UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
OR
|_| Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file Number 0-22516
GreenPoint Financial Corp.
(Exact name of registrant as specified in its charter)
Delaware 06-1379001
(State or other jurisdiction of incorporation or
organization) (IRS employer
identification number)
90 Park Avenue, New York, New York 10016
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 834-1201
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
Common Stock $0.01 par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. |X| Yes |_| No
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 27, 2000: Common stock par value $0.01 per share,
$1,707,748,925.
This figure is based on the closing price by the New York Stock Exchange
("NYSE") for a share of the registrant's common stock on March 27, 2000 which
was $19.375 as reported in the Wall Street Journal on March 28, 2000. The number
of shares of the registrant's Common Stock issued and outstanding as of March
27, 2000 was 104,008,117 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on May 5, 2000, and the Annual Report to Shareholders
for fiscal 1999 are incorporated herein by reference--Parts II, III and IV.
<PAGE>
TABLE OF CONTENTS
Page
No.
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PART I
ITEM 1. BUSINESS ..................................................... 1
General ............................................................... 1
Mortgage Banking Activities ........................................... 2
Manufactured Housing Activities ....................................... 3
Consumer Banking Activities ........................................... 4
Competition ........................................................... 5
Market Risk Management ................................................ 6
Liquidity Management .................................................. 6
Credit Risk ........................................................... 7
Securities Investment Activities ...................................... 14
Sources of Funds ...................................................... 16
Subsidiary Activities ................................................. 18
Personnel ............................................................. 19
Federal Taxation ...................................................... 19
State and Local Taxation .............................................. 20
Bank Regulation and Supervision ....................................... 21
ITEM 2. PROPERTIES ................................................... 24
ITEM 3. LEGAL PROCEEDINGS ............................................ 24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......... 25
ITEM 4A. EXECUTIVE OFFICERS ........................................... 25
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS .......................................... 27
ITEM 6. SELECTED FINANCIAL DATA ...................................... 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .......................... 27
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ON MARKET RISK ...... 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .................. 27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE .......................... 27
<PAGE>
Page
No.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ........... 28
ITEM 11. EXECUTIVE COMPENSATION ....................................... 28
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT ............................................... 28
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ............... 28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K .......................................... 29
<PAGE>
PART I
ITEM 1. BUSINESS
General
GreenPoint Financial Corp. (the "Company" or "GreenPoint") 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 Company is a leading national specialty housing finance company that
provides a variety of financial services, primarily through its three
subsidiaries, GreenPoint Bank, a New York State chartered savings bank (the
"Bank"), GreenPoint Mortgage Funding, Inc. ("GPM"), a New York Corporation
wholly-owned by the Bank and headquartered in Larkspur, California, and
GreenPoint Credit, LLC ("GreenPoint Credit"), a Delaware corporation
wholly-owned by the Bank and headquartered in San Diego, California. GPM is the
leading national lender in no documentation ("No Doc") and alternative A ("Alt
A") residential mortgages, and GreenPoint Credit is the second largest lender
nationally in the manufactured housing finance industry.
Through the Bank, GPM and GreenPoint Credit, the Company is primarily
engaged in lending throughout the nation. GPM originates both adjustable and
fixed rate mortgage 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 GreenPoint's
lending area. GreenPoint Credit is engaged in originating and servicing
manufactured housing loans. The Bank continues to attract retail deposits from
the general public and invests those deposits, together with funds generated
from operations, in loans and marketable securities. The Bank's revenues are
derived principally from interest on its loan portfolio and investment
securities, proceeds from the sales or securitizations of mortgage and
manufactured housing loans and fees from servicing these loans. The Bank's
primary sources of funds are deposits, proceeds from loan sales and
securitizations, and proceeds from principal and interest payments on loans,
mortgage-backed securities and other securities.
GreenPoint Community Development Corp. ("GPCDC") was organized in 1993 as
a for-profit community development subsidiary of the Company. Complementing the
Bank's leadership in lending in low- and moderate-income areas and to
minorities, GPCDC's focus is primarily on special lending programs, development
opportunities and assistance, consulting and other activities that promote the
objective of greater access to affordable housing for low- and moderate-income
persons residing in the areas served by the Company.
