 6.08 4.48
Total term certificates of deposit 2,901.3 55.54 5.36
Total deposits $ 5,223.5 100.00% 4.38%
The following table presents, by various rate categories, the amount of
certificates of deposit outstanding at the dates indicated.
<TABLE>
<CAPTION>
At December 31, Maturities at December 31, 1996
------------------------------------------ --------------------------------------------
Within One to
1996 1995 1994 1993 One Year Three Years Thereafter Total
--------- --------- --------- --------- --------- ---------- --------- ----------
(In millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Certificates of
deposit accounts:
3.99% or less $1,237.3 $ 127.8 $ 486.1 $1,013.0 $1,196.1 $ 41.0 $ 0.2 $1,237.3
4.00% to 4.99% 1,149.5 1,215.0 861.8 634.5 919.6 204.6 25.3 1,149.5
5.00% to 5.99% 3,166.9 3,869.6 721.9 435.2 2,086.3 1,004.9 75.7 3,166.9
6.00% to 6.99% 751.5 1,893.2 367.2 252.0 346.7 246.2 158.6 751.5
7.00% to 7.99% 297.2 606.2 306.3 352.5 153.4 116.8 27.0 297.2
8.00% to 8.99% 8.1 11.1 157.9 193.1 4.9 2.4 0.8 8.1
9.00% or greater 0.9 7.9 0.1 44.6 0.2 0.7 --- 0.9
Total $6,611.4 $7,730.8 $2,901.3 $2,924.9 $4,707.2 $1,616.6 $ 287.6 $6,611.4
</TABLE>
SUBSIDIARY ACTIVITIES The Company has formed two subsidiaries:
GreenPoint Community Development Corp. This for-profit community development
subsidiary was incorporated in 1993. The subsidiary offers lending programs,
development opportunities and assistance, consulting and other activities which
promote the objective of greater access to affordable housing for low-and
moderate-income persons residing in the New York metropolitan area. GreenPoint
Community Development Corp. is a subsidiary of the holding company.
GREENPOINT BANK. The Bank was organized in 1868 as a New York State chartered
mutual savings bank. On January 28, 1994, the Bank converted from the mutual
to the stock form of ownership, and 100% of its outstanding shares were
acquired by the Company. The Bank is the principal subsidiary of the Company.
As of December 31, 1996, the Bank has formed ten subsidiaries:
GREENPOINT MORTGAGE CORP. This subsidiary was incorporated on October 12, 1994
and began operations in the first quarter of 1995. On July 7, 1995, GPMC
acquired the wholesale residential mortgage lending business of
BarclaysAmerican/Mortgage Corp. ("BAM"). GPMC's activities consist of the
origination, sale and servicing of mortgage loans.
GREENPOINT MORTGAGE TRUST. This subsidiary was incorporated on February 16,
1996, as a real estate investment trust established for the purpose of
acquiring, holding and managing real estate mortgage assets.
GREENPOINT PURCHASING CORP. This subsidiary was incorporated on July 19, 1996,
with an agreement between the Company and the Nassau County Industrial
Development Agency. This agreement enables the Company, on a sales tax exempt
basis, to (1) purchase and/or lease machinery and equipment for the Lake
Success facility and (2) renovate and improve the facility.
GREENPOINT CORPORATE OFFICER LIFE INSURANCE. This subsidiary was incorporated
on July 25, 1996, as an insurance trust established for the purpose of
purchasing corporate life insurance policies for the officers of the Company.
3090 OCEAN AVENUE REALTY CORP. This subsidiary was incorporated on June 6,
1996, as a real estate investment subsidiary.
OTHER REAL ESTATE SUBSIDIARIES. The Bank has formed five wholly-owned
subsidiary corporations, all of which are incorporated under the laws of the
State of New York, for the purpose of holding and maintaining certain
properties acquired by the Bank as a result of foreclosure proceedings or deeds
in lieu thereof. As of December 31, 1996, four of these subsidiaries were
active. The Bank attempts to limit the carrying value of property held by any
one subsidiary to approximately $5 million. Accordingly, in the event the Bank
acquires additional properties through foreclosure or deeds in lieu thereof,
the Bank may form additional subsidiaries for the purpose of holding and
maintaining such properties. The properties selected by the Bank to be held in
its subsidiaries generally consist of multi-family properties with five units
or more, commercial properties and one-to four-family properties which have
been identified by the Bank as having attributes which may subject the Bank to
liabilities beyond those normally associated with its other real estate such as
properties which are not in compliance with building codes or properties with
potential environmental problems. A description of the Bank's subsidiaries are
set forth below:
NEERG CORP. This subsidiary was formed in January 1990 and currently holds 32
properties having an aggregate carrying value of $3.1 million and an aggregate
appraised value of $4.1 million, as of December 31, 1996, based on the
Company's most recent appraisals.
298 15TH STREET REALTY CORP. This subsidiary was formed in January 1993 and
currently holds 30 properties having an aggregate carrying value of $2.8
million and an aggregate appraised value of $3.9 million as of December 31,
1996, based on the Company's most recent appraisals.
NEERG SECOND CORP. This subsidiary was formed in June 1993 and currently holds
24 properties having an aggregate carrying value of $2.5 million and an
aggregate appraised value of $3.2 million, as of December 31, 1996, based on
the Company's most recent appraisals.
ALPHA REO CORPORATION. This subsidiary was formed in March 1994 and currently
holds 30 properties having an aggregate carrying value of $2.7 million and an
aggregate appraised value of $3.7 million, as of December 31, 1996, based on
the Company's most recent appraisals.
BETA REO CORP. This subsidiary was formed in June 1994 and currently holds no
properties.
SAVINGS BANK LIFE INSURANCE
As an issuing Company, the Company offers Savings Bank Life Insurance ("SBLI")
to its customers up to the legal maximum of $50,000 per insured individual and,
as a trustee Company, offers an additional $500,000 in group coverage per
insured under SBLI's Financial Institution Group Life Insurance policy. The
Company also offers insurance coverage for qualifying full-time employees in
amounts up to $1,000,000 and group mortgage life insurance in amounts up to
$110,000. The SBLI Department's activities are segregated from the Company and,
while they do not materially affect the Company's earnings, management believes
that offering SBLI is beneficial to the Company's relationship with its
depositors and the general public. The SBLI Department pays its own expenses
and reimburses the Company for expenses incurred on its behalf.
PERSONNEL
As of December 31, 1996, the Company had 1,807 full-time employees and 283
part-time employees. The employees are not represented by a collective
bargaining unit and the Company considers its relationship with its employees
to be good.
FEDERAL TAXATION
Generally, the Company and its subsidiaries report income on a consolidated
calendar year basis using the accrual method of accounting and are subject to
federal income taxation in the same manner as other corporations with certain
exceptions, including particularly, the Bank's addition to its tax reserve for
bad debts as discussed below. The following discussion of tax matters is
intended as a summary and does not purport to be a comprehensive description of
the tax rules applicable to the Company and its subsidiaries. The Company has
not been audited by the Internal Revenue Service during the last five years.
BAD DEBT RESERVES. For tax years prior to 1996, under the Internal Revenue
Code a special bad debt deduction for additions to the tax bad debt reserve was
allowed. Recently enacted federal legislation eliminated this reserve method.
For tax years beginning after December 31, 1995, the Bank is only permitted to
take federal deductions for bad debts on the basis of actual loan charge off
activity (specific charge-offs). This legislation also requires that the Bank
recapture into taxable income the portion of existing tax bad debt reserve
created in tax years beginning after December 31, 1987 over a six year period.
The amount of such reserve subject to recapture at December 31, 1996 is
approximately $2 million.
Provided the Bank continues to satisfy certain definitional tests and other
conditions, for New York State and City income tax purposes, the Bank is
permitted to continue to take special reserve method bad debt deductions. The
deductible annual addition to the state reserve may be computed using a
specific formula based on the Bank's loss history ("Experience Method") or a
statutory percentage equal to 32% of the Bank's New York State or City taxable
income ("Percentage Method"). The Bank used the percentage method for 1995 and
expects to use the percentage method for 1996.
TAXABLE DISTRIBUTIONS AND RECAPTURE. Under prior federal law, tax bad debt
reserves created prior to January 1, 1988 were subject to recapture into
taxable income should the Bank fail to meet certain thrift asset and
definitional tests. New federal legislation eliminated these thrift related
recapture rules. However, under current law, pre-1988 reserve remain subject
to recapture should the Bank make certain non dividend distributions or cease
to maintain a bank charter. Management has no intention of taking such actions.
At December 31, 1996, the Bank's total federal pre-1988 reserve was
approximately $140 million. This reserve reflects the cumulative effects of
federal tax deductions by the Bank for which no Federal income tax provision
has been made.
The Bank also maintains a state and local tax reserve for qualifying loans in
excess of the federal reserve for which no state and local tax has been
provided. The amount of the Bank's state and city tax reserve for qualifying
loans in excess of the Federal Reserve balance as of December 31, 1996 was
approximately $168 million. In the event the Bank were to allow "qualifying
assets" to fall below 60% of total assets or otherwise fail definitional tests,
the Bank would no longer be subject to the New York State and City reserve
method of computing bad debt deductions as described above. As a result, the
Bank would record a charge relating to this balance of the then existing tax
reserves. Future bad debt deductions would be based on a "specific loan
charge-off" method which is closely reflective of financial statement loan
charge-off activity. Management is not contemplating any actions that would
cause recapture of the qualifying reserves into taxable income.
CORPORATE ALTERNATIVE MINIMUM TAX. The Internal Revenue Code of 1986, as
amended, imposes a tax on alternative minimum taxable income ("AMT") at a rate
of 20%. AMTI is calculated as federal taxable income adjusted for certain
items of "tax preference". For tax years beginning before January 1, 1996, an
environmental tax of 0.12% of the excess of AMTI (with certain modifications)
over $2 million, was imposed on corporations, including the Company, whether or
not an alternative minimum tax ("AMT") was paid. The Company does not expect
to be subject to the AMT. The Company was subject to an environmental tax
liability for the tax year ended December 31, 1995, which was not material.
DIVIDENDS RECEIVED EXCLUSION AND OTHER MATTERS. The Company may exclude from
its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends received exclusion
is generally 70% in the case of dividends received from unaffiliated
corporations with which the Company will not file a consolidated tax return,
except that if the Company owns more than 20% of the stock of a corporation
distributing a dividend, then 80% of any dividends received may be excluded.
STATE AND LOCAL TAXATION
NEW YORK STATE AND NEW YORK CITY TAXATION. The Company and the Bank report
income on a combined calendar year basis to both New York State and New York
City. New York State Franchise Tax on corporations is imposed in an amount
equal to the greater of (a) 9% of "entire net income" allocable to New York
State (b) 3% of "alternative entire net income" allocable to New York State
(c) 0.01% of the average value of assets allocable to New York State or (d)
nominal minimum tax. Entire net income is based on federal taxable income,
subject to certain modifications. Alternative entire net income is equal to
entire net income without certain modifications. The New York City Corporation
Tax is imposed using similar alternative taxable income methods and rates.
A temporary Metropolitan Transportation Business Tax Surcharge on Banking
corporations doing business in the Metropolitan District has been applied since
1982. The Company transacts a significant portion of its business within this
District and is subject to this surcharge. For the tax year ended December 31,
1996, the surcharge rate is 17% of the State franchise tax liability. For
1996, an additional 2.5% tax surcharge on the New York State Franchise Tax is
also imposed on the Company. New York City does not impose surcharges
applicable to the Company.
The Company is being audited by the New York State Department of Taxation and
Finance for the tax years 1992, 1993 and 1994. The Company is also being
audited by the New York City Department of Finance for the tax years 1992 and
1993. Management of the Company believes that any actions taken by the taxing
authorities will not materially affect the financial condition and results of
operations of the Company.
MULTI STATE TAXATION. GPMC engages in mortgage lending activities in
approximately 40 states. Generally, GPMC is subject to tax in a state on the
basis of income generating activities occurring within that state. Generally,
state taxes are imposed on allocated income, average assets or a nominal
minimum tax. For the tax year ended December 31, 1996, GPMC is expected to
file returns in most states using the allocated income alternative.
DELAWARE STATE TAXATION. As a Delaware holding company not earning income in
Delaware, the Company is exempt from Delaware corporate income tax but is
required to file an annual report with and pay an annual franchise tax to the
State of Delaware. The tax is imposed as a percentage of the capital base of
the Company with an annual maximum of $150,000.
BANK REGULATION AND SUPERVISION
The Bank is a New York State chartered savings bank and its deposit accounts
are insured up to applicable limits by the FDIC. The Bank is subject to
extensive regulation by the New York State Banking Department (the "Banking
Department"), as its chartering agency, and by the FDIC, as the deposit
insurer. The Bank must file reports with the Banking Department and the FDIC
concerning its activities and financial condition, in addition to obtaining
regulatory approvals prior to entering into certain transactions such as
establishing branches, mergers with, or acquisitions of, other depository
institutions and the acquisition of assets and the assumption of liabilities of
other financial services companies. There are periodic examinations by the
Banking Department and the FDIC to assess the Bank's compliance with various
regulatory requirements. This regulation and supervision establishes a
comprehensive framework of activities in which a savings bank can engage and is
intended primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such regulation, whether by the Banking Department, the FDIC or
through legislation, could have a material adverse impact on the Company and
the Bank and their operations and stockholders. The Company is also required to
file certain reports with, and otherwise comply with the rules and regulations
of the Board of Governors of the FRB and of the United States Securities and
Exchange Commission ("SEC") under the federal securities laws. Certain of the
regulatory requirements applicable to the Company and to the Bank are referred
to below or elsewhere herein.
NEW YORK STATE LAW. The exercise by an FDIC-insured savings bank of the lending
and investment powers of a savings bank under the New York State Banking Law is
limited by FDIC regulations and other federal law and regulations. In
particular, the applicable provisions of New York State Banking law and
regulations governing the investment authority and activities of an FDIC
insured state-chartered savings bank have been effectively limited by the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and
the FDIC regulations issued pursuant thereto. See "Federal Deposit Insurance
Corporation Improvement Act of 1991-Restrictions on State-Chartered Banks."
The Bank derives its lending, investment and other authority primarily from the
applicable provisions of New York State Banking Law and the regulations of the
Banking Department, as limited by FDIC regulations. See "Federal Deposit
Insurance Corporation Improvement Act of 1991-Restrictions on State-Chartered
Banks." Under these laws and regulations, savings banks, including the Bank,
may invest in real estate mortgages, consumer and commercial loans, certain
types of debt securities, including certain corporate debt securities and
obligations of federal, state and local governments and agencies, certain types
of corporate equity securities and certain other assets subject to specified
limits.
New York State chartered savings banks may also invest in subsidiaries under
their service corporation investment power. A savings bank may use this power
to invest in corporations that engage in various activities authorized for
savings banks, plus any additional activities which may be authorized by the
Banking Department. Investment by a savings bank in the stock, capital notes
and debentures of its service corporations is limited to 3% of the bank's
assets, and such investments, together with the bank's loans to its service
corporations, may not exceed 10% of the savings bank's assets.
Under the New York State Banking Law, the Superintendent may issue an order to
a New York State chartered Banking institution to appear and explain an
apparent violation of law, to discontinue unauthorized or unsafe practices and
to keep prescribed books and accounts. Upon a finding by the Banking Department
that any director, employee or officer of any banking organization has violated
any law, or has continued unauthorized or unsafe practices in conducting the
business of the banking organization after having been notified by the
Superintendent to discontinue such practices, such director, employee or
officer may be removed from office after notice and an opportunity to be heard.
The Bank does not know of any past or current practice, condition or violation
that might lead to any proceeding by the Superintendent or the Banking
Department against the Bank or any of its directors, officers or employees.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991. On December 19,
1991, FDICIA became law. While FDICIA primarily addresses required capital
levels of insured institutions, and prompt corrective action for such
institutions as capital levels decline, it also imposes a number of new
mandatory supervisory measures on commercial banks, savings banks and savings
associations.
FDICIA requires financial institutions to take certain actions relating to
their internal operations, including: providing annual reports on financial
condition and management to the appropriate federal banking regulators, having
an annual audit of financial statements performed by an independent public
accountant and establishing an independent audit committee comprised solely of
outside directors. FDICIA and its implementing regulations also mandates
certain operational and managerial standards on financial institutions relating
to internal controls, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation, fees and benefits.
RESTRICTIONS UPON STATE-CHARTERED BANKS. FDICIA added new Section 24 to the
Federal Deposit Insurance Act (the "FDI Act") which generally limits the
activities and equity investments of state-chartered FDIC insured banks and
their subsidiaries to those permissible for national banks and their
subsidiaries, unless such activities and investments are specifically exempted
by Section 24 thereof ("Section 24") or consented to by the FDIC.
In October 1992, the FDIC adopted final regulations governing the equity
investments of such banks, effective on December 9, 1992, which generally
prohibit equity investments in securities and real estate by such banks and
require the divestiture of such investments by December 19, 1996. Section 24
provides an exception for investments in common and preferred stocks listed on
a national securities exchange or the shares of registered investment companies
by a bank if (1) the bank held such types of investments during the 14 month
period from September 30, 1990 through November 26, 1991, (2) the state in
which the bank is chartered permitted such investments as of September 30,
1991, and (3) the bank notifies the FDIC and obtains approval from the FDIC to
make or retain such investments. Upon receiving such FDIC approval, an
institution's investment in such equity securities will be subject to an
aggregate limit up to its core capital. Section 24 also contains an exception
for certain majority owned subsidiaries. Any bank holding impermissible equity
investments that do not receive FDIC approval must submit to the FDIC a plan
for divesting such investments as quickly and prudently as possible.
In December 1993 the FDIC adopted final regulations pertaining to the activity
restrictions imposed upon insured savings banks and their subsidiaries by
Section 24. Savings banks not engaging in such activities but that desire to
engage in otherwise impermissible activities may apply for approval from the
FDIC to do so if such bank meets its minimum capital requirements. The FDIC
will not approve an activity that it determines to present a significant risk
to the FDIC insurance funds.
PROMPT CORRECTIVE ACTION. FDICIA also establishes a system of prompt
corrective action to resolve the problems of undercapitalized institutions. The
FDIC, FRB, the Office of the Comptroller of the Currency ("OCC") and the Office
of Thrift Supervision ("OTS") have adopted final rules, effective December 19,
1992, which require such regulators to take certain supervisory actions against
undercapitalized institutions, the severity of which depends upon the
institution's degree of capitalization. Regulatory action taken will depend on
the level of capitalization of the institution and may range from restrictions
on capital distributions and dividends to seizure of the institution.
Generally, subject to a narrow exception, FDICIA requires the Banking regulator
to appoint a receiver or conservator for an institution that is critically
undercapitalized within 90 days after becoming critically undercapitalized.
The final rule adopted by the FDIC on September 15, 1992, to implement the
prompt corrective action section of FDICIA, generally provides that an insured
institution that has a total capital to risk-based assets ratio of less than
8.0%, core capital to risk-based assets of less than 4.0% or core capital to
total assets ("leverage capital ratio") of less than 4.0% would be considered
to be "undercapitalized." An insured institution that has total capital to
risk-based assets of less than 6.0%, core capital to risk-based assets of less
than 3.0% or a leverage capital ratio that is less than 3.0% would be
considered to be "significantly undercapitalized" and an insured institution
that has a tangible capital to assets ratio equal to or less than 2.0% would be
deemed to be "critically undercapitalized." See "Capital Maintenance."
Generally, under the rule, an insured institution that is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized" becomes
immediately subject to certain regulatory restrictions, including, but not
limited to, restrictions on growth, investment activities, capital
distributions and affiliate transactions. The filing of a capital restoration
plan, which must be guaranteed by any parent holding company, is also required.
In addition, "critically undercapitalized" institutions must receive prior
written approval from the FDIC to engage in any material transaction other than
in the normal course of business.
INSURANCE OF DEPOSIT ACCOUNTS. The Bank is a member of the Bank Insurance Fund
("BIF") of the FDIC. As a result of the HSA acquisition, approximately 76% of
the Bank's deposits (or approximately $9.86 billion), are insured by the BIF,
while the remainder, (or approximately $3.04 billion), are insured by the
Savings Association Insurance Fund ("SAIF") of the FDIC. Deposit insurance
premium rates on the Bank's BIF-insured deposits are currently 1.296 and 6.48
basis points on the Bank's SAIF deposits.
Under the FDI Act, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC. The
management of the Bank does not know of any practice, condition or violation
that might lead to termination of deposit insurance. At December 31, 1996, the
Bank's capital exceeded the capital requirements imposed by the FDIC.
CAPITAL MAINTENANCE. FDIC regulations require insured banks, such as the Bank,
to maintain minimum levels of capital. The regulations establish a minimum
leverage capital ratio requirement of not less than 3% for banks that receive
the highest examination rating awarded by the FDIC. For all other banks, the
minimum leverage capital requirement is 3% plus an additional cushion of at
least 100 to 200 basis points. Tier 1 capital (also referred to as "Core
capital") is comprised of the sum of common stockholders' equity,
non-cumulative perpetual preferred stock (including any related surplus) and
minority interests in consolidated subsidiaries, minus all intangible assets
(other than qualifying servicing rights). At December 31, 1996, the Bank's
ratio of Tier 1 capital to total assets equaled 6.64%, which exceeded the
minimum leverage requirement.
The FDIC also requires that savings banks meet a risk-based capital standard.
The risk-based capital standard requires the maintenance of total capital
(which is defined as core capital and supplementary capital) to risk-weighted
assets of at least 8% and Tier 1 capital to risk-weighted assets of at least
4%. In determining the amount of risk-weighted assets, all assets, plus certain
off-balance sheet items, are multiplied by a risk-weight of 0% to 100%, based
on the risks the FDIC believes are inherent in the type of asset or off-balance
sheet item. The components of core capital are equivalent to those discussed
above under the leverage capital ratio requirement. The components of
supplementary capital currently include cumulative perpetual preferred stock,
perpetual preferred stock, mandatory convertible securities, subordinated debt,
intermediate preferred stock and allowance for possible loan and lease losses.
Allowance for possible loan and lease losses includable in supplementary
capital is limited to a maximum of 1.25% of risk-weighted assets. Overall, the
amount of capital counted toward supplementary capital cannot exceed 100% of
Tier 1 capital.
At December 31, 1996, the Bank's total capital to risk-weighted assets
("risk-based capital ratio") was 16.40% and its Tier 1 capital to risk-weighted
assets ("Tier 1 risk-based capital ratio") was 15.15%, which exceeded the FDIC
risk-based capital requirements.
LOANS-TO-ONE-BORROWER LIMITATIONS. With certain limited exceptions, a New
York State chartered savings bank may not make loans or extend credit for
commercial, corporate or business purposes (including lease financing) to a
single borrower, the aggregate amount of which would be in excess of 15% of the
bank's net worth. The Bank currently complies with all applicable
loans-to-one-borrower limitations.
FDICIA requires the federal banking agencies to revise their risk-based capital
guidelines to, among other things, take adequate account of interest rate risk.
The federal banking agencies continue to consider modifications of the capital
requirements applicable to banking organizations. In August 1995, the Federal
banking agencies amended their risk-based capital guidelines to provide that
the banking agencies will include in their evaluations of a bank's capital
adequacy an assessment of the bank's exposure to declines in the economic value
of the bank's capital due to changes in interest rates. The agencies also
issued a proposed policy statement that describes the process that the agencies
will use to measure and assess the exposure of a bank's capital to changes in
interest rates. The agencies would issue proposed regulations for establishing
explicit charges against capital to account for interest rate risk.
STANDARDS FOR SAFETY AND SOUNDNESS. The FDI Act, as amended by FDICIA and the
Riegle Community Development and Regulatory Improvement Act of 1994 ("Community
Development Act"), requires the FDIC, together with the other federal bank
regulatory agencies, to prescribe standards, by regulations or guidelines,
relating to internal controls, information systems and internal audit systems,
loan documentation, credit underwriting, interest rate risk exposure, asset
growth, assets quality, earnings, stock valuation, and compensation, fees and
benefits and such other operational and managerial standards as the agencies
deem appropriate. The FDIC and the federal bank regulatory agencies have
adopted, effective August 9, 1995, a set of guidelines prescribing safety and
soundness standards pursuant to FDICIA as amended. The guidelines establish
general standards relating to internal controls and information systems,
internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, and compensation, fees and benefits. In general, the
guidelines require, among other things, appropriate systems and practices to
identify and manage the risks and exposures specified in the guidelines. In
addition, the FDIC adopted regulations that authorize, but do not require, the
FDIC to order an institution that has been given notice by the FDIC that it is
not satisfying any of such safety and soundness standards to submit a
compliance plan. If, after being so notified, an institution fails to submit
an acceptable compliance plan or fails in any material respect to implement an
accepted compliance plan, the FDIC must issue an order directing action to
correct the deficiency and may issue an order directing other actions of the
types to which an undercapitalized association is subject under the "prompt
corrective action" provisions of FDICIA. If an institution fails to comply
with such an order, the FDIC may seek to enforce such order in judicial
proceedings and to impose civil money penalties.
ANNUAL INDEPENDENT AUDIT AND REPORTING REQUIREMENTS. On June 2, 1993, the FDIC
adopted a final rule and related guidelines implementing the external audit,
audit committee and management reporting requirements of Section 36 of the FDI
Act. Under the FDIC rule, each insured depository institution with $500 million
or more in total assets as of the beginning of each fiscal year after December
31, 1992 must have an annual audit of its financial statements by an
independent accountant in accordance with GAAP and file an annual report with
the FDIC, its primary federal regulator and any appropriate state Banking
agency. For an insured depository institution that is a subsidiary of a holding
company, the independent audit requirement of the rule may be satisfied by
audited financial statements of the consolidated holding company. The annual
report required by the rule must contain: financial statements audited by an
independent public accountant; a statement of management's responsibilities for
preparing the annual financial statements, establishing and maintaining
adequate internal controls and procedures for financial reporting, and
complying with laws, regulations, or guidelines relating to safety and
soundness designated by the FDIC and the appropriate Federal Banking agency; a
separate assessment by management on the effectiveness of the internal controls
and procedures and the institution's compliance with the designated safety and
soundness laws, regulations and guidelines; and the independent public
accountant's report on management's assertions concerning the internal controls
and procedures.
In addition, insured depository institutions with total assets of $500 million
or more are required to establish an audit committee comprised entirely of
independent outside directors to review the annual audit findings and reports
with management and the independent public accountant. There are more stringent
criteria for audit committees of institutions with $3 billion or more in total
assets, such as the Bank, including the requirements that at least two
committee members have banking or related financial management experience and
that the committee have access to its own outside counsel. The Bank has an
audit committee in place which complies with this requirement.
EXTENSION OF CREDIT. Under FDICIA, the federal banking agencies are required
to adopt uniform regulations prescribing standards for extensions of credit
that are secured by liens on interests in real estate or made for the purpose
of financing the construction of a building or other improvements to real
estate. Under joint regulations adopted by the banking agencies, which became
effective March 19, 1993, all financial institutions must adopt and maintain
written policies that establish appropriate limits and standards for extensions
of credit that are secured by liens or interests in real estate or are made for
the purpose of financing permanent improvements to real estate. These policies
must establish loan portfolio diversification standards, prudent underwriting
standards (including loan-to-value limits) that are clear and measurable, loan
administration procedures, and documentation, approval and reporting
requirements. The real estate lending policies must reflect consideration of
the interagency Guidelines for Real Estate Lending Policies that have been
adopted by the federal bank regulators.
COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act ("CRA"), as
implemented by FDIC regulations, a savings institution has a continuing and
affirmative obligation consistent with its safe and sound operation to help
meet the credit needs of its entire community, including low and moderate
income neighborhoods. The CRA does not establish specific lending requirements
or programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community. The CRA requires the FDIC, in
connection with its examination of a savings institution, to assess the
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by such
institution. The CRA requires public disclosure of an institution's CRA rating
and requires the FDIC to provide a written evaluation of an institution's CRA
performance utilizing a four-tiered descriptive rating system. The Bank's
latest CRA rating received during 1996 from the FDIC, was "outstanding", the
highest rating available.
NEW YORK STATE REGULATION. New York State also requires banking institutions
organized in New York State to serve the credit needs of its local community
("NYCRA"), which are substantially similar to those imposed by the CRA.
Pursuant to the NYCRA, a bank is subject to an annual review by the Banking
Department in regards to a bank's CRA performance. The NYCRA requires the
Banking Department to make an annual written assessment of a bank's compliance
with the NYCRA, utilizing a four-tiered rating system, and make such assessment
available to the public. The NYCRA also requires the Superintendent to consider
a bank's NYCRA rating when reviewing a bank's application to engage in certain
transactions, including mergers, asset purchases and the establishment of
branch offices or automated teller machines, and provides that such assessment
may serve as a basis for the denial of any such application. The Bank's NYCRA
rating, received at its last review from the Banking Department in 1996, was
"outstanding", the highest rating available.
FEDERAL RESERVE SYSTEM. Under FRB regulations, the Bank is required to
maintain non-interest-earning reserves against its transaction accounts
(primarily NOW and regular checking accounts). The FRB regulations generally
require that an institution maintain reserves of 3% against aggregate
transaction accounts of $52.0 million or less (subject to adjustment by the
FRB) plus 10% (subject to adjustment by the FRB between 8% and 14%) against
that portion of total transaction accounts in excess of $52.0 million. The
first $4.3 million of otherwise reservable balances (subject to adjustments by
the FRB) are exempted from the reserve requirements. The Bank is in compliance
with the foregoing requirements. Because required reserves must be maintained
in the form of either vault cash, a non-interest-bearing account at a Federal
Reserve Bank or a pass-through account as defined by the FRB, the effect of
this reserve requirement is to reduce the Bank's interest-earning assets.
