<PAGE>
RULE NO. 424(b)(1)
REGISTRATION NO. 333-56569
PROSPECTUS
15,000,000 Shares
LOGO GREENPOINT FINANCIAL
Common Stock
(par value $.01 per share)
All of the shares of Common Stock offered hereby are being offered by
GreenPoint Financial Corp. (the "Company"). The Common Stock is listed on the
New York Stock Exchange (the "NYSE") under the symbol "GPT." On July 23, 1998,
the last reported sale price of the Common Stock on the NYSE was $40 1/8 per
share. See "Price Range of Common Stock and Dividends."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION, THE NEW YORK STATE
BANKING DEPARTMENT OR ANY OTHER STATE OR FEDERAL REGULATORY AGENCY, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION, THE NEW
YORK STATE BANKING DEPARTMENT, OR ANY OTHER STATE OR FEDERAL REGULATORY AGENCY
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE. THE SHARES OF COMMON STOCK OFFERED HEREBY
ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE COMMISSION, THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION
INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
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<S> <C> <C> <C>
Per Share $40.125 $1.200 $38.925
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Total (3) $601,875,000 $18,000,000 $583,875,000
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</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company estimated
at $750,000.
(3) The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional
2,250,000 shares of Common Stock on the same terms and conditions as set forth
above, solely to cover over-allotments, if any. If such over-allotment option
is exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $692,156,250, $20,700,000 and $671,456,250,
respectively.
The shares of Common Stock are being offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters, and
subject to approval of certain legal matters by Davis Polk & Wardwell, counsel
for the Underwriters. It is expected that delivery of the shares of Common
Stock will be made against payment therefor on or about July 29, 1998, at the
offices of J.P. Morgan Securities Inc., 60 Wall Street, New York, New York.
J.P. MORGAN & CO. GOLDMAN, SACHS & CO. LEHMAN BROTHERS
Joint Lead Managers
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
KEEFE, BRUYETTE & WOODS, INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
July 24, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SPECIFI-
CALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING, AND MAY
BID FOR AND PURCHASE SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIP-
TION OF THESE ACTIVITIES, SEE "UNDERWRITING."
No person has been authorized to give any information or to make any represen-
tation other than those contained or incorporated by reference in this prospec-
tus, and, if given or made, such information or representation must not be re-
lied upon as having been authorized by the Company or any of the Underwriters.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, the Common Stock in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this pro-
spectus nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof.
No action has been or will be taken by the Company or any Underwriter that
would permit a public offering of the Common Stock or possession or distribu-
tion of this Prospectus in any jurisdiction where action for that purpose is
required, other than in the United States. Persons into whose possession this
Prospectus comes are required by the Company and the Underwriters to inform
themselves about and to observe any restrictions as to the offering of the Com-
mon Stock and the distribution of this Prospectus.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information................. 3
Incorporation of Certain Documents
by Reference......................... 3
Cautionary Statement Concerning
Forward-Looking Information.......... 4
Prospectus Summary.................... 5
Risk Factors.......................... 8
Use of Proceeds....................... 10
Price Range of Common Stock and
Dividends............................ 10
Capitalization........................ 11
Selected Financial Data............... 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations........................ 14
Business.............................. 29
Management............................ 31
Description of Capital Stock.......... 34
Underwriting.......................... 38
Legal Matters......................... 39
Experts............................... 39
</TABLE>
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities Ex-
change Act of 1934, as amended (the "Exchange Act"), and in accordance there-
with files reports, proxy statements and other information with the Securities
and Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by the Company with the Commission may be inspected
and copied at the public reference facility maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
the following regional offices of the Commission: New York Regional Office,
Seven World Trade Center, Suite 1300, New York, New York 10048 and Chicago Re-
gional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The Commission also maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants such as the Company that file
electronically with the Commission. In addition, reports, proxy statements and
other information about the Company may be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed a Registration Statement on Form S-3 (together with all
amendments and exhibits thereto, including documents and information incorpo-
rated by reference, the "Registration Statement") with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"), that relates to
the securities offered hereby. As permitted by the rules and regulations of
the Commission, this Prospectus, which forms a part of the Registration State-
ment, omits certain information set forth in the Registration Statement.
Statements contained in this Prospectus as to the provisions of any document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete and each such statement is qualified
in its entirety by reference to the copy of such document as so filed. Copies
of the Registration Statement and the exhibits thereto are on file at the of-
fices of the Commission and may be obtained upon payment of the prescribed fee
or may be examined without charge at the public reference facilities of the
Commission described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the Company with the
Commission are incorporated herein by reference:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended Decem-
ber 31, 1997, as amended;
(2) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1998;
(3) the Company's Current Report on Form 8-K dated April 11, 1998;
(4) the Company's Current Report on Form 8-K dated July 6, 1998;
(5) the Company's Current Report on Form 8-K dated July 10, 1998; and
(6) the description of the Company's Common Stock contained in its registra-
tion statement on Form 8-A, filed on September 27, 1993, including any
amendments or reports filed for the purpose of updating such description.
All reports and other documents filed by the Company with the Commission pur-
suant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the effective date of the Registration Statement and prior to the termination
of this Offering shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of filing of such reports and documents. Any
statement contained in a document incorporated by reference herein shall be
deemed modified or superseded for purposes of this Prospectus to the extent
that a statement contained or incorporated by reference herein modifies or su-
persedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Pro-
spectus.
Upon written or oral request, the Company will provide or will cause to be
provided to each person to whom this Prospectus is delivered, without charge,
a copy of any or all such documents that are incorporated herein by reference
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the documents that are incorporated by refer-
ence into this Prospectus). Written or oral requests for copies should be di-
rected to GreenPoint Financial Corp., Attn. Investor Relations, 90 Park Ave-
nue, New York, New York 10016, telephone (212) 834-1710.
3
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act and is
subject to the safe harbor created by such sections. These forward-looking
statements include information concerning possible or assumed future results of
operations and business plans of the Company set forth under "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of Op-
erations" in the Company's Annual Report on Form 10-K, as amended, "Notes to
Consolidated Financial Statements" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's Quarterly Re-
port on Form 10-Q, and "Other Events" in the Company's Current Report on Form
8-K, each of which has been incorporated by reference herein. In addition,
these forward-looking statements include information concerning possible or as-
sumed future results of operations and business plans and strategies of the
Company set forth in this Prospectus under "Prospectus Summary -- Strategy,"
"-- Acquisition of BankAmerica Housing Services," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," and
other information set forth in this Prospectus and the documents incorporated
herein preceded by, followed by, or that include the words "believes," "ex-
pects," "anticipates," "intends," "plans," "estimates" or similar words or ex-
pressions. Forward-looking statements are subject to various risks and uncer-
tainties. The Company's actual results may differ materially from the results
discussed in such forward-looking statements because of a number of factors,
many of which are beyond the Company's ability to control or predict. Purchas-
ers of shares of Common Stock should understand that the following important
factors, in addition to those identified in the "Risk Factors" section of this
Prospectus and in the documents that have been incorporated herein, could af-
fect the future results of the Company and could cause results to differ mate-
rially from those expressed in such forward-looking statements: the effect of
economic conditions, including changes in interest rates, loan demand and real
estate values; risks and uncertainties associated with acquisitions, including
cost savings and ability to integrate the acquired business; levels of defaults
and prepayments on loans made by the Company; change in any applicable law,
rule, regulation or practice with respect to tax or accounting issues or other-
wise; and adverse changes or conditions in capital or financial markets. The
forward-looking statements are made as of the date of this Prospectus, and the
Company assumes no obligation to update the forward-looking statements or to
update the reasons why actual results could differ from those projected in the
forward-looking statements.
4
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in this
Prospectus. Reference is made to, and this summary is qualified in its entirety
by, the more detailed information and financial statements, including the notes
thereto, appearing elsewhere in this Prospectus and/or incorporated herein by
reference. Unless the context otherwise requires, all references to the Company
include GreenPoint Financial Corp. and its consolidated subsidiaries. Unless
otherwise indicated, all information set forth herein assumes that the Under-
writers' over-allotment option is not exercised. Throughout this Prospectus,
all references to numbers of shares of Common Stock and per share amounts have
been adjusted to reflect a 2-for-1 stock split paid on March 4, 1998. Prospec-
tive investors should carefully consider the information set forth under the
heading "Risk Factors."
THE COMPANY
The Company is a bank holding company organized under the laws of the state of
Delaware and registered under the Bank Holding Company Act of 1956, as amended
(the "BHCA"). The Company provides a variety of financial services, primarily
through its bank subsidiary, GreenPoint Bank, a New York State chartered sav-
ings bank (the "Bank") and the Bank's wholly-owned subsidiary, GreenPoint Mort-
gage Corp. ("GPMC"), a national home mortgage banking company headquartered in
Charlotte, North Carolina. As of March 31, 1998, the Company had consolidated
total assets of approximately $13.2 billion, total loans of approximately $8.9
billion, total deposits of approximately $10.9 billion and stockholders' equity
of approximately $1.3 billion. The Bank operates 73 full-service branches in
the greater New York City Metropolitan area.
Through the Bank and GPMC, the Company is primarily engaged in mortgage lending
in New York and across the nation. The Company originates both adjustable-rate
mortgage and fixed-rate loans, primarily through a network of mortgage brokers,
mortgage bankers, attorneys and other real estate professionals and, to a
lesser extent, from customers and members of the local communities in the
Company's lending area. The Company specializes in a limited documentation
mortgage loan product referred to as "No Doc" loans. The Company has histori-
cally funded its No Doc portfolio with consumer deposits raised through its
thrift operations in the greater New York City Metropolitan area. In 1997, the
Company's No Doc lending program accounted for 96.0% of its loan originations.
As a result of its No Doc lending focus, the Company traditionally has achieved
higher interest margins and levels of net interest income than those generated
by lenders that concentrate on loans underwritten in conformance with the Fed-
eral National Mortgage Association ("FNMA") standards. This, in turn, has re-
sulted in a relatively high level of profitability despite traditionally higher
levels of loan delinquencies. The Company, which expanded into 11 new markets
in the first quarter of 1998, currently operates in 27 markets across the
United States. The Company increased its mortgage loan originations from $2.4
billion in 1996 to $2.9 billion in 1997. For a more extensive discussion of the
business of the Company, see "Business -- The Company."
The Company maintains its principal executive offices at 90 Park Avenue, New
York, New York 10016, telephone (212) 834-1710.
STRATEGY
The Company believes that its unique expertise in the niche business of No Doc
lending differentiates it from other financial services companies. The
Company's No Doc loan business serves a particular niche of borrowers willing
to provide larger down payments and pay a premium, in the form of higher inter-
est rates and loan fees, in exchange for loan processing that is made more ex-
pedient by virtue of requiring less income and asset information than is re-
quired for FNMA conforming loans. The Company's strategy incorporates the use
of in-house appraisers to value the properties securing its loans and the ap-
plication of consistent collection practices in order to manage its lending
risks.
The following competitive strengths were significant to the Company's past suc-
cess and are significant to its future business strategy:
. Strong credit policies
. Rigorous expense management
. "Best in class" collection practices
. Stable funding through a strong and efficient deposit franchise
. Proactive capital management
. A disciplined approach to acquisitions
5
<PAGE>
The Company strives to achieve continued earnings growth through:
A Leading National Presence in No Doc Lending
The Company has sought to expand its No Doc lending operations beyond its orig-
inal base in the greater New York City Metropolitan area by opening offices in
five new markets in 1996, six new markets in 1997 and 11 new markets during the
first quarter of 1998. The Company intends to expand into 6 additional new mar-
kets during the remainder of 1998. Management expects the revenue contributions
of non-New York businesses to grow as a result of the Company's nation-wide ex-
pansion into new markets, increases in established markets outside New York and
investment in building its "True NoDoc" brand name.
Disciplined Expansion into Other Niche Consumer Finance Businesses
The Company believes that its pending acquisition of the manufactured housing
lending business of B of A Housing (as defined below) described below is con-
sistent with the Company's strategy of targeting under-served niche markets.
The Company intends to explore a variety of strategic investment options that
similarly complement its existing business strengths in order to diversify its
revenue sources, leverage its credit and expense management skills and provide
incremental growth opportunities.
Additional Consolidation Opportunities in the New York Consumer Banking and
Thrift Market
The Company also intends to expand its thrift franchise--currently the second
largest thrift franchise in the greater New York City Metropolitan area mea-
sured by deposits--by acquisition and to improve the profitability of its
branch offices by generating increased fee income through the introduction of
new products. In 1995, the Company acquired the 60-branch franchise of Home
Savings of America, FSB in New York. In 1997, the Company added mutual fund
sales to its annuity program, introduced a GreenPoint credit card program
through First USA, expanded its ATM network and introduced its first retail
home equity line of credit product. To increase sales of this enhanced product
line, the Company began an incentive program designed to build a more effective
sales culture within the branch offices. The combination of new product offer-
ings and an improved sales culture helped the Company achieve a 30.6% increase
in branch fee income to $6.4 million in the first quarter of 1998 over the
first quarter of 1997.
A Strong Commitment to Expense and Capital Management
The Company employs rigorous expense management and active capital management
in an effort to deliver enhanced stockholder value. In 1997, the Company
achieved an efficiency ratio of 42.7%, representing a 160 basis point improve-
ment in its efficiency ratio versus 1996. Even though the Company opened six
new sales offices outside of the greater New York City Metropolitan area and
established a new risk management function during 1997, the Company decreased
its number of full-time equivalent employees by 8.6% (to 1,951 employees) in
1997. In addition to headcount reduction, the relocation of the Company's mort-
gage servicing operation from New York City to Columbus, Georgia, where average
operating costs are lower, contributed to expense savings. During 1997, the
Company repurchased 11.4 million shares of Common Stock, while maintaining
strong capital levels. The Company is committed to further efforts to manage
costs and manage its capital actively.
ACQUISITION OF BANKAMERICA HOUSING SERVICES
On April 13, 1998, the Company announced that the Bank had entered into a de-
finitive agreement with BankAmerica Corporation, a Delaware corporation
("BankAmerica"), to acquire the manufactured housing lending business of
BankAmerica Housing Services ("B of A Housing"), a division of Bank of America,
FSB, a federal savings bank and wholly-owned subsidiary of BankAmerica, for a
purchase price of approximately $703 million (the "B of A Housing Acquisi-
tion"). The B of A Housing Acquisition will constitute a purchase for account-
ing and financial reporting purposes, resulting in approximately $468 million
of tax-deductible goodwill, which will be amortized over 15 years.