INTERSTATE BANKING AND BRANCHING. In the past, interstate banking has been
limited under the Bank Holding Company Act (the "BHCA") to those states that
permitted interstate banking by statute. New York was one of a number of
states that, subject to the reciprocity conditions of the New York Banking Law
(the "Banking Law"), permitted out-of-state bank holding companies to acquire
New York banks. By 1994, most states had adopted statutes permitting
multistate bank holding companies. The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 ("Interstate Banking Act") was enacted on
September 29, 1994. The Interstate Banking Act now permits approval under the
BHCA of the acquisition by a bank holding company that is well capitalized and
managed of a bank outside the holding company's home state regardless of
whether the acquisition is permitted under the law of the state of the acquired
bank. The Federal Reserve Board may not approve an acquisition under the BHCA
that would result in the acquiring holding company controlling more than 10% of
the deposits in the United States or more than 30% of the deposits in any
particular state.
In the past, branching across state lines was not generally available to a
state bank, such as the Bank. Out-of-state branches are authorized under the
Banking Law, but similar authority does not exist generally under the laws of
most other states. The Interstate Banking Act, beginning June 1, 1997, permits
the responsible banking agencies to approve merger transactions between banks
located in different states, regardless of whether the merger would be
prohibited under state law. Accordingly, the Interstate Banking Act will
permit a bank to have branches in more than one state. A state may "opt in" to
the provisions of the Interstate Banking Act prior to June 1, 1997, and a state
may "opt out" of the provisions of the Interstate Banking Act by adopting
appropriate legislation before that date.
The Interstate Banking Act will facilitate the consolidation of the banking
industry that has taken place over recent years and will allow the creation of
larger, presumably more efficient, banking networks, which may affect the
competition the Bank faces in the future. The effect of the Interstate Banking
Act on the Bank, if any, is likely to occur as banking institutions, state
legislators and bank regulators respond to the new federal regulatory
structure. The states will have to establish appropriate corporate law, tax
and regulatory structures to adjust to the growth of new interstate banks.
DIVIDEND RESTRICTIONS. New York law imposes certain restrictions on the
payment of dividends, including a provision that, without regulatory approval,
the Bank cannot declare and pay dividends in any calendar year in excess of its
"net profits" for such year combined with its "retained net profits" of the
two preceding years, less any required transfer to surplus.
HOLDING COMPANY REGULATION AND SUPERVISION
FEDERAL REGULATION. The Company is a registered bank holding company pursuant
to the Bank Holding Company Act of 1956, as amended ("BHCA").
The Company is subject to examination, regulation and periodic reporting under
the BHCA, as administered by the FRB. The FRB has adopted capital adequacy
guidelines for bank holding companies (on a consolidated basis) substantially
similar to those of the FDIC for the Bank.
The Company is required, under certain circumstances, to obtain the prior
approval of the FRB to acquire all, or substantially all, of the assets of any
bank or bank holding company. Prior FRB approval is required for the Company to
acquire direct or indirect ownership or control of any voting securities of any
bank or bank holding company if, after giving effect to such acquisition, it
would, directly or indirectly, own or control more than 5% of any class of
voting shares of such bank or bank holding company. The BHCA also prohibits the
acquisition by the Company of more than 5% of the voting shares, or
substantially all the assets of a bank located outside the State of New York
unless such an acquisition is specifically authorized by the laws of the state
in which such bank is located. New York State banking law permits the
interstate acquisition of banking institutions by bank holding companies on a
nationwide and reciprocal basis. See Item 5 "Restrictions on Acquisition of
the Company and the Bank. "In addition to the approval of the FRB, before any
bank acquisition can be completed, prior approval thereof may also be required
to be obtained from other agencies having supervisory jurisdiction over the
bank to be acquired, including the Banking Department.
The Company is required to give the FRB prior written notice of any purchase or
redemption of its outstanding equity securities if the gross consideration for
the purchase or redemption, when combined with the net consideration paid for
all such purchases or redemptions during the preceding 12 months, is equal to
10% or more of the Company's consolidated net worth. The FRB may disapprove
such a purchase or redemption if it determines that the proposal would
constitute an unsafe and unsound practice, or would violate any law,
regulation, FRB order or directive, or any condition imposed by, or written
agreement with, the FRB.
The status of the Company as a registered bank holding company under the BHCA
does not exempt it from certain federal and state laws and regulations
applicable to corporations generally, including, without limitation, certain
provisions of the federal securities laws.
In addition, a bank holding company is generally prohibited from engaging in,
or acquiring direct or indirect control of any company engaged in non-banking
activities. One of the principal exceptions to this prohibition is for
activities found by the FRB to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Some of the activities
that the FRB has determined by regulation to be closely related to banking are:
(i) making or servicing loans; (ii) performing certain data processing
services; (iii) providing discount brokerage services; (iv) acting as a
fiduciary, investment or financial advisor; (v) leasing personal or real
property; (vi) making investments in corporations or projects designed
primarily to promote community welfare; and (vii) acquiring a savings and loan
association.
Under the FDI Act, depository institutions are liable to the FDIC for losses
suffered or anticipated by the FDIC in connection with the default of a
commonly controlled depository institution or any assistance provided by the
FDIC to such an institution in danger of default. This law would have potential
applicability if the Company ever acquired as a separate subsidiary a
depository institution in addition to the Bank.
Subsidiary banks of a bank holding company are subject to certain quantitative
and qualitative restrictions imposed by the Federal Reserve Act on any
extension of credit to, or purchase of assets from, or letter of credit issued
on behalf of, the bank holding company or its subsidiaries, and on the
investment in or acceptance of stocks or securities of such holding company or
its subsidiaries as collateral for loans. In addition, provisions of the
Federal Reserve Act and federal regulations limit the amounts of, and establish
required procedures and credit standards with respect to, loans and other
extensions of credit to officers, Directors and principal shareholders of the
Bank, the Company, any subsidiary of the Company and related interests of such
persons. Moreover, subsidiaries of bank holding companies are prohibited from
engaging in certain tie-in arrangements (with the Company or any of its
subsidiaries) in connection with any extension of credit, lease or sale of
property or furnishing of services.
The Company and its subsidiary, the Bank, will be affected by the monetary and
fiscal policies of various agencies of the United States Government, including
the Federal Reserve System. In view of changing conditions in the national
economy and in the money markets, it is impossible for management of the
Company to accurately predict future changes in monetary policy or the effect
of such changes on the business or financial condition of the Company.
NEW YORK STATE BANK HOLDING COMPANY REGULATION. In addition to federal bank
holding company regulations, a bank holding company organized or doing business
in New York State may be also subject to regulation under the New York State
Banking Law. The term "bank holding company," for the purposes of the New York
State Banking Law, is defined generally to include any person, company or trust
that directly or indirectly either controls the election of a majority of the
directors or owns, controls or holds with power to vote more than 10% of the
voting stock of a bank holding company or, if the company is a banking
institution, another banking institution, or 10% or more of the voting stock of
each of two or more banking institutions. In general, a bank holding company
controlling, directly or indirectly, only one banking institution is not deemed
to be a bank holding company for the purposes of the New York State Banking
Law. Under New York State Banking Law, the prior approval of the Banking
Department is required before: (1) any action is taken that causes any company
to become a bank holding company; (2) any action is taken that causes any
banking institution to become or to be merged or consolidated with a subsidiary
of a bank holding company; (3) any bank holding company acquires direct or
indirect ownership or control of more than 5% of the voting stock of a banking
institution; (4) any bank holding company or subsidiary thereof acquires all or
substantially all of the assets of a banking institution; or (5) any action is
taken that causes any bank holding company to merge or consolidate with another
bank holding company. Additionally, certain restrictions apply to New York
State bank holding companies regarding the acquisition of banking institutions
which have been chartered five years or less and are located in smaller
communities. Officers, directors and employees of New York State bank holding
companies are subject to limitations regarding their affiliation with
securities underwriting or brokerage firms and other bank holding companies and
limitations regarding loans obtained from its subsidiaries. Although the
Company is not currently a bank holding company for purposes of New York State
law, any future acquisition of ownership, control, or the power to vote 10% or
more of the voting stock of another bank or bank holding company would cause it
to become such.
ACQUISITION OF THE COMPANY-FEDERAL RESTRICTIONS. Under the Federal Change in
Bank Control Act ("CIBCA"), a notice must be submitted to the FRB if any person
(including a company), or group acting in concert, seeks to acquire 10% or more
of the Company's shares of Common Stock outstanding, unless the FRB has found
that the acquisition will not result in a change in control of the Company.
Under the CIBCA, the FRB has 60 days within which to act on such notice, taking
into consideration certain factors, including the financial and managerial
resources of the acquirer, the convenience and needs of the communities served
by the Company and the Bank, and the anti-trust effects of the acquisition.
Under the BHCA, any company would be required to obtain prior approval from the
FRB before it may obtain "control" of the Company within the meaning of the
BHCA. Control generally is defined to mean the ownership or power to vote 25
percent or more of any class of voting securities of the Company or the ability
to control in any manner the election of a majority of the Company's directors.
See "Holding Company Regulation."
NEW YORK STATE CHANGE-IN-CONTROL RESTRICTIONS. In addition to the CIBCA, the
New York State Banking Law generally requires prior approval of the New York
State Banking Board before any action is taken that causes any company to
acquire direct or indirect control of a banking institution which is organized
in New York State. See "Restrictions on Acquisition of the Company and the
Bank-Regulatory Restrictions-New York State Change-in-Control Regulation."
FEDERAL SECURITIES LAW. The Company's Common Stock is registered with the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Company is subject to the information, proxy solicitation, insider trading
restrictions and other requirements under the Exchange Act.
ITEM 2. PROPERTIES
The Company's executive office is located at 90 Park Avenue, New York, New
York. This location contains approximately 41.1 thousand square feet of
commercial office space, located on the 4th floor, which the Company leases.
The Company also has an operating center at 1981 Marcus Avenue, Lake Success,
New York. This location contains approximately 105.3 thousand square feet of
commercial office space, which the Company leases.
The Company operates its consumer banking activities out of 76 branches located
throughout the New York Metropolitan area.
The Company operates its mortgage lending activities from its Lake Success
operating center, as well as Charlotte, North Carolina and Englewood Cliffs,
New Jersey. Hub offices are located in California, Connecticut, Florida,
Illinois, Massachusetts, Pennsylvania, Texas and Virginia.
ITEM 3. LEGAL PROCEEDINGS
PENDING LITIGATION
With the exception of the matters set forth below, the Company is not involved
in any pending legal proceedings other than routine legal proceedings occurring
in the ordinary course of business which, in the aggregate, involve amounts
which are believed by management to be immaterial to the consolidated financial
statements of the Company. The Bank has been named as a defendant in thirteen
unrelated legal complaints which assert that infant plaintiffs sustained
personal injuries from the ingestion of lead based paint, chips or dust.
Additionally, there are eleven other instances of threatened litigation. The
complaints are in various early stages of discovery. Outside counsel has
advised the Bank that because discovery on these claims has only recently
begun, counsel is not yet in a position to express an opinion as to the Bank's
liability or to quantify the Bank's potential exposure, if any, in dollar terms
at this time. The Company currently believes that such liability exposure, if
any, would not be material to the Bank's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to the Company's shareholders during the quarter ended
December 31, 1996.
ITEM 4A. EXECUTIVE OFFICERS
The following sets forth certain information regarding the individuals who are
deemed to be executive officers of the Company.
THOMAS S. JOHNSON, 56, has been the Chairman, President and Chief Executive
Officer of the Company and of the Bank since joining the Company in August
1993. Mr. Johnson has served as President of both Chemical Bank and
Manufacturers Hanover Trust Company. He is a Director of R.R. Donnelley & Sons
Company, a printing company, Online Resources & Communications Corporation, and
of a trustee of not-for-profit organizations including The Institute of
International Education, The Asia Society, The United States Japan Foundation,
WNET Channel 13, New York and Trinity College. A graduate of Trinity, Mr.
Johnson received a masters degree in business administration from Harvard
University.
BHARAT B. BHATT, 53, joined the Company in July 1995 and serves as Vice
Chairman of the Company and the Bank. Prior to joining the Company, Mr. Bhatt
was the Chief Financial Officer of Shawmut National Corporation (1992 -1994),
Senior Vice President at Mellon Bank (1989-1992) and Vice President at Chemical
Bank (1971-1989). Mr. Bhatt attended the Management Program at Harvard
Business School. Mr. Bhatt holds a Bachelor of Laws and a Bachelor of Commerce
degree from the University of Bombay. Mr. Bhatt is also a member of the
Institute of Chartered Accountants.
BERNADETTE ARIAS, 50, joined the Bank in 1963 and serves as an Executive Vice
President of the Company and the Bank. Her primary area of responsibility is
Consumer Banking Services. Mrs. Arias holds an undergraduate degree in
Accounting and a graduate degree in Marketing from New York University. She is
a Board Member of the Helen Keller Services for the Blind and the Futures in
Education foundation.
MARTIN S. DASH, 54, joined the Bank in 1964 and serves as an Executive Vice
President of the Company and the Bank. His primary area of responsibility is
Mortgage Lending and Servicing. Mr. Dash holds a Business Degree from Bernard
Baruch School of Business Administration of the City University of New York and
studied toward a masters degree in business administration at the Bernard M.
Baruch Graduate Business School. Mr. Dash is on the Board of the New York
Hospital Medical Center of Queens' Advisory Board and is a member of various
community and industry organizations including the Board of Managers of the
Flushing/Bayside YMCA and the YMCA of Greater New York.
CHARLES P. RICHARDSON, 50, joined the Company in April, 1993 and serves as the
Company's and Bank's Executive Vice President and Chief Financial Officer. Mr.
Richardson holds a business degree in Accounting from Temple University. Prior
to his joining the Company, Mr. Richardson was Executive Vice President and
Chief Financial Officer for Dollar Dry Dock Bank (1985-1992) and was a banking
and thrift industry consultant (1992-1993).
HOWARD C. BLUVER, 40, joined the Company and the Bank in June 1994 as Senior
Vice President, General Counsel and Secretary. Mr. Bluver is a graduate of the
State University of New York at Albany and the State University of New York at
Buffalo School of Law. Prior to joining the Company and the Bank, he served as
Deputy Chief Counsel for Corporate Transactions in the United States Treasury
Department's Office of Thrift Supervision. Prior thereto, he was in the
private practice of law.
RAMESH SHAH, 48, joined the Bank in June 1996 as Executive Vice President,
Marketing and Product Development. Mr. Shah holds a Masters in Business
Administration from Columbia University and a Bachelor of Arts degree from
Bates College. Prior to joining the Bank, Mr. Shah was Senior Vice President
of NatWest Bancorp. (1994 - 1996); Senior Vice President of Shearson Lehman
Brothers (1991 - 1994) and Senior Vice President of American Express Company
(1988 - 1991).
JEFFREY LEEDS, 51, joined the Bank in September 1995 as Senior Vice President
and Treasurer. Mr. Leeds earned a Bachelor's Degree in economics from the
University of Michigan and holds a Masters in Business Administration and
Master of Philosophy from the Columbia University Graduate School of Business.
Prior to joining the Bank, Mr. Leeds held a variety of positions at Chemical
Bank. His final assignment was as Head of the Asset and Liability Management
staff. Prior to that he served for seven years as Chief Money Market
Economist. Mr. Leeds began his career as an economist at the First National
Bank of Chicago. He also spent two years as Director of New Product
Development at the Chicago Board Options Exchange.
RALPH HALL, 47, is President and Chief Executive Officer of GreenPoint Mortgage
Corp. Mr. Hall had been General Manager, Chief Operating Officer and Director
of General Motors Acceptance Corporation (GMAC) Mortgage from 1992 to 1994; and
President, Chief Executive Officer and a Director of GMAC Capital Corp. from
1988 to 1992. Mr. Hall began his mortgage career at Citicorp Mortgage, Inc.
from 1986 to 1988; his last position at the Company being Vice President of
Operations and Product Development. Previously, he was a Senior Consulting
Manager with Arthur Anderson & Co. from 1978 to 1986. Ralph Hall served in the
United States Marine Corps from 1967 to 1971. Mr. Hall holds a MBA at the
University of Houston (1977) and a BS/BA in Accounting and Economics at
Southwest Missouri State University (1974).
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is currently listed on the New York Stock Exchange
(NYSE) under the symbol "GPT." Trading in the Company's stock commenced on
January 28, 1994. As of March 21, 1997, 47,152,976 shares of common stock were
issued and outstanding, and held by approximately 5,053 holders of record. The
Company paid a cash dividend of $0.20 per share in February, May, August and
November 1996, as well as 1995.
Information relating to the high, low and quarter-end closing sales prices of
the Common Stock appears on page 43 in the Company's 1996 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The above-captioned information appears under "Five Year Selected Consolidated
Data" on pages 11 and 12 in the Company's 1996 Annual Report to Shareholders
and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The above captioned information appears under "Management's Discussion and
Analysis" on pages 13 through 21 in the Company's 1996 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The above captioned information appears on pages 22 through 43 in the Company's
1996 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Information contained in the Company's Current Report on Form 8-K, which was
filed with the SEC on March 12, 1996, is incorporated herein by reference.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information presented under the heading "Information with Respect to Nominees
and Continuing Directors" on pages 3 through 5 in the Company's definitive
Proxy Statement for its Annual Meeting of Shareholders to be held on May 2,
1997, which was filed with the SEC on March 21, 1997, is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation included under the heading
"Executive Compensation" on pages 10 through 12 (excluding the Stock
Performance Graph on page 12) in the Company's Definitive Proxy Statement for
its Annual meeting of Shareholders to be held on May 2, 1997, which was filed
with the SEC on March 21, 1997, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to security ownership of certain beneficial owners and
management included under the heading "Securities Owned by Directors and
Executive Officers" on page 6 in the Company's Definitive Proxy Statement for
its Annual Meeting of Shareholders to be held on May 2, 1997, which was filed
with the SEC on March 21, 1997, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
included under the heading "Transactions with Certain Related Persons" on page
16 in the Company's Definitive Proxy Statement for its Annual Meeting of
Shareholders to be held on May 2, 1997, which was filed with the SEC on March
21, 1997, is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
GREENPOINT FINANCIAL CORP.
LIST OF EXHIBITS (FILED HEREWITH UNLESS OTHERWISE NOTED)
(a) The following documents are filed as a part of this report:
(1) Consolidated Financial Statements of the Company are incorporated by
reference to the following indicated pages of the 1996 Annual Report to
Stockholders:
Pages
-----
Report of Independent Accountants 44
Consolidated Statements of Financial Condition as
of December 31, 1996 and 1995 22
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994 23
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994 25
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1996, 1995 and 1994 24
Notes to the Consolidated Financial Statements 27
Exhibit
Number
2.1 Purchase of Assets and Liability Assumption Agreement by and between
Home Savings of America, FSB, and GreenPoint Bank (1)
3.1 Certificate of Incorporation of GreenPoint Financial Corp. (2)
3.2 Bylaws of GreenPoint Financial Corp.
3.3 Restated Organization Certificate of GreenPoint Bank (3)
3.4 Bylaws of GreenPoint Bank
10.1 Employment Agreement and Change of Control Agreement between GreenPoint
Financial Corp., GreenPoint Bank and Bharat B. Bhatt
10.2 Amended Employment Agreement between GreenPoint Financial Corp.,
GreenPoint Bank and Thomas S. Johnson (4)
10.3 Employment Agreements and Change of Control Agreements between
GreenPoint Financial Corp., GreenPoint Bank and Bernadette Arias,
Martin S. Dash and Charles P. Richardson (5)
10.4 GreenPoint Financial Corp. Amended and Restated 1994 Stock Incentive
Plan (6)
10.5 GreenPoint Financial Corp. 1994 Non-Employee Directors Stock Option
Plan (7)
10.6 GreenPoint Financial Corp. 1994 Annual Incentive Plan (8)
10.7 GreenPoint Financial Corp. 1994 Long Term Incentive Plan (9)
10.8 GreenPoint Bank Recognition and Retention Plan for Employees (10)
10.9 GreenPoint Bank Retirement Plan for Independent Directors (11)
10.10 GreenPoint Bank 1993 Directors' Deferred Fee Stock Unit Plan (12)
10.11 GreenPoint Bank Employee Protection Plan for Officers (13)
10.12 GreenPoint Bank Employee Protection Plan for Staff Members (14)
11.1 Statement Regarding Computation of Per Share Earnings
13.1 Annual Report to Stockholders for Fiscal Year ended December 31, 1996
21.1 Subsidiaries of the Company
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
________________
(1) Incorporated by reference to Exhibit 2.1 to the Company=s Quarterly
Report on Form 10-Q, dated June 30, 1995
(2) Incorporated by reference to Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q, dated March 31, 1995
(3) Incorporated by reference to Exhibit 3.3 to the 1994 10-K
(4) Incorporated by reference to Exhibit 10.1 to the 1994 10-K
(5) Incorporated by reference to Exhibit 10.2 to the 1994 10-K
(6) Incorporated by reference to Exhibit 10.3 to the 1994 10-K
(7) Incorporated by reference to Exhibit 10.4 to the 1994 10-K
(8) Incorporated by reference to Exhibit 10.5 to the 1994 10-K
(9) Incorporated by reference to Exhibit 10.6 to the 1994 10-K
(10) Incorporated by reference to Exhibit 10.7 to the 1994 10-K
(11) Incorporated by reference to Exhibit 10.8 to the 1994 10-K
(12) Incorporated by reference to Exhibit 10.9 to the 1994 10-K
(13) Incorporated by reference to Exhibit 10.10 to the 1994 10-K
(14) Incorporated by reference to Exhibit 10.11 to the 1994 10-K
Financial Statements Schedules
The Schedules have been omitted as the required information is either not
applicable or has been included in the Notes to the Consolidated Financial
Statements in the Company's Annual Report to Shareholders.
Reports on Form 8-K
No current reports on Form 8-K were filed by the Company with the Securities
and Exchange Commission during the quarter ended December 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GreenPoint Financial Corp.
By: /S/ Thomas S. Johnson
Thomas S. Johnson
Chairman of the Board,
President and Chief
Executive Officer
Dated: March 11, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on the dates indicated.
Signature Title Date
/S/ Thomas S. Johnson Chairman of the Board, 3/11/97
Thomas S. Johnson President and Chief
Executive Officer
/S/ Bernard S. Berman Director 3/11/97
Bernard S. Berman
Director 3/11/97
Edward C. Bessey
/S/ Dan F. Huebner Director 3/11/97
Dan F. Huebner
/S/ William M. Jackson Director 3/11/97
William M. Jackson
/S/ Susan J. Kropf Director 3/11/97
Susan J. Kropf
/S/ Robert M. McLane Director 3/11/97
Robert M. McLane
/S/ Charles B. McQuade Director 3/11/97
Charles B. McQuade
/S/ Alvin N. Puryear Director 3/11/97
Alvin N. Puryear
/S/ Robert P. Quinn Director 3/11/97
Robert P. Quinn
/S/ Edward C. Schmults Director 3/11/97
Edward C. Schmults
/S/ Wilfred O. Uhl Director 3/11/97
Wilfred O. Uhl
/S/ Robert F. Vizza Director 3/11/97
Robert F. Vizza
/S/ Jules Zimmerman Director 3/11/97
Jules Zimmerman
/S/ Charles P. Richardson Executive Vice President 3/11/97
Charles P. Richardson and Chief Financial Officer
/S/ Mary Beth Farrell Senior Vice President 3/11/97
Mary Beth Farrell and Comptroller
GREENPOINT FINANCIAL CORP.
BYLAWS
GREENPOINT FINANCIAL CORP.
BYLAWS
ARTICLE I - STOCKHOLDERS
SECTION 1. ANNUAL MEETING.
An annual meeting of the stockholders, for the election of Directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which
date shall be within thirteen (13) months subsequent to the later of the date
of incorporation or the last annual meeting of stockholders.
SECTION 2. SPECIAL MEETINGS.
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
may be called only by the Board of Directors pursuant to a resolution adopted
by a majority of the Whole Board. The term "Whole Board" shall mean the total
number of Directors which the Corporation would have if there were no vacancies
on the Board of Directors (hereinafter the "Whole Board").
SECTION 3. NOTICE OF MEETINGS.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law.
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than
thirty (30) days after the date for which the meeting was originally noticed,
or if a new record date is fixed for the adjourned meeting, written notice of
the place, date, and time of the adjourned meeting shall be given in conformity
herewith. At any adjourned meeting, any business may be transacted which might
have been transacted at the original meeting.
SECTION 4. QUORUM.
At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting, present in person or
by proxy (after giving effect to the provisions of Article FOURTH of the
Corporation's Certificate of Incorporation), shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law. Where a separate vote by a class or classes is
required, a majority of the shares of such class or classes present in person
or represented by proxy (after giving effect to the provisions of Article
FOURTH of the Corporation's Certificate of Incorporation) shall constitute a
quorum entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
SECTION 5. ORGANIZATION.
The Chairman of the Board of the Corporation or, in his or her absence,
such person as the Board of Directors may have designated or, in the absence of
such a person, such person as may be chosen by the holders of a majority of the
shares entitled to vote who are present, in person or by proxy, shall call to
order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.
SECTION 6. CONDUCT OF BUSINESS.
(a) The chairman of any meeting of stockholders shall determine the order
of business and the procedures at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
The date and time of the opening and closing of the polls for each matter upon
which the stockholders will vote at the meeting shall be announced at the
meeting.
(b) At any annual meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the business must
relate to a proper subject matter for stockholder action and the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered or mailed
to and received at the principal executive office of the Corporation not less
than ninety (90) days prior to the date of the annual meeting; provided,
however, that in the event that less than one hundred (100) days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the 10th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. A stockholder's notice to the Secretary shall set forth as to each
matter such stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the Corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the
Corporation's capital stock that are beneficially owned by such stockholder and
(iv) any material interest of such stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
brought before or conducted at an annual meeting except in accordance with the
provisions of this Section 6(b). The Chairman of the Board or other person
presiding over the annual meeting shall, if the facts so warrant, determine and
declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 6(b) and, if he
should so determine, he shall so declare to the meeting and any such business
so determined to be not properly brought before the meeting shall not be
transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of a majority of the Whole Board of Directors.
(c) Only persons who are nominated in accordance with the procedures set
forth in these Bylaws shall be eligible for election as Directors. Nominations
of persons for election to the Board of Directors of the Corporation may be
made at a meeting of stockholders at which directors are to be elected only (i)
by or at the direction of the Board of Directors or (ii) by any stockholder of
the corporation entitled to vote for the election of Directors at the meeting
who complies with the notice procedures set forth in this Section 6(c). Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made by timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered or mailed
to and received at the principal executive office of the Corporation not less
than ninety (90) days prior to the date of the meeting; provided, however, that
in the event that less than one hundred (100) days' notice or prior disclosure
of the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth (i) as to each person whom such stockholder proposes to
nominate for election or re-election as a Director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a
nominee and to serving as a Director if elected); and (ii) as to the
stockholder giving the notice (x) the name and address, as they appear on the
Corporation's books, of such stockholder and (y) the class and number of shares
of the Corporation's capital stock that are beneficially owned by such
stockholder. At the request of the Board of Directors any person nominated by
the Board of Directors for election as a Director shall furnish to the
Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a Director of the Corporation unless
nominated in accordance with the provisions of this Section 6(c). The Chairman
of the Board or other person presiding at the meeting shall, if the facts so
warrant, determine that a nomination was not made in accordance with such
provisions and, if he or she shall so determine, he or she shall so declare to
the meeting and the defective nomination shall be disregarded.
SECTION 7. PROXIES AND VOTING.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting. Any facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this paragraph may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the
original writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
All voting, including the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation, may
be made by a voice vote; provided, however, that upon demand therefore by a
stockholder entitled to vote or his or her proxy, a stock vote shall be taken.
Every stock vote shall be taken by ballot, each of which shall state the name
of the stockholder or proxy voting and such other information as may be
required under the procedures established for the meeting. The Board of
Directors shall, in advance of any meeting of stockholders, appoint one or more
inspectors to act at the meeting and make a written report thereof. The Board
of Directors may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able
to act at a meeting of stockholders, the Chairman of the Board, or in his
absence such person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
ability.
All elections for Directors shall be determined by a plurality of the
votes cast, and except as otherwise required by law, the Certificate of
Incorporation or these Bylaws, all other matters shall be determined by a
majority of the votes cast affirmatively or negatively.
SECTION 8. STOCK LIST.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
SECTION 9. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special
meeting of stockholders of the Corporation and may not be effected by any
consent in writing by such stockholders.
ARTICLE II - BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS, NUMBER AND TERM OF OFFICE.
The business and affairs of the Corporation shall be under the direction
of its Board of Directors. The number of Directors who shall constitute the
Whole Board shall be such number as the majority of the Whole Board shall from
time to time have designated except in the absence of such designation such
number shall be 16. The Board of Directors shall annually elect a Chairman of
the Board from among its members who shall when present, preside at meetings of
the Board of Directors.
The Directors, other than those who may be elected by the holders of any
class or series of Preferred Stock, shall be divided, with respect to the time
for which they severally hold office, into three classes, with the term of
office of the first class to expire at the first annual meeting of
stockholders, the term of office of the second class to expire at the annual
meeting of stockholders one year thereafter and the term of office of the third
class to expire at the annual meeting of stockholders two years thereafter,
with each Director to hold office until his or her successor shall have been
duly elected and qualified. At each annual meeting of stockholders, Directors
elected to succeed those Directors whose terms then expire shall be elected for
a term of office to expire at the third succeeding annual meeting of
stockholders after their election, with each Director to hold office until his
or her successor shall have been duly elected and qualified.