B of A Housing is the second largest originator and servicer of manufactured
housing loans, with annual originations in 1997 of more than $2.5 billion and a
servicing portfolio of $10.6 billion as of December 31, 1997. B of A Housing
has a national sales and services network of 45 offices and more than 5,000
dealer relationships in 48 states. The Company believes that the manufactured
housing lending business of B of A Housing is a sound strategic fit with the
Company's existing business and expects that the B of A Housing Acquisition
will provide the Company with a significant additional source of revenue
growth. Furthermore, while the Company is acquiring the revenue associated with
the B of A Housing servicing portfolio, it will not acquire any existing credit
risk other than that associated with a warehouse portfolio of up to $800 mil-
lion in loans to be originated prior to the closing of the acquisition. In or-
der to ensure the integration and future performance of the acquired business,
the Company expects to retain the key management of B of A Housing. The B of A
Housing Acquisition is subject to certain customary conditions. The Company ex-
pects to consummate the B of A Housing Acquisition in the third quarter of
1998.
6
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THE OFFERING
<TABLE>
<C> <S>
COMMON STOCK OFFERED(1)........................... 15,000,000 shares
COMMON STOCK OUTSTANDING AFTER THE
OFFERING(1)(2)(3)(4)............................. 98,422,124 shares
USE OF PROCEEDS................................... The Company intends to use
the net proceeds from the
offering together with
available cash to fund the
purchase price of the B of
A Housing Acquisition,
including the purchase of
up to $800 million in
warehouse loans in
connection therewith, and
for general working
capital purposes. In
addition, the net proceeds
of the offering will
qualify as Tier 1 Capital
of the Company for
regulatory purposes. See
"Use of Proceeds."
NYSE TRADING SYMBOL FOR COMMON STOCK.............. "GPT"
</TABLE>
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(1) Excludes up to 2,250,000 shares of Common Stock subject to an over-allot-
ment option granted by the Company to the Underwriters. See "Underwriting."
(2) Excludes 6,795,926 shares of Common Stock issuable upon exercise of out-
standing options and 2,448,104 shares of Common Stock reserved for issuance
pursuant to future option grants under the Company's stock option plans.
(3) Estimated based on the number of shares of Common Stock outstanding as of
July 21, 1998.
(4) The Company has authority to purchase up to approximately 2,000,000 shares
of Common Stock under its share repurchase program and expects to repurchase
additional shares of Common Stock, subject to ongoing assessments of the capi-
tal needs of the business and the market valuation of the Common Stock.
7
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, prospective
investors should consider carefully the following risk factors relating to the
Company and the Common Stock before making an investment in the shares of Com-
mon Stock offered hereby.
COMPETITION RISK
The Company faces significant competition both in making loans and in at-
tracting deposits. The greater New York City Metropolitan area has a high den-
sity of financial institutions, many of which are branches of significantly
larger institutions with greater financial resources than those of 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, commer-
cial banks, savings and loan associations, mortgage banking companies, credit
unions and finance companies. Its most direct competition for deposits histori-
cally has 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 competes primarily on the basis of pricing, terms and structure in
many of its markets. From time to time, competitors of the Company seek to com-
pete aggressively on the basis of these factors and the Company may lose market
share to the extent it is unwilling to match its competitors' pricing, terms
and structure in order to maintain its interest margins or to maintain its
credit discipline. To the extent that the Company matches competitors' pricing,
terms or structure, it may experience lower interest margins and/or increased
credit losses.
BUSINESS CONCENTRATION RISK
At March 31, 1998, one-to-four family residential mortgages constituted 87% of
the Company's total mortgage portfolio. In addition, in 1997, the Company's No
Doc lending program accounted for 96.0% of the Company's total originations. No
assurance can be given that the Company will be able to sustain the growth it
has achieved in the past, which may negatively impact its interest rate margin,
interest rate spread and net income. Further, in the event other financial in-
stitutions establish lending programs which target one-to-four family residen-
tial mortgages by offering lending products similar to the Company's No Doc
program, 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 may place the Com-
pany in a less favorable position to increase its market share in other types
of lending than an institution with a broader based lending business and expe-
rience in other types of lending.
NO DOC LENDING RISKS
The Company's lending activities emphasize the origination of real estate loans
that are underwritten with primary reliance placed upon a borrower's level of
equity in the property securing the loan or level of down payment. In contrast,
other lending institutions may rely more heavily upon a borrower's demonstrated
ability to repay the loan and independently verified income levels. The Company
does not seek to independently verify a borrower's income or asset information
in connection with its No Doc lending program. Compared to the loans originated
in accordance with FNMA underwriting guidelines and procedures ("FNMA con-
forming loans"), No Doc loans involve a higher degree of risk because the Com-
pany has limited verified knowledge of the borrower's level of income or abil-
ity to service the indebtedness which, in turn, may result in a higher rate of
default.
Because the Company's No Doc underwriting determinations rely upon the market
value of the properties securing the loans, declines in real estate values in
the Company's primary lending areas may result in unanticipated principal
losses to the Company and declines in the regional economies may result in in-
creased delinquencies or increased foreclosure-related expenses and expenses
related to its other real estate. At December 31, 1997, 69% of the Company's
mortgage loan portfolio was secured by properties located in New York State,
most of which were located in New York City and the surrounding counties. Com-
pared to lending institutions that rely more heavily upon a borrower's income
and demonstrated ability to repay the loan, No Doc loans involve additional li-
quidity risks because they are less readily marketable in the secondary market
either as whole loans or as pooled or securitized loans.
8
<PAGE>
RISKS FROM EXPANSION INTO NEW MARKETS
In the first quarter of 1998, the Company expanded its lending business into
11 new markets across the country, and it intends to continue to expand its
business into new markets. Although the Company believes that it has imple-
mented appropriate underwriting and credit quality controls in these new mar-
kets and will implement similar controls in future markets, there can be no
assurance that the Company will be successful in generating significant loan
originations in these new markets or that the Company's loss experience in
these areas will be comparable to that in New York. The Company has less fa-
miliarity with real estate markets in these areas than it does in New York and
credit losses are likely to increase with the seasoning of these relatively
new loans.
RISKS FROM ACQUISITIONS
The Company recently announced that it entered into a definitive agreement to
acquire the manufactured housing lending business of B of A Housing, which
will constitute a new line of business for the Company. The Company expects
that the B of A Housing business will continue to be operated by its current
management, and therefore will be dependent on the current employees of B of A
Housing. There can be no assurance that the Company will be successful in re-
taining key personnel currently employed by B of A Housing. In addition, there
can be no assurance that the B of A Housing Acquisition will be accretive to
cash or GAAP earnings per share, that the Company will be able to manage the B
of A Housing business successfully or, to the extent appropriate, integrate it
into the Company's existing business or that the Company will be able to main-
tain B of A Housing's volume of loan originations. Furthermore, there is sub-
stantial competition in the market for originations of manufactured housing
loans. The Company continually evaluates acquisition opportunities and may un-
dertake informal discussions or negotiations that may result in future acqui-
sitions. Because acquisitions typically involve the payment of a premium over
book and market values, future acquisitions could result in dilution to the
Company's income and book value.
INTEREST RATE RISK
The Company's profitability, like that of most financial institutions, is de-
pendent to a large extent upon its net interest income, which is the differ-
ence between its interest income on interest-earning assets, such as loans and
investments, and its interest expense on its deposits and borrowings. Interest
rate risk arises in the ordinary course of the Company's business because the
repricing characteristics of its mortgage loans and other interest-earning as-
sets do not necessarily match those of its deposit and other interest-bearing
liabilities.
Changes in interest rates can also affect the amount of loans the Company
originates, as well as the value of its loans and other interest-earning as-
sets and its ability to realize gains on the sale of such assets and liabili-
ties. Prevailing interest rates also affect the extent to which borrowers pre-
pay loans owned by the Company. When interest rates increase, borrowers are
less likely to prepay their loans, and when interest rates decrease, borrowers
are more likely to prepay loans. Funds generated by prepayment might be in-
vested at a less favorable interest rate. Prepayments may adversely affect the
value of mortgage loans, the levels of such assets that are retained in the
Company's portfolio, net interest income and loan servicing income. Similarly,
prepayments on mortgage-backed securities can adversely affect the value of
such securities and the interest income generated by them.
In addition, an increase in interest rates could adversely impact the ability
of the Company's floating-rate borrowers to meet their higher payment obliga-
tions, which could result in an increase in non-performing assets and credit
losses.
Increases in interest rates might cause depositors to shift funds from ac-
counts that have a comparatively lower cost (such as regular savings accounts)
to accounts with a higher cost (such as certificates of deposit). If the cost
of deposits increases at a rate greater than yields on interest-earning assets
increase, the interest-rate spread will be negatively affected. Changes in the
asset and liability mix also affect the interest-rate spread.
PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS
The Company's Certificate of Incorporation and Bylaws contain provisions that
might have the effect of discouraging certain transactions involving an actual
or threatened change of control of the Company, and Delaware law contains
certain provisions, including those related to transactions with certain
interested stockholders, that might have the effect of discouraging certain
transactions not approved by a company's board of directors. See "Description
of Capital Stock."
9
<PAGE>
USE OF PROCEEDS
All of the Common Stock offered hereby is being sold by the Company. The net
proceeds of the offering are expected to be approximately $583,125,000
($670,706,250 if the Underwriters' over-allotment option is exercised in full).
The Company intends to use the net proceeds of the Offering together with
available cash to fund the purchase price of the B of A Housing Acquisition,
including the purchase of up to $800 million in warehouse loans in connection
therewith, and for general working capital purposes. In addition, the net pro-
ceeds of the offering will qualify as Tier 1 Capital of the Company for regula-
tory purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The following table sets forth the high and low last reported sale prices for
the Common Stock on the NYSE for the periods indicated and the cash dividends
declared per share of Common Stock in each quarter:
<TABLE>
<CAPTION>
-----------------------
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C>
1996
First Quarter......................................... $14.50 $12.00 $0.10
Second Quarter........................................ 15.25 13.63 0.10
Third Quarter......................................... 19.13 13.50 0.10
Fourth Quarter........................................ 25.07 19.63 0.10
1997
First Quarter......................................... $31.69 $22.81 $0.13
Second Quarter........................................ 33.28 25.88 0.13
Third Quarter......................................... 33.00 29.34 0.13
Fourth Quarter........................................ 36.28 31.13 0.13
1998
First Quarter......................................... $37.31 $32.69 $0.16
Second Quarter........................................ 42.06 36.19 0.16
</TABLE>
The number of stockholders of record of Common Stock on July 21, 1998 was
4,392. For the last sale price of the Common Stock as of a recent date, see the
cover of this Prospectus.
Future dividends will be determined by the Company's Board of Directors based
upon an assessment of the earnings and financial condition of the Company and
other factors, including applicable governmental regulations and policies. Cash
dividends from the Bank and liquid assets at the holding company level are the
Company's principal sources of funds for paying cash dividends on the Common
Stock. The Bank is subject to certain regulatory requirements that affect its
ability to pay cash dividends to the Company. See "Description of Capital
Stock -- Common Stock -- Dividends."
10
<PAGE>
CAPITALIZATION
The following table sets forth the long-term debt and consolidated capitaliza-
tion of the Company as of March 31, 1998 (i) on an actual basis and (ii) as ad-
justed to give effect to the sale by the Company of the shares of Common Stock
offered hereby. This table should be read in conjunction with "Selected Finan-
cial Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
---------------------
AS OF MARCH 31, 1998
---------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
Dollars in millions
Total long-term debt.............................. $ 399.6 $ 399.6
Stockholders' equity:
Common stock $0.01 par value, 220,000,000 shares
authorized, 84,469,000 shares outstanding
(99,469,000 shares as adjusted)(1)............. 1.1 1.1
Additional paid-in capital...................... 835.3 1,165.9
Unallocated Employee Stock Ownership Plan (ESOP)
shares......................................... (113.7) (113.7)
Unearned stock plans shares..................... (5.3) (5.3)
Retained earnings............................... 1,162.2 1,162.2
Accumulated other comprehensive income, net..... (2.5) (2.5)
Treasury stock.................................. (597.8) (342.6)
-------- -----------
Total stockholders' equity........................ $1,279.3 $1,865.1(2)
-------- -----------
Total capitalization.............................. $1,678.9 $2,264.7
======== ===========
REGULATORY CAPITAL RATIOS:
Tier 1 Capital (to average assets)(3)............. 7.32% 12.00%(2)
Risk-based capital:
Tier 1 Capital (to risk weighted assets)(3)....... 14.78% 23.77%(2)(4)
Total Capital (to risk weighted assets)(3)........ 16.03% 25.03%(2)(4)
</TABLE>
- -------
(1)Excludes 7,162,488 shares issuable upon exercise of outstanding stock
options (of which 2,566,565 are currently exercisable) and 2,496,104 shares
reserved for issuance for future option grants under the Company's stock option
plans.
(2)The Company has authority to purchase up to approximately 2,000,000 shares
of Common Stock under its share repurchase program and expects to repurchase
additional shares of Common Stock, subject to ongoing assessments of the
capital needs of the business and the market valuation of the Common Stock.
(3)These ratios are calculated using regulatory guidelines which exclude the
impact on stockholders' equity resulting from the adoption of Statement of Fi-
nancial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities."
(4)The net proceeds from the transaction are assumed to be invested in over-
night funds which are assigned to the 20% risk weight category.
11
<PAGE>
SELECTED FINANCIAL DATA
The results of operations and balance sheet data presented below for the three
months ended March 31, 1998 and 1997 and as of March 31, 1998 and 1997, respec-
tively, were derived from the unaudited consolidated financial statements of
the Company incorporated by reference herein, which, in the opinion of manage-
ment, include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement for the unaudited interim periods. The results
of operations and balance sheet data presented below for each of the years in
the three year period ended December 31, 1997 and as of December 31, 1997 and
1996, respectively, were derived from the audited consolidated financial state-
ments of the Company and notes thereto incorporated by reference herein. The
results of operations and balance sheet data presented below for the year ended
December 31, 1994, the six months ended December 31, 1993, the year ended
June 30, 1993 and as of December 31, 1995, December 31, 1994 and December 31,
1993, respectively, were derived from the audited consolidated financial state-
ments and the related notes not presented or incorporated by reference herein.
The data for the three month period ended March 31, 1998 is not necessarily in-
dicative of operating results that may be expected for a full year.
<TABLE>
<CAPTION>
------------------------------------------------------------------
SIX
THREE MONTHS MONTHS YEAR
ENDED YEARS ENDED ENDED ENDED
MARCH 31, DECEMBER 31, DECEMBER 31, JUNE 30,
------------- --------------------------- ------------ --------
1998 1997 1997 1996 1995 1994 1993 1993
------ ------ ------ ------ ------ ------ ------------ --------
Dollars in millions,
except per share data
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATION
Net interest income..... $119.4 $120.4 $475.0 $446.5 $350.7 $337.5 $158.4 $303.2
Provision for possible
loan losses............ 4.0 5.0 18.9 15.7 9.5 32.3 25.3 63.6
Total non-interest
income................. 12.8 19.2 56.2 56.9 35.8 27.1 16.2 33.0
Total non-interest
expense................ 74.0 68.2 270.3 263.2 178.6 121.4 51.8 99.7
Income taxes............ 20.6 26.7 94.4 92.0 90.9 98.0 41.2 83.7
Net income.............. 33.6 39.7 147.6 132.5 107.5 112.9 56.3 83.9(1)
Basic earnings per
share.................. 0.47 0.49 1.96 1.56 1.16 1.12(2) -- --
Diluted earnings per
share.................. 0.45 0.47 1.86 1.51 1.14 1.11(2) -- --
Dividends per share..... 0.16 0.13 0.50 0.40 0.40 0.30(2) -- --
</TABLE>
- -------
(1) Includes the cumulative effect of change in accounting principles of ($5.3)
million.
(2) Earnings per share calculations and dividends per share are for the period
subsequent to the Company's initial public offering on January 28, 1994.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
AT
AT MARCH 31, DECEMBER 31,
----------------- --------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
Dollars in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Loans receivable held
for investment, net.... $8,916.9 $7,693.7 $8,795.6 $7,294.3 $5,858.6 $5,594.1 $5,376.6
Allowance for possible
loan losses............ 110.0 106.0 109.0 105.0 105.5 103.0 147.0
Securities and trading
assets................. 2,357.4 3,999.1 2,036.7 4,359.4 5,900.8 736.7 378.2
Money market
investments............ 813.7 378.1 1,060.0 494.1 1,550.7 265.0 1,151.8
Goodwill................ 565.6 612.0 577.1 623.6 670.2 0.5 0.7
Other real estate owned,
net.................... 20.4 26.8 24.0 28.6 29.2 54.0 74.8
Total assets............ 13,228.2 13,261.2 13,083.5 13,325.6 14,670.5 6,955.0 7,377.1
Total deposits.......... 10,867.7 11,230.5 10,973.0 11,452.3 12,898.3 5,223.5 5,650.4
Long term debt.......... 399.6 -- 399.5 -- -- -- --
Stockholders' equity.... 1,279.3 1,432.9 1,269.6 1,459.8 1,551.3 1,521.2 786.3
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
AT OR
AT OR FOR THE FOR THE
THREE MONTHS AT OR FOR THE YEAR
ENDED AT OR FOR THE YEARS ENDED SIX MONTHS ENDED ENDED
MARCH 31, DECEMBER 31, DECEMBER 31, JUNE 30,
-------------- -------------------------------------- ---------------- --------
1998 1997 1997 1996 1995 1994 1993 (1) 1993
------ ------ -------- -------- -------- -------- ---------------- --------
Dollars in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED DATA AND RATIOS
PERFORMANCE RATIOS
Return on average
assets (2)............ 1.19% 1.05% 1.08% 0.91% 1.18% 1.59% 1.72% 1.36%
Return on average
equity (2)............ 12.04 9.51 10.64 8.62 6.96 7.91 14.96 12.22
Net interest margin
(3)................... 3.93 3.97 3.93 3.51 4.05 4.92 5.05 5.07
Operating expense to
average assets (4).... 1.70 1.73 1.69 1.57 1.76 1.75 1.58 1.62
Efficiency ratio (5)... 42.1% 43.4% 42.7% 44.3% 41.4% 34.0% 28.7% 26.8%
ASSET QUALITY
Non-performing loans to
total loans........... 3.77% 4.45% 3.97% 4.78% 6.49% 6.80% 12.02% 11.63%
Non-performing assets
to total assets....... 2.73 2.84 2.90 2.89 2.94 6.42 10.21 10.99
Allowance for possible
loan losses to non-
performing loans...... 32.23 30.32 30.70 29.48 26.24 26.26 23.45 23.70
Net loan charge-off
experience to average
total loans (6)....... 0.13 0.21 0.18 0.25 0.22 0.56 0.27 0.71
Ratio of allowance for
possible loan losses
to net charge-offs
(6)................... 9.13x 6.60x 7.32x 6.48x 8.05x 3.24x 3.54x 3.63x
CAPITAL
Tier 1 capital to risk
weighted assets....... 14.78% 15.33% 14.29% 15.47% 16.25% 39.61% 16.55% 15.73%
Tier 1 capital to
average assets........ 7.32 6.90 7.19 6.78 6.19 21.85 10.68 11.33
OTHER
Mortgage loan
originations.......... $579.0 $645.0 $2,848.7 $2,353.0 $1,023.5 $1,058.3 $582.4 $1,079.6
Full-service consumer
bank offices.......... 73 74 74 76 84 24 24 24
Full-time equivalent
employees............. 1,869 1,954 1,951 2,135 2,025 1,392 1,411 1,372
</TABLE>
- -------
(1) Income statement ratios for the six months ended December 31, 1993 are
annualized.
(2) Excludes non-recurring personnel expense, net of tax, and gains on branch
and asset sales, net of tax.
(3) Represents net interest income on a taxable-equivalent basis divided by av-
erage interest-earning assets.
(4) Operating expense excludes goodwill expense, ORE (income) or expense, non-
recurring personnel expense and restructuring (recovery) or charge.
(5) Calculated by dividing operating expense by the sum of net interest income
and non-interest income, excluding pre-tax gains on branch and asset sales.
(6) Excludes a non-recurring recovery of $6.1 million contingency reserve and a
non-recurring loss of $56.1 million related to the bulk sale of non-performing
loans for the years ended December 31, 1995 and 1994, respectively.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 VS. THREE MONTHS ENDED MARCH 31, 1997
Overview
The Company's loan originations totaled $579 million, down 10% from the first
quarter of 1997, and down 21% from the prior quarter. The Company believes the
decline reflects the rise in market demand for refinancings, which became the
primary focus of mortgage brokers in the first quarter of 1998. The percentage
of new loans originated outside of New York was 59%, and ARMs as a percentage
of total originations were 32%. Management believes the decline was primarily
attributable to lower volume from the mortgage brokers. Due to the general in-
crease in refinance activity of "conforming" products during the first quarter
of 1998, mortgage brokers were primarily focused on meeting this demand, which
reduced the volume of no-documentation originations during the quarter.
Asset quality continued to improve as non-performing loans and non-performing
assets declined. The ratio of non-performing loans to total loans declined 68
basis points to 3.77%, a 15% decrease from March 31, 1997 and 20 basis points
lower than the fourth quarter of 1997.
Net interest margin was 3.93%, down 4 basis points from the first quarter of
1997 and up 2 basis points from the fourth quarter of 1997.
Net income for the quarter ended March 31, 1998 was $33.6 million, or $0.45 per
diluted share, a 4% per share decrease from the $0.47 per share ($39.7 million)
for the comparable 1997 period. Excluding a non-recurring charge, core earnings
were $0.52 per share, up 27% over the first quarter of 1997, and up 6% over the
fourth quarter of 1997.
Core Cash Earnings
Core cash earnings are net of non-recurring items, and include certain non-cash
charges related to goodwill and the Employee Stock Ownership Plan ("ESOP"). The
non-cash expenses, unlike all other expenses incurred by the Company, result in
net increases in the Company's tangible capital and enable the Company to pur-
sue increases in shareholder value through growth of earning assets, increases
in cash dividends and additional repurchases of the Company's stock.
<TABLE>
<CAPTION>
-----------------------------------------------
THREE MONTHS ENDED
-----------------------------------------------
MARCH 31, 1998 DECEMBER 31, 1997 MARCH 31, 1997
-------------- ----------------- --------------
<S> <C> <C> <C>
Dollars in millions, except
per share amounts
Net income................... $33.6 $36.7 $39.7
Non-recurring items, net of
tax(1)...................... 5.2 -- (5.0)
----- ----- -----
Core net income............ 38.8 36.7 34.7
Add back:
Goodwill expense........... 11.6 11.6 11.6
Employee stock plans
expense................... 5.5 5.2 4.8
----- ----- -----
Core cash earnings......... $55.9 $53.5 $51.1
===== ===== =====
Core cash earnings per
share(2).................. $0.76 $0.71 $0.61
===== ===== =====
</TABLE>
- -------
(1) Non-recurring items include branch sales, asset sales and non-recurring
personnel expense.
(2) Based on the weighted average shares used to calculate diluted earnings per
share.
Net Interest Income
Net interest income on a taxable equivalent basis decreased by $1.9 million, or
1.5%, to $120.8 million for the first quarter of 1998 from $122.7 million for
the first quarter of 1997. The decrease primarily reflects additional expense
resulting from the issuance of long term debt and guaranteed preferred benefi-
cial interest in Company's junior subordinated debentures ("capital securi-
ties"), partially offset by a rise in the average yield on interest-earning as-
sets due to a reduction in the lower yielding securities portfolio to fund the
net growth in the higher yielding loan portfolio.
14
<PAGE>
Interest income on mortgages increased by $29.7 million, or 17.6%, to $198.6
million for the first quarter of 1998 versus $168.9 million for the first quar-
ter of 1997 as a result of $1.4 billion average loan portfolio growth. Interest
income on securities and money market investments fell by a combined $24.3 mil-
lion, or 35.3%, to $44.5 million for the first quarter of 1998 from $68.8 mil-
lion in the comparable 1997 quarter primarily as a result of a $1.5 billion de-
cline in the average securities and money market portfolios. This shift in the
Company's interest-earning asset mix into the higher yielding loan portfolio
primarily resulted in a 26 basis point increase in the yield on average inter-
est-earning assets to 8.12% in the first quarter of 1998 from 7.86% in the
first quarter of 1997.
Interest expense increased $7.8 million, or 6.6%, to $125.7 million in the
first quarter of 1998 from $117.9 million in the first quarter of 1997 primar-
ily as a result of a combined $8.0 million of interest expense on long term
debt and capital securities incurred in the 1998 quarter.
The average cost of funds increased 25 basis points to 4.47% in the first quar-
ter of 1998 from 4.22% in the comparable 1997 quarter primarily as a result of
the higher average cost of long term debt and capital securities and a 21 basis
point rise in the average cost of time deposits in the first quarter of 1998 as
compared to the first quarter of 1997. The Company makes use of long term debt
and capital securities as a means of managing its liquidity and capital posi-
tion.
15
<PAGE>
Average Balance Sheets and Interest Yield/Cost
The following table sets forth certain information relating to the Company's
average statements of financial condition (unaudited) and statements of income
(unaudited) for the quarters ended March 31, 1998 and 1997, and reflects the
average yield on assets and average cost of liabilities for the periods indi-
cated. Such annualized yields and costs are derived by dividing income or ex-
pense by the average balance of assets or liabilities, respectively, for the
periods shown. Average balances are derived from average daily balances. Aver-
age balances and yields include non-accrual loans. The yields and costs in-
clude fees that are considered adjustments to yields. Interest and yields are
presented on a taxable-equivalent yield basis.
<TABLE>
<CAPTION>
------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------------
1998 1997
------------------------------------------ -----------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST YIELD/COST BALANCE INTEREST YIELD/COST
------------------------------- ---------- --------- -------- ----------
Taxable--
Equivalent Interest and Rates, dollars in millions (1)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Mortgage loans(2)............... $ 8,930.2 $198.6 8.90% $ 7,565.4 $168.9 8.93%
Other loans(2).................. 32.0 0.7 8.82 27.8 0.6 8.08
Money market investments(3)..... 1,168.8 16.2 5.63 328.3 4.3 5.37
Securities(4)................... 1,911.6 28.3 5.97 4,234.4 64.4 6.13
Trading assets.................. 3.6 0.1 5.73 2.5 0.1 6.41
Other interest-earning assets... 118.3 2.6 8.90 103.5 2.3 9.03
---------------------- ------ --------- ------
Total interest-earning assets... 12,164.5 246.5 8.12 12,261.9 240.6 7.86
---------------------- ------ --------- ------
Non-interest earning assets(5).. 903.9 923.7
---------------------- ---------
Total assets.................... $ 13,068.4 $13,185.6
====================== =========
LIABILITIES & STOCKHOLDERS' EQUI-
TY:
Interest-bearing liabilities:
Savings......................... $ 1,715.3 $ 10.3 2.44% $ 1,876.6 $ 12.2 2.64%
N.O.W........................... 332.8 1.0 1.26 335.3 1.4 1.70
Money market and variable
rate savings................... 2,166.2 17.9 3.35 2,369.8 19.6 3.36
Term certificates of deposit.... 6,505.0 86.4 5.39 6,507.7 83.1 5.18
Mortgagors' escrow.............. 138.1 0.3 0.96 85.8 0.3 1.19
Trading liabilities............. 1.5 -- 5.49 -- -- --
Securities sold under agreements
to repurchase.................. 145.4 1.7 4.66 144.3 1.3 3.55
Long term debt.................. 199.8 3.5 6.94 -- -- --
Guaranteed preferred beneficial
interest in Company's junior
subordinated debentures........ 199.8 4.6 9.16 -- -- --
---------------------- ------ --------- ------
Total interest-bearing liabili-
ties............................ 11,403.9 125.7 4.47 11,319.5 117.9 4.22
---------------------- ------ --------- ------
Other liabilities(6)............. 377.3 401.9
---------------------- ---------
Total liabilities................ 11,781.2 11,721.4
Preferred shares of subsidiary... -- 3.6
Stockholders' equity............. 1,287.2 1,460.6
---------------------- ---------
Total liabilities, preferred
shares of subsidiary and stock-
holders' equity................. $ 13,068.4 $13,185.6
====================== =========
Net interest income/interest
rate spread(7).................. $120.8 3.65% $122.7 3.64%
====== ==== ====== ====
Net interest-earning assets/net
interest margin(8).............. $ 760.6 3.93% $ 942.4 3.97%
====================== ==== ========= ====
Ratio of interest-earning assets
to interest-bearing liabili-
ties............................ 1.07x 1.08x
==== ====
</TABLE>
- -------
(1) The Company's incremental tax rate used to adjust tax-exempt interest to a
taxable-equivalent basis was 44.4% and 44.7% for the quarters ended March 31,
1998 and 1997.