SECTION 2. VACANCIES AND NEWLY CREATED DIRECTORSHIPS.
Subject to the rights of the holders of any class or series of Preferred
Stock, and unless the Board of Directors otherwise determines, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the Directors then in office, though less than a
quorum, and Directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to
which they have been elected expires and until such Director's successor shall
have been duly elected and qualified. No decrease in the number of authorized
directors constituting the Board shall shorten the term of any incumbent
Director.
SECTION 3. REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all Directors. A
notice of each regular meeting shall not be required.
SECTION 4. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by a majority of
the Directors then in office (rounded up to the nearest whole number), or by
the Chairman of the Board and shall be held at such place, on such date, and at
such time as they, or he or she, shall fix. Notice of the place, date, and
time of each such special meeting shall be given each Director by whom is it
not waived by mailing written notice not less than five (5) days before the
meeting or by telegraphing or telexing or by facsimile transmission of the same
not less than twenty-four (24) hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
SECTION 5. QUORUM.
At any meeting of the Board of Directors, a majority of the Whole Board
shall constitute a quorum for all purposes. If a quorum shall fail to attend
any meeting, a majority of those present may adjourn the meeting to another
place, date, or time, without further notice or waiver thereof.
SECTION 6. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
SECTION 7. CONDUCT OF BUSINESS.
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board or the Chairman of the Board may from time
to time determine, and all matters shall be determined by the vote of a
majority of the Directors present, except as otherwise provided herein or
required by law. Action may be taken by the Board of Directors without a
meeting if all members thereof consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors.
SECTION 8. POWERS.
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges
on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any Officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any Officer upon any
other person for the time being;
(5) To confer upon any Officer of the Corporation the power to appoint,
remove and suspend subordinate Officers, employees and agents;
(6) To adopt from time to time such stock option, stock purchase, bonus
or other compensation plans for Directors, Officers, employees and agents of
the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for Directors, Officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with these
Bylaws, for the management of the Corporation's business and affairs.
SECTION 9. COMPENSATION OF DIRECTORS.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as Directors,
including, without limitation, their services as members of committees of the
Board of Directors.
SECTION 10. RETIREMENT OF DIRECTORS.
Except for the initial members of the Board of Directors, no person shall
be eligible for initial election as a Director who is 65 years of age or more.
No person may be elected, appointed, nominated or otherwise serve as a Director
of the Corporation after December 31 of the year in which such person attains
the age of 72, grandfathering the three Directors who currently (as at April
1994) have attained the age of 72 or more to the age of 75. Vacancies on the
Board of Directors created by operation of this provision may be filled in
accordance with these Bylaws.
ARTICLE III - COMMITTEES
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS.
The Board of Directors, by a vote of a majority of the Whole Board of
Directors, may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of a majority of the Whole Board and shall, for these committees and
any others provided for herein, elect a Director or Directors to serve as the
member or members, designating, if it desires, other Directors as alternate
members who may replace any absent or disqualified member at any meeting of the
committee. The Board of Directors, by a resolution adopted by a majority of
the Whole Board may terminate any committee previously established. Any
committee so designated by resolution adopted by a majority of the Whole Board
may exercise the power and authority of the Board of Directors to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General
Corporation Law if the resolution which designates the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
SECTION 2. CONDUCT OF BUSINESS.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law or the Board of Directors.
Adequate provision shall be made for notice to members of all meetings; a
majority of the members shall constitute a quorum unless the committee shall
consist of one (1) or two (2) members, in which event one (1) member shall
constitute a quorum; and all matters shall be determined by a majority vote of
the members present. Action may be taken by any committee without a meeting if
all members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of such committee.
SECTION 3. NOMINATING COMMITTEE.
The Board of Directors, by resolution adopted by a majority of the Whole
Board, shall appoint a Nominating Committee of the Board, consisting of not
less than three (3) members of the Board of Directors, one of whom shall be the
Chairman of the Board. The Nominating Committee shall have authority (a) to
review any nominations for election to the Board of Directors made by a
stockholder of the Corporation pursuant to Section 6(c)(ii) of Article I of
these Bylaws in order to determine compliance with such Bylaw and (b) to
recommend to the Whole Board nominees for election to the Board of Directors
(i) to replace those Directors whose terms expire at the annual meeting of
stockholders next ensuing and (ii) to fill vacancies resulting from death,
resignation, retirement, disqualification, removal from office or other cause,
or resulting from an increase in the authorized number of Directors.
ARTICLE IV - OFFICERS
SECTION 1. GENERALLY.
(a) The Board of Directors shall choose a Chairman of the Board, who
shall be the Chief Executive Officer and President, and a Secretary and from
time to time may choose such other officers as it may deem proper. The
Chairman of the Board shall be a member of the Board of Directors. Any number
of offices may be held by the same person.
(b) The term of office of all Officers shall be until the next annual
election of Officers and until their respective successors are chosen but any
Officer may be removed from office at any time by the affirmative vote of a
majority of the authorized number of Directors then constituting the Board of
Directors, or by the Chairman of the Board.
(c) All Officers chosen by the Board of Directors or the Chairman of the
Board shall each have such powers and duties as generally pertain to their
respective Offices, subject to the specific provisions of this ARTICLE IV.
Such officers shall also have such powers and duties as from time to time may
be conferred by the Board of Directors.
SECTION 2. CHAIRMAN OF THE BOARD OF DIRECTORS, CHIEF EXECUTIVE OFFICER
AND PRESIDENT.
The Chairman of the Board, Chief Executive Officer and President, subject
to the provisions of these Bylaws and to the direction of the Board of
Directors, shall serve in a general executive capacity and, when present, shall
preside at all meetings of the stockholders of the Corporation. He shall
perform all duties and have all powers which are commonly incident to the
office of Chairman of the Board or which are delegated to him by the Board of
Directors. He shall have power to sign all stock certificates, contracts and
other instruments of the Corporation which are authorized.
He shall also have general responsibility for the management and control
of the business and affairs of the Corporation and shall perform all duties and
have all powers which are commonly incident to the offices of President and
Chief Executive Officer or which are delegated to them by the Board of
Directors. Subject to the direction of the Board of Directors, he shall have
general supervision of all of the other Officers, employees and agents of the
Corporation.
SECTION 3. VICE PRESIDENT.
The Vice Presidents shall perform the duties and exercise the powers
usually incident to their respective offices and/or such other duties and
powers as may be properly assigned to them by the Board of Directors or the
Chairman of the Board. A Vice President or Vice Presidents may be designated
as Executive Vice President or Senior Vice President.
SECTION 4. SECRETARY.
The Secretary or Assistant Secretary shall issue notices of meetings,
shall keep their minutes, shall have charge of the seal and the corporate
books, shall perform such other duties and exercise such other powers as are
usually incident to such office and/or such other duties and powers as are
properly assigned thereto by the Board of Directors or the Chairman of the
Board. Subject to the direction of the Board of Directors, the Secretary shall
have the power to sign all stock certificates.
SECTION 5. ASSISTANT SECRETARIES AND OTHER OFFICERS.
The Board of Directors or the Chairman of the Board may appoint one or
more Assistant Secretaries and such other Officers who shall have such powers
and shall perform such duties as are provided in these Bylaws or as may be
assigned to them by the Board of Directors or the Chairman of the Board.
SECTION 6. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the Chairman of the
Board or any Officer of the Corporation authorized by the Chairman of the Board
shall have power to vote and otherwise act on behalf of the Corporation, in
person or by proxy, at any meeting of stockholders of or with respect to any
action of stockholders of any other corporation in which this Corporation may
hold securities and otherwise to exercise any and all rights and powers which
this Corporation may possess by reason of its ownership of securities in such
other corporation.
ARTICLE V - STOCK
SECTION 1. CERTIFICATES OF STOCK.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the Chairman of the Board or the President, and by
the Secretary or an Assistant Secretary, certifying the number of shares owned
by him or her. Any or all of the signatures on the certificate may be a
facsimile.
SECTION 2. TRANSFERS OF STOCK.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 Article V of these Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
SECTION 3. RECORD DATE.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise
any rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) days nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the next day preceding the
day on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment or rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
SECTION 5. REGULATIONS.
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
SECTION 1. NOTICES.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, Director, Officer, employee or
agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by prepaid telegram or mailgram or
other courier. Any such notice shall be addressed to such stockholder,
Director, Officer, employee or agent at his or her last known address as the
same appears on the books of the Corporation. The time when such notice is
received, if hand delivered, or dispatched, if delivered through the mails or
by telegram or mailgram or other courier, shall be the time of the giving of
the notice.
SECTION 2. WAIVERS.
A written waiver of any notice, signed by a stockholder, Director,
Officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, Director, Officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
SECTION 1. FACSIMILE SIGNATURES.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any Officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof designated by the Board.
SECTION 2. CORPORATE SEAL.
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a designated committee thereof,
duplicates of the seal may be kept and used by the Chief Financial Officer or
by an Assistant Secretary or an assistant to the Chief Financial Officer.
SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS.
Each Director, each member of any committee designated by the Board of
Directors, and each Officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
Officers or employees, or committees of the Board of Directors so designated,
or by lawyers, accountants, agents or any other person as to matters which such
Director or committee member or officer reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
SECTION 4. FISCAL YEAR.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
SECTION 5. TIME PERIODS.
In applying any provision of these Bylaws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE VIII - AMENDMENTS
The Board of Directors by a resolution adopted by a majority of the Whole
Board, may amend, alter or repeal these Bylaws at any meeting of the Board,
provided notice of the proposed change was given not less than two days prior
to the meeting. The stockholders shall also have power to amend, alter or
repeal these Bylaws at any meeting of stockholders provided notice of the
proposed change was given in the notice of the meeting; provided, however,
that, notwithstanding any other provisions of the Bylaws or any provision of
law which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class or series of the
voting stock required by law, the Certificate of Incorporation, any Preferred
Stock Designation or these Bylaws, the affirmative votes of the holders of at
least 80% of the voting power (taking into account the provisions of Article
FOURTH of the Certificate of Incorporation) of all the then-outstanding shares
of the Voting Stock voting together as a single class, shall be required to
alter, amend or repeal any provisions of these Bylaws.
The above Bylaws are effective as of August 31, 1993, the date of incorporation
of GP FINANCIAL CORP.
BYLAWS
OF
GREENPOINT BANK
BYLAWS OF GREENPOINT BANK
ARTICLE I. HOME OFFICE
The home office of the GreenPoint Bank ("SAVINGS BANK") is 807 Manhattan
Avenue, Brooklyn, New York.
ARTICLE II. SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All annual and special meetings of
shareholders shall be held at the home office of the SAVINGS BANK or at such
other place in the State in which the principal place of business of the
SAVINGS BANK is located as the Board of Directors may determine.
SECTION 2. ANNUAL MEETING. A meeting of the shareholders of the SAVINGS
BANK for the election of Directors and for the transaction of any other
business of the SAVINGS BANK shall be held annually within 120 days after the
end of each calendar year.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders for
any purpose or purposes, unless otherwise prescribed by the regulations of the
New York State Banking Department ("NYB"), may be called at any time by the
Chairman of the Board of Directors (as set forth in Article V, Section 7,
hereinafter referred to as the "Chairman of the Board") or by a majority of the
Whole Board of Directors, whereas the term "Whole Board of Directors" shall
mean the number of authorized directorships, whether or not there exists any
vacancies in any previously authorized directorships.
SECTION 4. CONDUCT OF MEETINGS. The Chairman of the Board shall preside
at all meetings and in his absence, a person designated by a majority of the
Board shall preside at all meetings. The chairman of any meeting of
stockholders shall determine the order of business and the procedures at the
meeting, including such regulations of the manner of voting and the conduct of
discussion as seem to him in order.
SECTION 5. NOTICE OF MEETINGS. Written notice stating the place, day
and hour of the meeting and the purpose(s) for which the meeting is called
shall be delivered not fewer than 10 nor more than 50 days before the date of
the meeting, either personally or by mail, by or at the direction of the
Chairman of the Board, the secretary, or the Board of Directors calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the SAVINGS BANK as of the record date prescribed in
Section 6 of this Article II, with postage prepaid. When any shareholders'
meeting, either annual or special, is adjourned for 30 days or more, notice of
the adjourned meeting shall be given as in the case of an original meeting. It
shall not be necessary to give any notice of the time and place of any meeting
adjourned for less than 30 days or of the business to be transacted at the
meeting, other than an announcement at the meeting at which such adjournment
is taken.
SECTION 6. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend,
or in order to make a determination of shareholders for any other proper
purpose, the Board of Directors shall fix in advance a date as the record date
for any such determination of shareholders. Such date in any case shall be not
more than 50 days and, in case of a meeting of shareholders, not fewer than 10
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment.
SECTION 7. VOTING LISTS. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books
for shares of the SAVINGS BANK shall make a complete list of the shareholders
entitled to vote at such meeting, or any adjournment, arranged in alphabetical
order, with the address and the number of shares held by each. This list of
shareholders shall be kept on file at the home office of the SAVINGS BANK.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection by any shareholder during the
entire time of the meeting. The original stock transfer book shall constitute
prima facie evidence of the shareholders entitled to examine such list or
transfer books or to vote at any meeting of shareholders.
SECTION 8. QUORUM. A majority of the outstanding shares of the SAVINGS
BANK entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of shareholders. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to constitute less than a
quorum. If less than a majority of the outstanding shares is represented at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. The
existence of a quorum at any meeting, or the existence of a duly organized
meeting at which enough shareholders have withdrawn from such meeting to
constitute less than a quorum, however, shall not serve to amend, alter or
modify any provisions in the SAVINGS BANK'S restated organization certificate
or these Bylaws which require the vote of more than a majority of the
outstanding shares entitled to vote at a duly organized meeting.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney in fact. Proxies solicited on behalf of the management shall be voted
as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the Whole Board of Directors. No proxy shall be
valid more than eleven months from the date of its execution except for a proxy
coupled with an interest.
SECTION 10. VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS. When
ownership stands in the name of two or more persons, in the absence of written
directions to the SAVINGS BANK to the contrary, at any meeting of the
shareholders of the SAVINGS BANK any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such and present in person or by proxy at such meeting, but no
votes shall be cast for such stock if a majority cannot agree.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation may be voted by any officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy, but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name. Shares standing in the name of a
receiver may be voted by such receiver, and shares held by or under the control
of a receiver may be voted by such receiver without the transfer into his
name, if authority to do so is contained in an appropriate order of the court
or other public authority by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee and
thereafter the pledgee, shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the SAVINGS BANK, nor
shares held by another corporation, if a majority of the shares entitled to
vote for the election of directors of such other corporation are held by the
SAVINGS BANK, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
SECTION 12. CUMULATIVE VOTING. Shareholders shall not be entitled to
cumulate their votes for election of directors.
SECTION 13. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board of Directors may appoint any persons other than
nominees for office as inspectors of election to act at such meeting or any
adjournment. The number of inspectors shall be either one or three. Any such
appointment shall not be altered at the meeting. If inspectors of election are
not so appointed, the Chairman of the Board may, or on the request of a
shareholder present at the meeting shall, make such appointment at the meeting.
If appointed at the meeting, the Chairman of the Board shall determine whether
there shall be one or three inspectors of election. If appointed at the
meeting and the Chairman of the Board fails to determine whether there shall be
one or three inspectors of election, the majority of the votes present shall
determine whether one or three inspectors are to be appointed. In case any
person appointed as inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment by the Board of Directors in advance of
the meeting, or at the meeting by the Chairman of the Board.
Unless otherwise prescribed by regulations of the NYB, the duties of such
inspectors shall include: determining the number of shares outstanding and the
voting power of each share, the number of shares represented at the meeting,
the existence of a quorum, and the authenticity, validity and effect of
proxies; receiving votes, ballots, or consents; hearing and determining all
challenges and questions in any way arising in connection with the rights to
vote; counting and tabulating all votes or consents; determining the result;
and such acts as may be proper to conduct the election or vote with fairness to
all shareholders.
SECTION 14. NEW BUSINESS. Any new business to be taken up at the annual
meeting shall be stated in writing and filed with the secretary of the SAVINGS
BANK at least 45 days before the date of the annual meeting, and all business
so stated, proposed, and filed shall be considered at the annual meeting, but
no other proposal shall be acted upon at the annual meeting. Any shareholder
may make any other proposal at the annual meeting and the same may be discussed
and considered, but unless stated in writing and filed with the secretary at
least 45 days before the meeting, such proposal shall be laid over for action
at an adjourned, special, or annual meeting of the shareholders taking place 30
days or more thereafter. This provision shall not prevent the consideration
and approval or disapproval at the annual meeting of reports of officers,
directors and committees; but in connection with such reports no new business
shall be acted upon at such annual meeting unless stated and filed as herein
provided.
SECTION 15. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of shareholders, or any other action which may be taken at a
meeting of the shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the SAVINGS BANK
shall be under the direction of its Board of Directors. No more than three
salaried officers of the SAVINGS BANK may simultaneously serve on the board.
The Board of Directors shall annually elect a Chairman from among its members
who shall preside at its regular and special meetings. In the absence or
inability of the foregoing officer to act, at any fully constituted meeting of
the Board members, a temporary chairperson shall be appointed by those present
to act as such during the interim term.
SECTION 2. NUMBER AND TERM. The Board of Directors shall consist of
fourteen (14) members and shall be divided into three classes as nearly equal
in number as possible. The members of each class shall be elected for a term
of three years and until their successors are elected and qualified. One class
shall be elected annually.
SECTION 3. REGULAR MEETINGS. A regular monthly meeting of the Board of
Directors shall be held at least eleven times a year without other notice than
this bylaw. At least one meeting shall be held immediately after and at the
same place as, the annual meeting of shareholders, which shall be the annual
meeting of the Board. The Board of Directors may provide, by resolution, the
time and place, within the SAVINGS BANK's normal lending territory, for the
holding of additional regular meetings without other notice than such
resolution.
SECTION 4. QUALIFICATION. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the SAVINGS
BANK unless the SAVINGS BANK is a wholly owned subsidiary of a holding company.
SECTION 5. SPECIAL MEETINGS. The Chairman of the Board, or in the
absence or disability of the Chairman of the Board, an Executive Vice President
may call special meetings of the Board, and the Secretary of the Board shall
call a meeting upon the written request of a majority of the Board of
Directors. A special meeting may be held at such time and place as shall be
stated in the notice of meeting.
SECTION 6. PARTICIPATION IN MEETINGS BY DIRECTORS. Members of the Board
of Directors, or any committee thereof, may participate in a meeting of such
Board or Committee by means of conference telephone, or by means of similar
communications equipment by means of which all persons participating in the
meeting can speak and hear each other at the same time and such participation
shall constitute presence in person at such meeting.
SECTION 7. NOTICE. Written notice of any special meeting shall be given
to each director at least twenty-four (24) hours prior thereto when delivered
personally or by telephone or telegram, or at least five days prior thereto
when delivered by mail at the address at which the director is most likely to
be reached. Such notice shall be deemed to be delivered when deposited in the
mail so addressed, with postage prepaid if mailed, or when delivered to the
telegraph company if sent by telegram. Any director may waive notice of any
meeting by a writing filed with the secretary. The attendance of a director at
a meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. The business to be transacted at, and the purpose of, any special
meeting of the Board of Directors must be specified in the notice of such
meeting and no other business shall be transacted at that time.
SECTION 8. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transacting of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall
be given in the same manner as prescribed by Section 7 of this Article III.
SECTION 9. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless a greater number is prescribed by regulations of the NYB,
the Restated Organization Certificate or by these Bylaws.
SECTION 10. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken by the Board of Directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors.
SECTION 11. ELIGIBILITY, RESIGNATION AND RETIREMENT. Any director may
resign at any time by sending a written notice of such resignation to the home
office of the SAVINGS BANK addressed to the Chairman of the Board. Unless
otherwise specified, such resignation shall take effect upon receipt by the
Chairman of the Board. The absence from regular meetings of the Board of
Directors and the meetings of any committee of the Board of which the director
is a member, for six consecutive months, unless excused by resolution of the
Board of Directors, shall automatically constitute a resignation, effective
when such resignation is accepted by the Board of Directors.
Except for the initial members of the Board of Directors as set forth in
the Restated Organization Certificate, no person shall be eligible for initial
election as a Director who is 65 years of age or more. No person may be
elected, appointed, nominated or otherwise serve as a director of the SAVINGS
BANK after December 31 of the year in which such person attains the age of 72,
grandfathering the three Directors who currently (as at April 1994) have
attained the age of 72 or more to the age of 75. Vacancies on the Board of
Directors created by operation of this provision may be filled in accordance
with the Bylaws.
SECTION 12. VACANCIES. All vacancies in the office of Director,
including newly created Directorships resulting from an increase in the number
of Directors, shall be filled by election of stockholders, except that
vacancies not exceeding one-third of the entire Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors,
although less than a quorum of the Board of Directors, provided that the
nomination of a candidate therefor shall have been made by the Nominating
Committee, created as hereinafter provided in these Bylaws. A director elected
to fill a vacancy shall be elected to serve for the balance of the unexpired
term and a Director elected to fill a vacancy to be filled by reason of an
increase in the number of directors shall be elected to serve for the balance
of the unexpired term of the class to which such director is elected.
SECTION 13. COMPENSATION. Directors, as such, may receive compensation
for their services, including a stated retainer. By resolution of the Board of
Directors, a reasonable fixed sum, and reasonable expenses of attendance, if
any, may be allowed for actual attendance at each regular or special meeting of
the Board of Directors. Members of either standing, special or temporary
committees, as such, may receive compensation for their services, including a
stated retainer, as the Board of Directors may determine. By resolution of the
Board of Directors, a reasonable fixed sum, and reasonable expenses of
attendance, if any, may be allowed for actual attendance at each regular or
special meeting of committees.
SECTION 14. PRESUMPTION OF ASSENT. A director of the SAVINGS BANK who
is present at a meeting of the Board of Directors at which action on any
SAVINGS BANK matter is taken shall be presumed to have assented to the action
taken unless his dissent or abstention shall be entered in the minutes of the
meeting or unless he shall file a written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the secretary of the SAVINGS
BANK within five days after the date a copy of the minutes of the meeting is
received. Such right to dissent shall not apply to a director who voted in
favor of such action.
SECTION 15. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, any director may be removed for cause by a vote of
the holders of a majority of the shares then entitled to vote at an election of
directors. Whenever the holders of the shares of any class are entitled to
elect one or more directors by the provisions of the Restated Organization
Certificate or supplemental sections thereto, the provisions of this section
shall apply, in respect to the removal of a director or directors so elected,
to the vote of the holders of the outstanding shares of that class and not to
the vote of the outstanding shares as a whole.
SECTION 16. EMERGENCY AUTHORITY. In the event there shall occur an
acute emergency resulting from a hostile attack, as defined in Article 7 of the
New York State Defense Emergency Act, which shall be of such severity as to
prevent the conduct and management of the affairs and business of the SAVINGS
BANK by its Directors and officers as otherwise provided in these Bylaws, any
three or more available members of the then incumbent Executive Committee shall
constitute an emergency Board of Directors which shall have the power, subject
to limitations prescribed in Article 7 of the New York State Defense Emergency
Act, by a majority of such persons present, to take any and every action which
may be necessary to meet the exigencies of the acute emergency and to enable
the SAVINGS BANK to conduct its business during such period, including the
relocation elsewhere of any office of the SAVINGS BANK which shall be unable to
function because of the acute emergency. If during the period of acute
emergency there shall be no Executive Committee, or a minimum of three members
of the then incumbent Executive Committee shall not be available, then and in
that event such other available Directors as may be needed to obtain the
minimum of three members shall serve on the emergency Board of Directors.
During a period of acute emergency resulting from a hostile attack, the
emergency management of the SAVINGS BANK shall be in accordance with the powers
and limitations contained in the existing provisions of Article 7 of the New
York State Defense Emergency Act, and such provisions shall suspend or modify
these Bylaws to the extent of any conflict.
ARTICLE IV. COMMITTEES
SECTION 1. ENUMERATION OF COMMITTEES. The standing committees of the
Board of Directors shall be an Executive Committee, an Audit Committee, and a
Nominating Committee. The Board of Directors, by vote of a majority of the
whole Board of Directors, may from time to time designate additional committees
of the Board, either temporary or permanent, with such lawfully delegable
powers and duties as it thereby confers not inconsistent with these Bylaws, to
serve at the pleasure of a majority of the Whole Board and shall, for these
committees and any others provided for herein, elect a Director or Directors to
serve as the member or members, designating, if it desires, other Directors as
alternate members ("Alternate Directors") who may replace any absent or
disqualified member at any meeting of the committee; provided however, that the
Chairman shall be a member of, and shall serve as the chairman of the Executive
Committee and he shall be an ex-officio member of all other committees, except
the Audit Committee and any other committee on which he is prohibited from
being a member, by law, the Restated Organization Certificate or these Bylaws.
The Board of Directors, by a resolution adopted by a majority of the Whole
Board may terminate any committee previously established.
SECTION 2. THE EXECUTIVE COMMITTEE. The Executive Committee shall
consist of the Chairman of the Board and four additional Directors elected
annually by the vote of the majority of the Whole Board.
If any member of the Executive Committee shall be absent from any meeting
of the committee, the Chairman shall designate some other Director, other than
one serving as a salaried officer, to act as a member of the committee at that
meeting. In the event there shall be a vacancy in the office of Chairman, then
and in that event such other additional Director or Directors as may be needed
to obtain the full complement of five members shall be elected by the Board to
serve until the vacancy is filled, or until the next annual meeting. Any
member of the executive committee may be removed at any time with or without
cause by resolution adopted by a majority of the Whole Board of Directors.
Regular meetings of the Executive Committee may be held without notice at
such times and places as the Executive Committee may fix from time to time by
resolution. Special meetings of the committee may be called by the Chairman or
at any time by any two members of the committee, upon twenty-four hours' notice
by mail, in person, or by telegraph or telephone. The notice of a special
meeting of the committee, however given, shall state the time when and the
place, which shall be within the State of New York, where the meeting is to be
held and the business which is to be presented and no business other than that
stated in the notice shall be transacted at said meeting. The Executive
Committee may make rules for the regulation of its meetings and proceedings not
inconsistent with these Bylaws.
Four members of the committee, including designees designated to act for
an absent member or members of the committee, shall be necessary for a quorum
at any meeting of the committee. Attendance by Alternate Directors shall
constitute membership on the Committee for determining quorum requirements.
Action of the executive committee must be authorized by the affirmative vote of
a majority of the members present at a meeting at which a quorum is present.
Any action required or permitted to be taken by the executive committee at a
meeting may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by all of the members of the executive
committee.
Except as otherwise provided herein, the Executive Committee, when the
Board of Directors is not in session, shall have and may exercise all of the
authority of the Board of Directors, except to the extent, if any, that such
authority may be limited by resolution adopted by a majority of the Whole Board
of Directors or by the laws of the State of New York. In addition, the
Executive Committee shall not have the authority of the Board of Directors with
reference to: the submission to stockholders of any action that requires
stockholders' authorization under New York law or regulations; the filling of
vacancies in the Board of Directors or in any committee of the Board of
Directors; the fixing of compensation of the Directors for serving on the Board
or any committee thereof; the amendment or repeal of any resolution of the
Board of Directors which by its terms shall not be so amendable or repealable;
the taking of any action which is expressly required by New York law or
regulation to be taken at a meeting of the Board of Directors or by a specified
proportion of Directors; the amendment or repeal of the Restated Organization
Certificate or Bylaws of the SAVINGS BANK or adoption of new Bylaws of the
SAVINGS BANK, or recommending to the shareholders a plan of merger,
consolidation, or conversion; the sale, lease or other disposition of all or
substantially all of the property and assets of the SAVINGS BANK otherwise than
in the usual and regular course of its business; a voluntary dissolution of the
SAVINGS BANK; a revocation of any of the foregoing; or the approval of a
transaction in which any member of the executive committee, directly or
indirectly, has any material beneficial interest.
SECTION 3. THE NOMINATING COMMITTEE. The Board of Directors, by
resolution adopted by a majority of the Whole Board, shall appoint a Nominating
Committee of the Board, consisting of not less than three (3) members of the
Board of Directors, one of whom shall be the Chairman of the Board. The
Nominating Committee shall have authority (a) to review any nominations for
election to the Board of Directors made by a stockholder of the SAVINGS BANK
and (b) to recommend to the Whole Board nominees for election to the Board of
Directors (i) to replace those Directors whose terms expire at the annual
meeting of stockholders next ensuing and (ii) to fill vacancies resulting from
death, resignation, retirement, disqualification, removal from office or other
cause, or resulting from an increase in the authorized number of Directors.
SECTION 4. THE AUDIT COMMITTEE. The Audit Committee shall consist of
four or more Directors, none of whom shall be a salaried officer of the SAVINGS
BANK, who shall be elected to said Committee at the annual meeting of the Board
of Directors, or in the case of the filling of a vacancy (such vacancy, in
every case to be filled by an existing non-salaried Director) at any regular or
special meeting of the Board. The Audit Committee shall assist the Board of
Directors in fulfilling its obligation to oversee the appropriateness of
accounting policies, and SAVINGS BANK procedures and controls and shall be
charged with the duty of carrying out the requirements of Section 254 of the
Banking Law as the same now is in force or as it may be amended or of any law
substituted therefor. In performing its functions, the Audit Committee shall
utilize the expertise of the SAVINGS BANK's internal Auditing Department under
the direction of the SAVINGS BANK's internal Auditor. The Audit Committee
shall hold formal meetings with the SAVINGS BANK's internal auditors on a
quarterly basis.