(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 agreements to resell.
(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) Includes accrued interest payable, accounts payable, official checks drawn
against the Bank, accrued expenses, and other miscellaneous non-interest-bear-
ing obligations of the Company.
(7) Net interest rate spread represents the difference between the average
yield on interest-earning assets and the average cost of interest-bearing lia-
bilities.
(8) Net interest margin represents net interest income on a taxable-equivalent
basis, divided by average interest-earning assets.
16
<PAGE>
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 on a tax equivalent basis and interest expense
during the periods indicated. Information is provided in each category on
changes (i) attributable to changes in volume (changes in volume multiplied by
prior rate), (ii) attributable to changes in rate (changes in rate multiplied
by prior volume), and (iii) the net change. The changes attributable to the
combined impact of volume and rate have been allocated proportionately to vol-
ume and rate.
<TABLE>
<CAPTION>
----------------------------------------
THREE MONTHS ENDED MARCH 31, 1998
COMPARED TO THREE MONTHS ENDED
MARCH 31, 1997 INCREASE/(DECREASE)
----------------------------------------
DUE TO
----------------------------
AVERAGE VOLUME AVERAGE RATE NET CHANGE
-------------- ------------ ----------
<S> <C> <C> <C>
Dollars in millions
Interest-earning assets:
Mortgage loans (1)................. $30.3 $(0.6) $29.7
Other loans (1).................... 0.1 -- 0.1
Money market investments (2)....... 11.7 0.2 11.9
Securities......................... (34.2) (1.9) (36.1)
Trading assets..................... -- -- --
Other interest-earning assets...... 0.3 -- 0.3
----- ----- -----
Total interest earned on assets.. 8.2 (2.3) 5.9
----- ----- -----
Interest-bearing liabilities:
Savings............................ (1.0) (0.9) (1.9)
N.O.W. ............................ -- (0.4) (0.4)
Money market and variable rate
savings........................... (1.7) -- (1.7)
Term certificates of deposit....... 0.4 2.9 3.3
Mortgagors' escrow................. 0.1 (0.1) --
Trading liabilities................ -- -- --
Securities sold under agreements to
repurchase........................ -- 0.4 0.4
Long term debt..................... 3.5 -- 3.5
Guaranteed Preferred Beneficial
Interest in Company's Junior
Subordinated Debentures........... 4.6 -- 4.6
----- ----- -----
Total interest paid on
liabilities..................... 5.9 1.9 7.8
----- ----- -----
Net change in net interest income.... $ 2.3 $(4.2) $(1.9)
===== ===== =====
</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 agreements to resell.
Provision for Possible Loan Losses
The provision for possible loan losses decreased by $1.0 million, or 20.0%, to
$4.0 million for the first quarter of 1998, from $5.0 million for the compara-
ble 1997 period. The provision exceeded net charge-offs by $1.0 million for the
first quarter of 1998. The decrease to the allowance for loan losses is made in
recognition of the growth in the loan portfolio.
Non-Interest Income
Non-interest income decreased by $6.4 million, or 33%, to $12.8 million in the
first quarter of 1998 from $19.2 million for the first quarter of 1997. The
first quarter 1997 results include a $5.9 million gain on the sale of two bank-
ing offices and a $2.4 million gain on the sale of bank owned properties. Ex-
cluding these non-recurring gains, non-interest income increased $1.9 million,
or 17.4%, for the current quarter compared to the 1997 quarter.
Banking fees and commissions rose $1.5 million, or 30.6%, to $6.4 million for
the first quarter of 1998 from $4.9 million in the first quarter of 1997. The
increase reflects a rise in fee income generated from the further development
of services and products, such as sales of annuities, mutual funds and credit
cards.
17
<PAGE>
Non-Interest Expense
Non-interest expense increased by $5.7 million, or 8.4%, to $73.9 million in
the current quarter, as compared to $68.2 million for the comparable 1997 peri-
od. The first quarter 1998 results include a non-recurring charge of $8.3 mil-
lion in personnel expense related to the retirement of senior executives. Ex-
cluding the non-recurring personnel expense, non-interest expense decreased by
$2.6 million, or 3.8%, for the current quarter as compared to the comparable
1997 period.
The Company's emphasis on expense control resulted in reductions in other ad-
ministrative expenses and advertising expense. Other administrative expense
fell $1.7 million, or 13.6%, to $10.8 million for the first quarter of 1998
compared to $12.5 million for the first quarter of 1997. Advertising expense
decreased $0.5 million, or 22.7%, to $1.7 million in the first quarter of 1998
from $2.2 million in the comparable 1997 quarter.
ORE income, net, increased $1.1 million to $1.6 million for the first quarter
of 1998, compared to $0.5 million for the first quarter of 1997. The increase
primarily reflects a reduction in ORE operating expenses due to a decline in
the portfolio of foreclosed properties and a rise in the gains recognized on
the sales of ORE properties in the 1998 quarter as compared to the 1997 quar-
ter.
ESOP and stock plans expense increased $0.8 million, or 16.7%, to $5.6 million
for the first quarter of 1998 from $4.8 million in the first quarter of 1997
primarily as a result of a higher average market price of the Company's stock
during the 1998 quarter, compared to the 1997 quarter.
Salaries and benefits expense rose $0.4 million, or 1.8%, to $23.1 million for
the first quarter of 1998, compared to $22.7 million for the first quarter of
1997 primarily as a result of the expansion of the Company's national mortgage
business.
Income Tax Expense
Income tax expense decreased by $6.1 million, or 22.8%, to $20.6 million in the
current quarter, from $26.7 million for the comparable period of 1997. The de-
crease is primarily due to a $12.2 million, or 18.4%, decrease in income before
income taxes. Additionally, income tax expense was further reduced by the de-
crease in the effective tax rate from 40.25% in the 1997 period to 38.00% in
the 1998 period.
Financial Condition
Total assets were $13.2 billion at March 31, 1998 compared to $13.1 billion at
December 31, 1997. Net loans receivable held for investment rose $121.3 million
to $8.9 billion at March 31, 1998 on total originations of $579.0 million.
18
<PAGE>
Interest Rate Sensitivity Gap Analysis
The table below depicts the Company's interest rate sensitivity as of March 31,
1998. Allocations of assets and liabilities, including non-interest-bearing
sources of funds to specific periods, are based upon management's assessment of
contractual or anticipated repricing characteristics, adjusted periodically to
reflect actual experience. Those gaps are then adjusted for the net effect of
off-balance sheet financial instruments such as interest rate swaps.
<TABLE>
<CAPTION>
-----------------------------------------------------------
REPRICING PERIODS
--------------------------------------------------
MORE MORE MORE
THAN THREE THAN SIX THAN ONE MORE
THREE MONTHS TO MONTHS YEAR TO THAN
MONTHS SIX TO ONE THREE THREE
OR LESS MONTHS YEAR YEARS YEARS TOTAL
------- ---------- -------- -------- ------ -------
Dollars in millions
<S> <C> <C> <C> <C> <C> <C>
Total loans, net........ $1,006 $ 726 $1,246 $1,787 $4,156 $ 8,921
Money market investments
(1).................... 814 -- -- -- -- 814
Securities held to
maturity............... 2 -- -- -- 2 4
Securities available for
sale................... 909 95 310 644 396 2,354
Other interest earning
assets................. 117 -- -- -- -- 117
------ ------ ------ ------ ------ -------
Total interest earning
assets................. 2,848 821 1,556 2,431 4,554 12,210
------ ------ ------ ------ ------ -------
Cash and due from
banks.................. 127 -- -- -- -- 127
Goodwill................ 11 10 21 84 440 566
Other non interest
earning assets......... 325 -- -- -- -- 325
------ ------ ------ ------ ------ -------
Total assets............ $3,311 $ 831 $1,577 $2,515 $4,994 $13,228
====== ====== ====== ====== ====== =======
Term certificates of
deposit................ $1,347 $1,597 $1,861 $1,472 $ 231 $ 6,508
Core deposits........... 251 254 501 1,838 1,516 4,360
------ ------ ------ ------ ------ -------
Total deposits.......... 1,598 1,851 2,362 3,310 1,747 10,868
------ ------ ------ ------ ------ -------
Mortgagors' escrow...... 8 8 17 67 49 149
Securities sold under
agreements to
repurchase............. 160 -- -- -- -- 160
Long term debt.......... -- -- -- -- 200 200
Guaranteed Preferred
Beneficial Interest in
Company's Junior
Subordinated
Debentures............. -- -- -- -- 200 200
Other liabilities....... 372 -- -- -- -- 372
Stockholders' equity.... -- -- -- -- 1,279 1,279
------ ------ ------ ------ ------ -------
Total liabilities and
stockholders' equity... $2,138 $1,859 $2,379 $3,377 $3,475 $13,228
====== ====== ====== ====== ====== =======
Off balance sheet
financial instruments.. $ 800 $ -- $ -- $ (300) $ (500) $ --
====== ====== ====== ====== ====== =======
Interest rate
sensitivity gap........ 1,973 (1,028) (802) (1,162) 1,019
Cumulative gap.......... 1,973 945 143 (1,019)
Interest rate
sensitivity gap as a
percentage of total
assets 14.92% (7.77)% (6.06)% (8.78)% 7.70%
Cumulative gap as a
percentage of total
assets................. 14.92% 7.14% 1.08% (7.70)%
</TABLE>
- -------
(1) Consists of interest-bearing deposits in other banks, federal funds sold
and securities purchased under agreements to resell.
Market Risk Management
The Company's primary market risk exposure is interest rate risk.
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 match those of its deposit liabilities. The re-
sulting interest rate risk is managed by adjustments to the Company's invest-
ment portfolio and through the use of off-balance sheet instruments such as in-
terest rate swaps.
Management responsibility for interest rate risk resides with the Asset and Li-
ability Management Committee ("ALCO"). The committee is comprised of the Chair-
man and Chief Executive Officer, the Chief Operating Officer, the Treasurer and
the Company's senior business-unit and financial executives. Interest rate risk
management strategies are formulated and
19
<PAGE>
monitored by ALCO within policies and limits approved by the Board of Direc-
tors. These policies and limits set forth the maximum risk which the Board of
Directors deems prudent, govern permissible investment securities and off-bal-
ance 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 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 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 liabili-
ties. 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 Company's mortgage loans and its mortgage-backed securities
can be prepaid before contractual amortization and/or maturity. Also, repricing
of the Company's non-time deposits is subject to management's evaluation of the
existing interest rate environment, current funding and liquidity needs, and
other factors influencing the market competition for such deposits. The amounts
in the accompanying schedule reflect management's judgment of the most likely
repricing schedule; actual results could vary from those detailed herein.
The difference between assets and liabilities repricing in a given period is
one approximate measure of interest rate sensitivity. More assets than liabili-
ties repricing in a period (a positive gap) implies earnings will rise as in-
terest rates rise, and decline as interest rates decline. More liabilities
repricing than assets implies declining income as rates rise.
The use of interest rate instruments such as interest rate swaps is integrated
into the Company's interest rate risk management. The Bank enters into interest
rate swap contracts in managing the interest rate risk associated with its
fixed-rate mortgages and variable rate securities in its investment portfolio.
The notional amounts of these contracts approximate $875 million at March 31,
1998, and are not reflected in the Company's balance sheet. These contracts
have an average term of approximately four years. Under the terms of these con-
tracts, the Bank pays an average fixed rate of 6.08% and receives an average
variable rate of 5.63% on the swaps hedging the fixed rate loan portfolio and
pays an average variable rate of 5.74% and receives an average variable rate of
5.71% on the swaps hedging the variable rate securities portfolio. 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 deriva-
tives. The amounts exchanged are determined by reference to the notional
amounts and the other terms of the derivatives. These instruments are included
in the interest rate sensitivity table for purposes of analyzing interest rate
risk. However, these relationships do not consider the impact that rate move-
ments 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 pos-
itive 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 earned on earlier investments and loan originations.
As of March 31, 1998, the cumulative volume of assets maturing or repricing
within one year exceeded liabilities by $143.0 million, or 1.08% of assets, im-
plying modest current-year income sensitivity to movements in the level of in-
terest rates.
The static gap analysis is an incomplete representation of interest rate risk
for several reasons. It fails to account for changes in prepayment speeds on
the Company's mortgage loan and mortgage backed securities portfolios. The be-
havior of deposit balances will vary with changes in the general level of in-
terest rates and management's pricing strategies. The gap analysis does not
provide a clear presentation of the risks to income arising from options embed-
ded in the balance sheet.
Accordingly, ALCO makes extensive use of an earnings simulation model in the
formulation of its market risk management strategy. The model gives effect to
management assumptions concerning the repricing of assets, liabilities and off-
balance sheet financial instruments, as well as business volumes, under a vari-
ety of hypothetical interest rate scenarios. These hypothetical scenarios in-
corporate interest rate increases and decreases of 200 basis points. Actual in-
terest rate changes during the past three years have fallen within this range
and management expects that any changes over the next year will not exceed this
range.
Management's assumptions, particularly those concerning prepayments in the loan
portfolio and pricing of the Company's deposit products, are based on frequent
historical analyses of the behavior patterns of the Company's customers in re-
sponse
20
<PAGE>
to changes in both general market interest rates and rates offered by banks.
These assumptions represent management's estimate of the likely effect of
changes in interest rates and do not necessarily reflect actual results. The
earnings simulation model takes into account interest rate caps and floors,
call options and balloon payments embedded in certain mortgage loans, and mort-
gage backed securities, in determining the earnings at risk.
At March 31, 1998, based on this model, the Company's potential earnings at
risk to a gradual, parallel 200 basis point rise in market interest rates over
the next 12 months on instruments held for other than trading purposes was ap-
proximately 1.1% of projected 12 month earnings.
Liquidity Risk Management
The Company's primary sources of funds are deposits and proceeds from principal
and interest payments on loans, mortgage-backed securities and other securi-
ties. 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 competi-
tion.
The Company and the Bank also have both short-term and long-term debt ratings
from four recognized credit rating firms. These ratings 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 op-
erating, financing, lending, and investing activities during any given period.