ARTICLE V. OFFICERS
SECTION 1. POSITIONS. The Board shall elect a Chairman of the Board, who
shall be the Chief Executive Officer and President, and who shall be a member
of the Board of Directors. The Board shall also elect one or more Executive
Vice Presidents, one or more Senior Vice Presidents, and a Secretary, who need
not be members of the Board. The offices of Secretary and, if appointed,
Treasurer, may be held by the same person and a Vice President may also be
either a Secretary or Treasurer. Any offices may be held concurrently by the
same person, except that the Chairman shall hold no additional office other
than in this Section 1 provided. The Board of Directors shall also appoint the
Auditor, who may not hold another office.
The Chairman and the Executive Vice Presidents shall be the Executive
Officers of the SAVINGS BANK.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the SAVINGS
BANK required to be elected by the Board of Directors pursuant to Section 1
hereof shall be elected annually at the annual meeting of the Board of
Directors or at the first meeting of the Board of Directors held after each
annual meeting of the shareholders. If the election of officers is not held at
such meeting, such election shall be held as soon thereafter as possible. Each
officer shall hold office until a successor has been duly elected and qualified
or until the officer's death, resignation, retirement or removal in the manner
hereinafter provided. Election or appointment of an officer, employee or agent
shall not of itself create contractual rights. The Board of Directors may
authorize the SAVINGS BANK to enter into an employment contract with any
officer; but no such contract shall impair the right of the Board of Directors
to remove any officer at any time in accordance with Section 3 of this Article
V.
SECTION 3. REMOVAL. Any officer may be removed by the Board of
Directors whenever in its judgment the best interests of the SAVINGS BANK will
be served thereby, but such removal, other than for cause, shall be without
prejudice to the contractual rights, if any, of the person so removed.
SECTION 4. VACANCIES. A vacancy in any executive officer position
because of death, resignation, removal, disqualification or otherwise, may be
filled by the Board of Directors for the unexpired portion of the term. Any
vacancy in any officer position other than an executive officer position may be
filled by the Chief Executive Officer for the unexpired portion of the term,
provided such action by the Chief Executive Officer is ratified by the Board of
Directors.
SECTION 5. DELEGATION OF DUTIES. In the absence or disability of an
officer of the SAVINGS BANK, or for any other reason which may seem sufficient
to the Board, the Board of Directors may delegate his powers and duties to any
other officer or to any Director.
SECTION 6. REMUNERATION. The remuneration of the officers shall be fixed
from time to time by the Board of Directors. The employees of the SAVINGS BANK
shall receive such compensation and allowances as the Board of Directors may
from time to time fix or approve or, within limits or schedules from time to
time fixed or established by the Board as may be determined by the Executive
Committee, the Chairman or a committee of the Board appointed for that purpose.
SECTION 7. CHAIRMAN OF THE BOARD OF DIRECTORS, CHIEF EXECUTIVE OFFICER
AND PRESIDENT. The Chairman of the Board shall be the Chief Executive Officer
and President of the SAVINGS BANK and, subject to the provisions of these
Bylaws and the resolutions of the Board, shall have the active management,
direction and supervision of the SAVINGS BANK and its officers, its operations,
securities and obligations, and shall have all powers and perform all duties
incidental of his office. He shall preside at all meetings of the Board and
the Executive Committee, appoint all committees not otherwise provided for by
law or by these Bylaws or by action of the Board of Directors, and shall be an
ex-officio member of all other committees, except the Audit Committee and
committees on which he is ineligible to serve by law, the Restated Organization
Certificate or these Bylaws. He may perform, or cause to be performed, at any
time, any of the functions or duties of any other officer. He may assign to
all other officers, employees and agents of the SAVINGS BANK, duties in
addition to those specifically described in these Bylaws.
He shall have custody of the common seal and direct the use of it. He
shall have power to sign and execute any and all contracts, papers and legal
documents. He may delegate to Counsel or such other officers as are designated
by the Board of Directors, the authority, under the seal of the SAVINGS BANK,
to execute and acknowledge, in the name and on behalf of the SAVINGS BANK, all
contracts, papers and documents incident or related to the business of the
SAVINGS BANK, except where otherwise directed by law or by these Bylaws.
Unless otherwise provided by resolution of the Board of Directors or
these Bylaws, he may fill vacancies on committees and may appoint such other
committees as he may deem necessary or the Board may require. He shall perform
such other duties as the Board of Directors may direct.
The decisions of the Chairman of the Board on any matter, incident to the
business of the SAVINGS BANK, shall be conclusive unless modified by the Board
of Directors.
SECTION 8. EXECUTIVE VICE PRESIDENTS. The Executive Vice Presidents
shall perform such administrative and executive duties as are provided in these
Bylaws, and as may be properly required of them or delegated to them by the
Chairman, or as may from time to time be required by the Board of Directors,
and shall exercise such powers as may from time to time be conferred upon them
by the Board.
In the absence or disability of the Chairman, the Board of Directors may
designate an Executive Vice President to perform the duties and exercise the
powers of such officers.
SECTION 9. SECRETARY. The Secretary shall give due notice as in these
Bylaws provided of all meetings of the Board of Directors and of the Executive
Committee. He shall attend all meetings of the Board and of said Committee and
shall keep the minutes thereof. If requested so to do he shall attend and keep
the minutes of the meetings of any and all other committees of the Board. He
shall have custody of the corporate records of the SAVINGS BANK and its common
seal; and when properly affixed to any document shall attest said seal. He
shall perform all of the usual duties of the Secretary of a corporation,
together with such duties as may from time to time be properly assigned to him
by the Chairman or the Board of Directors.
SECTION 10. SENIOR VICE PRESIDENTS. The Senior Vice Presidents shall
severally perform such duties and shall exercise such powers as may from time
to time be assigned to or conferred upon them by the Board of Directors, and
they shall perform such other duties as may be assigned to them by the Chairman.
SECTION 11. AUDITOR. The Auditor shall, subject to the control and
direction of the Board of Directors, have supervision and control of such
program of internal audit as may be approved by the Board or be required by a
body having supervisory or examining authority over the SAVINGS BANK; said
program shall in any case, require periodic review and verification of the
assets of the SAVINGS BANK, the control of items of income and the review of
expenditures. He shall also examine, or cause to be examined, and verify, or
cause to be verified, entries in financial records and shall review, or cause
to be reviewed all reports made to examining, supervisory and taxing
authorities before they are forwarded or filed. The Auditor shall report in
writing upon the foregoing matters to the Chairman at least as often as once in
each quarter. The Auditor also shall transmit directly to the Audit Committee
of the Board of Directors such reports, quarterly or otherwise, as may be
necessary for that Committee to perform its functions. The Auditor shall also
prepare or have prepared and shall submit any and all additional reports
required of him at any time by the Board of Directors or the Chairman.
SECTION 12. OTHER OFFICERS. The Chairman of the Board or the Board of
Directors, upon recommendation of the Chairman of the Board, may in their
discretion, from time to time, establish such other offices as it may deem wise
and may elect incumbents thereof and fix their duties and powers not
inconsistent with the provisions of these Bylaws. Such officers, unless the
Board shall by resolution duly adopted otherwise provide, shall hold office
during the pleasure of the Board and the Chairman.
ARTICLE VI. SECURITIES AND INVESTMENTS
SECTION 1. LOANS AND INVESTMENTS. The Board of Directors shall from
time to time determine and direct to what extent the funds and property of the
SAVINGS BANK shall be invested, and, subject to all applicable provisions of
law, the kind and character of the investments which are to be made and how the
same shall be handled and dealt with. No loans shall be contracted on behalf
of the SAVINGS BANK and no evidence of indebtedness shall be issued in its name
unless authorized by the Board of Directors. Such authority may be general or
confined to specific instances.
SECTION 2. CARE AND CUSTODY OF SECURITIES. All stocks, bonds and other
securities, including bonds and mortgages, not directed by the Board of
Directors to be held in bearer form, or in the name of a nominee, shall be in
the name of the SAVINGS BANK and, to the extent that the form of the several
securities may permit or as may be permitted or required by law, shall be
registered or recorded in the name of the SAVINGS BANK. All securities
including bonds and mortgages held by the SAVINGS BANK shall be kept in such
manner and at such places as the Board of Directors, having due regard for the
safety and protection thereof, may direct, and all or any part thereof may be
lodged or deposited for safekeeping with such other institutions as the Board
may from time to time approve.
SECTION 3. TRANSFERS OF SECURITIES, ETC. Transfers and assignments of
stocks, bonds and other securities standing, issued or registered in the name
of the SAVINGS BANK may be signed by any two of the following officers acting
by virtue of their several offices, to wit: the Chairman, the President, an
Executive Vice President, the Secretary, or may be signed by any one of said
officers together with such other officer or officers, or person or persons, as
the Board of Directors may from time to time authorize or designate.
The Chairman or the President, or in their absence an Executive Vice
President (other than one serving as Mortgage Loan Officer) or the Secretary,
shall execute any and all instruments for the proper transaction of the
business of the SAVINGS BANK relating to its mortgage investments, including
extensions, modifications, alterations, and amendments, assignments and
satisfaction pieces. The Board of Directors may, nevertheless, at any time
authorize and empower other additional officers or employees to do any one or
more of these things.
ARTICLE VII. DEPOSITORIES, CHECKS AND DRAFTS
SECTION 1. DEPOSITARIES AND WITHDRAWALS. The Board of Directors may
from time to time designate banks, trust companies or similar institutions to
be depositaries of funds of the SAVINGS BANK and may by resolution designate
the officer or officers, or employee or employees, who shall be authorized to
sign the checks, drafts, vouchers or orders of the SAVINGS BANK upon which such
depositaries shall be authorized to pay out the moneys so deposited. Unless
and until the Board shall otherwise provide, such checks, drafts, vouchers or
orders for the payment of deposited funds shall be signed by any two of the
following officers (other than one serving concurrently as Mortgage Loan
Officer or Auditor): the Chairman, the President, an Executive Vice President,
a Senior Vice President, a Vice President, the Secretary, the Comptroller, an
Assistant Vice President, an Assistant Secretary, an Assistant Comptroller and
the Assistant to the President, if the Board of Directors shall have
established the offices of Assistant Vice President, Assistant Secretary,
Assistant Comptroller or Assistant to the Chairman.
SECTION 2. DEPOSITORS' WITHDRAWALS. The Chairman, the President, an
Executive Vice President or the Secretary shall designate those officers and
employees who shall be authorized to sign or countersign checks drawn upon the
general deposit accounts of the SAVINGS BANK issued in payment of depositor
withdrawals.
The Board of Directors may also adopt such other means of payment of
depositor withdrawals as to it may seem proper and expedient.
ARTICLE VIII. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of
capital stock of the SAVINGS BANK shall be in such form as shall be determined
by the Board of Directors and approved by the NYB. Such certificates shall be
signed by the Chairman of the Board or by any other officer of the SAVINGS BANK
authorized by the Board, attested by the secretary or an assistant secretary,
and sealed with the corporate seal or a facsimile thereof. The signatures of
such officers upon a certificate may be facsimiles if the certificate is
manually signed on behalf of a transfer agent or a registrar, other than the
SAVINGS BANK itself or one of its employees. Each certificate for shares of
capital stock shall be consecutively numbered or otherwise identified. The
name and address of the person to whom the shares are issued, with the number
of shares and date of issue, shall be entered on the stock transfer books of
the SAVINGS BANK. All certificates surrendered to the SAVINGS BANK for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares has been surrendered and
canceled, except that in case of a lost or destroyed certificate, a new
certificate may be issued upon such terms and indemnity to the SAVINGS BANK as
the Board of Directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of capital stock of
the SAVINGS BANK shall be made only on its stock transfer books. Authority for
such transfer shall be given only by the holder of record or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney authorized by a duly executed power of attorney and filed with the
SAVINGS BANK. Such transfer shall be made only on surrender for cancellation
of the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the SAVINGS BANK shall be deemed by the SAVINGS
BANK to be the owner for all purposes.
ARTICLE IX. FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the SAVINGS BANK shall be as fixed by the Board of
Directors. The SAVINGS BANK shall be subject to an annual audit as of the end
of its fiscal year by independent public accountants appointed by and
responsible to the Board of Directors. The appointment of such accountants
shall be subject to annual ratification by the shareholders.
ARTICLE X. DIVIDENDS
Subject to the terms of the SAVINGS BANK's Restated Organization
Certificate and the regulations and orders of the NYB, the Board of Directors
may, from time to time, declare, and the SAVINGS BANK may pay, dividends on its
outstanding shares of capital stock.
ARTICLE XI. CORPORATE SEAL
The Board of Directors shall provide a SAVINGS BANK seal, which shall be
two concentric circles between which shall be the name of the SAVINGS BANK.
The year of incorporation or an emblem may appear in the center.
ARTICLE XII. SURETY BONDS
SECTION 1. SURETY BONDS AND PREMIUMS THEREON. The SAVINGS BANK shall
procure from a responsible surety company approved by the Board of Directors
and shall keep continuously in force and effect a banker's blanket bond of
insurance or a fidelity bond of similar type and character covering all of the
officers and employees of the SAVINGS BANK in such amount as the Board may fix.
The Board may also require that individual officers or employees shall furnish
separate bonds conditioned on the faithful performance of their several duties.
It shall be obligatory upon the officers and employees to furnish to the
SAVINGS BANK and to the surety company involved any and all information
necessary or appropriate to the procurement of any bond or bonds herein
provided for. The SAVINGS BANK may dismiss any officer or employee who shall
fail when asked or who shall refuse to give any and all proper and relevant
information required by the designated surety company or as to whom such surety
company shall decline to give a bond or whom the surety company shall decline
to include in a general bond.
All expenses connected with such bond or bonds and all premiums thereon
shall be borne by the SAVINGS BANK.
ARTICLE XIII. INDEMNIFICATION
SECTION 1. SCOPE OF INDEMNIFICATION. Except to the extent expressly
prohibited by the New York Banking Law, the SAVINGS BANK shall indemnify each
person made, or threatened to be made, a party to any action or proceeding,
whether criminal or civil, by reason of the fact that such person or such
person's testator or intestate is or was a director or officer of the SAVINGS
BANK, or is or was serving, in any capacity, at the request of the SAVINGS
BANK, any other corporation, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, against judgments, fines, penalties, amounts
paid in settlement and reasonable expenses, including attorneys' fees and
expenses, reasonably incurred in enforcing such person's right to
indemnification, incurred in connection with such action or proceeding, or any
appeal therein, provided that no such indemnification shall be made if a
judgment or other final adjudication adverse to such persons establishes that
such person's acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
or that such person personally gained in fact a financial profit or other
advantage to which such person was not legally entitled, and provided that no
such indemnification shall be required with respect to any settlement or other
nonadjudicated disposition of any threatened or pending action or proceeding
unless the SAVINGS BANK has given its prior consent to such settlement or other
disposition.
SECTION 2. REIMBURSEMENT OF EXPENSES. The SAVINGS BANK shall advance or
promptly reimburse upon request any person entitled to indemnification
hereunder for all reasonable expenses, including attorneys' fees and expenses,
reasonably incurred in defending any action or proceeding in advance of the
final disposition thereof upon receipt of an undertaking by or on behalf of
such person to repay such amount if such person is ultimately found not to be
entitled to indemnification or, where indemnification is granted, to the extent
the expenses so advanced or reimbursed exceed the amount to which such person
is entitled; provided, however, that such person shall cooperate in good faith
with any request by the SAVINGS BANK that common counsel be used by the parties
to any action or proceeding who are similarly situated unless to do so would be
inappropriate due to actual or potential differing interest between or among
parties.
SECTION 3. ADDITIONAL RIGHTS. Nothing herein shall limit or affect any
right of any director, officer, or other corporate personnel otherwise than
hereunder to indemnification or expenses, including attorneys' fees and
expenses, under any statute, rule, regulation, certificate of incorporation,
Bylaws, insurance policy, contract, or otherwise; without affecting or limiting
the rights of any director, officer or other corporate personnel pursuant to
this Article XIII, the SAVINGS BANK is authorized to enter into agreements with
any of its directors, officers or other corporate personnel extending rights to
indemnification and advancement of expenses to the fullest extent permitted by
applicable law.
SECTION 4. NOTICE OF AMENDMENTS OR ELIMINATION. Anything in these
Bylaws to the contrary notwithstanding, no elimination or amendment of this
Article adversely affecting the right of any person to indemnification or
advancement of expenses hereunder shall be effective until the 60th day
following notice to such person of such action, and no elimination of or
amendment to this Article XIII shall deprive any such person's rights hereunder
arising out of alleged or actual occurrences, act or failures to act prior to
such 60th day. Any amendments or eliminations made pursuant to this Section
are only effective with regard to acts occurring after such date.
SECTION 5. AMENDMENT OR ELIMINATION. The SAVINGS BANK shall not, except
by elimination or amendment of this Article XIII in a manner consistent with
the preceding Section 4, take any corporate action or enter into any agreement
which prohibits, or otherwise limits the rights of any person to,
indemnification in accordance with the provisions of this Article XIII. The
indemnification of any person provided by this Article XIII shall continue
after such person has ceased to be a director or officer of the SAVINGS BANK
and shall inure to the benefit of such person's heirs, executors,
administrators and legal representatives.
SECTION 6. SEVERABILITY OF PROVISION. In case any provision in this
Article XIII shall be determined at any time to be unenforceable in any
respect, the other provisions of this Article XIII shall not in any way be
affected or impaired thereby, and the affected provision shall be given the
fullest possible enforcement in the circumstances, it being the intention of
the SAVINGS BANK to afford indemnification and advancement of expenses to its
directors or officers, acting in such capacities or in the other capacities
mentioned herein, to the fullest extent permitted by law.
ARTICLE XIV. RULES AND REGULATIONS
Management shall adopt rules and regulations not inconsistent with law
for the payment of deposits and interest and, generally, for the transaction
and management of the affairs of the SAVINGS BANK. Such rules and regulations
shall be posted in a conspicuous place in the offices of the SAVINGS BANK and
shall be available to depositors upon request. Such posting shall be taken and
held as actual notice to and be binding upon each depositor and to all persons
claiming any interest in any account. All notices to the SAVINGS BANK from
depositors, or other persons claiming any interest in any account, shall be not
effective unless they are in writing and signed by the persons giving such
notice.
Rules and regulations adopted by management or any amendments thereto
shall be transmitted to the Board of Directors at its next regular monthly
meeting following the adoption of same.
ARTICLE XV. AMENDMENTS
These Bylaws may be amended in a manner consistent with regulations of
the NYB at any time by a majority vote of the Whole Board of Directors, or by
the affirmative vote of at least 80% of the votes eligible to be cast by the
shareholders of the SAVINGS BANK at any legal meeting.
EMPLOYMENT AGREEMENT
AGREEMENT by and among GREENPOINT FINANCIAL CORP., a Delaware
corporation (the "Company"), GREENPOINT BANK, a New York chartered savings bank
(the "Bank") and BHARAT B. BHATT (the "Executive"), dated as of the 21st day
of August, 1995.
1. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
PROVIDED, HOWEVER, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 1; or
(b) individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company (the
"Board"); PROVIDED, HOWEVER, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
(c) consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(d) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
2. EFFECTIVE DATE. For the purpose of this Agreement, "Effective Date"
shall mean the first date after the date hereof on which a Change of Control
(as defined in Section 1) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Executive that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
3. TERM.(a) EMPLOYMENT PERIOD. The Company and the Bank hereby agree
to continue the Executive in their employ, and the Executive hereby agrees to
remain in the employ of the Company and the Bank subject to the terms and
conditions of this Agreement, for the period commencing on the date hereof (the
"Commencement Date")and ending on the third anniversary of such date (the
"Employment Period"); PROVIDED, HOWEVER, that commencing with the Commencement
Date, the Employment Period shall be extended for one day each day until such
time as the Board of Directors of the Company and the Bank or the Executive
elects not to extend the term of the Agreement further by giving written notice
to the other party in accordance with Section 12(b) of this Agreement in which
case the term of this Agreement shall end on the third anniversary of the date
of such written notice. The Board of Directors of the Company and the Bank
will review the Agreement and the Executive's performance annually for purposes
of determining whether to give notice not to extend the Agreement, and the
results thereof shall be included in the minutes of the Boards' meeting.
Notwithstanding anything in this Agreement to the contrary and pursuant to
Section 5(c) hereof, the Employment Period shall cease and Executive's
employment shall terminate on the Executive's retirement date in accordance
with the Company's and the Bank's general retirement policy as it exists from
time to time.
(b) TERMINATION OF EMPLOYMENT. (i) Executive's employment with the
Company and the Bank may be terminated at any time for (i)cause, (ii)
disability, (iii) death or (iv) any other reason. In any such case, the right
to terminate shall be specifically conditioned on satisfaction of the Company's
or the Bank's obligations, if any, provided hereunder, including but not
limited to all payments required under Section 6.
(ii) Upon the termination of Executive's employment with the Company
or the Bank, the daily extension provided pursuant to Section 3(a), shall cease
(if such extensions have not previously ceased).
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) Commencing on
the date hereof and for the remainder of the Employment Period, the Executive
shall be Vice Chairman of the Company and the Bank and shall have such duties,
responsibilities and authority as shall be consistent therewith, as determined
from time to time prior to the Effective Date by or under the authority of the
Boards of Directors of the Company and the Bank (the "Boards"), as the case may
be.
(ii) During the Employment Period, except for periods of absence
occasioned by illness, reasonable vacation periods, and reasonable leaves of
absence, the Executive shall devote substantially all of his business time,
attention, skill and efforts to the business and affairs of the Company and the
Bank and the faithful performance of his responsibilities under this Agreement.
During the Employment Period it shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not, in the judgement of the Boards, present any conflict of
interest with the Company and the Bank, or materially affect the performance of
Executive's duties pursuant to this Agreement. It is expressly understood and
agreed that to the extent that any such activities have been conducted by the
Executive prior to the Commencement Date, the continued conduct of such
activities (or the conduct of activities similar in nature and scope thereto)
subsequent to the Commencement Date shall not thereafter be deemed to present a
conflict of interest with the Company and the Bank, or materially affect the
performance of Executive's duties pursuant to this Agreement.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") of not
less than $325,000. The Annual Base Salary shall be paid periodically in the
same frequency as other officers of the Company. During the Employment Period,
the Annual Base Salary shall be reviewed at least annually. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") pursuant to the Company's annual incentive
plans, with a target bonus of 50% of Annual Base Salary (the "Target Bonus")
and a maximum bonus of 100% of Annual Base Salary (the "Maximum Bonus");
PROVIDED, HOWEVER, after the Effective Date, the Annual Bonus shall be no less
than the Target Bonus. Each such Annual Bonus shall be paid no later than the
end of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer
the receipt of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be eligible to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies
and pursuant to the provisions of such plans, practices, policies and programs,
provided that after the Effective Date in no event shall such plans, practices,
policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices, policies
and programs as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and its affiliated
companies and pursuant to the provisions of such plans, practices, policies and
programs, provided that after the Effective Date in no event shall such plans,
practices, policies and programs provide the Executive with benefits which are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable business expenses
incurred by the Executive in performing his obligations under this Agreement.
(vi) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits provided generally to other peer
executives of the Company.
(vii) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with current policies.
(viii) SUPPLEMENTAL RETIREMENT BENEFIT. The Company will provide
Executive with a supplemental retirement benefit, after offset of all other
retirement benefits received from the Company and its affiliates and any
previous employers and the employers' portion of social security, of 60% of
Executive's final average pay, which shall be defined as the average of his
highest three years of Annual Base Salary and Annual Bonus during the shorter
of (x) the ten years prior to the date of his termination of employment with
the Company, and (y) the term of his employment with the Company. Benefits
will accrue ratably over ten years (i.e.,6% of final average pay per year),
with accrued benefits vesting after 5 years.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties.
For purposes of this Agreement, "Disability" shall mean the absence of the
Executive from the Executive's duties with the Company on a full-time basis for
the greater of (x) 180 consecutive business days, and (y) the Executive's
cumulative unused sick days, in each case as a result of incapacity due to
mental or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or the Bank or one of
their affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief Executive Officer of
the Company which specifically identifies the manner in which the Board or
Chief Executive Officer believes that the Executive has not substantially
performed the Executive's duties, or
(ii) the Executive's personal dishonesty, willful misconduct, any
breach of fiduciary duty involving personal profit, willful violation of any
law, rule, regulation (other than traffic violations or similar offenses) or
final cease and desist order or any material breach of any provision of this
Agreement.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive not in good faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company or the
Bank or their affiliates. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or the Boards, as the
case may be, or based upon the advice of counsel for the Company or the Bank
shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company or the Bank or
their affiliates. The cessation of employment of the Executive shall not be
deemed to be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of a
majority of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together with counsel, to be heard
before the Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in subparagraph (i) or (ii) above,
and specifying the particulars thereof in detail.
(c) RETIREMENT. The Executive's employment shall terminate as a result
of retirement in accordance with the Company's and the Bank's general
retirement policy as it exists from time to time ("Retirement"), provided that
after the Effective Date such policy may be no less favorable to the Executive
than that existing during the 120-day period immediately prior to the Effective
Date.
(d) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent with
the Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
4(a) of this Agreement, or any other action by the Company or the Bank which
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action taken in good faith and which is remedied by the Company or
the Bank promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, unless waived by the Executive, other than
an isolated, insubstantial and inadvertent failure occurring in good faith and
which is remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(iii) the Company's requiring the Executive to be based at any office
or location after the Effective Date other than where the Executive was located
immediately prior to the Effective Date other than in connection with a change
of the Company's headquarters if the Executive is relocated to such
headquarters, or, after the Effective Date, the Company's requiring the
Executive to travel on Company business to a substantially greater extent than
required immediately prior to the Effective Date, in either case, unless waived
by the Executive.
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement, unless waived by the Executive.
For purposes of this Section 5(d), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this Agreement
to the contrary notwithstanding, a termination by the Executive for any reason
during the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(e) NOTICE OF TERMINATION. Any purported termination by the Company, or
by the Executive shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice).
(f) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason or other than Good Reason, the date of receipt of the
Notice of Termination or any later date specified therein, as the case may be,
(ii) if the Executive's employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death, Disability or Retirement, the Date
of Termination shall be the date of death of the Executive, the Disability
Effective Date or the date of Retirement, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON; OTHER
THAN FOR CAUSE, RETIREMENT, DEATH OR DISABILITY. If, during the Employment
Period, the Company shall terminate the Executive's employment other than for
Cause or Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts (the "Special Termination Amount"):
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the product of (x)
the higher of (i) the Maximum Bonus and (II) the Annual Bonus paid or payable,
including any bonus or portion thereof which has been earned but deferred (and
annualized for any fiscal year consisting of less than twelve full months or
during which the Executive was employed for less than twelve full months), for
the most recently completed fiscal year during the Employment Period, if any
(such higher amount being referred to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination, and the denominator of which is 365 and
(3) any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in each
case to the extent not theretofore paid (the sum of the amounts described in
clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of (1) three and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the Highest Annual Bonus; and
C. an amount equal to the difference between (a) the actuarial
equivalent of the benefit (utilizing actuarial assumptions no less favorable to
the Executive than those in effect under the Company's qualified defined
benefit retirement plan (the "Retirement Plan"))under the Retirement Plan
immediately prior to the Effective Date, and any excess or supplemental
retirement plan in which the Executive participates (together, the "SERP")
which the Executive would receive if the Executive's employment continued for
three years after the Date of Termination assuming for this purpose that all
accrued benefits are fully vested, and, assuming that the Executive's
compensation in each of the three years is the sum of Executive's Annual Base
Salary and the Maximum Bonus, and (b) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under the Retirement Plan
and the SERP as of the Date of Termination. In the event it shall be
determined that a payment by the Company to or for the benefit of the Executive
shall be made pursuant to the terms of this Section 6(a) as a result of
Executive's termination of employment as described hereunder solely as a result
of a Change of Control (as defined in Section 1), then under clause (a) of this
Subsection 6(a)(i)C, solely for purposes of determining the actuarial
equivalent of the supplemental retirement benefit described in Section
4(b)(viii) of this Agreement, and not the actuarial equivalent of the benefit
under the Retirement Plan or any other excess or supplemental retirement plan
in which the Executive participates, the words "five years" should be
substituted for the words "three years" each time they appear in such clause
(a);
(ii) for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs, practices
and policies described in Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more favorable to the Executive, as
in effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their families,
PROVIDED, HOWEVER, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until three years after
the Date of Termination and to have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive in his reasonable discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is entitled to receive
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations, the Special
Termination Amount and the timely payment or provision of Other Benefits. The
Special Termination Amount and Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits after the Effective Date, the term Other Benefits as utilized in this
Section 6(b) shall include, without limitation, and the Executive's estate
and/or beneficiaries shall be entitled to receive, benefits at least equal to
the most favorable benefits provided by the Company and its affiliated
companies to the estates and beneficiaries of peer executives of the Company
and such affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as are in effect with respect to
other peer executives and their beneficiaries at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as are in effect on
the date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement
shall terminate without further obligations to the Executive, other than for
payment of Accrued Obligations, the Special Termination Amount and the timely
payment or provision of Other Benefits. Accrued Obligations and the Special
Termination Amount shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits after the Effective Date, the term Other Benefits as utilized in this
Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as are in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as are in effect at any time thereafter generally with respect to other
peer executives of the Company and its affiliated companies and their families.