Cash and cash equivalents, including money market investments, totaled $0.9
billion at March 31, 1998.
The Company had outstanding mortgage loan commitments of $455.8 million at
March 31, 1998. The Company anticipates that it will have sufficient funds
available to meet its current loan commitments.
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 fo-
cuses its efforts on its fundamental disciplines, loan underwriting and admin-
istration.
The Company lends funds based on the borrower's level of equity in the property
securing the loan. The Company generally does not originate loans with a loan
to value ratio in excess of 75%. Strict appraisal standards are maintained, re-
quiring all appraisers to be state certified, and all appraisals are subject to
additional levels of review by senior management.
The Company closely monitors trends in delinquent and nonperforming loans
through cycles in the economy and in the real estate market. The Company also
tracks economic and housing market trends. These performance and economic
trends are analyzed in the ongoing fine-tuning of lending practices. In 1997,
the Company created an independent, executive-level risk management function.
Along with monitoring trends and developing lending policies, the risk manage-
ment function is building credit scoring and other quantitative models to en-
hance GreenPoint's strong expertise in effectively managing credit risk.
The Company uses various collection procedures and works to maintain contact
with the borrowers to obtain repayment. In addition, the Company reviews the
trends in amount and frequency of loans that were transferred to other real es-
tate owned, trends in sales activity of its foreclosed property including aver-
age principal loss experienced and the holding period for such properties.
Management has set forth a policy for establishment and review of the adequacy
of the allowance for loan losses. The policy requires management to provide for
estimated future costs related to problem loans. Management believes that the
allowance for loan losses is adequate. However, such determination is suscepti-
ble to the effect of future unanticipated changes in general economic and mar-
ket conditions that may affect the financial circumstances of borrowers and/or
residential real estate values within the Company's lending areas.
21
<PAGE>
Non-Performing Assets
The Company's asset quality improved during the quarter ended March 31, 1998,
as non-performing assets decreased by 4.6%. The ratio of non-performing loans
to total loans fell to 3.77% at March 31, 1998 from 3.97% at December 31, 1997
while the ratio of non-performing assets to total assets fell to 2.73% at March
31, 1998 from 2.90% at December 31, 1997.
Non-performing assets, net of related specific reserves, were as follows:
<TABLE>
<CAPTION>
--------------------------------------
AT MARCH 31, 1998 AT DECEMBER 31, 1997
----------------- --------------------
<S> <C> <C>
Dollars in millions
Mortgage loans secured by:
Residential one-to-four family........ $265.6 $271.0
Residential multi-family.............. 42.0 46.0
Commercial property................... 33.3 38.0
Other loans............................. 0.3 0.1
------ ------
Total non-performing loans(1)........... 341.2 355.1
------ ------
Total other real estate owned, net...... 20.4 24.0
------ ------
Total non-performing assets............. $361.6 $379.1
====== ======
</TABLE>
- -------
(1) Includes $18.4 million and $24.3 million of non-accrual mortgage loans un-
der 90 days past due at March 31, 1998 and December 31, 1997, respectively.
Allowance for Possible Loan Losses
The following is a summary of the provision and allowance for possible loan
losses:
<TABLE>
<CAPTION>
------------------------
THREE
MONTHS ENDED MARCH 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Dollars in millions
Balance beginning of period........................... $ 109.0 $ 105.0
Provision charged to income........................... 4.0 5.0
Charge-offs........................................... (3.2) (4.1)
Recoveries............................................ 0.2 0.1
----------- -----------
Balance end of period................................. $ 110.0 $ 106.0
=========== ===========
</TABLE>
Capital Ratios
The Company's ratio of period-end stockholders' equity to ending total assets
at March 31, 1998 was 9.67% compared to 9.70% at December 31, 1997.
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 cor-
rective 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 re-
quire 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 of Tier 1 capital to average total
assets of 3% is required for banks and bank holding companies, with an addi-
tional 100 to 200 basis points required for all but the highest rated institu-
tions. Management believes, as of March 31, 1998, that the Company and the Bank
meet all capital adequacy requirements to which it is subject.
As of March 31, 1998, the most recent notification from the FDIC categorized
the Bank as well capitalized under the regulatory framework for prompt correc-
tive action. To be categorized as well capitalized, the Bank must maintain min-
imum
22
<PAGE>
Tier 1 capital, total capital and leverage ratios of 6%, 10% and 5%, respec-
tively. There have been no conditions or events since that notification that
management believes have changed the Company's or Bank's category.
<TABLE>
<CAPTION>
--------------------------
AS OF MARCH 31, 1998
--------------------------
REQUIRED FOR
CAPITAL
ADEQUACY
ACTUAL PURPOSES
------------- ------------
AMOUNT RATIO AMOUNT RATIO
------ ------ ------ -----
<S> <C> <C> <C> <C>
Dollars in millions
Total Capital (to Risk Weighted Assets):
Company............................................ $993.4 16.03% $495.7 8.00%
Bank............................................... 980.6 15.84% 495.2 8.00%
Tier 1 Capital (to Risk Weighted Assets):
Company............................................ $915.9 14.78% $247.8 4.00%
Bank............................................... 903.2 14.59% 247.6 4.00%
Tier 1 Capital (to Average Assets):
Company............................................ $915.9 7.32% $500.2 4.00%
Bank............................................... 903.2 7.23% 499.7 4.00%
<CAPTION>
--------------------------
AS OF DECEMBER 31, 1997
--------------------------
REQUIRED FOR
CAPITAL
ADEQUACY
ACTUAL PURPOSES
------------- ------------
AMOUNT RATIO AMOUNT RATIO
------ ------ ------ -----
<S> <C> <C> <C> <C>
Dollars in millions
Total Capital (to Risk Weighted Assets):
Company............................................ $974.1 15.54% $501.3 8.00%
Bank............................................... 959.6 15.34% 500.6 8.00%
Tier 1 Capital (to Risk Weighted Assets):
Company............................................ $895.8 14.29% $250.6 4.00%
Bank............................................... 881.4 14.09% 250.3 4.00%
Tier 1 Capital (to Average Assets):
Company............................................ $895.8 7.19% $498.5 4.00%
Bank............................................... 881.4 7.08% 497.7 4.00%
</TABLE>
23
<PAGE>
YEAR ENDED DECEMBER 31, 1997 VS. YEAR ENDED DECEMBER 31, 1996
Overview
During 1997, the Company continued to expand its presence in the national mort-
gage market. Summarized below are several significant 1997 financial results.
. Net income per diluted share for the year increased 23% over 1996.
. Diluted core cash earnings per share for the year were $2.65, or $210.3 mil-
lion, an increase of 24% over 1996.
. Core cash return on average equity increased to 15.68% in 1997 from 12.70% in
1996.
. Mortgage loan originations totaled $2.85 billion for 1997, an increase of 21%
over the $2.35 billion in 1996.
. The Company repurchased 11.4 million shares of its stock during 1997 at a to-
tal cost of $355.5 million.
. GreenPoint continues to maintain a strong capital position with a leverage
ratio of 7.19%, a Tier 1 risk-based ratio of 14.29% and a total risk based ra-
tio of 15.54% at December 31, 1997.
. Asset quality continued to improve. The ratio of non-performing loans to to-
tal loans at December 31, 1997 was 3.97% versus 4.78% at December 31, 1996. Al-
though the Company's loan portfolio grew by $1.5 billion in 1997, or 21%, total
non-performing loans of $355.1 million at December 31, 1997 were essentially
equal to the amounts reported last year.
Core Cash Earnings
Core cash earnings are net of non-recurring items, and include certain non-cash
charges, related to goodwill and the ESOP. The 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 addi-
tional repurchases of the Company's stock.
<TABLE>
<CAPTION>
----------------
YEARS ENDED
DECEMBER 31,
----------------
1997 1996
------ ------
<S> <C> <C>
Dollars in millions, except per share amounts
Net income (excluding non-recurring items)(1)................. $144.2 $126.3
Add back:
Goodwill amortization(2).................................... 46.4 46.5
Employee stock plans expense................................ 19.7(3) 14.7
------ ------
Core cash earnings............................................ $210.3 $187.5
====== ======
Core cash earnings per share(4)............................... $ 2.65 $ 2.14
====== ======
</TABLE>
- -------
(1) Non-recurring items include branch sales, asset sales and restructuring
(recovery) charge.
(2) Goodwill amortization relates to the 1995 acquisitions. This expense will
continue through the year 2010.
(3) Includes ESOP amortization expense of $17.1 million and stock plans share
amortization expense of $2.6 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 an-
nual allocations to plan participants. Stock plans share amortization expense
is scheduled to occur through the year 2000 and will be approximately $2.1 mil-
lion annually.
(4) Based on the weighted average shares used to calculate diluted earnings per
share.
Net Interest Income
Net interest income on a taxable equivalent basis increased by $28.4 million,
or 6.3%, to $482.1 million for 1997 from $453.7 million for 1996. The increase
primarily reflects the reduction of the lower yielding securities portfolio to
fund the net growth in the Company's loan portfolio. During 1997, the Company
made greater use of alternative funding sources such as repurchase agreements
and long-term debt as a means of managing the cost of funds.
Interest income on mortgages increased by $137.2 million, or 23.2%, to $728.9
million for 1997 from $591.7 million for 1996 primarily as a result of $1.6
billion average loan portfolio growth partially offset by a 14 basis point de-
crease in the average yield. The decline in the average yield on mortgages re-
flects the generally lower interest rate environment of 1997, particularly its
effects on increased loan prepayments. Interest income on securities and money
market investments decreased by a combined $148.5 million, or 38.4%, to $238.4
million for 1997 from $386.9 million for 1996.
24
<PAGE>
The shift in the Company's interest-earning asset mix into the higher yielding
loan portfolio resulted in a 40 basis point increase in the yield on average
interest-earning assets to 7.99% for 1997 from 7.59% for 1996.
The Company aggressively managed its cost of funds during 1997 by reducing core
deposit rates, allowing certain high cost customer deposits to run off and,
where appropriate, replacing those funds with alternative sources such as re-
purchase agreements and long-term debt. The cost of funds for 1997 was 4.36%,
the same as for 1996.
The increase in the yield on average interest-earning assets, combined with
control of the cost of funds resulted in GreenPoint's 1997 interest rate spread
and net interest margin rising to 3.63% and 3.93%, respectively, from 3.23% and
3.51%, respectively, for 1996.
Provision for Possible Loan Losses
The provision for possible loan losses increased by $3.2 million, or 20.4%, to
$18.9 million for 1997 from $15.7 million for 1996. The increase included 1997
net additions to the allowance for possible loan losses totaling $4.0 million.
Non-Interest Income
Non-interest income decreased slightly to $56.2 million for 1997 from $56.9
million for 1996. The decline was primarily the result of lower net gains on
sales of loans, lower proceeds from branch sales and a decline in securities
lending fee income. These declines were partially offset by larger securities
gains and gains on the sale of assets.
The Company's consumer branch network generated $4.5 million of additional fee
income during 1997 compared with 1996 primarily as the result of the introduc-
tion of new fee generating services and products such as sales of annuities,
mutual funds and GreenPoint's new credit card.
Non-Interest Expense
Total non-interest expense increased by $7.1 million, or 2.7%, to $270.3 mil-
lion for 1997 from $263.2 million in 1996. The 1997 amount includes a $2.5 mil-
lion restructuring charge related to the transfer of the Company's mortgage
servicing from New York to Georgia, while the 1996 amount includes a $1.6 mil-
lion recovery of an unrelated 1995 restructuring charge. The Company's emphasis
on expense control resulted in a 160 basis point improvement in the efficiency
ratio to 42.7% for 1997 from 44.3% for 1996.
Salaries and benefits increased by $6.9 million, or 8.0%, to $93.7 million for
1997 from $86.8 million in 1996, primarily as a result of the expansion of the
Company's national mortgage business.
ESOP and stock plans expense increased by $5.0 million, or 33.6%, to $19.7 mil-
lion primarily as a result of a higher average market price of the Company's
stock during 1997 compared to 1996.
Lower FDIC deposit insurance rates combined with a smaller deposit base for
1997 resulted in a $2.4 million, or 46.2%, decrease in deposit insurance premi-
ums to $2.8 million for 1997 from $5.2 million for 1996.
Net expense of premises and equipment remained relatively flat at $47.3 million
for 1997 compared with $46.6 million for 1996. Other administrative expense
fell $6.1 million, or 9.4%, to $59.7 million for 1997 compared to $65.8 million
for 1996.
Income Tax Expense
Income tax expense increased by $2.4 million, or 2.6%, to $94.4 million for
1997 from $92.0 million for 1996 primarily as a result of higher pre-tax income
in 1997 partially offset by a drop in the Company's effective tax rate. The
Company's effective tax rate was 39.0% for 1997 compared to 41.0% for 1996.
Financial Condition
Total assets were $13.1 billion at December 31, 1997 compared with $13.3 bil-
lion at December 31, 1996.
Net loans receivable held for investment increased by $1.5 billion to $8.8 bil-
lion at December 31, 1997 on total originations of $2.9 billion.
The combined balances of money market investments and securities available for
sale decreased by $1.8 billion to $3.1 billion at December 31, 1997. During
1997, the Company used the proceeds from the decline of these investments pri-
marily to fund loan portfolio growth.
Total deposits decreased by $0.5 billion to $11.0 billion at December 31, 1997.
25
<PAGE>
YEAR ENDED DECEMBER 31, 1996 VS. YEAR ENDED DECEMBER 31, 1995
Effect of 1995 Acquisitions on Comparability of Operating Results
The comparability of 1996 and 1995 operating results is significantly affected
by two acquisitions completed by the Company during 1995. GreenPoint purchased
the wholesale residential mortgage lending business of Barclays
American/Mortgage Corp. ("BAM") in July 1995 and the 60 New York consumer bank-
ing branches of Home Savings of America, FSB ("HSA") in September 1995. The
1995 annual results include only those related revenues and expenses subsequent
to the respective acquisition dates.
Substantial increases in the Company's asset, liability and employee bases re-
sulting 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 sub-
stantial change in the composition of the Company's balance sheet that affected
certain key performance ratios. The Company received cash, certificates of de-
posit and short-term debt securities totaling approximately $7.5 billion in re-
turn for assuming approximately $8.1 billion of customer deposits from HSA. 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.