(d) RETIREMENT If the Executive's employment is terminated by reason of
the Executive's Retirement during the Employment Period, this Agreement shall
terminate without further obligations to the Executive under this agreement,
other than for payment of Accrued Obligations, and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits after the Effective Date, the
term Other Benefits as utilized in this Section 6(d) shall include, without
limitation, and the Executive shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and its affiliated
companies to peer executives of the Company and such affiliated companies under
such plans, programs, practices and policies relating to retirement benefits,
if any, as are in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as are in effect on the
date of the Executive's Retirement with respect to other peer executives of
the Company and its affiliated companies.
(e) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (x) his Annual Base Salary through the Date
of Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the
Employment Period, excluding a termination for Good Reason, this Agreement
shall terminate without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other Benefits. In
such case, all Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"); provided that the Company shall have no such obligation
if it is determined by a court that the Company was not in breach of the
Agreement and that the Executive's claims were not made in good faith.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 9) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of
all taxes and net of any benefits that result from the deductibility by the
Executive of such taxes (including, in each case, any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick LLP or such other certified public accounting firm as may be designated
by the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event
that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the Company to the Executive
within five days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order to
effectively contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(a) or 9(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 9(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company and the Bank all secret or confidential
information, knowledge or data relating to the Company or the Bank or any of
their affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the Company
and the Bank or any of their affiliated companies and which shall not be or
become public knowledge (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement). After termination of the
Executive's employment with the Company and the Bank, the Executive shall not,
without the prior written consent of the Company and the Bank or as may
otherwise be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and the Bank
and those designated by the Company and the Bank. In no event shall an
asserted violation of the provisions of this Section 10 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
IF TO THE EXECUTIVE:
Mr. Bharat B. Bhatt
15 Christie Hill Road
Darien CT 06820
IF TO THE COMPANY OR THE BANK:
GreenPoint Financial Corp.
41-60 Main Street
Flushing, New York 11355
Attention: Howard C. Bluver
Senior Vice President and General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company or the Bank may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's or the Bank's failure to insist
upon strict compliance with any provision hereof or any other provision of
this Agreement or the failure to assert any right the Executive or the Company
or the Bank may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to Section
5(d)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
13. NO PROHIBITED PAYMENTS. Notwithstanding anything in this Agreement
to the contrary, the Company and the Bank shall not make any payment to the
Executive which, according to the opinion of the Company's outside counsel,
would violate Section 2523(k) of the Comprehensive Thrift and Bank Fraud
Prosecution and Taxpayer Recovery Act of 1990 (codified at 12 U.S.C. 1828(k)),
or any rules or regulations promulgated thereunder.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from their Boards of Directors, the Company
and the Bank have caused these presents to be executed in their name on their
behalf, all as of the day and year first above written.
_____________________________________
BHARAT B. BHATT
ATTEST: GREENPOINT FINANCIAL CORP.
___________________ by: ________________________________
Secretary Thomas S. Johnson
President and Chief Executive Officer
Seal
ATTEST: GREENPOINT BANK
___________________ By: ________________________________
Secretary Thomas S. Johnson
President and Chief Executive Officer
Seal
Exhibit 11.1
Statement Regarding Computation of Per Share Earnings
(In millions, except per share amounts )
Year Ended
December 31,
---------------------------
1996 1995 1994(a)
------- ------- -------
Net income $ 132.5 $ 107.5 $ 104.7
Weighted average number of common stock and
common stock equivalents outstanding during
each period - primary 43.9 47.0 47.3
Weighted average number of common stock and
common stock equivalents outstanding during
each period - fully diluted 44.5 47.2 47.2
Net earnings per share - primary $ 3.02 $ 2.29 $ 2.21
Net earnings per share - fully diluted $ 2.97 $ 2.28 $ 2.22
(a) Amounts are from January 28, 1994, date of initial public offering of
common stock.
GREENPOINT FINANCIAL
UNDERWRITING THE AMERICAN DREAM
ANNUAL REPORT 1996
FINANCIAL REVIEW
_______________________________________________________________________________
TABLE OF CONTENTS
- ------------------------------------------------------------
Five Year Selected Consolidated Data 11
Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Consolidated Financial Statements 22
Notes to the Consolidated Financial Statements 27
Report of Independent Accountants 44
10
SELECTED CONSOLIDATED FINANCIAL CONDITION DATA
_______________________________________________________________________________
<TABLE>
<CAPTION>
December 31, June 30,
-------------------------------------------- -------------------
(In millions) 1996 1995 1994 1993 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total assets $13,325.6 $14,670.5 $6,955.0 $7,377.1 $6,444.7 $5,879.7
Loans receivable held for investment, net 7,294.3 5,858.6 5,594.1 5,376.6 5,200.8 4,870.6
Allowance for possible loan losses 105.0 105.5 103.0 147.0 136.5 130.5
Securities 4,359.4 5,900.8 736.7 378.2 481.0 500.3
Money market investments 494.1 1,550.7 265.0 1,151.8 303.2 181.6
Loans receivable held for sale, net(1) 4.8 175.1 11.1 65.8 74.5 15.3
Goodwill 623.6 670.2 0.5 0.7 0.8 -
Other real estate owned, net 28.6 29.2 54.0 74.8 72.6 46.9
Deposits 11,452.3 12,898.3 5,223.5 5,650.4 5,543.3 5,092.9
Stockholders' equity 1,459.8 1,551.3 1,521.2 786.3 730.0 646.1
</TABLE>
SELECTED CONSOLIDATED OPERATING DATA
_______________________________________________________________________________
<TABLE>
<CAPTION>
For the For the For the
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
(In millions) 1996 1995 1994 1993 1993 1992
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $974.0 $696.5 $563.8 $273.2 $547.6 $548.9
Interest expense 527.5 345.8 226.3 114.8 244.4 300.9
Provision for possible loan losses (15.7) (9.5) (32.3) (25.3) (63.6) (59.9)
Non-interest income 56.9 35.8 27.1 16.2 33.0 32.6
Non-interest expense 263.2 178.6 121.4 51.8 99.7 78.1
Income taxes 92.0 90.9 98.0 41.2 83.7 69.0
Cumulative effect of change in
accounting principles(2) - - - - (5.3) -
Net income $132.5 $107.5 $112.9 $ 56.3 $ 83.9 $ 73.6
</TABLE>
See notes on following page
11
SELECTED FINANCIAL RATIOS AND OTHER DATA
_______________________________________________________________________________
<TABLE>
<CAPTION>
At or For the Six Months At or For the
Year Ended Ended Year Ended
December 31, December 31, June 30,
(Dollars in millions, except per share data) 1996 1995 1994 1993)(3) 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C. <C> <C> <C> <C> <C>
Performance Ratios:
Return on average assets(4) 0.91% 1.18% 1.59% 1.72% 1.36% 1.29%
Return on average equity(4) 8.62 6.96 7.91 14.96 12.22 12.08
Return on tangible equity(4) 14.82 7.93 7.92 14.97 12.23 12.09
Net interest spread during period 3.23 3.36 4.15 4.67 4.61 3.83
Net interest margin 3.51 4.05 4.92 5.05 5.07 4.47
Operating expense to average assets(5) 1.57 1.76 1.75 1.58 1.62 1.37
Efficiency ratio(6) 44.3 41.4 34.0 28.7 26.8 25.1
Average interest-earning assets to
average interest-bearing liabilities 1.07x 1.17x 1.23x 1.11x 1.11x 1.12x
PER SHARE DATA:
Earnings per share $ 3.02 $ 2.29 $ 2.21(7) - - -
Book value per share 34.77 34.25 32.31 - - -
Tangible book value per share 19.92 19.12 32.30 - - -
Dividends per share 0.80 0.80 0.60(8) - - -
Dividend payout ratio 26.49% 34.93% 27.15% - - -
ASSET QUALITY RATIOS:
Non-performing loans to total loans 4.78% 6.49% 6.80% 12.02% 11.63% 12.30%
Non-performing assets to total assets 2.89 2.94 6.42 10.21 10.99 11.40
Allowance for possible loan losses to
non-performing loans 29.48 26.24 26.26 23.45 23.70 20.94
Allowance for possible loan losses to
total loans 1.41 1.75 1.79 2.63 2.52 2.58
Allowance for possible loan losses $ 105.0 $ 105.5 $ 103.0 $ 147.0 $ 136.5 $ 130.5
Net charge-offs $ 16.2 $ 13.1(9) $ 31.8(10) $ 14.8 $ 37.6 $ 13.2
Percentage of net loan charge-off
experience to average total loans 0.25% 0.22% 0.56% 0.27% 0.71% 0.27%
Ratio of allowance for possible
loan losses to net charge-offs 6.48x 8.05x 3.24x 3.54x 3.63x 9.89x
CAPITAL DATA:
Tangible assets $12,725.3 $13,985.1 $6,954.5 $7,376.4 $6,443.9 $5,879.7
Tangible capital $ 859.5 $ 865.9 $1,520.7 $ 785.6 $ 729.2 $ 646.1
Tangible capital ratio 6.75% 6.19% 21.87% 10.65% 11.32% 10.99%
Total equity to total assets 10.95 10.57 21.87 10.66 11.33 10.99
OTHER DATA:
Mortgage loan originations $ 2,353.0 $ 1,023.5 $1,058.3 $ 582.4 $1,079.6 $1,068.7
Full-service consumer bank offices 76 84 24 24 24 20
Full-time equivalent employees (FTE) 2,135 2,025 1,392 1,411 1,372 1,201
</TABLE>
(1) Loans held for sale at December 31, 1993 and June 30, 1993 include $52.1
million and $60.0 million, net of non-performing loans.
(2) Reflects changes due to the adoption of Statements of Financial Accounting
Standards No. 106 and 112.
(3) Income statement ratios for the six months ended December 31, 1993 are
annualized.
(4) Excluding the $5.3 million after-tax gain on branch sales for the year
ended December 31, 1996.
(5) Operating expense excludes goodwill expense, ORE (income) or expense and
restructuring (recovery) charge.
(6) The efficiency ratio is calculated by dividing non-interest expense
(excluding goodwill expense, ORE (income) or expense and restructuring
(recovery) charge) by the sum of net interest income and non-interest income,
excluding the $8.9 million pre-tax gain on branch sales.
(7) Earnings per share is for the period subsequent to the initial public
offering on January 28, 1994.
(8) Dividends for the year ended December 31, 1994 are for three quarters.
(9) Net charge-off amount excludes a nonrecurring recovery of $6.1 million
contingency reserve, included in the 1994 bulk loan sale loss amount.
(10) Net charge-off amount excludes a nonrecurring loss of $56.1 million
related to the bulk sale of non-performing loans.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS
_______________________________________________________________________________
GREENPOINT FINANCIAL CORP.
GreenPoint Financial Corp. (the "Company" or "GreenPoint") is the leading
national lender in no-documentation ("No-Doc") mortgages. Its principal
subsidiaries are GreenPoint Bank (the "Bank"), a New York State chartered
savings bank with 76 branches serving customers throughout the greater New York
City area, and GreenPoint Mortgage Corp. (the "Mortgage Company"), a national
mortgage banking company headquartered in Charlotte, N.C.
OVERVIEW OF 1996 FINANCIAL RESULTS
During 1996, the Company focused on implementing its strategy to become the
leader in the national market for specialty home finance products through
careful expansion and achieving operational and staffing efficiencies.
Summarized below are several significant financial results of 1996.
. The Company had record net income for 1996 of $132.5 million, or $3.02 per
share, a 23.2% increase over the $107.5 million, or $2.29 per share, earned in
1995 reflecting a full year's effect in 1996 of two 1995 acquisitions, a
substantial increase in loan production and the achievement of planned cost
savings.
. Core cash earnings rose to $188.4 million, or $4.29 per share, in 1996
compared to $136.4 million, or $2.90 per share, in the prior year.
. Return on average equity rose to 8.62% in 1996 compared to 6.96% in 1995.
Return on average tangible equity rose to 14.82% from 7.93%.
. The Company's ratio of operating expense to average total assets decreased
to 1.57% for 1996 compared to 1.76% for 1995, reflecting planned cost savings
achieved during 1996 despite the demands for additional resources associated
with the national expansion of the Company's mortgage business.
. Mortgage loan originations increased by 130% to $2.35 billion for 1996
compared to $1.02 billion for 1995. The increase reflects greater demand for
GreenPoint's loan products in New York and New Jersey and the Company's
successful national expansion which began in mid-1995 with the acquisition of
the wholesale residential mortgage lending business of
BarclaysAmerican/Mortgage Corp. ("BAM") by the Bank. The BAM operations are
centralized in the Mortgage Company. During 1996, the Mortgage Company opened
loan offices in five cities, introducing its no-doc loan products to Boston,
Chicago, Miami, Philadelphia and Washington, D.C. Loan originations from
outside New York accounted for more than 60% of the total for 1996.
. Credit quality improved significantly as both non-performing loans and
non-performing assets decreased by more than 10%. The ratio of non-performing
loans to total loans fell to 4.78% at December 31, 1996 compared to 6.49% a
year ago. This reflects the successful initiatives taken during 1996 to
increase collection and resolution of delinquent loans, as well as loan
portfolio growth.
. The Company repurchased 5.1 million shares of its stock during 1996 at a
total cost of $169.5 million. GreenPoint continues to maintain a strong capital
position with a leverage ratio of 6.68%, a Tier 1 risk-based ratio of 15.24%
and a total risk-based ratio of 16.49% at December 31, 1996.
EFFECT OF 1995 ACQUISITIONS ON COMPARABILITY OF OPERATING RESULTS
Two 1995 acquisitions affect the comparability of 1996, 1995 and 1994 annual
results. The Bank completed the BAM acquisition on July 7, 1995 and on
September 22, 1995, purchased the 60 New York consumer banking branches of Home
Savings of America, FSB ("HSA"). Both transactions were accounted for as
purchases. Therefore, 1995 annual results include only those related revenues
and expenses subsequent to the respective acquisition dates.
The substantial increases in the Company's asset, liability and employee bases
resulting from the acquisitions (and the inclusion of a full year's effect in
1996) are the primary factors contributing to increases in revenue, expense and
average balances from year to year.
The HSA acquisition also resulted in a substantial change in the composition of
the Company's balance sheet that affected certain key performance ratios. In
return for assuming approximately $8.1 billion of customer deposits from HSA,
the Company received cash, certificates of deposit and short-term debt
securities totaling approximately $7.5 billion. The resulting shift in the
Company's average interest-earning asset mix away from the higher yielding loan
portfolio caused a reduction in the yield on average interest-earning assets
and contributed to compression of the interest rate spread.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
CORE CASH EARNINGS
Management believes that the measurement and reporting of core cash earnings
provides useful and relevant information about the Company's financial
performance. Core cash earnings are defined as reported net income excluding
the branch sale, plus certain non-cash charges. These non-cash expenses, unlike
all other expenses incurred by the Company, result in net increases in
GreenPoint's tangible capital and enable the Company to pursue increases in
shareholder value through growth of earning assets, increases of cash
dividends, and additional repurchases of the Company's stock.
13
CORE CASH EARNINGS
For the Year Ended
December 31,
(In millions, except per share amounts) 1996 1995
- --------------------------------------------------------------------
Core net income $127.2(a) $107.5
Add back:
Goodwill amortization 46.5(b) 13.8
Employee stock plans expense 14.7(c) 15.1
Core cash earnings $188.4 $136.4
Core cash earnings per share $ 4.29 $ 2.90
(a) Net income less $5.3 million after-tax gain on branch sale.
(b) Goodwill amortization relates to the two 1995 acquisitions. This expense
will continue through the year 2010.
(c) Includes ESOP amortization expense of $9.0 million (which includes $0.8
million of 401(k) saving plan matching contribution expense) and stock plans
share amortization expense of $5.7 million. ESOP amortization expense is
scheduled to occur through the year 2018 and will vary from year to year based
upon changes in the average annual market price of the Company's stock and by
changes in annual allocations to plan participants. Stock plans share
amortization expense is scheduled to occur through the year 2000 and will be
approximately $2.2 million annually.
NET INTEREST INCOME
Net interest income on a taxable equivalent basis increased by $103.0 million,
or 29.4%, to $453.7 million for 1996 from $350.7 million for 1995. The increase
reflects the Company's higher level of average net interest-earning assets
combined with significant improvement in the Company's average cost of funds.
Interest income on mortgages increased by $59.5 million, or 11.2%, to $591.7
million for 1996 from $532.2 million for 1995 primarily as a result of
substantially higher loan origination volume and the Company's decision in
mid-1996 to portfolio new production rather than sell loans in the secondary
market. As a result, average mortgage loans for 1996 increased by $709.0
million, or 12.2%, over 1995.
Throughout 1996, the Company pursued an aggressive deposit pricing strategy
which reduced the average cost of funds by 33 basis points to 4.36% for 1996
compared to 4.69% for 1995.
The Company's ability during 1996 to utilize the proceeds from maturities of
lower yielding money market investments and securities to fund both loan
portfolio growth and planned run-off in certain high cost customer deposits
resulted in continuous improvement in the interest rate spread and net interest
margin. GreenPoint's interest rate spread and net interest margin improved to
3.52% and 3.82%, respectively, by the fourth quarter of 1996 compared to 2.68%
and 2.96%, respectively, for the fourth quarter of 1995.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses increased by $6.2 million, or 65.3%, to
$15.7 million for 1996 from $9.5 million for 1995. The 1995 provision included
the effect of a $6.1 million recovery of a special contingency reserve relating
to a 1994 bulk sale of non-performing loans.
NON-INTEREST INCOME
Non-interest income increased by $21.1 million, or 59.0%, to $56.9 million for
1996 from $35.8 million for 1995. The increase is primarily the result of
higher fee income generated by the Company's expanded New York consumer banking
branch network, a $1.5 million increase in securities lending fees and an $8.9
million gain on the sale of two branches.
NON-INTEREST EXPENSE
Total non-interest expense increased by $84.6 million, or 47.4%, to $263.2
million for 1996 from $178.6 million for 1995. Total operating expense
increased by $58.9 million, or 36.8%, to $219.1 million for 1996 from $160.2
million for 1995.
The inclusion in 1996 of a full year's expense related to the operations of the
Mortgage Company and the expanded consumer banking branch network was the
primary factor leading to the increase in non-interest expense.
Other factors that affected non-interest expense were:
. Expense of the Company's ESOP and other employee stock plans decreased
slightly to $14.7 million for 1996 from $15.1 million for 1995. The decrease
occurred as a result of a change in the Company's ESOP share allocation
schedule that lengthens the amortization period from fifteen to twenty-five
years. Without this change, the 1996 cost would have increased to $19.8 million
primarily as a result of a higher average market price of the Company's stock
during 1996 compared to 1995.
. FDIC deposit insurance premiums decreased by $4.0 million to $5.2 million
for 1996 from $9.2 million for 1995, due to a reduction in assessment rates and
the recapitalization of the Savings Association Insurance Fund. The 1995
deposit insurance premiums expense included a $3.4 million refund from the FDIC
related to the re-capitalization of the Bank Insurance Fund.
. In 1996, the Company recovered $1.6 million of an $8.0 million restructuring
charge taken in 1995. The recovery reflected lower severance payments than were
anticipated due to the Company's ability to reassign many of the affected
employees to other job vacancies created by normal attrition and lower
write-downs required on sold or closed facilities.
The Company's efficiency ratio was 44.3% for 1996 compared to 41.4% for 1995.
Although the ratio increased year over year, the Company achieved planned cost
savings associated with the HSA acquisition and was able to improve the ratio
steadily from 53.4% in the fourth quarter of 1995 to 42.7% in the fourth
quarter of 1996, despite the demands for resources required by the expansion of
the Company's national mortgage business.
14
INCOME TAX EXPENSE
Income tax expense increased by $1.1 million to $92.0 million for 1996 from
$90.9 million for 1995. The increase arose from a $26.1 million increase in
pre-tax income, which was partially offset by a 10.6% decrease in the Company's
effective tax rate to 40.98%, as a result of a series of business initiatives
implemented by the Company.
FINANCIAL CONDITION
Total assets were $13.3 billion at December 31, 1996 compared to $14.7 billion
at December 31, 1995. The $1.4 billion decrease resulted from planned deposit
liability run-off funded by reductions in money market investments and
securities available for sale.
Loans receivable held for investment, net increased by $1.4 billion to $7.3
billion at December 31, 1996 as a result of a 130% increase in mortgage loan
originations in 1996 over 1995 and the Company's decision in 1996 to portfolio
new loan production rather than sell loans in the secondary market. New loan
production was funded by reductions in money market investments and securities
available for sale.
As a result of the increased loan originations and planned deposit run-off
during 1996, the combined balances of cash and due from banks, money market
investments and securities available for sale decreased by $2.7 billion to $4.9
billion at December 31, 1996 from $7.6 billion at December 31, 1995.
NON-PERFORMING ASSETS
Please refer to notes 7 and 8 of "Notes to the Consolidated Financial
Statements" for information about the Company's non-performing assets.
RISK MANAGEMENT
LIQUIDITY MANAGEMENT
The Company's primary sources of funds are deposits and proceeds from principal
and interest payments on loans, mortgage-backed securities and other
securities. While maturities and scheduled amortization of loans and securities
are a predictable source of funds, deposit flows and mortgage prepayments are
greatly influenced by general interest rate levels, economic conditions and
competition.
The Company and the Bank have recently applied for and received both short-term
and long-term debt ratings from three recognized credit rating firms. These
ratings will allow the Company and the Bank to access the wholesale debt
markets, thereby providing the Company with additional flexibility in accessing
and utilizing the most cost effective and appropriate means for meeting its
funding needs.
The Company's most liquid assets are cash and cash equivalents, including money
market investments. The level of these assets is dependent on the Company's
operating, financing, lending, and investing activities during any given
period. Cash and cash equivalents, including money market investments, totaled
$0.6 billion at December 31, 1996 compared to $1.7 billion at December 31, 1995.
The Company had outstanding mortgage loan commitments of $0.5 billion and
commitments to sell mortgage-backed securities of approximately $0.09 billion
at December 31, 1996. The Company anticipates that it will have sufficient
funds available to meet its current loan commitments.
CAPITAL MANAGEMENT
Management closely monitors the capital of the Company and the Bank to ensure
that adequate levels are maintained at all times to support ongoing needs.
Management considers various factors in its evaluations including the
appropriate capital levels needed to support growth through either expansion or
acquisition and the amount of capital needed to absorb unanticipated risk.
The Company and the Bank are also subject to minimum regulatory capital
requirements imposed by various Federal and state banking authorities,
including the Federal Reserve Board, the FDIC and the New York State Banking
Department. These capital requirements vary according to an institution's
capital level and the composition of its assets. Furthermore, pursuant to the
FDIC Improvement Act of 1991 ("FDICIA"), the Federal banking regulators have
set the minimum capital ratios for a well-capitalized banking institution at 6%
Tier 1 risk-based capital, 10% total risk-based capital and 5% Tier 1 leverage
capital. At December 31, 1996, the Company and the Bank exceeded these levels
and are expected to be in excess of the minimum ratios required of a
well-capitalized institution in the future.
Following is a table of the components of regulatory capital as defined by the
banking regulators for risk-based capital and leverage ratio guidelines.
COMPONENTS OF CAPITAL
At December 31,
(In millions) 1996 1995
- -------------------------------------------------------------
Tier 1 Capital:
Common stockholders' equity $1,587.7 $1,685.1
Unallocated ESOP shares (119.6) (124.0)
Unearned stock plans shares (8.3) (9.8)
Preferred shares of subsidiary 3.6 --
Less: Goodwill (623.6) (670.2)
Unrealized loss (gain) on
securities available for sale 23.3 (14.9)
Tier 1 Capital 863.1 866.2
Tier 2 Capital:
Qualifying allowance for
possible loan losses 69.7 66.1
Tier 2 Capital 69.7 66.1
Total qualifying capital $ 932.8 $ 932.8
Risk-weighted assets $5,578.3 $5,328.5
15
During 1996, strong cash earnings and liquidity levels enabled the Company to
complete two stock repurchase programs. The Company purchased a total of 5.1
million shares at an average cost per share of $33.25.
Total stockholders' equity decreased by $91.5 million to $1.5 billion at
December 31, 1996 primarily due to the Company's repurchase of common stock of
$169.5 million, the declaration of $34.1 million in dividends and a change in
unrealized loss on securities available for sale of $38.2 million. These
decreases were partially offset by net income of $132.5 million and $17.8
million in additional capital arising from ESOP and employee stock plans share
allocations and stock options exercises.
CREDIT RISK MANAGEMENT
In conducting its lending activities, the Company is exposed to the possibility
that borrowers may default on their loans. To manage this risk, the Company
focuses its efforts on the fundamental disciplines-loan underwriting and
administration.
The Company lends funds primarily based on the borrower's level of equity in
the property securing the loan. The Company does not originate loans with a
loan to value ratio in excess of 75%. Strict appraisal standards are
maintained, requiring all in house appraisers to be state certified and all
appraisals are subject to two additional levels of review by higher levels of
management.
The Company closely monitors trends in delinquent and nonperforming loans
through cycles in the economy and in the real estate market. The Company works
to maintain contact with the borrowers and utilizes varied collection
procedures to obtain repayment. In addition, the Company reviews the trends in
amount and frequency of loans that were transferred to other real estate owned
and trends in sales activity of its foreclosed property, including average
principal loss experienced and the holding period for such properties.
Management has comprehensive policies for reviewing the adequacy of the
allowance for loan losses. The policies require the Company to provide for
estimated future costs and expenses related to problem loans. Management
believes that the allowance for loan losses is adequate. However, such
determination is susceptible to the effect of future unanticipated changes in
general economic and market conditions that may affect the financial
circumstances of borrowers and/or residential real estate values within the
Company's lending areas.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
As outlined in Note 7 to the consolidated financial statements, the allowance
for possible loan losses remained relatively constant during the year, as the
provision of $15.7 million approximated charge offs (net of recoveries) of
$16.2 million for the year.
NON-PERFORMING ASSETS
The tables in Notes 7 and 8 to the consolidated financial statements reflect
the favorable results of the Company's efforts to convert non-performing assets
to interest-earning assets as quickly as possible, while minimizing potential
losses on the conversion. The decrease in non-performing assets of 10.8%
($384.7 million at December 31, 1996, compared to $431.3 million at December
31, 1995) results from the proactive approach to managing overall credit risk,
as well as economic conditions.
INTEREST RATE RISK MANAGEMENT
Interest rate risk is defined as the sensitivity of the Company's current and
future earnings to changes in the level of market interest rates. It arises in
the ordinary course of the Company's business, as the repricing characteristics
of its mortgage loans do not necessarily match those of its deposit
liabilities. The resulting interest rate risk is managed by careful attention
to the mix of asset maturities and deposit offerings and by adjustments to the
Company's investment portfolio and the use of off balance sheet instruments
such as interest rate swaps and options.
Management responsibility for interest rate risk resides with the Asset and
Liability Management Committee ("ALCO"). The committee is comprised of the
Chairman and Chief Executive Officer, the Vice Chairman, the Chief Financial
Officer, the Treasurer and the Company's senior business-unit and financial
executives. Interest rate risk management strategies are formulated and
monitored by ALCO within policies and limits approved by the Board of
Directors. These policies and limits set forth the maximum risk which the Board
of Directors deems prudent, govern permissible investment securities and off
balance sheet instruments and identify acceptable counterparties to securities
and off balance sheet transactions.
ALCO risk management strategies allow for the assumption of interest rate risk
within the Board approved limits. The strategies are formulated based upon
ALCO's assessments of likely economic and financial market developments and
trends in the Company's mortgage and consumer banking businesses. Strategies
are developed with the aim of enhancing the Company's net income and capital,
while ensuring that the risks to income and capital from adverse movements in
interest rates are acceptable.
The Company's income is affected by changes in the level of market interest
rates based upon mismatches between the repricing of its assets and
liabilities. One measure of interest rate sensitivity is provided by the
accompanying net gap analysis, which organizes assets and liabilities according
to the time period in which they reprice or mature. For many of the Company's
assets and liabilities the maturity or repricing date is not determinable with
certainty. For example, the
16
Company's mortgage loans and its mortgage-backed securities can be prepaid
before contractual amortization and/or maturity. Also, the repricing behavior
of the Company's non-time deposits is subject to the interest rate environment,
current funding and liquidity needs, and other factors influencing the market
competition for such deposits. Consequently, ALCO evaluates many different
interest rate scenarios in arriving at its assessment of the most likely gap
analysis and repricing schedule. The amounts reflected in the accompanying
schedule could vary from those detailed in the schedule.
The difference between assets and liabilities repricing in a given period is
one approximate measure of interest rate sensitivity. More assets than
liabilities repricing in a period (a positive gap) implies earnings will rise
as interest rates rise, and decline as interest rates decline. More liabilities
repricing than assets implies declining income as rates rise. However, these
relationships do not consider the impact that the rate movements might have on
other components of the Bank's risk profile; for example, an increase in
interest rates, while implying that earnings will rise in a positive gap
period, might also result in higher credit or default risk due to a higher
probability of borrowers being unable to pay the contractual payments on loans.
Likewise, a decrease in rates might result in an increase in the risk that
funds received from loan prepayments cannot be reinvested at rates and spreads
achieved by management on earlier investments and loan originations.
The use of interest rate instruments such as interest rate swaps is integrated
into the Company's interest rate risk management. The notional amounts of these
instruments are not reflected in the Company's balance sheet. However, these
instruments are included in the interest rate sensitivity table for purposes of
analyzing interest rate risk.
As of December 31, 1996, the cumulative volumes of assets and liabilities
maturing or repricing within one year were approximately equal, implying little
current-year income sensitivity to movements in the level of interest rates.