General
Net income for 1996 was $132.5 million, or $1.51 per diluted share, a 23.2% in-
crease over the $107.5 million, or $1.14 per diluted share, earned in 1995, re-
flecting the full year's effect in 1996 of the two 1995 acquisitions, a sub-
stantial increase in loan production and the achievement of planned cost sav-
ings.
Core cash earnings rose to $187.5 million, or $2.14 per diluted share, in 1996
compared to $140.7 million, or $1.50 per diluted share in the prior year.
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 re-
sulting from the two 1995 acquisitions, the Company's ability to re-deploy pro-
ceeds from the maturity of lower yielding money market and securities invest-
ments into loan portfolio growth during 1996, and significant improvement in
the Company's average cost of funds resulting from an aggressive deposit pric-
ing strategy.
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 58.9%, 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 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 mil-
lion for 1996 from $178.6 million for 1995. The 1995 results include an $8.0
million restructuring charge while the 1996 results include a $1.6 million re-
covery of the same charge. Excluding the 1995 restructuring charge and the sub-
sequent recovery in 1996, the increase in non-interest expense is primarily the
result of recognizing a full year's effect of the 1995 acquisitions in 1996,
partially offset by lower FDIC deposit insurance premiums.
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 resulted from a $26.1 million increase in
pre-tax income, which was partially offset by the effect of a 10.6% decrease in
the Company's effective tax rate to 40.98%.
26
<PAGE>
Average Consolidated Balance Sheet, Interest and Rates
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1997 1996 1995
-------------------------- -------------------------- -------------------------
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>
Taxable--Equivalent Interest and Rates, dollars in millions(1)
ASSETS:
Mortgage loans(2)....... $ 8,167.0 $728.9 8.92% $ 6,531.0 $591.7 9.06% $5,822.0 $532.2 9.14%
Other loans(2).......... 28.9 2.3 7.94 31.7 2.6 8.12 26.6 1.9 7.35
Money market
investments(3)......... 740.3 41.4 5.59 1,261.0 70.0 5.54 742.7 43.8 5.91
Securities(4)........... 3,212.9 197.0 6.13 5,101.4 316.9 6.22 2,059.9 118.6 5.76
Trading assets.......... 3.9 0.2 5.93 -- -- -- -- -- --
Other interest-earning
assets................. 110.9 10.0 9.05 -- -- -- -- -- --
--------- ------ --------- ------ -------- ------
Total interest-earning
assets................ 12,263.9 979.8 7.99 12,925.1 981.2 7.59 8,651.2 696.5 8.05
--------- ------ --------- ------ -------- ------
Non-interest earning
assets(5).............. 904.9 1,031.0 437.9
--------- --------- --------
Total assets........... $13,168.8 $13,956.1 $9,089.1
========= ========= ========
LIABILITIES &
STOCKHOLDERS' EQUITY:
Savings................. $ 1,830.1 46.7 2.55% $ 1,976.5 55.2 2.79% $ 972.1 28.4 2.93%
N.O.W. ................. 330.5 5.3 1.61 333.9 6.1 1.83 170.9 3.4 1.97
Money market and
variable rate savings.. 2,273.7 76.5 3.36 2,541.9 85.6 3.37 1,675.1 55.7 3.33
Term certificates of
deposit ............... 6,512.8 343.1 5.26 7,126.6 377.8 5.30 4,472.4 257.0 5.75
Mortgagors' escrow...... 98.3 1.1 1.09 80.9 1.0 1.26 79.6 1.3 1.59
Securities sold under
agreements to
repurchase............. 170.9 7.8 4.58 47.9 1.8 3.88 -- -- --
Trading liabilities..... 1.9 0.1 5.89 -- -- -- -- -- --
Long term debt.......... 92.4 6.4 6.92 -- -- -- -- -- --
Guaranteed Preferred
Beneficial Interest in
Company's Junior
Subordinated
Debentures............. 115.4 10.7 9.29 -- -- -- -- -- --
--------- ------ --------- ------ -------- ------
Total interest-bearing
liabilities........... 11,426.0 497.7 4.36 12,107.7 527.5 4.36 7,370.1 345.8 4.69
------ ------ ------
Other liabilities(6).... 397.7 371.5 173.8
--------- --------- --------
Total liabilities...... 11,823.7 12,479.2 7,543.9
Preferred shares of
subsidiary............. 3.4 0.9 --
Stockholders' equity.... 1,341.7 1,476.0 1,545.2
--------- --------- --------
Total liabilities &
stockholders' equity.. $13,168.8 $13,956.1 $9,089.1
========= ========= ========
Net interest
income/interest rate
spread(7).............. $482.1 3.63% $453.7 3.23% $350.7 3.36%
====== ===== ====== ===== ====== =====
Net interest-earning
assets/net interest
margin(8).............. $ 837.9 3.93% $ 817.4 3.51% $1,281.1 4.05%
========= ===== ========= ===== ======== =====
Ratio of interest-
earning assets to
interest-bearing
liabilities............ 1.07x 1.07x 1.17x
===== ===== =====
</TABLE>
- -------
(1) The Company's incremental tax rate used to adjust tax-exempt interest to a
taxable-equivalent basis was 44.2% and 44.6% for the years ended December 31,
1997 and 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 agreements to resell.
(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 deferred tax assets,
accrued interest receivable, and other miscellaneous non-interest earning as-
sets.
(6) Includes accrued interest payable, accounts payable, official checks drawn
against the Bank, accrued expenses, and other miscellaneous non-interest bear-
ing obligations of the Company.
(7) Net interest rate spread represents the difference between the average
yield on interest-earning assets and the average cost of interest-bearing lia-
bilities.
(8) Net interest margin represents net interest income on a taxable-equivalent
basis divided by average interest-earning assets.
27
<PAGE>
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 years indicat-
ed. 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, 1997 YEAR ENDED DECEMBER 31, 1996
COMPARED TO COMPARED TO
YEAR ENDED DECEMBER 31, 1996 YEAR ENDED DECEMBER 31, 1995
INCREASE/(DECREASE) INCREASE/(DECREASE)
--------------------------------- --------------------------------
DUE TO DUE TO
--------------------- ---------------------
AVERAGE AVERAGE NET AVERAGE AVERAGE NET
VOLUME RATE CHANGE VOLUME RATE CHANGE
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dollars in millions
Mortgage loans(1)....... $146.2 $ (9.0) $137.2 $ 64.2 $ (4.7) $ 59.5
Other loans(1).......... (0.2) (0.1) (0.3) 0.5 0.2 0.7
Money market
investments(2)......... (29.1) 0.5 (28.6) 29.0 (2.8) 26.2
Securities.............. (114.2) (5.7) (119.9) 195.7 2.6 198.3
Trading assets.......... 0.2 -- 0.2 -- -- --
Other interest-earning
assets................. 10.0 -- 10.0 -- -- --
--------- --------- --------- --------- ---------- ---------
Total interest earned
on assets............ 12.9 (14.3) (1.4) 289.4 (4.7) 284.7
--------- --------- --------- --------- ---------- ---------
Savings................. (4.0) (4.5) (8.5) 28.2 (1.4) 26.8
N.O.W. ................. (0.1) (0.7) (0.8) 2.9 (0.2) 2.7
Money market and
variable rate savings.. (9.0) (0.1) (9.1) 29.2 0.7 29.9
Term certificates of
deposit................ (31.3) (3.4) (34.7) 142.1 (21.3) 120.8
Mortgagors' escrow...... 0.2 (0.1) 0.1 -- (0.3) (0.3)
Securities sold under
agreements to
repurchase............. 5.6 0.4 6.0 1.8 -- 1.8
Trading liabilities..... 0.1 -- 0.1 -- -- --
Long term debt.......... 6.4 -- 6.4 -- -- --
Guaranteed Preferred
Beneficial Interest in
Company's Junior
Subordinated
Debentures............. 10.7 -- 10.7 -- -- --
--------- --------- --------- --------- ---------- ---------
Total interest paid on
liabilities.......... (21.4) (8.4) (29.8) 204.2 (22.5) 181.7
--------- --------- --------- --------- ---------- ---------
Net change in net
interest income........ $ 34.3 $ (5.9) $ 28.4 $ 85.2 $ 17.8 $103.0
========= ========= ========= ========= ========== =========
</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 and secu-
rities purchased under agreement to resell.
28
<PAGE>
BUSINESS
OVERVIEW
The Company is a bank holding company organized in August 1993 under the laws
of the state of Delaware and registered under the BHCA. The Company provides a
variety of financial services through the Bank and GPMC and, to a lesser ex-
tent, through GreenPoint Community Development Corp. ("GPCDC"), its community
development subsidiary. As part of the Company's long term business plans, the
Company intends to continue to explore a variety of alternative strategic in-
vestment options to complement its existing business strengths, including pos-
sible acquisitions of other thrift institutions, acquisitions of other finan-
cial institutions or financial services companies or their assets, or expansion
into other banking, mortgage, real estate or consumer finance related business-
es. As of March 31, 1998, the Company had consolidated total assets of approxi-
mately $13.2 billion, total deposits of approximately $10.9 billion and stock-
holders' equity of approximately $1.3 billion.
The Bank was organized in 1868 as a New York State chartered savings bank. The
Bank and its wholly owned subsidiary GPMC, a national mortgage banking company,
are primarily engaged in the business of mortgage lending throughout the United
States. The Bank and GPMC have total loans receivable of approximately $8.9
billion, which represents approximately 67% of total assets of the Company as
of March 31, 1998. The Bank continues to attract retail deposits from the gen-
eral public, which the Bank then invests, 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 se-
curities. The Bank's primary sources of funds are deposits, principal and in-
terest payments from loans, and wholesale funds.
GPCDC is a for-profit community development subsidiary organized in 1993. Com-
plementing the Bank's leadership in lending in low- and moderate-income areas
and to minorities, GPCDC's focus is primarily on special lending programs, de-
velopment opportunities and assistance, consulting and other activities that
promote the objective of greater access to affordable housing for low- and mod-
erate-income persons residing in the areas served by the Company.
MORTGAGE BANKING SERVICES
The Company specializes in No Doc mortgage loan products. No Doc loan products
serve a particular niche of borrowers willing to provide larger down payments
and pay a premium, in the form of higher interest rates and loan fees, in ex-
change for loan processing that is made more expedient by virtue of requiring
less income and asset information than is required for loans underwritten in
conformance with FNMA standards. This business strategy, which also relies on
strict appraisal requirements, has enabled the Company to achieve higher inter-
est margins and levels of net interest income than typical FNMA conforming
loans which, in turn, has resulted in a high level of profitability despite
historically higher levels of loan delinquencies.
CONSUMER BRANCH NETWORK
The Consumer Branch Network ("Branch Network") consists of 73 full-service
banking offices, with 89 ATMs, located in the greater New York City Metropoli-
tan area. The Branch Network 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,
mutual funds, mortgages, home equity loans, credit cards, Savings Bank Life In-
surance, safe deposit services and student loans.
MANUFACTURED HOUSING LENDING
Manufactured housing lending, like the Company's No Doc lending, is a niche
residential lending business. The Company hopes to leverage its experience in
residential lending and the experience of the current management and personnel
of B of A Housing to enhance its revenues and further expand the Company's
mortgage lending business.
29
<PAGE>
SUPERVISION AND REGULATION
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 Federal Deposit Insurance Corpora-
tion (the "FDIC"). The Bank is subject to extensive regulation by both the New
York State Banking Department (the "Banking Department") and by the FDIC. New
York State Banking law and federal law respecting FDIC-insured state banking
institutions both delineate permissible activities of the Bank and require the
Bank, among other things, to file reports with the Banking Department and the
FDIC regarding its activities and financial condition, to obtain regulatory ap-
provals prior to entering into certain transactions such as establishing
branches, mergers with or acquisitions of other depository institutions, to
maintain certain minimum levels of capital and to serve the credit needs of the
communities in which it operates. In addition, the Board of Governors of the
Federal Reserve System (the "FRB") requires the Bank to maintain certain re-
serves against its transaction accounts.
Holding Company Regulation and Supervision
The Company is a registered bank holding company pursuant to the BHCA, and as
such is subject to examination, regulation and periodic reporting under the
BHCA, as administered by the FRB. Under the BHCA and the rules and regulations
of the FRB, the Company, as a bank holding company, is required to meet capital
adequacy guidelines substantially similar to those of the FDIC for the Bank, is
required, under certain circumstances, to obtain the prior approval or to give
prior written notice to the FRB before entering into certain transactions such
as mergers or acquisitions involving the Company or acquisitions of more than
5% of any class of voting shares of a bank or bank holding company. In addi-
tion, as a bank holding company, the Company is generally prohibited from en-
gaging in, or acquiring direct or indirect control of, any company engaged in
non-banking activities.
Under the Federal Deposit Insurance 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 pro-
vided 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 subsid-
iary a depository institution in addition to the Bank.
In addition, although the Company is not currently a "bank holding company" as
defined under the New York State Banking Law, if it were to become such, it
would be subject to additional regulation by the Banking Department.
30
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS
Set forth below are the names, ages and positions of the individuals who are
deemed to be executive officers of the Company and the Bank as of the date of
this Prospectus.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME AGE OFFICE
- --------------------------------------------------------------------------------
<S> <C> <C>
Thomas S. Johnson........... 57 Chairman and Chief Executive Officer
Bharat B. Bhatt............. 54 President and Chief Operating Officer
Ralph Hall.................. 49 Executive Vice President, Mortgage Banking
S.A. Ibrahim................ 46 Executive Vice President, Risk Management
Jeffrey R. Leeds............ 52 Executive Vice President, Finance
Charles P. Richardson....... 51 Executive Vice President, Corporate Development
Ramesh Shah................. 50 Executive Vice President, Consumer Banking
</TABLE>
THOMAS S. JOHNSON was Chairman, President and Chief Executive Officer of the
Company and the Bank from August 1993 to October 1997. Since that time, he has
been Chairman and Chief Executive Officer of the Company and the Bank. Mr.
Johnson previously 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 Alleghany
Corporation, and a trustee of not-for-profit organizations including The Insti-
tute of International Education, The Asia Society, The United States Japan
Foundation, WNET Channel 13, New York, and Trinity College. A graduate of Trin-
ity, Mr. Johnson received a masters degree in business administration from Har-
vard University.
BHARAT B. BHATT joined the Company in July 1995 and serves as President and
Chief Operating Officer of the Company and the Bank. Prior to that he served 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 holds a Bachelor of Laws and a Bachelor of
Commerce degree from the University of Bombay. Mr. Bhatt attended the Manage-
ment Program at Harvard Business School. Mr. Bhatt is also a member of the In-
stitute of Chartered Accountants.