However, the gap report does not represent a precise measure of risk, given the
uncertainties of the repricing assumptions on indeterminate assets and
liabilities, and the fact that not all rates move equally at their repricing
dates.
ALCO supplements the gap report with two other measures of interest rate risk.
It uses an earning simulation model which gives effect to management
assumptions concerning the repricing of assets and liabilities, as well as
business volumes, under a variety of economic and interest rate scenarios. ALCO
also considers the sensitivity of economic value to changes in interest rates.
This measure compares the estimated change in the net present value of the
Company's assets to the change in the net present value of its liabilities for
various changes in interest rate levels. All three measures of risk are subject
to limits deemed by the Board of Directors as acceptable.
All of these measures of risk represent the Company's exposure to interest rate
movements at particular points in time. The risk position is always changing.
The ALCO continuously monitors the Company's risk profile as it changes, and
alters the rate sensitivity to ensure limits are adhered to, and that the
resulting risk profile is appropriate to its views on the course of interest
rates and developments in its core business.
17
INTEREST RATE SENSITIVITY GAP ANALYSIS
<TABLE>
<CAPTION>
At December 31, 1996
- ----------------------------------------------------------------------------------------------------------------
More Than More Than More Than More
Within 1 Year to 3 Years to 5 Years to Than
(Dollars in millions) One Year 3 Years 5 Years 10 Years 10 Years Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total loans $2,835.4 $ 1,291.3 $ 986.3 $1,414.1 $ 772.0 $ 7,299.1
Money market investments(1) 494.1 - - - - 494.1
Securities held to maturity - - - - 4.0 4.0
Securities available for sale 1,928.1 898.1 732.4 503.8 293.0 4,355.4
Total interest-earning assets 5,257.6 2,189.4 1,718.7 1,917.9 1,069.0 12,152.6
Cash and due from banks 81.9 - - - - 81.9
Excess of cost over fair value of net
assets acquired 42.3 84.6 84.6 211.0 201.1 623.6
Other non-earning assets 467.5 - - - - 467.5
Total assets $5,849.3 $ 2,274.0 $ 1,803.3 $2,128.9 $1,270.1 $13,325.6
Term certificates $4,707.2 $ 1,616.6 $ 248.8 $ 38.8 - $ 6,611.4
Core deposits 1,043.4 1,849.9 1,336.1 611.5 - 4,840.9
Total interest-bearing liabilities 5,750.6 3,466.5 1,584.9 650.3 - 11,452.3
Other liabilities 409.9 - - - - 409.9
Preferred shares of subsidiary - - - - 3.6 3.6
Stockholders' equity - - - - 1,459.8 1,459.8
Total liabilities and equity $6,160.5 $ 3,466.5 $ 1,584.9 $ 650.3 $1,463.4 $13,325.6
Off balance sheet financial instruments 300.0 (300.0) - - - -
Interest rate sensitivity gap $ (11.2) $(1,492.5) $ 218.4 $1,478.6 $ (193.3)
Cumulative interest rate sensitivity gap $ (11.2) $(1,503.7) $(1,285.3) $ 193.3
Cumulative interest rate sensitivity
gap as a percentage of total assets
at December 31, 1996 (0.08%) (11.28%) (9.64%) 1.45%
</TABLE>
(1) Consists of interest-bearing deposits in other banks, federal funds sold
and securities purchased under agreements to resell.
18
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
GENERAL
Net income for 1995 was $107.5 million compared to $112.9 million for 1994. The
1995 results included an $8.0 million restructuring charge for employee
severance benefits costs associated with planned branch consolidations and
related fixed asset writedowns.
NET INTEREST INCOME
Net interest income on a taxable equivalent basis increased by $13.2 million,
or 3.9%, to $350.7 million for 1995 from $337.5 million for 1994. The increase
in 1995 was the result of the Company's higher average interest-earning assets,
partially offset by higher average interest-bearing liabilities and a higher
average cost of funds.
PROVISION FOR POSSIBLE LOAN LOSSES
The Company's provision for possible loan losses decreased by $22.8 million, or
70.6%, to $9.5 million for 1995 from $32.3 million for 1994. The 1994 provision
includes the effect of a $11.6 million provision related to a 1994 bulk sale of
non-performing loans.
NON-INTEREST INCOME
Non-interest income increased by $8.7 million, or 32.2%, to $35.8 million for
1995 from $27.1 million for 1994. The increase was primarily due to additional
fee income generated by the operations of the Mortgage Company and the
Company's expanded branch network combined with a $3.3 million recovery of
previous special provisions for losses on loans sold with recourse and a $1.8
million increase in net gain on sales of loans.
NON-INTEREST EXPENSE
Non-interest expense increased by $57.2 million, or 47.1%, to $178.6 million
for 1995 from $121.4 million for 1994. The 1995 amount included the $8.0
million restructuring charge and a $2.5 million charge to write down a
receivable from a former transaction processor for the Company. Excluding the
restructuring charge and the receivable write down, the increase in 1995 was
attributable to: the additional expenses associated with the operations of the
Mortgage Company and the branch network; an increase in ESOP and stock plans
expense of $2.9 million due to a higher average market price of the Company's
shares and an increase in the number of shares allocated to participants of the
ESOP; and a $4.0 million facilities management expense related to the Company's
mainframe computer conversion which was completed during the third quarter of
1995. Additionally, Federal deposit insurance premiums decreased by $4.2
million in 1995 due primarily to a $3.4 million refund from the FDIC and a
decrease in the assessment rate.
INCOME TAX EXPENSE
Income tax expense decreased by $7.1 million, or 7.2%, to $90.9 million for
1995 from $98.0 million for 1994. The Company's effective rate decreased to
45.82% for 1995 from 46.47% for 1994.
NON-PERFORMING ASSETS
Non-performing loans increased by $9.9 million, or 2.5%, to $402.1 million at
December 31, 1995 from $392.2 million at December 31, 1994. Net total other
real estate owned decreased by $24.8 million, or 45.9%, to $29.2 million at
December 31, 1995 from $54.0 million at December 31, 1994.
19
AVERAGE CONSOLIDATED BALANCE SHEET, INTEREST AND RATES
<TABLE>
<CAPTION>
(Taxable-Equivalent Interest and Rates; in millions)(1) Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
------------------------------ ------------------------------ -------------------------------
Average Average Average
Yield/ Yield/ Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Mortgage loans(2) $ 6,531.0 $591.7 9.06% $5,822.0 $532.2 9.14% $5,702.8 $514.3 9.02%
Other loans(2) 31.7 2.6 8.12 26.6 1.9 7.35 19.4 1.4 7.47
Money market investments(3)(6) 1,261.0 70.0 5.54 742.7 43.8 5.91 439.7 17.0 3.85
Securities(4) 5,101.4 316.9 6.22 2,059.9 118.6 5.76 692.4 32.7 4.72
Total interest-earning assets 12,925.1 981.2 7.59 8,651.2 696.5 8.05 6,854.3 565.4 8.25
Non-interest earning assets(5) 1,031.0 437.9 250.7
Total assets $13,956.1 $9,089.1 $7,105.0
LIABILITIES & STOCKHOLDERS' EQUITY:
Savings $ 1,976.5 55.2 2.79% $ 972.1 28.4 2.93% $ 652.8 20.2 3.09%
NOW 333.9 6.1 1.83 170.9 3.4 1.97 107.6 2.2 2.09
Money market and variable
rate savings 2,541.9 85.6 3.37 1,675.1 55.7 3.33 1,829.4 58.0 3.17
Term certificates of deposit 7,126.6 377.8 5.30 4,472.4 257.0 5.75 2,841.1 144.6 5.09
Mortgagors' escrow 80.9 1.0 1.26 79.6 1.3 1.59 76.4 1.3 1.65
Repurchase agreements 47.9 1.8 3.88 - - - - - -
Funds held for stock purchases(6) - - - - - - 55.2 1.6 2.86
Total interest-bearing
liabilities 12,107.7 527.5 4.36 7,370.1 345.8 4.69 5,562.5 227.9 4.10
Other liabilities(7) 371.5 173.8 115.7
Total liabilities 12,479.2 7,543.9 5,678.2
Preferred shares of subsidiary 0.9 - -
Stockholders' equity 1,476.0 1,545.2 1,426.8
Total liabilities &
stockholders' equity $13,956.1 $9,089.1 $7,105.0
Net interest income/interest
rate spread(8) $453.7 3.23% $350.7 3.36% $337.5 4.15%
Net interest-earning assets/net
interest margin(9) $ 817.4 3.51% $1,281.1 4.05% $1,291.8 4.92%
Ratio of interest-earning assets
to interest-bearing liabilities 1.07x 1.17x 1.23x
</TABLE>
(1) The applicable tax rate used to adjust tax-exempt interest to a taxable
equivalent basis was approximately 44.7% in 1996.
(2) In computing the average balances and average yield on loans, non-accruing
loans and loans held for sale have been included.
(3) Includes interest-bearing deposits in other banks, federal funds sold and
securities purchased under resale agreements.
(4) The average yield does not give effect to changes in fair value that are
reflected as a component of stockholders' equity.
(5) Includes goodwill, banking premises and equipment-net, net deferred tax
assets, accrued interest receivable, and other miscellaneous non-interest
earning assets.
(6) Interest expense on funds held for stock purchases was reported as a $1.6
million offset to short-term investment income in 1994.
(7) Includes accrued interest payable, accounts payable, official checks drawn
against the bank, accrued expenses, and other miscellaneous non-interest
bearing obligations of the Company.
(8) Net interest rate spread represents the difference between the average
yield on average interest-earning assets and the average cost of
interest-bearing liabilities.
(9) Net interest margin represents net interest income divided by average
interest-earning assets.
20
RATE/VOLUME ANALYSIS
The following table presents the effects of changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
on the Company's interest income and interest expense during the periods
indicated. The changes attributable to the combined impact of volume and rate
have been allocated proportionately to volume and rate.
<TABLE>
<CAPTION>
Year Ended December 31, 1996 Year Ended December 31, 1995
Compared to Compared to
Year Ended December 31, 1995 Year Ended December 31, 1994
Increase/(Decrease) Increase/(Decrease)
---------------------------- ------------------------------
Due to Due to
- -------------------------------------------------------------------------------------------------------
Average Average Net Average Average Net
(Dollars in millions) Volume Rate Change Volume Rate Change
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans(1) $ 64.2 $ (4.7) $ 59.5 $ 10.9 $ 7.0 $ 17.9
Other loans(1) 0.5 0.2 0.7 0.5 - 0.5
Money market investments(2) 29.0 (2.8) 26.2 15.1 11.7 26.8(3)
Securities 195.7 2.6 198.3 78.6 7.3 85.9
Total interest earned on assets 289.4 (4.7) 284.7 105.1 26.0 131.1
Savings 28.2 (1.4) 26.8 9.3 (1.1) 8.2
NOW 2.9 (0.2) 2.7 1.3 (0.1) 1.2
Money market and other variable
rate savings 29.2 0.7 29.9 (5.0) 2.7 (2.3)
Term certificates of deposit 142.1 (21.3) 120.8 91.8 20.6 112.4
Mortgagors' escrow - (0.3) (0.3) - - -
Repurchase agreements 1.8 - 1.8 - - -
Funds held for stock purchases - - - (1.6) - (1.6)
Total interest paid on liabilities 204.2 (22.5) 181.7 95.8 22.1 117.9
Net change in net interest income $ 85.2 $ 17.8 $103.0 $ 9.3 $ 3.9 $ 13.2
</TABLE>
(1) In computing the volume and rate components of net interest income for
loans, non-accrual loans and loans held for sale have been included.
(2) Includes interest-bearing deposits in other banks, federal funds sold and
securities purchased under resale agreements.
(3) Includes $1.6 million relating to funds held for stock purchases which,
for financial reporting purposes, was offset by related interest expense.
21
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
_______________________________________________________________________________
December 31,
(In millions, except share amounts) 1996 1995
- -------------------------------------------------------------------------------
ASSETS:
Cash and due from banks $ 81.9 $ 153.7
Money market investments:
Interest-bearing deposits in other banks 105.6 -
Federal funds sold and securities purchased under
agreements to resell 388.5 1,550.7
Total cash and cash equivalents 576.0 1,704.4
Loans receivable held for sale 4.8 175.1
Securities available for sale 4,355.4 5,896.5
Securities held to maturity
(fair value of $4.0 and $4.4, respectively) 4.0 4.3
Loans receivable held for investment (net of
allowance for possible loan losses of $105.0 in
1996 and $105.5 in 1995) 7,294.3 5,858.6
Accrued interest receivable, net 89.5 73.0
Banking premises and equipment, net 128.2 113.7
Deferred income taxes, net 80.2 70.1
Other real estate owned, net 28.6 29.2
Goodwill 623.6 670.2
Other assets 141.0 75.4
Total assets $13,325.6 $14,670.5
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits:
N.O.W. and checking $ 524.2 $ 501.8
Savings and club 1,901.7 2,034.7
Variable rate savings 1,853.7 1,995.3
Money market 561.3 635.7
Term certificates of deposit 6,611.4 7,730.8
Total deposits 11,452.3 12,898.3
Mortgagors' escrow 66.9 58.9
Securities sold under agreements to repurchase 89.5 -
Accrued income taxes payable 45.1 7.6
Other liabilities 208.4 154.4
Total liabilities 11,862.2 13,119.2
Commitments and contingencies
Preferred shares of subsidiary 3.6 -
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; 55,115,582 and 54,965,582
shares issued, respectively) 0.5 0.5
Additional paid-in capital 810.2 801.4
Unallocated Employee Stock Ownership Plan (ESOP)
shares (119.6) (124.0)
Unearned stock plans shares (8.3) (9.8)
Retained earnings 1,038.0 942.1
Unrealized (loss) gain on securities available
for sale, net (23.3) 14.9
Treasury stock, at cost (7,871,400 shares and
2,748,200 shares, respectively) (237.7) (73.8)
Total stockholders' equity 1,459.8 1,551.3
Total liabilities and stockholders' equity $13,325.6 $14,670.5
See accompanying notes to the consolidated financial statements
22
CONSOLIDATED STATEMENTS OF INCOME
_______________________________________________________________________________
For the Year Ended December 31,
-------------------------------
(In millions, except per share amounts) 1996 1995 1994
- -------------------------------------------------------------------------------
INTEREST INCOME:
Mortgages $591.7 $532.2 $514.3
Money market investments 68.0 43.8 15.4
Securities 311.7 118.6 32.7
Other loans 2.6 1.9 1.4
Total interest income 974.0 696.5 563.8
Interest expense 527.5 345.8 226.3
Net interest income 446.5 350.7 337.5
Provision for possible loan losses (15.7) (9.5) (32.3)
Net interest income after provision for
possible loan losses 430.8 341.2 305.2
NON-INTEREST INCOME:
Income from fees and commissions:
Mortgage loan operations fee income 14.6 13.8 12.9
Mortgage servicing fees 8.3 10.0 10.3
Banking services fees and commissions 17.4 6.4 2.9
Other fee income 3.9 4.4 1.0
Net gain (loss) on securities 0.9 (0.6) -
Net gain on sales of loans 2.9 1.8 -
Gain on sale of branches 8.9 - -
Total non-interest income 56.9 35.8 27.1
NON-INTEREST EXPENSE:
Salaries and benefits 86.8 68.6 54.4
Employee Stock Ownership and stock plans
expense 14.7 15.1 12.2
Net expense of premises and equipment 46.6 23.6 16.2
Federal deposit insurance premiums 5.2 9.2 13.4
Other administrative expenses 65.8 43.7 27.9
Other real estate owned operating income (0.8) (3.4) (2.9)
Goodwill amortization 46.5 13.8 0.2
Restructuring (recovery) charge (1.6) 8.0 -
Total non-interest expense 263.2 178.6 121.4
Income before income taxes 224.5 198.4 210.9
Income taxes 92.0 90.9 98.0
Net income $132.5 $107.5 $112.9
Earnings per share $ 3.02 $ 2.29 $ 2.21(a)
(a) Amount is from January 28, 1994 through December 31, 1994, the period
subsequent to the Company's initial public offering.
See accompanying notes to the consolidated financial statements.
23
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
_______________________________________________________________________________
For the Year Ended December 31,
-------------------------------
(In millions) 1996 1995 1994
- -------------------------------------------------------------------------------
COMMON STOCK
Balance at beginning of period $ 0.5 $ 0.5 $ -
Issuance of stock in initial public offering - - 0.5
Balance at end of period 0.5 0.5 0.5
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period 801.4 794.6 -
Issuance of stock in initial public offering,
net of issuance costs - - 774.2
Issuance of common stock to stock plans 3.7 - 18.6
Amortization of ESOP shares committed to be
released 4.5 3.5 1.7
Amortization of stock plans shares during
the period 0.6 0.1 0.1
Tax benefit for vested stock plans shares - 0.9 -
Exercise of stock options - 1.1 -
Adjustment to initial public offering
issuance costs - 1.2 -
Balance at end of period 810.2 801.4 794.6
UNALLOCATED ESOP SHARES
Balance at beginning of period (124.0) (131.0) -
Issuance of stock in initial public offering - - (80.4)
Open market purchases of common stock by
ESOP trustee - - (56.7)
Amortization of ESOP shares committed to be
released 4.4 7.0 6.1
Balance at end of period (119.6) (124.0) (131.0)
UNEARNED STOCK PLANS SHARES
Balance at beginning of period (9.8) (14.3) -
Issuance of common stock to stock plans (3.7) - (18.6)
Amortization of stock plans shares during
the period 5.2 4.5 4.3
Balance at end of period (8.3) (9.8) (14.3)
RETAINED EARNINGS
Balance at beginning of period 942.1 871.4 786.3
Net income for the period 132.5 107.5 112.9
Dividends paid (34.1) (36.8) (27.8)
Exercise of stock options (2.5) - -
Balance at end of period 1,038.0 942.1 871.4
NET UNREALIZED (LOSS) GAIN ON SECURITIES
AVAILABLE FOR SALE, NET OF TAX
Balance at beginning of period 14.9 - -
Net change in unrealized (loss) gain on
securities available for sale (38.2) 14.9 -
Balance at end of period (23.3) 14.9 -
TREASURY STOCK
Balance at beginning of period (73.8) - -
Exercise of stock options 5.6 - -
Purchase of treasury stock (169.5) (73.8) -
Balance at end of period (237.7) (73.8) -
TOTAL STOCKHOLDERS' EQUITY $1,459.8 $1,551.3 $1,521.2
See accompanying notes to the consolidated financial statements
24
CONSOLIDATED STATEMENTS OF CASH FLOWS
_______________________________________________________________________________
For the Year Ended December 31,
--------------------------------
(In millions) 1996 1995 1994
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 132.5 $ 107.5 $ 112.9
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Provision for possible loan losses 15.7 9.5 32.3
Depreciation and amortization of premises
and equipment 16.1 10.3 9.9
Goodwill amortization 46.5 13.8 0.2
Accretion of discount on securities, net of
premium amortization (71.0) (71.6) (9.2)
ESOP and stock plans expense 14.7 15.1 12.2
Net change in loans held for sale 170.3 (286.3) 27.9
Net gain on sales of other real estate owned (6.6) (9.9) (11.2)
Deferred income taxes 21.5 39.4 46.4
Decrease (increase) in other assets 25.5 3.5 20.0
Increase (decrease) in other liabilities 50.1 (17.8) 0.7
Other, net 21.4 (18.7) (67.6)
Net cash provided by (used in) operating
activities 436.7 (205.2) 174.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan originations, net of principal
repayments (1,447.4) 10.7 (381.7)
Purchase of mortgage loans held for
investment, net - (119.6) -
Proceeds from sales of non-performing
loans held for sale, net - - 198.4
Proceeds from sales of other real estate
owned 12.0 25.1 33.2
Repurchases of mortgage loans sold with
recourse - (14.3) (26.7)
Purchases of securities available for sale (6,363.9) (2,637.3) -
Purchases of securities held to maturity (1.1) (1.3) (784.5)
Proceeds from maturities of securities
available for sale 4,398.5 3,849.8 -
Proceeds from maturities of securities
held to maturity - 609.0 426.1
Proceeds from sales of securities
available for sale 3,233.8 - -
Principal repayments on securities 263.2 4.4 9.2
Purchases of premises and equipment (30.6) (16.2) (4.5)
Net cash and cash equivalents received in
acquisitions - 454.0 -
Net cash provided by (used in) investing
activities 64.5 2,164.3 (530.5)
Statements continued on following page.
See accompanying notes to the consolidated financial statements.
25
CONSOLIDATED STATEMENTS OF CASH FLOWS
_______________________________________________________________________________
For the Year Ended December 31,
--------------------------------
(In millions) 1996 1995 1994
- -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net withdrawals from depositors' accounts (1,293.3) (440.1) (426.9)
Cash paid on transfer of deposit liabilities (143.8) - -
Funds received from depositors for the
purchase of GreenPoint Financial Corp.
common stock - - 133.6
Funds returned for over-subscriptions of
common stock - - (153.7)
Funds loaned to ESOP trustee for the
purchase of additional ESOP shares - - (56.7)
Cash paid for initial public offering
related expenses - - (26.3)
Payments for cash dividends (34.1) (36.8) (27.8)
Purchase of treasury stock (169.5) (73.8) -
Other, net 11.1 2.7 14.7
Net cash used in financing activities (1,629.6) (548.0) (543.1)
Net (decrease) increase in cash and cash
equivalents (1,128.4) 1,411.1 (899.1)
Cash and cash equivalents at beginning of
period 1,704.4 293.3 1,192.4
Cash and cash equivalents at end of period $ 576.0 $1,704.4 $ 293.3
Non-cash activities:
Non-performing mortgage loans transferred
to held for sale, net $ - $ - $ 150.6
Additions to other real estate owned, net $ 28.6 $ 22.6 $ 75.6
Loans to facilitate sales of other real
estate $ 22.5 $ 29.7 $ 51.6
Unsettled trades $ 89.5 $ - $ -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes $ 26.9 $ 35.6 $ 84.5
Interest paid $ 521.7 $ 336.7 $ 225.0
In addition to the non-cash investing and financing activities previously
stated, during the year ended December 31, 1995, GreenPoint Bank purchased
selected assets and assumed selected liabilities of BarclaysAmerican/Mortgage
Corp. ("BAM") for $7.1 million, and also acquired approximately $8.1 billion of
deposits and 60 New York branches of Home Savings of America, FSB.
Fair value of assets acquired, including cash and cash
equivalents $7,462.4
Excess of cost over fair value of net assets acquired 685.0
Cash paid (7.1)
Liabilities assumed, principally deposits $8,140.3
See accompanying notes to the consolidated financial statements.
26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
_______________________________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GreenPoint Financial Corp. (the "Company") is a bank holding company organized
in 1993 under the laws of the state of Delaware and registered under the Bank
Holding Company Act of 1956, as amended. The Company acquired 100% of the
outstanding capital stock of GreenPoint Bank (the "Bank"), a New York State
chartered savings bank, upon its conversion from the mutual to the capital
stock form of ownership on January 28, 1994. The Company, through the Bank and
its primary subsidiary, GreenPoint Mortgage Corp. ("GPMC"), is engaged in
specialty limited documentation mortgage lending nationally and consumer
banking in the New York City metropolitan area.
(a) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company, the
Bank and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. When necessary, certain
reclassifications of prior year financial statement amounts have been made to
conform to the current year presentation.
(b) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE
The Company enters into short-term purchases of securities under agreements to
resell ("reverse repurchase agreements") and sales of securities under
agreements to repurchase ("repurchase agreements") of substantially identical
securities. The amounts advanced under reverse repurchase agreements and the
amounts borrowed under repurchase agreements are carried on the balance sheet
at the amount advanced or borrowed, respectively, plus accrued interest.
Interest earned on reverse repurchase agreements and interest incurred on
repurchase agreements are reported as interest income and interest expense,
respectively.
(c) SECURITIES HELD TO MATURITY AND SECURITIES AVAILABLE FOR SALE
Securities classified as held to maturity are carried at amortized cost. The
Company has the positive intent and ability to hold these securities to
maturity.
Securities that may be sold in response to or in anticipation of changes in
interest rates and resulting prepayment risk, or other factors, are classified
as available for sale and are carried at fair value. Unrealized gains and
losses on these securities are reported, net of applicable taxes, as a separate
component of stockholders' equity.
Amortization of premiums and accretion of discounts are reported in interest
income, using a method which results in a level yield over the projected
holding period of the security.
Gains and losses on the sale of securities are determined using the specific
identification method.
(d) LOANS RECEIVABLE HELD FOR INVESTMENT
Loans receivable held for investment are stated at the aggregate of their
remaining unpaid principal balances, less any related charge-offs, net deferred
loan fees, unearned discount and allowance for possible loan losses.
Interest income on loans receivable is recognized on an accrual basis except
when a loan has been past due 90 days or upon determination that collection is
doubtful, when a loan is placed on non-accrual status and all accrued but
unpaid interest receivable is reversed and charged against current interest
income. Thereafter, interest income on non-accrual loans is recorded only when
received in cash. A loan is returned to accrual status when the principal and
interest are no longer past due and the borrower's ability to make periodic
principal and interest payments is reasonably assured.
Loan fees and certain direct loan origination costs are deferred. Net deferred
fees are amortized into interest income over the contractual life of the loan
using the level-yield method.
(e) ALLOWANCE FOR POSSIBLE LOAN LOSSES
Management's periodic evaluation of the adequacy of the allowance for possible
loan losses is based on the Company's past loan loss experience, known and
inherent risks in the loan portfolio, adverse situations which may affect the
borrowers' ability to repay, the estimated value of the underlying real estate
collateral and current economic and market conditions within the geographic
areas surrounding underlying real estate.
The allowance for possible loan losses is increased by provisions for possible
loan losses charged to income and is reduced by charge-offs, net of recoveries.
(f) LOANS RECEIVABLE HELD FOR SALE
Loans receivable held for sale are carried at the lower of cost or estimated
market value in the aggregate. Net unrealized losses are provided for in a
valuation allowance created through charges to income. Transfers from loans
held for investment to loans held for sale are recorded at the lower of cost or
estimated market value in the aggregate.
(g) GOODWILL
Goodwill arising from the 1995 acquisition of the New York branches of Home
Savings of America is being amortized over 15 years. The goodwill associated
with the 1995 BarclaysAmerican/Mortgage acquisition is being amortized over 5
years. These intangible assets are evaluated by management on a periodic basis.
27
(h) OTHER REAL ESTATE OWNED
Other real estate owned ("ORE") consists of real estate acquired through
foreclosure or deed in lieu of foreclosure. ORE is recorded at the lower of
cost or estimated fair value less estimated selling costs at the time of
foreclosure. Valuation write downs made at or shortly after the acquisition
date are charged against the Company's allowance for possible loan losses.
Subsequent declines in the estimated fair value, net operating results, and
gains and losses on the disposition of the related properties are charged
against the Company's operating results as incurred.
(i) DERIVATIVE FINANCIAL INSTRUMENTS
The Company has limited involvement in derivative financial instruments, using
interest-rate swaps to manage interest rate exposure associated with its fixed
rate mortgage loan portfolio. These instruments are considered derivative
financial instruments held for purposes other than trading and are accounted
for under the accrual method. Interest income (expense) resulting from the
derivatives is accrued and reported as an adjustment to mortgage loan interest
income.
Realized gains and losses from the settlement or termination of derivatives
contracts are deferred on the balance sheet and are amortized to interest
income or interest expense over the appropriate risk management periods.
Amortization commences when the contract is settled or terminated. If the
related assets or liabilities are sold or otherwise disposed, then the deferred
gain or loss on the derivative contract is recognized as an adjustment to the
gain or loss on disposition of the related assets or liabilities.
(j) BANKING PREMISES AND EQUIPMENT
Buildings, equipment, improvements and furniture and fixtures are carried at
cost, less accumulated depreciation and amortization. Buildings, equipment and
furniture and fixtures are depreciated over their estimated useful lives using
the straight-line method. Leasehold improvements are amortized using the
straight-line method over the shorter of their estimated useful lives or the
terms of related leases.
(k) STOCK-BASED COMPENSATION PLANS
Deferred compensation for stock award plans is recorded as a reduction of
stockholders' equity and is calculated as the cost of the shares purchased by
the Bank and contributed to the plan. Compensation expense is recognized over
the vesting period of actual stock awards based upon the fair value of shares
at the award date.
Compensation expense for the Employee Stock Ownership Plan and Trust ("ESOP")
is recognized for the number of shares allocated to ESOP participants as they
are committed to be released. The difference between the fair value of the
shares allocated and the cost of the shares to the ESOP is charged or credited
to additional paid-in capital.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). SFAS No. 123 permits either the recognition of compensation cost for
the estimated fair value of employee stock-based compensation arrangements on
the date of grant, or the disclosure in the notes to the financial statements
of the pro forma effects on net income and earnings per share, determined as if
the fair value-based method had been applied in measuring compensation cost.
The Company has adopted the disclosure option and continues to apply APB
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") in
accounting for its plans. Accordingly, no compensation cost has been recognized
for the Company's stock option plans.
(l) INCOME TAXES
The Company and certain of its subsidiaries file consolidated tax returns with
the Federal, state and local taxing authorities. Other subsidiaries file
separate domestic tax returns as required.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases ("temporary differences"). Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which temporary differences are expected to be recovered or settled. A
valuation allowance is provided for deferred tax assets where realization is
not considered "more likely than not". The effect of changes in tax laws or
rates on deferred tax assets and liabilities is recognized in the period that
includes the enactment date.
(m) EARNINGS PER SHARE
Earnings per common and common equivalent share are calculated by dividing net
income by the weighted average number of shares of common stock and common
stock equivalents considered outstanding. Stock options are regarded as common
stock equivalents, and therefore are considered in earnings per share
calculations if dilutive. Common stock equivalents are computed using the
treasury stock method. ESOP shares that have been allocated to participants'
accounts or are committed to be released for allocation are considered
outstanding for earnings per share calculations.
(n) IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, Statement of Financial Accounting Standards No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" ("SFAS No. 125") was issued. The statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, (or for certain types of transactions
occuring after December 31, 1997) and shall be applied prospectively. The
Company does not expect SFAS No. 125 to have a significant effect on its
financial statements.
28
(o) STATEMENT OF CASH FLOWS
For the purpose of reporting cash flows, cash and cash equivalents include cash
and due from banks, interest-bearing deposits in other banks, federal funds
sold and reverse repurchase agreements, all of which have initial maturities of
less than ninety days.
2. CONVERSION TO STOCK FORM OF OWNERSHIP AND INITIAL PUBLIC OFFERING
On January 28, 1994, the Company completed the issuance and sale of 53,650,000
shares of its common stock (the "Transaction"), at a price of $15.00 per share,
through an initial public offering ("IPO"). From the Transaction, the Company
received gross proceeds of $804.8 million, which included $133.6 million of
Bank depositor balance withdrawals that were converted into IPO purchases of
the Company's common stock.
In accordance with the requirements of the New York State Banking Law, the Bank
established a liquidation account in the amount equal to its capital as of the
date of the latest consolidated statement of condition appearing in the final
IPO prospectus. The liquidation account is maintained for the benefit of
eligible pre-conversion depositors who continue to maintain their accounts at
the Bank after the Transaction. The liquidation account is reduced annually to
the extent that such depositors have reduced their qualifying deposits as of
each subsequent audited balance sheet date. Subsequent increases in their
balances will not restore such depositors' interest in the liquidation account.
In the event of a liquidation of the Bank (a circumstance not envisioned or
expected by management) such depositors would be entitled, under New York State
law, to receive a distribution from the liquidation account in an amount
proportionate to their then current adjusted qualifying account balances for
all such depositors then holding qualifying deposits in the Bank. The balance
of the liquidation account at December 31, 1996 was $135.4 million.
In addition to the restrictions described above, the Bank may not declare or
pay cash dividends on or repurchase any of its shares of common stock if the
effect thereof would cause stockholders' equity to be reduced below then
applicable capital maintenance requirements or if such declaration and payment
would otherwise violate either regulatory requirements and/or applicable
banking laws, or would reduce the Bank's capital level below the then aggregate
balance required for the liquidation account.
3. BUSINESS ACQUISITIONS
On July 7, 1995, the Company paid approximately $7.1 million to acquire the
national wholesale residential mortgage lending operation of
BarclaysAmerican/Mortgage Corporation, a subsidiary of Barclays Bank PLC. The
transaction was structured as a purchase of certain assets and an assumption of
certain liabilities which generated goodwill of approximately $5.0 million.
On September 22, 1995, the Bank completed the acquisition of the New York
branch system of Home Savings of America, FSB ("HSA"), a subsidiary of H.F.
Ahmanson & Company. The Bank assumed approximately $8.1 billion of customer
deposit liabilities and received approximately $7.5 billion in cash,
certificates of deposit and short-term Federal agency debt securities. The
acquisition was structured as a purchase of assets and assumption of
liabilities which generated goodwill of approximately $680.0 million.
4. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Company is required to maintain reserves on deposit with the Federal
Reserve Bank of New York. The amount of required reserves at December 31, 1996
was $34.1 million. The average amount of those reserve deposits was
approximately $40.5 million for the year ended December 31, 1996.
5. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
The maximum amounts of reverse repurchase agreements outstanding on any day
during the years ended December 31, 1996 and 1995, were $1.42 billion and
$999.2 million, respectively. The average amounts of these agreements
outstanding during the years ended December 31, 1996 and 1995, were $791.6
million and $540.4 million, respectively.
29
6. SECURITIES
SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated fair value of securities available for sale at
December 31, 1996 and 1995 are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
(In millions) Cost Gains Losses Value
- -------------------------------------------------------------------------------
Securities Available for Sale December 31, 1996
- -------------------------------------------------------------------------------
U.S. Government and Federal Agency
Obligations:
U.S. Treasury Notes/Bills $1,944.3 $ 0.3 $(16.2) $1,928.4
Agency Discount Notes/Asset
Backed Securities 66.4 - - 66.4
Mortgage-Backed Securities 1,881.0 - (23.1) 1,857.9
Collateralized Mortgage Obligations 32.4 - - 32.4
Trust Certificates Collateralized
by GNMA Securities 409.8 - (3.3) 406.5
Other 63.9 0.2 (0.3) 63.8
Total securities available for
sale $4,397.8 $ 0.5 $(42.9) $4,355.4
Gross Gross
Amortized Unrealized Unrealized Fair
(In millions) Cost Gains Losses Value
- -------------------------------------------------------------------------------
Securities Available for Sale December 31, 1995
- -------------------------------------------------------------------------------
U.S. Government and Federal Agency
Obligations:
U.S. Treasury Notes/Bills $1,352.3 $ 4.0 $ - $1,356.3
Agency Discount Notes 2,417.0 0.1 (0.1) 2,417.0
Mortgage-Backed Securities 1,668.8 25.0 - 1,693.8
Trust Certificates Collateralized
by GNMA Securities 430.3 0.3 (1.8) 428.8
Other 0.6 - - 0.6
Total securities available
for sale $5,869.0 $29.4 $ (1.9) $5,896.5
In December 1995, in accordance with guidance issued by the Financial
Accounting Standards Board, the Company reclassified $105.1 million in
securities from the held to maturity category to the available for sale
category. The securities were adjusted to market value, resulting in net
unrealized gains of approximately $1.7 million.
During the year ended December 31, 1996, the Company sold available for sale
securities aggregating $3.2 billion, resulting in gross realized gains of $2.7
million and gross realized losses of $2.1 million. There were no sales of
securities during the years ended December 31, 1995 and 1994.
Mortgage-backed securities, almost all of which have contractual maturities of
more than 10 years, are subject to scheduled and nonscheduled principal
payments which shorten the average life to an estimated 5.7 years. The
amortized cost and estimated fair value of securities at December 31, 1996 by
contractual maturity are summarized below:
Securities Available Securities Held
for Sale to Maturity
-------------------- ----------------
Amortized Fair Amortized Fair
(In millions) Cost Value Cost Value
- -------------------------------------------------------------------------------
Maturity schedule of securities December 31, 1996
- -------------------------------------------------------------------------------
Due in one year or less $1,143.1 $1,142.7 $ - $ -
Due after one year through five years 1,008.2 990.3 2.2 2.2
Due after five years through ten years 674.9 670.2 - -
Due after ten years 1,571.6 1,552.2 1.8 1.8
Total securities $4,397.8 $4,355.4 $4.0 $4.0
The Company lends portions of its investment in U.S. government and agency
securities to pre-authorized securities dealers in return for a securities
lending fee. These loaned securities are collateralized at 102% of their fair
value with government and/or agency securities. To protect the Company's
investment, the agreements contain provisions to increase the collateral
obtained, should the value of the collateral decline or the fair value of the
securities loaned increase. Upon maturity or early termination of a loan, the
Company's securities are returned. At December 31, 1996, $1.9 billion of the
Company's securities were on loan to securities dealers. Income earned on
loaned securities, included in other income, for the years ended December 31,
1996, 1995 and 1994 was $2.0 million, $0.5 million, and $0.6 million,
respectively. The maximum amount of securities loaned on any day during the
years ended December 31, 1996 and 1995 was $2.3 billion and $1.8 billion,
respectively.
30
7. LOANS RECEIVABLE
The Company's loans receivable balances are summarized as follows:
December 31,
(In millions) 1996 1995
- -------------------------------------------------------------------------------
Conventional first mortgage loans:
Residential one- to four-family $6,350.4 $5,081.3
Residential multi-family 544.1 474.2
Commercial property 467.1 375.7
Second mortgage and home equity loans 44.1 37.9
Other 41.8 53.3
Total loans receivable held for investment 7,447.5 6,022.4
Deferred loan origination fees and unearned discount (48.2) (58.3)
Allowance for possible loan losses (105.0) (105.5)
Loans receivable held for investment, net $7,294.3 $5,858.6
NON-ACCRUAL LOANS
The outstanding balances of non-accrual loans as of December 31, 1996 and 1995
are as follows:
December 31,
(In millions) 1996 1995
- ----------------------------------------------------------
Mortgage loans secured by:
Residential one- to four-family $271.2 $291.6
Residential multi-family 48.3 61.6
Commercial property 36.5 48.9
Other loans 0.1 -
Total $356.1 $402.1
The effect of non-accrual loans on interest income is as follows:
Year ended December 31,
(In millions) 1996 1995 1994
- ---------------------------------------------------------------
Interest Income
As originally contracted $ 45.1 $ 50.8 $ 72.3
As recognized (22.9) (33.7) (40.3)
Reduction of interest income $ 22.2 $ 17.1 $ 32.0
ALLOWANCE FOR POSSIBLE LOAN LOSSES
Activity in the allowance for possible loan losses is summarized as follows:
At or for the Year Ended December 31,
(In millions) 1996 1995 1994
- --------------------------------------------------------------------
Balance beginning of period $105.5 $103.0 $147.0
Provisions charged to income 15.7 9.5 32.3
Transfer from allowance for
loans held for sale - - 11.6(a)
Charge offs (17.5) (15.5) (93.1)(b)
Recoveries 1.3 8.5(c) 5.2
Balance end of period $105.0 $105.5 $103.0
(a)Represents the remaining allowance related to non-performing loans held for
sale that was restored to the overall allowance for possible loan losses.
(b)Includes $56.1 million incurred in a bulk sale of non-performing loans.
(c) Includes a $6.1 million recovery of 1994's bulk sale charge off.
GEOGRAPHIC CONCENTRATION
As of December 31, 1996, 60% of the Company's mortgage loan portfolio is
secured by properties located in New York and New Jersey. The properties
securing the remaining portfolio are dispersed throughout the country, with no
state representing more than 10%.
8. OTHER REAL ESTATE OWNED
The following is a summary of ORE owned by the Company:
December 31,
(In millions) 1996 1995
- ---------------------------------------------------------------
Property type:
Residential one- to four-family $17.5 $14.9
Residential multi-family 4.0 5.4
Commercial 8.4 11.1
Allowance for potential declines in value (1.3) (2.2)
Other real estate owned, net $28.6 $29.2
Activity in the allowance for potential declines in value for ORE is summarized
as follows:
At or for the Year Ended December 31,
(In millions) 1996 1995 1994
- -----------------------------------------------------------------------------
Balance beginning of period $ 2.2 $ 5.1 $14.4
Provisions (recoveries) charged to income 0.9 0.5 (1.0)
Charge offs (1.8) (3.4) (8.3)
Balance end of period $ 1.3 $ 2.2 $ 5.1
31
The following is a summary of ORE income activity:
Year Ended December 31,
-------------------------
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------
Operating expense, net of rental and other income $ 4.9 $ 6.0 $ 9.3
Provision for (recovery of) potential decline in
value of ORE 0.9 0.5 (1.0)
Net gain on sales of ORE properties (6.6) (9.9) (11.2)
Net ORE operating income $(0.8) $(3.4) $ (2.9)
During the years ended December 31, 1996, 1995 and 1994, the Company acquired
through foreclosure or deed in lieu of foreclosure, loans with book values of
$33.1 million, $27.2 million and $74.8 million, respectively. Charges to the
allowance for possible loan losses, reducing the carrying value of ORE
properties to their estimated fair values, amounted to $4.5 million, $5.5
million and $15.4 million during the years ended December 31, 1996, 1995 and
1994, respectively. Sales of ORE properties during these respective periods
totaled $29.3 million, $46.5 million and $80.2 million.
9. DEPOSITS
The contractual maturities of term certificates of deposit are summarized as
follows:
December 31,
---------------------------------------------
1996 1995
--------------------- ----------------------
Percentage Percentage
of Term of Term
(In millions) Amount Deposits Amount Deposits
- -------------------------------------------------------------------------------
Due within six months $2,961.6 44.80% $3,628.1 46.93%
Due within six to twelve months 1,745.6 26.40 2,141.4 27.70
Due within one to two years 1,311.6 19.84 1,003.3 12.98
Due within two to three years 305.0 4.61 612.6 7.92
Due within three to four years 179.7 2.72 183.2 2.37
Due within four to five years 69.1 1.05 129.5 1.68
Due beyond five years 38.8 0.58 32.7 0.42
Total $6,611.4 100.00% $7,730.8 100.00%
Included in term certificates of deposit are certificates in denominations of
$100,000 or more at December 31, 1996 and 1995, aggregating $687.8 million and
$771.0 million, respectively.
Interest expense on deposits is summarized as follows:
Year Ended December 31,
---------------------------
(In millions) 1996 1995 1994
- -------------------------------------------------------------
Account type:
N.O.W. and checking $ 6.1 $ 3.4 $ 2.2
Savings and club 55.2 28.4 20.2
Variable rate savings 66.1 41.5 43.2
Money market 19.5 14.2 14.8
Term certificates of deposit 377.8 257.0 144.6
Total $524.7 $344.5 $225.0
10. PREFERRED STOCK OF SUBSIDIARY
GreenPoint Mortgage Trust (the "Trust"), a wholly-owned subsidiary of the Bank,
is a newly formed real estate investment trust established for the purpose of
acquiring, holding and managing real estate mortgage assets.
During 1996, the Trust issued 10,000 shares of 12.0% cumulative preferred stock
with a liquidation preference of $1,000. Preferred shareholders will be
entitled to receive quarterly cumulative cash dividends, which is considered
minority interest expense by the Company.
The cumulative preferred shares may be redeemed at any time or from time to
time, in whole or in part, at a redemption price equal to the liquidation
value, plus any dividends accrued and unpaid at the option of the Trust. The
preferred shares are treated as Tier 1 capital for the Company and the Bank.
The preferred shares have no stated maturity and are not subject to any
mandatory sinking fund or redemption rights.
11. RESTRUCTURING CHARGE
In December 1995, the Company recorded a pre-tax restructuring charge of $8.0
million that reflected actions initiated during the fourth quarter of that year
and during 1996 to improve operating efficiency. In 1996, the Company recovered
$1.6 million of the restructuring charge, due to lower than expected severance
payments and write-downs on sold or closed facilities.
32
12. PENSION PLAN AND OTHER EMPLOYEE BENEFITS
DEFINED BENEFIT PENSION PLAN
The Bank maintains a noncontributory, qualified, defined benefit pension plan
(the "Plan") covering sub-stantially all employees of the Company who have
completed one year of service with the Company. Effective May 6, 1996, the Plan
was amended to calculate future benefits under a cash balance formula. Each
participant has an account to which amounts are allocated based on a percentage
of the participants eligible base salary and years of service, which grows at a
specified rate of interest. Benefits accrued prior to May 6, 1996 were based
primarily on each participant's years of service and highest average
compensation. The funding of the Plan is actuarially determined on an annual
basis. The Bank's Plan conforms to the requirements of the Employee Retirement
Income Security Act of 1974, as amended.
The actuarial present value of benefit obligations as of December 31, 1996 and
1995 are shown as follows:
December 31,
------------------
(In millions) 1996 1995
- -------------------------------------------------------------------------------
Actuarial present value of benefit obligation:
Accumulated benefit obligation (including vested
benefits of $26.3 and $24.7, respectively) $ 27.9 $ 28.5
Effect of future compensation 2.6 8.4
Projected benefit obligation $ 30.5 $ 36.9
Plan assets at fair value (Primarily investments in
mutual fund shares of equity and bond funds) $ 43.4 $ 38.7
Projected benefit obligation (30.5) (36.9)
Plan assets in excess of projected benefit obligation 12.9 1.8
Amount contributed - 0.6
Unrecognized net transition asset (1.3) (1.7)
Unrecognized net (gain) loss (6.9) 1.6
Unrecognized prior service (benefit) cost (3.1) 0.3
Prepaid pension cost $ 1.6 $ 2.6
Net periodic pension costs reported for the years ended December 31, 1996, 1995
and 1994, were $1.0 million, $1.1 million and $1.1 million, respectively.
The assumptions used for the years ended December 31, 1996, 1995 and 1994 to
determine the net periodic pension cost were:
Year Ended December 31,
--------------------------
1996 1995 1994
- ------------------------------------------------------------------------------
Weighted average discount rate 7.50% 7.00% 8.50%
Rate of increase in future compensation levels 4.50% 6.00% 6.00%
Expected long-term rate of return on assets 8.00% 8.00% 8.00%
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AND RETIREMENT PLAN FOR DIRECTORS
The Bank maintains a nonqualified, unfunded Supplemental Executive Retirement
Plan ("SERP") for the primary purpose of providing benefits to certain eligible
employees in excess of limitations imposed by Federal tax law. At December 31,
1996 and 1995, the SERP expense was $0.7 million and $0.5 million, respectively.
The Bank also maintains a non-qualified, unfunded defined benefit Retirement
Plan for Directors who are not entitled to receive benefits under the Pension
Plan. This plan provides retirement benefits to eligible retired or disabled
Independent Directors and their beneficiaries. At December 31, 1996 and 1995,
the Retirement Plan for Directors expense was $0.3 million and $0.5 million,
respectively.
401(K) SAVINGS PLAN
During 1996, the Bank amended its Incentive Savings Plan to include provisions
under Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"401(k) Savings Plan"). Substantially all of the employees of the Company
employed prior to July 1, 1996 are eligible to participate. Participants may
contribute on a pre-tax basis up to 6% of their eligible salary and may be
eligible to receive a matching contribution equal to 100% of the first 3% of
eligible salary they contribute to the 401(k) Savings Plan. Participants may
invest their pre-tax contributions in any of the investment funds made
available under the 401(k) Savings Plan, including a fund that invests
primarily in the Company's stock. The matching contribution may be funded by
using some of the shares released for allocation under the ESOP. Matching
contributions generally become vested over a five-year period. Plan expense for
matching contributions was approximately $0.8 million for the year ended
December 31, 1996.
OTHER POSTRETIREMENT BENEFITS
The Company provides certain unfunded health care and life insurance benefits
to eligible retired employees. Participants generally become eligible for
retiree health care and life insurance benefits after 10 years of service with
the Company. The Company also gives retired directors the option of
participating in certain retiree health care benefits.
33
The following table sets forth the Accumulated Postretirement Benefit
Obligation ("APBO") at December 31, 1996 and 1995, respectively:
December 31,
-------------------
(In millions) 1996 1995
- ---------------------------------------------------------------
Retirees $ 7.0 $ 7.0
Fully eligible active plan participants 1.8 3.3
Other plan participants 5.2 6.0
Total APBO 14.0 16.3
Unrecognized prior service cost 0.2 0.3
Unrecognized gain (loss) 0.3 (3.6)
Accrued postretirement benefit cost $14.5 $13.0
The net postretirement benefits expense for the years ended December 31, 1996,
1995 and 1994 was comprised of the following:
Year Ended December 31,
(In millions) 1996 1995 1994
- -------------------------------------------------------------------------------
Service cost (benefits for service during the year) $1.2 $0.7 $0.8
Interest cost on APBO 0.9 1.0 0.7
Net postretirement benefits expense $2.1 $1.7 $1.5
In measuring the APBO, a 9.0% annual trend rate for health care costs was
assumed for the year ended December 31, 1996, and an 11.5% annual trend rate
was assumed for the years ended December 31, 1995 and 1994. This rate is
assumed to decline to 5.0% by the year 2000. The weighted average discount rate
used in determining the APBO was 7.5%, 7.0% and 8.5%, for the years ended
December 31, 1996, 1995 and 1994, respectively.
If the assumed health care cost trend rate increased by 1%, the APBO as of
December 31, 1996 would increase by $1.8 million. The effect of a 1% increase
in the cost trend rate on the service and interest cost components of net
periodic postretirement benefits expense would be an increase of $0.3 million.
EMPLOYER'S ACCOUNTING FOR POSTEMPLOYMENT BENEFITS
The Company is accounting for postemployment benefits on a comprehensive
accrual basis. This basis requires the Company to charge to expense the
expected costs of providing these benefits to all postemployment employees,
during the years such employees are actively employed by the Company. At
December 31, 1996 and 1995, the Company's postemployment liability was
approximately $0.5 million and $1.2 million, respectively.
13. INCOME TAXES
For the tax years prior to 1996, a special bad debt deduction was allowed for
additions to the Bank's tax bad debt reserves. As a result of recently enacted
Federal legislation, for tax years beginning after January 1, 1996, the Bank is
only permitted to take deductions for bad debts for Federal tax purposes on the
basis of actual loan charge-off activity. This legislation also requires that
the Bank recapture into taxable income the portion of existing tax bad debt
reserves created in the years beginning after December 31, 1987 over a six year
period. The amount of such reserve subject to recapture at December 31, 1996 is
approximately $2.0 million.
At December 31, 1996, no Federal income tax provision has been made against the
Bank's pre-1988 tax bad debt reserve of approximately $140 million. However,
these reserves remain subject to recapture should the Bank make certain
non-dividend distributions or cease to maintain a Bank charter. Management has
no intention of taking any such actions.
For New York State income tax purposes, the Bank is permitted to continue to
take special reserve method bad debt deductions. At December 31, 1996, the Bank
maintained a state tax bad debt reserve in excess of the Federal reserve of
approximately $161 million for which no state tax has been provided. In the
event the Bank were to allow qualifying assets to fall below 60% or otherwise
fail state definitional tests, the balance of the reserve would be subject to
recapture into taxable income. Furthermore, any charge to the qualifying tax
bad debt reserves other than for losses on qualifying loans may create income
for State tax purposes only. The Bank's qualifying assets at December 31, 1996
and 1995 exceeded 60%.
The Company's deferred tax asset represents the anticipated Federal, state and
local tax benefits expected to be realized in future years upon the utilization
of the underlying tax attributes comprising this balance. In management's
opinion, the net deferred tax asset is fully realizable. Accordingly, no
valuation allowance has been provided.
The components of income tax expense for the years ended December 31, 1996,
1995 and 1994, are summarized as follows:
34
Year Ended December 31,
(In millions) 1996 1995 1994
- -------------------------------------------------------
Current:
Federal $60.3 $34.3 $33.4
State and local 10.2 17.2 18.2
Total current 70.5 51.5 51.6
Deferred:
Federal 11.4 24.1 28.8
State and local 10.1 15.3 17.6
Total deferred 21.5 39.4 46.4
Total $92.0 $90.9 $98.0
In addition to the income tax expense attributable to operations, deferred
income tax (benefit) liability in the amount of $(31.6) million and $12.6
million was separately allocated to stockholders' equity to recognize the
related tax effect of the net unrealized gain or loss on securities available
for sale for the years ended December 31, 1996, and 1995, respectively.
The amounts reported as income tax expense vary from amounts that would be
reported by applying the statutory Federal income tax rate to income before
income taxes due to the following:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
(In millions) 1996 1995 1994
- -------------------------------------- ------------------ ------------------ ------------------
Percentage Percentage Percentage
of Pre-tax of Pre-tax of Pre-tax
Amount Earnings Amount Earnings Amount Earnings
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax expense at Federal statutory rate $78.6 35.00% $69.4 35.00% $73.8 35.00%
State and local taxes, net of Federal
income tax benefit 13.2 5.89 20.9 10.53 23.3 11.05
Other 0.2 0.09 0.6 0.29 0.9 0.42
Total income taxes $92.0 40.98% $90.9 45.82% $98.0 46.47%
</TABLE>
Included in deferred income tax expense for the years ended December 31, 1995
and 1994 are expenses of $0.8 million and $0.4 million, respectively, relating
to adjustments to deferred tax assets and liabilities for enacted changes in
tax laws and rates.
35
The balances of the net deferred tax asset at December 31, 1996 and 1995 were
comprised as follows:
December 31,
(In millions) 1996 1995
- ------------------------------------------------------------------------------
DEFERRED TAX ASSETS:
Allowance for possible loan losses $45.4 $ 48.0
Non-accrued interest income on non-accrual loans 8.3 11.3
Capitalized cost of acquisition, other real estate 4.4 2.7
Other real estate, valuation allowance for market
decline 0.1 0.8
Postretirement and post-employment benefits 6.8 5.2
Restructuring charges - 3.3
Unrealized loss on securities available for sale 19.0 -
Deferred loan fees - 8.5
Other 4.4 6.2
-------------------
$88.4 $ 86.0
DEFERRED TAX LIABILITIES:
Premises and equipment $(3.4) $ (2.4)
Excess servicing asset (1.8) (0.9)
Deferred loan fees (3.0) -
Unrealized gain on securities available for sale - (12.6)
-------------------
(8.2) (15.9)
Net deferred tax asset $80.2 $ 70.1
14. DERIVATIVE FINANCIAL INSTRUMENTS
The Bank enters into interest rate swap contracts in managing its interest rate
risk. The notional amount of these contracts approximates $300 million at
December 31, 1996. These contracts have a term of approximately 3 years. Under
the terms of the contracts, the Bank pays an average fixed rate of 6.33% and
receives an average variable rate of 5.52%. The notional amounts of derivatives
do not represent amounts exchanged by the parties and, thus, are not a measure
of the Company's exposure through its use of derivatives. The amounts exchanged
are determined by reference to the notional amounts and the other terms of the
derivatives.
Interest rate swaps are contracts in which a series of interest rate flows in a
single currency are exchanged over a prescribed period. The risks inherent in
interest rate swaps are the potential inability of a counterparty to meet the
terms of its contract and the risk associated with changes in the market values
of the contracts due to movements in the underlying interest rates. The current
credit exposure of derivatives is represented by the fair value of contracts
with a positive fair value at the reporting date. To reduce credit risk,
management may deem it necessary to obtain collateral.
15. COMMITMENTS AND CONTINGENCIES
In the normal course of business, there are various outstanding commitments and
contingent liabilities that have not been reflected in the consolidated
financial statements. In addition, in the normal course of business, there are
various other outstanding legal proceedings. In the opinion of management,
after consultation with legal counsel, the financial position of the Company
will not be affected materially as a result of such commitments and contingent
liabilities or by the outcome of such legal proceedings.
The principal commitments and contingent liabilities of the Company are
discussed in the following paragraphs.
PENDING LITIGATION
The Bank or one of its subsidiaries has been named as a defendant in thirteen
unrelated legal complaints which assert that infant plaintiffs sustained
personal injuries from the ingestion of lead based paint, chips or dust.
Additionally there are eleven other instances of threatened litigation. The
complaints are in various early stages of discovery. Outside counsel has
advised the Bank that because discovery on these claims has only recently
begun, counsel is not yet in a position to express an opinion as to the Bank's
liability or to quantify the Bank's potential exposure, if any, in dollar terms
at the time. Because of the absence of both a determination of liability and a
reasonable estimate of an associated liability exposure in dollar terms, if
any, the Bank has not established a contingency reserve for these complaints.
Accordingly, in the event that one or more of these actions are subsequently
determined to represent an accruable liability for the Bank, such accruals
would be funded through charges to be made against the Bank's operating income
for the period or periods in which such determinations may occur. The Company
currently believes that such liability exposure, if any, would not be material
to the Bank's financial condition.
LOAN COMMITMENTS
At December 31, 1996 and 1995, the Company had outstanding commitments to
originate mortgage loans totaling approximately $486.0 million and $209.1
million, respectively. The commitments to originate mortgage loans at December
31, 1996 included $371.8 million of commitments to originate fixed rate
mortgage loans and $114.2 million of commitments to originate adjustable rate
mortgage loans.
RECOURSE OBLIGATIONS
The Company has sold loans to FNMA with recourse obligations. The aggregate
amount of loans still subject to recourse was $121.0 million at December 31,
1996. The Company's obligation to repurchase loans is to be reduced by 49.6% at
December 31, 1997, by another 45.0% at December 31, 1998 and by the final 5.4%
at December 31, 1999.
36
LEASE COMMITMENTS
The Company has entered into noncancelable operating lease agreements for
banking premises and equipment with expiration dates ranging through the year
2023. The Company's premises are used principally for branch offices and
administrative operations, and it is expected that many agreements will be
renewed at expiration in the normal course of business.
Rental expense for Company premises for the years ended December 31, 1996, 1995
and 1994 amounted to $9.1 million, $3.1 million and $1.2 million, respectively.
The projected minimum rental payments under the terms of the noncancelable
leases, exclusive of taxes and escalation charges, at December 31, 1996 are
summarized as follows:
Year Ending
(In millions) December 31, Amount
- ------------------------------------------
1997 $ 12.3
1998 11.3
1999 9.1
2000 8.1
2001 7.9
thereafter 51.3
Total $100.0
Minimum rental income under noncancelable sublease agreements aggregate $19.2
million.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
The methods and assumptions used to estimate fair values are set forth in the
following paragraphs for each major grouping of the Company's financial
instruments.