RALPH HALL is Executive Vice President, Mortgage Banking, of the Company and
the Bank. Mr. Hall had been General Manager, Chief Operating Officer and Direc-
tor 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 Andersen & 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 Uni-
versity of Houston (1977) and a BS/BA in Accounting and Economics at Southwest
Missouri State University (1974).
S.A. IBRAHIM joined GreenPoint Bank in March 1997 and now serves as Executive
Vice President, Risk Management of the Company and the Bank. Prior to joining
the Bank, Mr. Ibrahim was in charge of International Reengineering at American
Express' Travel Related Services Company. Previously, he held various positions
at Chemical Banking Corporation, including Chief Executive Officer of the Mort-
gage Business, Chief of Staff to the Vice Chairman in charge of Consumer Bank-
ing and Chief Credit Officer for Consumer Banking. He has also been head of the
Credit Card Operations at Crocker Bank and Chief Financial Officer of the Busi-
ness Services Division at Bank of America. Mr. Ibrahim holds a B.E. in Engi-
neering from Osmania University in Hyderabad, India, and an MBA in Finance from
the Wharton School at the University of Pennsylvania.
JEFFREY R. LEEDS joined the Bank in September 1995 and serves as Executive Vice
President, Finance of the Company and the Bank. Prior to that, he served as Se-
nior Vice President and Treasurer. 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. Mr. Leeds earned a
Bachelor's Degree in economics from the University of Michigan and holds a Mas-
ters in Business Administration and Master of Philosophy from the Columbia Uni-
versity Graduate School of Business.
CHARLES P. RICHARDSON joined the Company in April, 1993 and serves as Executive
Vice President, Corporate Development of the Company and the Bank. Prior to
that, he served as Executive Vice President and Chief Financial Officer of
31
<PAGE>
each. Prior to his joining the Company, Mr. Richardson was Executive Vice Pres-
ident and Chief Financial Officer for Dollar Dry Dock Bank (1985-1992) and was
a banking and thrift industry consultant (1992-1993). Mr. Richardson holds a
business degree in Accounting from Temple University.
RAMESH SHAH joined the Bank in June 1996 as Executive Vice President, Marketing
and Product Development, and now serves as Executive Vice President, Consumer
Banking of the Company and the Bank. 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 Ex-
press Company (1988-1991). Mr. Shah holds a Masters in Business Administration
from Columbia University and a Bachelor of Arts degree from Bates College.
DIRECTORS OF THE COMPANY
Set forth below are the names and ages of the directors of the Company as of
the date of this Prospectus and the year in which each director's term expires.
The biographies of Messrs. Bhatt and Johnson are located above under the cap-
tion "--Executive Officers."
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME AGE TERM EXPIRES
- --------------------------------------------------------------------------------
<S> <C> <C>
Bharat B. Bhatt................................................ 54 2001
Dan Huebner.................................................... 67 1999
William M. Jackson............................................. 49 2000
Thomas S. Johnson.............................................. 57 1999
Susan J. Kropf................................................. 49 1999
Robert M. McLane............................................... 68 2001
Charles B. McQuade............................................. 57 2000
Alvin N. Puryear............................................... 61 2000
Robert P. Quinn................................................ 62 2000
Edward C. Schmults............................................. 67 2001
Wilfred O. Uhl................................................. 70 2001
Robert F. Vizza................................................ 65 2001
Jules Zimmerman................................................ 64 1999
</TABLE>
DAN F. HUEBNER has been a Director of the Company since its formation in August
1993. A graduate of the University of Minnesota, Mr. Huebner also holds both a
masters and professional degree in aeronautics from the California Institute of
Technology. He is the retired Vice Chairman and a Director of Grumman Corpora-
tion. Mr. Huebner is presently a Trustee of the Atlantic Mutual Insurance Co.
and the Vesterheim Norwegian American Museum, and a Director of the Centennial
Insurance Co. and the Atlantic Specialty Insurance Co.
WILLIAM M. JACKSON has been a Director of the Company since its formation in
August 1993. A graduate of Harvard College, Mr. Jackson received a law degree
from George Washington University Law School. Mr. Jackson is a partner with
Satterlee, Stephens, Burke & Burke, L.L.P., a law firm in New York City.
SUSAN J. KROPF has been a Director of the Company since July 1994. Ms. Kropf
has served as Executive Vice President/President, North America of Avon Prod-
ucts, Inc. ("Avon") since March, 1997. She served as Senior Vice
President/President--New and Emerging Markets of Avon from July 1996 to Febru-
ary 1997. She served as Senior Vice President--Global Product and Business
Development/President--Eastern Europe of Avon from 1994 to July 1996. She
served as Senior Vice President--Global Product Management of Avon from 1993 to
1994, and Group Vice President, U.S. Product Marketing Group of Avon from 1992
to 1993. Ms. Kropf is a Director of Avon and Mead Corporation. A graduate of
St. John's University, Ms. Kropf received a masters degree in business adminis-
tration from New York University.
ROBERT M. MCLANE has been a Director of the Company since its formation in Au-
gust 1993. A graduate of Yale University, Mr. McLane is a retired Senior Vice
President of Marsh & McLennan, Inc., an insurance brokerage corporation. He is
presently a Director of several private corporations and is a Trustee of Green-
wood Cemetery, Brooklyn, New York.
CHARLES B. MCQUADE has been a Director of the Company since its formation in
August 1993. A graduate of Fordham College, Mr. McQuade also obtained a masters
degree in business administration at the Bernard M. Baruch Graduate Business
School. Mr. McQuade is the President and Chief Executive Officer of the Securi-
ties Industry Automation Corporation. Mr. McQuade is a Director with the Brook-
lyn Bureau of Community Service and serves on the Advisory Boards of the
32
<PAGE>
Center for Advanced Technology in Telecommunications (Polytechnic Institute)
and The Stanton Heiskell Center for Public Policy in Telecommunications and In-
formation Systems (City University of New York).
ALVIN N. PURYEAR has been a Director of the Company since its formation in Au-
gust 1993. A graduate of Yale University, he received masters and doctorate de-
grees from Columbia University's Graduate School of Business Administration.
Dr. Puryear is a Professor of Management at Bernard M. Baruch College of the
City University of New York. He is a director of Bank of Tokyo- Mitsubishi
Trust Company in New York City. He is also the Chairman of the Presbyterian
Church Investment and Loan Corporation, and a Director of the Broadcast Capital
Fund, a small business investment company licensed by the Small Business Admin-
istration, and The Interracial Council for Business Opportunity.
ROBERT P. QUINN has been a Director of the Company since its formation in Au-
gust 1993. A graduate of the University of Notre Dame, Mr. Quinn was a General
Partner and Managing Director of the investment banking firm of Salomon Broth-
ers Inc, where he continues as an Honorary Director. Mr. Quinn is also a
Trustee of G.E. Funds, a registered investment management company with several
mutual fund portfolios. Mr. Quinn is the former Chairman and present member of
the Board of Directors of St. Francis-Mercy Corporation, Roslyn, New York. Mr.
Quinn is a member of the Advisory Council for the University of Notre Dame
School of Arts and Letters.
EDWARD C. SCHMULTS has been a Director of the Company since July 1994. Mr.
Schmults served as Senior Vice President and General Counsel of GTE Corporation
from February 1984 to June 1994. A graduate of Yale University, Mr. Schmults
received a law degree from Harvard Law School. Mr. Schmults held various posi-
tions in government, including service as Deputy Attorney General of the United
States and Under Secretary of the United States Treasury Department. Mr.
Schmults was a partner with White & Case, a law firm in New York City. Mr.
Schmults is a Director of The Germany Fund, The Central European Equity Fund,
Deutsche Portfolio and Deutsche Funds, Inc., and Chairman of the Board of
Trustees of The Edna McConnell Clark Foundation.
WILFRED O. UHL has been a Director of the Company since its formation in August
1993. A graduate of The Cooper Union School of Engineering, Mr. Uhl is the re-
tired President of The Long Island Lighting Company, and a member of The New
York Society of Professional Engineers and The Institute of Electrical and
Electronic Engineers. Mr. Uhl is also Treasurer of The Interdenominational
Housing Project in Great Neck, New York, and a Director of Wartburg Lutheran
Services, Brooklyn, New York, a provider of services to the elderly.
ROBERT F. VIZZA has been a Director of the Company since its formation in Au-
gust 1993. He is the retired President and Chief Executive Officer of the St.
Francis-Mercy Corporation, the St. Francis Hospital Foundation and the St.
Francis Research and Education Corp., Roslyn, New York. Having earned a doctor-
ate in business administration from New York University, Dr. Vizza also at-
tained an Honorary Doctorate of Laws from LaSalle College and is a Fellow of
The International Academy of Management. He is a Director of the Phoenix Home
Life Mutual Insurance Company, Greater New York Hospital Association, and the
Catholic Health Network of L.I.
JULES ZIMMERMAN has been a Director of the Company since its formation in Au-
gust 1993. A graduate of Hofstra University, Mr. Zimmerman is the retired Pres-
ident and Chief Executive Officer of Hickok Associates, Incorporated, a con-
sulting firm. He was a senior officer with Avon Products, Inc. from 1976 to
1985 and Chief Financial Officer from 1985 to 1988. Mr. Zimmerman was the New
York Chapter President of The National Association of Corporate Directors and
is affiliated with The American Institute of Certified Public Accountants and
the New York State Society of Certified Public Accountants. He is a member of
the Board of Directors of Projectvision Inc., an electronics company, Manhattan
Scientific, Inc., a development stage electronics company, and the Associated
Blind.
33
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following information discusses certain provisions of the Company's Certif-
icate of Incorporation, as amended (the "Certificate"), and Bylaws (the "By-
laws") and the Delaware General Corporation Law (the "DGCL"). This information
does not purport to be complete and is qualified in its entirety by reference
to the Certificate, the Bylaws and the DGCL.
AUTHORIZED CAPITAL
The Company is authorized to issue two hundred and seventy million
(270,000,000) shares of capital stock consisting of two hundred and twenty mil-
lion (220,000,000) shares of Common Stock, par value $.01 per share, and
50,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock"). As of July 21, 1998, there were 83,422,124 shares of Common Stock out-
standing and no shares of Preferred Stock outstanding.
COMMON STOCK
Voting
Except as described below under the caption "--Restrictions on Acquisitions--
Limitations on Voting Rights," the holders of Common Stock (the "Stockholders")
are entitled to one vote per share. Stockholders do not have the right to cumu-
lative voting in the election of directors.
Dividends
Subject to the prior rights of the holders of any Preferred Stock then out-
standing, holders of Common Stock are entitled to receive such dividends as may
be declared by the Board of Directors out of funds legally available therefor
and, in the event of liquidation or dissolution, to receive the net assets of
the Company remaining after payment of all liabilities and after payment to
holders of all shares of Preferred Stock of the full preferential amounts to
which such holders may be entitled, in proportion to their respective holdings.
The Company is a legal entity separate and distinct from its banking and other
subsidiaries. A substantial portion of the Company's revenues result from
amounts paid as dividends to the Company by the Bank. New York law imposes cer-
tain restrictions on the ability of the Bank to pay such dividends.
In addition, the Company and its bank subsidiaries are subject to various gen-
eral regulatory policies and requirements relating to the payment of dividends,
including requirements to maintain adequate capital above regulatory minimums.
The Banking Department and the FDIC are authorized to determine, under certain
circumstances relating to the financial condition of a state bank, that the
payment of dividends would be an unsafe or unsound practice and to prohibit
payment thereof. The Banking Department and the FDIC have indicated that paying
dividends that deplete a bank's capital base to an inadequate level would be an
unsound and unsafe banking practice. The Banking Department, the FDIC and the
FRB have each indicated that banking organizations should generally pay divi-
dends only out of current operating earnings.
Preemptive Rights; Redemption
Stockholders are not entitled to any preemptive, subscription or conversion
rights. The Common Stock is not subject to redemption. All of the outstanding
shares of Common Stock, including the securities offered hereby, are fully paid
and nonassessable.
PREFERRED STOCK
No shares of Preferred Stock are currently outstanding. The Board of Directors
can, without Stockholder approval, (i) provide for the issuance of shares of
Preferred Stock in series, (ii) establish the number of such shares to be in-
cluded in such series, and (iii) fix the designation, powers, preferences and
rights of each such series and any qualifications, limitations or restrictions
thereon. The Company does not currently have any plans to issue Preferred
Stock.
RESTRICTIONS ON ACQUISITIONS
Limitations on Voting Rights
The Certificate provides that no record owner of Common Stock beneficially
owned, directly or indirectly, by a person who beneficially owns more than 10%
of the then-outstanding shares of Common Stock (the "Limit") as of the record
date for
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determining the Stockholders entitled to vote on any matter may vote any shares
of Common Stock in excess of the Limit. Any such record holder may cast that
number of votes equal to the number of votes that a single record owner of all
Common Stock beneficially owned by such person would be entitled to cast sub-
ject to the limitation on voting rights described in this paragraph, multiplied
by a fraction, the numerator of which is the number of shares of Common Stock
that are both beneficially owned by such person and owned of record by such
record owner and the denominator of which is the total number of shares of Com-
mon Stock beneficially owned by such person owning shares in excess of the lim-
it. "Beneficial ownership" is determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act (the "Rules") and includes (i)
shares beneficially owned, directly or indirectly, by such person or any of his
"affiliates" (as defined in the Certificate), (ii) shares that such person or
his any of his affiliates (A) has the right to acquire upon exercise of conver-
sion rights, exchange rights, warrants, options or otherwise or (B) has sole or
shared voting or investment power with respect thereto pursuant to any agree-
ment, arrangement, understanding, relationship or otherwise or (iii) shares
beneficially owned, directly or indirectly, by any other person with which such
first mentioned person or any of its affiliates acts as a partnership, limited
partnership, syndicate or other group pursuant to any agreement, arrangement or
undertaking for the purpose of acquiring, holding, voting or disposing of any
shares of capital stock of the Company (provided that no person shall be deemed
to be the beneficial ownership of any shares solely because such person holds a
revocable proxy granted for a particular meeting of Stockholders pursuant to a
public solicitation of proxies). No director or officer of the Company shall be
deemed to beneficially own shares beneficially owned by any other director or
officer solely by virtue of acting in their capacities as such, and neither
shall the Company's Employee Stock Ownership Plan (the "ESOP") or any similar
plan of the Company or the Bank or any trustee of the ESOP or any similar plan
(solely by virtue of such trustee's capacity as a trustee) be deemed to benefi-
cially own any shares held under the ESOP or any similar plan. This provision
of the Certificate can be amended only upon the vote of the holders of at least
80% of the voting power of all of the then-outstanding shares of capital stock
of the Company entitled to vote generally in the election of Directors (after
giving effect to the limitations described in this paragraph) (the "Voting
Stock"), voting as a single class.