December 31, 1996 December 31, 1995
-------------------- --------------------
Carrying Estimated Carrying Estimated
(In millions) Values Fair Values Values Fair Values
- -------------------------------------------------------------------------------
Assets:
Cash and due from banks $ 81.9 $ 81.9 $ 153.7 $ 153.7
Interest-bearing deposits in other
banks 105.6 105.6 - -
Federal funds sold and securities
purchased under agreements to
resell 388.5 388.5 1,550.7 1,550.7
Securities:
Bonds and mortgage-backed
securities available for sale 4,355.4 4,355.4 5,896.5 5,896.5
Bonds and mortgage-backed
securities held to maturity 4.0 4.0 4.3 4.4
Loans receivable held for sale 4.8 4.8 175.1 175.1
Loans receivable held for investment 7,294.3 7,469.7 5,858.6 6,065.7
Liabilities:
Deposits:
Deposits due on demand and/or
with no specified maturities 4,840.9 4,840.9 5,167.5 5,167.5
Term certificates of deposit 6,611.4 6,669.0 7,730.8 7,822.2
Accrued Interest:
Receivable 89.5 89.5 73.0 73.0
Payable 6.3 6.3 2.4 2.4
Securities sold under agreement to
repurchase 89.5 89.5 - -
Off-balance sheet:
Commitment to originate mortgage loans - 486.0 - 238.0
Mandatory delivery commitments and
option related contracts - - 0.6 (0.5)
Interest rate swaps - (1.8) - -
CASH AND DUE FROM BANKS
The carrying values of cash and due from banks approximate fair values.
INTEREST-BEARING DEPOSITS IN OTHER BANKS
The carrying values of interest-bearing deposits in other banks approximate
fair values.
FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
The carrying values of federal funds sold and securities purchased under
agreements to resell approximate fair values.
SECURITIES
The fair values of bonds and mortgage-backed securities are based on published
market valuations or estimated price quotations provided by securities dealers.
LOANS RECEIVABLE HELD FOR SALE
The fair values of loans held for sale are estimated using quoted market prices
for securities backed by similar loans, adjusted for differences in loan
characteristics.
37
LOANS RECEIVABLE HELD FOR INVESTMENT
Fair value of the Company's Mortgage Loan portfolio is based on comprehensive
portfolio valuation analyses performed as of December 31, 1996 and 1995 by an
independent pricing firm, engaged specifically for this purpose by the Company.
The remaining categories of loans, home equity loans, student loans and home
improvement loans, were deemed to have estimated market values approximating
their respective carrying values.
DERIVATIVE INSTRUMENTS
Mandatory Delivery Commitments-The fair value of commitments is estimated by
comparing the Company's cost to acquire mortgages to the current price for
similar mortgage loans, taking into account the terms of the commitments.
Option Contracts-Fair value is determined utilizing quotes obtained from
established reputable sources within the industry.
Interest Rate Swaps-the fair value generally reflects the estimated amounts
that the Company would receive or pay to terminate the contracts at the
reporting date, thereby taking into account the current unrealized gains or
losses of open contracts.
DEPOSITS
The fair value of all deposits with no specified maturities is deemed to be
equal to the amounts payable on demand.
The fair value of the Company's term certificates of deposit was estimated by
discounting cash flows based on contractual maturities at current interest
rates for raising funds of similar remaining maturities.
ACCRUED INTEREST RECEIVABLE AND PAYABLE
The fair value of these financial assets and liabilities approximate their
carrying values.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The carrying values of securities sold under agreements to repurchase
approximate their fair values.
COMMITMENTS TO ORIGINATE MORTGAGE LOANS
The fair value of loan commitments issued and outstanding is based on rates and
terms of similar commitments issued by the Company on December 31, 1996 and
1995, respectively.
LIMITATIONS
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instruments being
estimated.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. In those instances for which no market exists for
portions of the Company's financial instruments, fair value estimates were
based on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of the affected financial instruments, and
other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore, should not be
considered to represent any specific market values. Changes in the assumptions
could significantly affect the fair valuation estimates.
17. REGULATORY MATTERS
The Company and the Bank are subject to various regulatory capital requirements
administered by the Federal and state banking agencies. The Board of Governors
of the Federal Reserve System establishes minimum capital requirements for the
consolidated bank holding company as well as for the Bank.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that involve
quantitative measures of its assets, liabilities, and certain off balance sheet
items as calculated under regulatory accounting practices. These guidelines
require minimum ratios of risk-based capital to risk adjusted assets of 4% for
Tier 1 capital and 8% for total capital. The Federal Reserve Board also has
guidelines for a leverage ratio that is designed to complement the risk-based
capital ratios in determining the overall capital adequacy of banks and bank
holding companies. A minimum leverage ratio to Tier 1 capital to average total
assets of 3% is required for banks and bank holding companies, with an
additional 100 to 200 basis points required for all but the highest rated
institutions. Management believes, as of December 31, 1996, that the Company
and the Bank meet all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the FDIC categorized
the Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must
maintain minimum Tier 1 capital, total capital and leverage ratios of 6%, 10%
and 5%, respectively. There have been no conditions or events since that
notification that management believes have changed the Company's or Bank's
category.
38
For Capital
Actual Adequacy Purposes
---------------- -----------------
(In millions) Amount Ratio Amount Ratio
- -------------------------------------------------------------------------------
As of December 31, 1996
Total Capital (to Risk Weighted Assets):
Company $932.8 16.72% $446.2 8.00%
Bank 914.2 16.40% 445.8 8.00%
Tier 1 Capital (to Risk Weighted Assets):
Company $863.1 15.47% $223.1 4.00%
Bank 844.5 15.15% 222.9 4.00%
Tier 1 Capital (to Average Assets):
Company $863.1 6.78% $509.0 4.00%
Bank 844.5 6.64% 508.4 4.00%
For Capital
Actual Adequacy Purposes
---------------- -----------------
(In millions) Amount Ratio Amount Ratio
- -------------------------------------------------------------------------------
As of December 31, 1995
Total Capital (to Risk Weighted Assets):
Company $932.8 17.50% $426.3 8.00%
Bank 921.5 17.30% 426.1 8.00%
Tier 1 Capital (to Risk Weighted Assets):
Company $866.2 16.25% $213.1 4.00%
Bank 854.9 16.05% 213.0 4.00%
Tier 1 Capital (to Average Assets):
Company $866.2 6.19% $559.5 4.00%
Bank 854.9 6.11% 559.2 4.00%
DIVIDEND LIMITATION
The Company's principal source of funds for distributions of dividends to
shareholders, stock repurchase activities and any acquisitions to be made at
the holding company level, are dividends from the Bank. Federal law imposes
limitations on the payment of dividends by member banks of the Federal Reserve
System. Under such limitations, dividend payments by such banks are limited to
the lesser of (i) the amount of undivided profits and (ii) an amount not in
excess of net income for the current year plus retained net income for the
preceding two years. Dividends paid by the bank during 1996 were within these
limitations.
18. STOCK BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
The Bank's Employee Stock Ownership Plan and Trust ("ESOP") covers
substantially all employees of the Company who have been credited with 1,000
hours of service during a twelve month period. Participants receive
allocations on the basis of their eligible base compensation and generally
become vested over a five-year period. Participants fully vest in their
benefit upon retirement, death or disability while in active employment,
or in the event of a change in control of the Company or the Bank. Participants
who terminate employment before becoming 100% vested forfeit the unvested
portion of their accounts. Forfeitures are reallocated among the remaining
participants.
During 1994, the ESOP purchased 8,233,802 shares of the Company's common stock
in 1994, at a weighted average price of $16.65 per share. The purchases were
funded with a loan of $137.1 million from the Company, which is collateralized
by the unallocated Company shares owned by the ESOP. The loan will be repaid
primarily from contributions by the Bank and dividends paid by the Company on
unallocated shares over the applicable loan amortization period. The
outstanding principal balance of the loan as of December 31, 1996 and 1995 was
$129.9 million and $130.9 million, respectively, and the interest rate was
6.00% at both dates.
The shares owned by the ESOP are held by a third party trustee and released for
allocation to participants as repayments of the loan are made. The number of
shares released for allocation in any year is based upon the ratio of current
year principal and interest payments to the total of current year and all
projected future years' principal and interest payments. As of December 31,
1996, 1,054,415 shares have been allocated to participants' accounts. There are
7,179,387 unallocated shares with a value of $341.0 million, based upon the
December 31, 1996 closing price of $47.50 per share.
The Company recognized $8.2 million, $10.5 million and $7.8 million of
compensation expense relating to the ESOP for the years ended December 31,
1996, 1995 and 1994, respectively.
RESTRICTED STOCK PLAN
The Bank's Recognition and Retention Plan ("RRP"), authorizes the granting of
up to 1,242,018 shares of the Company's common stock to officers, employees and
directors emeriti of the Company.
In 1994, the Bank purchased 1,242,018 shares of the Company's common stock on
behalf of the RRP, at the initial public offering price of $15.00 per share.
Through December 31, 1996, 1,215,044 shares have been awarded to participants.
These awards vest ratably over a three to five year period on the anniversary
dates of the awards. Participants' awards fully vest upon retirement, death or
disability while in active employment, or in the event of the participant's
termination of employment due to a change in control of the Company or the Bank.
For the years ended December 31, 1996, 1995 and 1994, the Company recognized
$5.1 million, $4.6 million and $4.4 million, respectively, of compensation
expense relating to the RRP.
39
STOCK INCENTIVE PLAN
Under the Amended and Restated 1994 Stock Incentive Plan (the "Stock Incentive
Plan"), grants may be made in the form of incentive stock options ("ISOs"),
non-statutory stock options ("NSOs"), limited rights and restricted stock to
officers and other key employees. The Stock Incentive Plan provides that the
total number of shares available for grant shall be 3,500,000 shares of the
Company's common stock.
The ISOs and NSOs granted under the Stock Incentive Plan vest and become
exercisable over a three to five year period and expire on the tenth
anniversary of the grant. In the event of the employee's death, disability, or
retirement while in active employment or in the event of an employee's
termination of service due to a change in control of the Company or the Bank,
all ISOs and NSOs held by such participant vest and generally become
exercisable in full for a period of one year. The term during which any future
ISOs and NSOs granted vest and become exercisable is at the discretion of the
Compensation Committee. The exercise price for all ISOs or NSOs is at least
100% of the fair market value of the stock on the grant date.
As of December 31, 1996, 150,000 shares of restricted stock at a
weighted-average fair value of $24.62, had been granted under the Stock
Incentive Plan.
The following table presents a summary of the aggregate stock option
transactions for the years ended December 31, 1996 and 1995.
Year Ended December 31,
-------------------------------------------
1996 1995
--------------------- --------------------
Weighted Weighted
Number of Average Number of Average
Stock Exercise Stock Exercise
Options Price Options Price
- -------------------------------------------------------------------------------
Stock options outstanding,
beginning of period 2,737,562 $19.31 1,536,696 $15.77
Granted 272,000 31.67 1,304,734 23.14
Exercised (267,017) 15.38 (73,564) 15.00
Canceled (60,152) 18.01 (30,304) 15.00
Stock options outstanding, end of
period 2,682,393 $20.98 2,737,562 $19.31
Options exercisable at year-end 482,310 188,367
Weighted-average fair value of
options granted during the year $8.48 $5.68
The range of exercise prices on options outstanding for the years ended
December 31, 1996 and 1995 were $15.00 to $48.25 and $15.00 to $27.25,
respectively. The weighted average remaining contractual life for options
outstanding at December 31, 1996 is 7.94 years.
DIRECTORS' STOCK OPTION PLAN
Under the Company's Directors' Stock Option Plan the Company may grant up to
725,000 NSOs to directors who are not officers or employees of the Company
("Non-Employee Directors").
The exercise price is equal to 100% of the fair market value of the stock on
the grant date. The term of each NSO is ten years from the grant date. All
NSOs become exercisable over a ten-year period. In the event of the death,
retirement or disability of the Non-Employee Director or upon a change in
control of the Company these NSOs become immediately exercisable.
The following table presents a summary of the aggregate NSO transactions for
the years ended December 31, 1996 and 1995.
Year Ended December 31,
-------------------------------------------
1996 1995
--------------------- -------------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
NSOs Price NSOs Price
- -------------------------------------------------------------------------------
NSOs outstanding, beginning of period 621,000 $21.96 15,000 $24.25
Granted 6,000 28.50 606,000 21.90
NSOs outstanding, end of period 627,000 $22.02 621,000 $21.96
Options exercisable at year-end 102,495 9,000
Weighted-average fair value of
options granted during the year $4.20 $6.90
The range of exercise prices on options outstanding for the year ended December
31, 1996 and 1995 were $21.88 to $28.50 and $21.88 to $24.25, respectively. The
weighted average remaining contractual life for options outstanding at December
31, 1996 is 8.08 years.
40
Because stock options under the Stock Incentive Plan and the Directors Stock
Option Plan have characteristics significantly different from those of traded
options and because changes in the subjective assumptions can materially affect
the fair value estimate, the Company used a Black Scholes option-pricing model
with the following weighted-average assumptions used for grants in 1996 and
1995:
Year Ended December 31,
1996 1995
- ---------------------------------------------------
Dividend yield 2.60% 3.52%
Expected volatility 22.70% 24.62%
Risk-free interest rate 6.54% 7.09%
Expected option lives 5.65 years 6.79 years
Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards made under
those plans, consistent with the method of SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
Year Ended December 31,
(In millions, except per share data) 1996 1995
- ---------------------------------------------------------------
Net income As reported $132.5 $107.5
Pro forma $130.7 $106.4
Earnings per share As reported $ 3.02 $ 2.29
Pro forma $ 2.98 $ 2.27
The effects of applying SFAS No. 123 for providing pro forma disclosures are
not indicative of the effects on reported net income for future years because
SFAS No. 123 has not been applied to all outstanding, non-vested awards (does
not apply to awards prior to January 1, 1995). Additional awards in future
years are anticipated.
19. EDUCATIONAL AND CHARITABLE FOUNDATION
The Bank has committed to endow a $50 million Educational and Charitable
Foundation (the "Foundation"). The purpose of the Foundation is to fund grants
for civic, cultural, affordable housing and educational programs within the
communities served by the Bank. The endowment of this program is to be
established through contributions of a percentage of future net earnings in
excess of an annual amount of $90 million of pro forma earnings by the Bank. As
of December 31, 1996, the Bank has contributed $9.9 million, or 19.8%, of its
funding commitment to the Foundation.
20. CONDENSED PARENT COMPANY FINANCIAL STATEMENTS
The following condensed statements of financial condition at December 31, 1996
and 1995 and condensed statements of income and cash flows for the years ended
December 31, 1996 and 1995 and for the period from January 28, 1994 (date of
conversion) to December 31, 1994 for GreenPoint Financial Corp. (parent
company only) reflect the Company's investment in its wholly-owned subsidiaries
using the equity method of accounting.
PARENT COMPANY ONLY-CONDENSED STATEMENTS OF FINANCIAL CONDITION
December 31,
(In millions) 1996 1995
- ---------------------------------------------------------------------
ASSETS:
Cash and due from banks $ 0.6 $ 0.4
Money market investments 12.5 6.7
Banking premises and equipment - 0.2
Other assets 0.5 -
Investment in subsidiaries 1,446.3 1,545.1
Total assets $1,459.9 $1,552.4
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Accrued income taxes payable $ 0.1 $ 0.1
Other liabilities - 1.0
Total liabilities 0.1 1.1
Stockholders' equity 1,459.8 1,551.3
Total liabilities and stockholders' equity $1,459.9 $1,552.4
PARENT COMPANY ONLY-CONDENSED STATEMENTS OF INCOME
Period from
Jan. 28,
Year Ended 1994 to
December 31, Dec. 31,
------------------ --------
(In millions) 1996 1995 1994
- -------------------------------------------------------------------------------
Dividends from GreenPoint Bank $207.9 $ 47.9 $ 28.1
Interest Income:
Loan to GreenPoint Bank ESOP - 5.8 7.3
Money market investments 0.4 5.4 3.0
Securities held to maturity - 8.1 7.9
Total interest income 0.4 19.3 18.2
Securities lending fees - 0.1 0.1
Total income 208.3 67.3 46.4
Administrative expenses 0.5 1.1 0.9
Income before income taxes and equity in
undistributed (loss) earnings of subsidiaries 207.8 66.2 45.5
Income taxes - 8.3 8.2
Income before equity in undistributed (loss)
earnings of subsidiaries 207.8 57.9 37.3
Equity in undistributed(loss)earnings of
subsidiaries (75.3) 49.6 67.4
Net income $132.5 $107.5 $104.7
41
PARENT COMPANY ONLY-CONDENSED STATEMENTS OF CASH FLOWS
Period from
Jan. 28,
Year Ended 1994 to
December 31, Dec. 31,
------------------ --------
(In millions) 1996 1995 1994
- -------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 132.5 $ 107.5 $ 104.7
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed loss (earnings)
of subsidiaries 75.3 (49.6) (67.4)
Net change in other liabilities (1.0) (1.1) 2.2
Net change in other assets (0.5) 0.5 (0.5)
Other, net - (2.6) (6.3)
Net cash provided by operating activities 206.3 54.7 32.7
INVESTING ACTIVITIES:
Purchases of securities - - (445.9)
Maturities of securities - 170.2 185.0
Funds loaned to GreenPoint Bank ESOP - - (137.1)
Payments for investments in and advances
to subsidiaries - (124.3) (288.4)
Repayment of investments in and advances
to subsidiaries - 0.6 -
Principal payments of ESOP loans - - 2.9
Other, net 0.2 (0.2) (0.1)
Net cash provided by (used in) investing
activities 0.2 46.3 (683.6)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 3.1 1.1 694.3
Purchase of treasury stock (169.5) (73.8) -
Dividends paid (34.1) (36.8) (27.8)
Net cash (used in) provided by financing
activities (200.5) (109.5) 666.5
Net increase (decrease) in cash and cash
equivalents 6.0 (8.5) 15.6
Cash and cash equivalents at beginning of
period 7.1 15.6 -
Cash and cash equivalents at end of period $ 13.1 $ 7.1 $ 15.6
In connection with the HSA acquisition in September 1995, the Company made a
$353.2 million capital contribution to the Bank. The contribution was affected
through the transfer of certain assets as detailed in the table below:
Cash $113.1
Securities held to maturity 99.7
ESOP loan receivable(1) 134.2
Other 6.2
Total $353.2
NOTE:
(1)The ESOP loan receivable relates solely to the Bank's employee stock
ownership plan. The transfer assigns the right to receive the loan payments
made by the ESOP trustee and does not release the Bank from its obligation to
make contributions to the plan.
42
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31, 1996 Year Ended December 31, 1995
-------------------------------------- -------------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st
(In millions, except per share data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C. <C> <C> <C> <C> <C> <C>
Interest income $237.4 $239.0 $246.5 $251.1 $252.4 $155.7 $145.6 $142.8
Interest expense on deposits 122.9 126.9 134.2 143.5 151.0 72.8 63.8 58.2
Net interest income 114.5 112.1 112.3 107.6 101.4 82.9 81.8 84.6
(Provision for) recovery of possible loan losses (4.9) (3.4) (3.7) (3.7) 2.5 (3.8) (2.7) (5.5)
Net interest income after provision for
possible loan losses 109.6 108.7 108.6 103.9 103.9 79.1 79.1 79.1
Non-interest income 10.8 11.2 23.4 11.5 12.7 9.4 7.5 6.2
Non-interest expense 63.3 64.9 67.2 67.8 80.8 33.7 31.8 32.3
Income before income taxes 57.1 55.0 64.8 47.6 35.8 54.8 54.8 53.0
Income taxes 23.3 20.9 27.5 20.3 16.4 24.6 25.4 24.5
Net income $ 33.8 $ 34.1 $ 37.3 $ 27.3 $ 19.4 $ 30.2 $ 29.4 $ 28.5
Earnings per share $ 0.81 $ 0.79 $ 0.83 $ 0.60 $ 0.42 $ 0.64 $ 0.62 $ 0.60
Stock price per common share
High $50.13 $38.25 $30.50 $29.00 $29.50 $28.25 $24.25 $24.25
Low $39.25 $27.00 $27.25 $24.00 $25.13 $23.63 $22.00 $20.63
Closing $47.50 $38.13 $28.25 $27.50 $26.75 $27.63 $23.63 $23.13
</TABLE>
43
REPORT OF INDEPENDENT ACCOUNTANTS
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF GREENPOINT FINANCIAL CORP. AND
SUBSIDIARIES
In our opinion, the accompanying consolidated statement of financial condition
and the related consolidated statements of income, changes in stockholders'
equity and of cash flows, present fairly, in all material respects, the
financial position of GreenPoint Financial Corp. and its subsidiaries at
December 31, 1996, and the results of their operations and their cash flows for
the year ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and the significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above. The financial statements of
GreenPoint Financial Corp. and its subsidiaries for the years ended December
31, 1995 and 1994 were audited by other independent accountants whose report
dated January 19, 1996 expressed an unqualified opinion on those statements.
/s/ PRICE WATERHOUSE LLP
New York, New York
January 21, 1997
44
DIRECTORS AND OFFICERS
_______________________________________________________________________________
BOARD OF DIRECTORS
BERNARD S. BERMAN
President of D. Berman and Sons Sales, Incorporated
EDWARD C. BESSEY
Retired Vice Chairman of Pfizer Inc.
DAN F. HUEBNER
Retired Vice Chairman and Director of Grumman Corporation
WILLIAM M. JACKSON
Partner in the law firm of Satterlee, Stephens, Burke & Burke, L.L.P.
THOMAS S. JOHNSON
Chairman, President and Chief Executive Officer
SUSAN J. KROPF
Senior Vice President - President, New & Emerging Markets Avon Products, Inc.
ROBERT M. MCLANE
Retired Senior Vice President of Marsh & McLennan, Inc.
CHARLES B. MCQUADE
President and Chief Executive Officer of the Securities Industry
Automation Corporation
ALVIN N. PURYEAR
Professor of Management at Bernard M. Baruch College of
the City University of New York
ROBERT P. QUINN
Retired General Partner and Managing Director of Solomon Brothers Inc.
EDWARD C. SCHMULTS
Retired Senior Vice President and General Counsel of GTE Corporation
WILFRED O. UHL
Retired President of The Long Island Lighting Company
ROBERT F. VIZZA
President and Chief Executive Officer of St. Francis Hospital
JULES ZIMMERMAN
Retired President and Chief Executive Officer of Hickok Associates,
Incorporated
SENIOR MANAGEMENT
THOMAS S. JOHNSON
Chairman, President and Chief Executive Officer
BHARAT B. BHATT
Vice Chairman
BERNADETTE ARIAS
Executive Vice President
MARTIN S. DASH
Executive Vice President
RALPH J. HALL
President and Chief Executive Officer of GreenPoint Mortgage Corp.
CHARLES P. RICHARDSON
Executive Vice President and Chief Financial Officer
RAMESH N. SHAH
Executive Vice President
HOWARD C. BLUVER
Senior Vice President and General Counsel
GREENPOINT FOUNDATION
_______________________________________________________________________________
BOARD OF DIRECTORS
THE REV. DR. CALVIN O. BUTTS III
The Abyssinian Baptist Church
DR. W. ANN REYNOLDS
Chancellor
City University of New York
MOST REV. JOSEPH M. SULLIVAN
Brooklyn Catholic Charities
45
CORPORATE INFORMATION
_______________________________________________________________________________
EXECUTIVE OFFICES
90 Park Avenue
New York, NY 10016-1303
COMMON STOCK
GreenPoint Financial Corp.'s common stock is listed on the New York Stock
Exchange (NYSE) under the symbol GPT.
SOURCES OF INFORMATION
For information relating to share positions, transfer requirements, lost
certificates and
related matters, call our transfer agent at: 1-800-851-9677.
For information regarding Annual and Quarterly Reports and related matters,
call our Stockholder Relations Department at 212-834-1710.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
TRANSFER AGENT
Chase Mellon Shareholder Services
JAF Building
P.O. Box 3068
New York, NY 10116-3068
46
GREENPOINT FINANCIAL
SUBSIDIARY ACTIVITIES
The Company has formed two subsidiaries:
GREENPOINT COMMUNITY DEVELOPMENT CORP. This for-profit community
development subsidiary was incorporated in 1993. The subsidiary offers lending
programs, development opportunities and assistance, consulting and other
activities which promote the objective of greater access to affordable housing
for low-and moderate-income persons residing in the New York metropolitan area.
GreenPoint Community Development Corp. is a subsidiary of the holding company.
GREENPOINT BANK. The Bank was organized in 1868 as a New York State
chartered mutual savings bank. On January 28, 1994, the Bank converted from
the mutual to the stock form of ownership, and 100% of its outstanding shares
were acquired by the Company. The Bank is the principal subsidiary of the
Company.
As of December 31, 1996, the Bank has formed ten subsidiaries:
GREENPOINT MORTGAGE CORP. This subsidiary was incorporated on October 12,
1994 and began operations in the first quarter of 1995. On July 7, 1995, GPMC
acquired the wholesale residential mortgage lending business of
BarclaysAmerican/Mortgage Corp. ("BAM"). GPMC's activities consist of the
origination, sale and servicing of mortgage loans.
GREENPOINT MORTGAGE TRUST. This subsidiary was incorporated on February
16, 1996, as a real estate investment trust established for the purpose of
acquiring, holding and managing real estate mortgage assets.
GREENPOINT PURCHASING CORP. This subsidiary was incorporated on July 19,
1996, with an agreement between the Company and the Nassau County Industrial
Development Agency. This agreement enables the Company, on a sales tax exempt
basis, to (1) purchase and/or lease machinery and equipment for the Lake
Success facility and (2) renovate and improve the facility.
GREENPOINT CORPORATE OFFICER LIFE INSURANCE. This subsidiary was
incorporated on July 25, 1996, as an insurance trust established for the
purpose of purchasing corporate life insurance policies for the officers of the
Company.
3090 OCEAN AVENUE REALTY CORP. This subsidiary was incorporated on June 6,
1996, as a real estate investment subsidiary.
OTHER REAL ESTATE SUBSIDIARIES. The Bank has formed five wholly-owned
subsidiary corporations, all of which are incorporated under the laws of the
State of New York, for the purpose of holding and maintaining certain
properties acquired by the Bank as a result of foreclosure proceedings or deeds
in lieu thereof. As of December 31, 1996, four of these subsidiaries were
active. The Bank attempts to limit the carrying value of property held by any
one subsidiary to approximately $5 million. Accordingly, in the event the Bank
acquires additional properties through foreclosure or deeds in lieu thereof,
the Bank may form additional subsidiaries for the purpose of holding and
maintaining such properties. The properties selected by the Bank to be held in
its subsidiaries generally consist of multi-family properties with five units
or more, commercial properties and one-to four-family properties which have
been identified by the Bank as having attributes which may subject the Bank to
liabilities beyond those normally associated with its other real estate such as
properties which are not in compliance with building codes or properties with
potential environmental problems. A description of the Bank's subsidiaries are
set forth below:
NEERG CORP. This subsidiary was formed in January 1990 and currently holds
32 properties having an aggregate carrying value of $3.1 million and an
aggregate appraised value of $4.1 million, as of December 31, 1996, based on
the Company's most recent appraisals.
298 15TH STREET REALTY CORP. This subsidiary was formed in January 1993 and
currently holds 30 properties having an aggregate carrying value of $2.8
million and an aggregate appraised value of $3.9 million as of December 31,
1996, based on the Company's most recent appraisals.
NEERG SECOND CORP. This subsidiary was formed in June 1993 and currently
holds 24 properties having an aggregate carrying value of $2.5 million and an
aggregate appraised value of $3.2 million, as of December 31, 1996, based on
the Company's most recent appraisals.
ALPHA REO CORPORATION. This subsidiary was formed in March 1994 and
currently holds 30 properties having an aggregate carrying value of $2.7
million and an aggregate appraised value of $3.7 million, as of December 31,
1996, based on the Company's most recent appraisals.
BETA REO CORP. This subsidiary was formed in June 1994 and currently holds
no properties.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 33-74556,33-87758 and 33-87760) of GreenPoint
Financial Corp. of our report dated January 21, 1997 appearing on Page 44 of
the Annual Report to Stockholders which is incorporated in this Annual Report
on Form 10-K.
/S/ PRICE WATERHOUSE LLP
New York, New York
March 27, 1997
Report of Independent Accountants
To the Board of Directors and
Stockholders of GreenPoint Financial Corp.
In our opinion, the accompanying consolidated statement of financial condition
and the related consolidated statements of income, of changes in stockholders'
equity and of cash flows, appearing on pages 22 through 42 of the 1996 Annual
Report to Stockholders, present fairly, in all material respects, the financial
position of GreenPoint Financial Corp. and its subsidiaries at December 3l,
1996, and the results of their operations and their cash flows for the year in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
/S/ PRICE WATERHOUSE LLP
New York, New York
January 21, 1997
INDEPENDENT AUDITORS' CONSENT
The Shareholders and the Board of Directors of GreenPoint Financial Corp.
We consent to incorporation by reference in the registrations statements
(Nos. 33-74556, 33-87758 and 33-87760) on Form S-8 of GreenPoint Financial
Corp. of our report dated January 19, 1996, relating to the consolidated
statement of financial condition of GreenPoint Financial Corp. and
Subsidiaries as of December 31, 1995 and the related consolidated statements
of income, changes in stockholders' equity and cash flows for the years
ended December 31, 1995 and 1994, which report is included in the December
31, 1996 annual report on Form 10-K of GreenPoint Financial Corp.
By: /S/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Jericho, New York
March 26, 1997
To the Board of Directors and Shareholders
GreenPoint Financial Corp. and Subsidiaries
We have audited the consolidated statement of financial condition of
GreenPoint Financial Corp., and Subsidiaries as of December 31, 1995 and
the related consolidated statements of income, changes in stockholders'
equity and cash flows for the years ended December 31, 1995 and 1994. These
consolidated financial statements are the responsibility of the compnay's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, a well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of GreenPoint
Financial Corp. and Subsidiaries as of December 31, 1995 and the results of
their operations and their cash flows for the years ended December 1995 and
1994, in conformity with generally accepted accounting principles.
By: /S/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Jericho, New York
January 19, 1996