Change of Control Provisions in the Certificate and Bylaws
The Certificate provides that Business Combinations between the Company or any
majority-owned subsidiary of the Company and an "Interested Stockholder" (as
defined below) or any affiliate thereof require the affirmative vote of the
holders of at least 80% of the Voting Stock, voting as a single class, unless
such Business Combination (i) is approved by a majority of the Company's direc-
tors who are unaffiliated with the Interested Stockholder and were members of
the Board of Directors prior to the time the Interested Stockholder became such
(or were elected by a majority of such directors) or (ii) meets certain price
and procedure requirements that provide for consideration per share of common
stock and any other class of voting stock generally equal to the greater of
that paid by the Interested Stockholder when it acquired its shares of such
stock or the highest per share closing price of the Common Stock on the NYSE
during the 30-day period immediately preceding the date in question. "Business
Combination" is defined to include: (i) any merger or consolidation of the Com-
pany or any subsidiary of the Company with any Interested Stockholder or any
other corporation that is or, after such merger or consolidation, would be an
"Affiliate" (as defined in Rule 12b-2 of the Rules) of an Interested Stockhold-
er, (ii) any sale, lease, exchange, mortgage, pledge, transfer or other dispo-
sition to or with any Interested Stockholder or Affiliate thereof or any of the
assets of the Company or any Subsidiary having a Fair Market Value (as defined
in the Certificate) of at least 25% of the combined assets of the Company and
its Subsidiaries, (iii) the issue or transfer by the Company or any Subsidiary
of any securities of the Company or any Subsidiary to any Interested Stock-
holder or Affiliate thereof in exchange for cash, securities or other property
having a Fair Market Value of at least 25% of the combined Fair Market Value of
the common stock of the Company and its Subsidiaries (other than an issuance or
transfer to an employee benefit plan of the Company or any Subsidiary), (iv)
the adoption of any plan for the liquidation or dissolution of the Company pro-
posed by or on behalf of an Interested Stockholder or Affiliate thereof, or (v)
any reclassification of securities or recapitalization of the Company, or any
merger or consolidation of the Company with any of its Subsidiaries or any
other transaction that has the effect of increasing the proportionate share of
the outstanding shares of any class of equity or convertible securities of the
Company or any of its Subsidiaries owned by any Interested Stockholder or Af-
filiate thereof. "Interested Stockholder" is defined to include any person who
beneficially owns, directly or indirectly, more than 10% of the Voting Stock,
is an Affiliate of the Company and at any time within the two-year period imme-
diately prior to the date in question was the beneficial owner, directly or in-
directly, of 10% of more of the voting power of the then-outstanding Voting
Stock, or is an assignee of or otherwise succeeded to any such shares, if such
assignment or succession was by means of a transaction not involving a public
offering within the meaning of the Securities Act.
Certain Other Provisions of the Certificate and Bylaws
The Certificate and Bylaws contain a number of other provisions that may also
be deemed to have the effect of discouraging or delaying attempts to gain con-
trol of the Company, including provisions in the Certificate: (i) classifying
the Board of Directors into three classes, each class to serve for three years,
with one class being elected annually; (ii) authorizing the Board of Directors
to fix the size of the Board of Directors; (iii) authorizing directors to fill
vacancies on the Board of Directors that occur between annual meetings; (iv)
providing that directors may be removed only for cause and only by the
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<PAGE>
affirmative vote of the holders of at least 80% of the Voting Stock, voting as
a single class; (v) authorizing only the Board of Directors, acting pursuant to
a resolution adopted by a majority of the total number of authorized directors,
to call a special meeting of Stockholders; (vi) requiring any action by Stock-
holders to be effected at a duly called annual or special meeting of Stock-
holder and not by written consent of the Stockholders; (vii) permitting the
Board of Directors to consider all relevant factors when evaluating offers by
another person to make a tender or exchange offer for any equity security of
the Company, to merge or consolidate the Company with another entity or to pur-
chase or otherwise acquire all or substantially all of the properties and as-
sets of the Company, including the social and economic effects of accepting
such an offer on customers, employees and the communities in which the Company
or any of its majority-owned subsidiaries operates or is located; and (viii)
requiring the affirmative vote of the holders of at least 80% of the of the
Voting Stock to amend any of the aforementioned provisions of the Certificate
and Bylaws imposing an 80% voting requirement. The existence of the foregoing
provisions could result in (i) the Company being less attractive to a potential
acquiror, and (ii) the Stockholders receiving less for their shares of Common
Stock than otherwise might be available in the event of a take-over attempt.
Regulation
The Change in Bank Control Act prohibits a person or group of persons from ac-
quiring "control" of a bank holding company unless the FRB has been given 60
days' prior written notice of such proposed acquisition and within that time
period the FRB has not issued a notice disapproving the proposed acquisition or
extending for up to another 30 days the period during which such a disapproval
may be issued, or unless the acquisition is subject to FRB approval under the
BHCA. An acquisition may be made prior to the expiration of the disapproval pe-
riod if the FRB issues written notice of its intent not to disapprove the ac-
tion. Under a rebuttable presumption established by the FRB, the acquisition of
more than ten percent of a class of voting stock of a bank holding company with
a class of securities registered under Section 12 of the Exchange Act, such as
the Company, would, under the circumstances set forth in the presumption, con-
stitute the acquisition of control.
In addition, any company is required to obtain the approval of the FRB under
the BHCA before acquiring 25 percent (five percent in the case of an acquiror
that is a bank holding company) or more of the outstanding shares of Common
Stock or otherwise obtaining "control" over the Company. Under the BHCA, "con-
trol" generally means (i) the ownership or control of 25 percent or more of any
class of voting securities of a bank holding company, (ii) the ability to elect
a majority of a bank holding company's directors or (iii) the ability otherwise
to exercise a controlling influence over the management and policies of a bank
holding company. Accordingly, prior approval of the FRB would be required be-
fore any company could acquire 25% or more of the Company's Common Stock.
Under New York Banking Law, the prior approval of the Banking Department is re-
quired before (i) any action is taken that causes any company to become a bank
holding company, (ii) 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; (iii) any bank holding company acquires direct or indirect ownership
or control of more than 5% of the voting stock of a banking institution; (iv)
any bank holding company or subsidiary thereof acquires all or substantially
all of the assets of a banking institution; or (v) any action is taken that
causes any bank holding company to merge or consolidate with another bank hold-
ing company.
In addition, prior approval of the Banking Department is required before taking
any action that causes any company to acquire direct or indirect "control" of a
banking institution. Under New York Banking Law, "control" is presumed to exist
if any company directly or indirectly owns, controls or holds with power to
vote 10% or more of the voting stock of a banking institution or of any company
that owns, controls or holds the power to vote 10% or more of the voting stock
of a banking institution. Accordingly, prior approval of the Banking Department
would be required before any company could acquire 10% or more of the Company's
Common Stock.
THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to Section 203 of the DGCL, which prohibits a publicly-
held Delaware corporation such as the Company from engaging in various "Busi-
ness Combination" transactions with any "Interested Stockholder" for a period
of three years after the date of the transaction in which the person became
such, unless (i) the board of directors approved the Business Combination or
the transaction that resulted in the stockholder becoming an Interested Stock-
holder prior to the date the Interested Stockholder became such, (ii) upon con-
summation of the transaction resulting in the stockholder becoming an Inter-
ested Stockholder, the Interested Stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced, ex-
cluding for purposes of determining the number of shares outstanding those
shares owned by (a) persons who are directors and also officers and (b) em-
ployee stock plans in which employee participants do not have the right to de-
termine confidentially whether shares held subject to the plan will be tendered
in a tender or exchange offer, or (iii) on or subsequent to such date the Busi-
ness Combination is approved by the board of directors and authorized at an an-
nual or special meeting of stockholders, and not by written consent, by the af-
firmative vote of at least 66 2/3% of the outstanding voting stock which is not
owned by the Interested Stockholder. "Business Combination" is
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<PAGE>
defined in a similar manner as that term is defined in the Certificate. "Inter-
ested Stockholder" is a person who (i) is the owner of 15% or more of the cor-
poration's voting stock or (ii) is an affiliate or associate of the corporation
and was the owner of 15% or more of the corporation's voting stock within the
immediately preceding three-year period, and the affiliates and associates of
such persons. Section 203 could prohibit or delay mergers or other takeover at-
tempts with respect to the Company and, accordingly, may discourage attempts to
acquire the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon Share-
holder Services L.L.C.
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<PAGE>
UNDERWRITING
J.P. Morgan & Co. is acting as bookrunning lead manager for the Offering. J.P.
Morgan & Co., Goldman, Sachs & Co and Lehman Brothers Inc. are acting as joint
lead managers.
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated July 23, 1998 (the "Underwriting Agreement"), the Underwriters
named below, for whom J.P. Morgan Securities Inc., Goldman, Sachs & Co., Lehman
Brothers Inc., Friedman, Billings, Ramsey & Co., Inc., Keefe, Bruyette & Woods,
Inc. and NationsBanc Montgomery Securities LLC, are acting as representatives
(the "Representatives"), have severally agreed to purchase, and the Company has
agreed to sell to them, the respective number of shares of Common Stock set
forth opposite their names below. Under the terms and conditions of the Under-
writing Agreement, the Underwriters are obligated to take and pay for all such
shares of Common Stock, if any are taken. Under certain circumstances, the com-
mitments of nondefaulting Underwriters may be increased as set forth in the Un-
derwriting Agreement.
<TABLE>
----------
<CAPTION>
Number of Shares
UNDERWRITERS ----------------
<S> <C>
J.P. Morgan Securities Inc. ................................... 3,412,500
Goldman, Sachs & Co. .......................................... 3,071,250
Lehman Brothers Inc. .......................................... 3,071,250
Friedman, Billings, Ramsey & Co., Inc. ........................ 1,365,000
Keefe, Bruyette & Woods Inc. .................................. 1,365,000
NationsBanc Montgomery Securities LLC.......................... 1,365,000
ABN AMRO Incorporated.......................................... 150,000
Advest, Inc ................................................... 150,000
Arnhold and S. Bleichroeder, Inc. ............................. 150,000
Chatsworth Securities LLC...................................... 150,000
Johnston, Lemon & Co. Incorporated............................. 150,000
Ormes Capital Markets, Inc. ................................... 150,000
Charles Schwab & Co., Inc. .................................... 150,000
Southeast Research Partners, Inc. ............................. 150,000
Tucker Anthony Incorporated.................................... 150,000
----------
Total........................................................ 15,000,000
==========
</TABLE>
The Underwriters propose initially to offer the Common Stock directly to the
public at the price set forth on the cover page of this Prospectus and to cer-
tain dealers at such price less a concession not in excess of $0.72 per share.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $0.10 per share to certain other dealers. After the public offering
of the Common Stock, the public offering price and such concessions may be
changed.
Pursuant to the Underwriting Agreement, the Company has granted the Underwrit-
ers an option, exercisable for 30 days from the date of this Prospectus, to
purchase up to an additional 2,250,000 shares of Common Stock on the same terms
and conditions as set forth on the cover page hereof. The Underwriters may ex-
ercise such option to purchase solely for the purpose of covering over-allot-
ments, if any, made in connection with the sale of the Common Stock offered
hereby. To the extent such option is exercised, each Underwriter will have a
commitment, subject to certain conditions, to purchase approximately the same
percentage of such additional Common Stock as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares
of Common Stock offered hereby.
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<PAGE>
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriters may over-allot in connection with the Offering,
creating a syndicate short position. In addition, the Underwriters may bid for,
and purchase, shares of Common Stock in the open market to cover syndicate
short positions or to stabilize the price of the Common Stock. Finally, the un-
derwriting syndicate may reclaim selling concessions allowed for distributing
the Common Stock in the Offering if the syndicate repurchases previously dis-
tributed Common Stock in syndicate covering transactions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain
the market price of the Common Stock above independent market levels. The Un-
derwriters are not required to engage in these activities, and may end any of
these activities at any time.
The Company has agreed to indemnify the Underwriters against certain liabili-
ties, including liabilities under the Securities Act.
The Company and each of the Company's executive officers and directors have
agreed, with limited exceptions, that during the period beginning from the date
of this Prospectus and continuing to and including the date 90 days after the
date of this Prospectus, they will not (i) offer, pledge, announce the inten-
tion to sell, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, Common
Stock or any securities of the Company convertible into or exchangeable for
Common Stock or (ii) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of Common
Stock, whether any such transaction described in clauses (i) or (ii) above is
to be settled by delivery of Common Stock or such other securities, in cash or
otherwise, in each case without the prior written consent of J.P. Morgan Secu-
rities Inc. The restrictions described in this paragraph do not apply to (a)
the issuance by the Company of shares of Common Stock pursuant to employee
stock option and restricted stock plans existing on, or upon the conversion or
exchange of convertible or exchangeable securities outstanding as of, the date
of this Prospectus, (b) the issuance of shares of Common Stock in connection
with the transactions described in this Prospectus or (c) any such action taken
in connection with the acquisition by the Company or any of its affiliates of
the stock or assets of one or more businesses or any division or portion of any
such business.
From time to time in the ordinary course of their respective businesses, cer-
tain of the Underwriters and their affiliates have engaged in and may in the
future engage in commercial and/or investment banking transactions with the
Company and its affiliates.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by its special counsel, Wachtell, Lipton, Rosen & Katz, and for the Un-
derwriters by their special counsel, Davis Polk & Wardwell. Wachtell, Lipton,
Rosen & Katz has provided and continues to provide services for the Company,
including in connection with the B of A Housing Acquisition.
EXPERTS
The financial statements as of and for the years ended December 31, 1997 and
1996 incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1997 have been so incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
The financial statements for December 31, 1995 incorporated herein by reference
to the Company's 1997 Annual Report on Form 10-K have been so incorporated in
reliance on the report of KPMG Peat Marwick LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
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