On March 30, 1999, the Company completed the acquisition of Headlands
Mortgage Company ("Headlands") that was accounted for as a tax-free pooling of
interests, with 0.62 shares of the Company's stock being exchanged for each
share of Headlands stock.
Forward-Looking Statements
This Annual Report on Form 10-K contains certain forward-looking
statements, which are based on management's current expectations. These
forward-looking statements include information concerning possible or assumed
future results of operations and business plans, including those relating to
earnings growth (on both a GAAP and cash basis); revenue growth; origination
volume in both the Company's mortgage and manufactured housing finance
businesses; tangible capital generation; market share; expense levels; and other
business operations and strategies. For these statements, GreenPoint claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 to the extent provided by
applicable law. Forward-looking statements involve inherent risks and
uncertainties. We caution you that a number of important factors could cause
actual results to differ materially from those contained in any forward-looking
statement. Such factors include, but are not limited to: risks and uncertainties
related to acquisitions and related integration activities; prevailing economic
conditions; changes in interest rates, loan demand, real estate values, and
competition, which can materially affect origination levels in the Company's
mortgage and manufactured housing finance businesses; the level of defaults and
prepayments on loans made by the Company and each of its affiliates; changes in
accounting principles, policies, and guidelines; adverse changes or conditions
in capital or financial markets which could adversely affect the ability of the
Company to sell or securitize mortgage and manufactured housing originations on
a timely basis or at prices which are acceptable to the Company; changes in any
applicable law, rule, regulation or practice with respect to tax or legal
issues; and other economic, competitive, governmental, regulatory, and
technological factors affecting the Company's operations, pricing, products, and
services. The forward-looking statements are made as of the date of this report,
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.
1
<PAGE>
Mortgage Banking Activities
Products and Services
The Company, through its mortgage banking subsidiary GreenPoint Mortgage
Funding, Inc. ("GPM") is in the business of originating, selling, securitizing,
and servicing mortgage loans secured by one-to four- family residences. Also,
certain loans originated by GPM are retained in the Bank's loan portfolio. As a
specialty mortgage lender, GPM's strategy is to focus on specialized mortgage
loan products for primarily high credit quality borrowers. GPM generally places
an emphasis on credit scores obtained from three major credit bureaus to
evaluate the credit quality of borrowers. GPM considers " high credit quality
borrowers" to be those whose credit scores equal or exceed levels required for
the sale or exchange of their mortgage loans through the Federal National
Mortgage Association ("Fannie Mae") or the Federal Home Loan Mortgage Operation
("Freddie Mac") (collectively "the agencies"). The specialized mortgage loans
targeted by GPM provide a relatively greater "spread" (i.e., greater interest
and other income to the originator relative to the cost associated with funding
and selling the mortgage loans) compared to other mortgage loans that present a
similar credit risk. GPM believes that its wholesale lending channel supported
by its correspondent and retail lending channels, provides an efficient and
responsive origination system for the types of mortgage loans it seeks to
originate.
GPM presently offers a broad range of mortgage loan products in order to
provide maximum flexibility to borrowers and third party mortgage brokers and
other entities through which it originates mortgage loans.
Agency Mortgage Loans. These mortgage loans satisfy the underwriting
criteria for sale or exchange through one of the Agencies:
Non-agency Mortgage Loans. These mortgage loans fail to satisfy the
criteria to be Agency mortgage loans for one or more reasons. Certain of these
mortgage loans ("Jumbos") generally meet the Agency criteria but exceed the
maximum loan size (currently $252,700 for single-family, one-unit mortgage loans
in the continental United States). Jumbos are generally eligible for sale to one
of the nationally privately- sponsored mortgage conduits.
Certain other non-agency mortgage loans ("Alt A") may fail to satisfy
other elements of the agency underwriting criteria, such as those relating to
documentation, employment history, income verification, loan to value ratios,
qualifying ratios, or required borrower net worth. GPM emphasizes the
origination of mortgage loans which fail to satisfy one or more of the agency
and national conduit underwriting criteria but which, from a credit risk
standpoint (as determined primarily by credit score), present a comparable risk
profile.
Home Equity Mortgage Loans. Home equity mortgage loans are generally
secured by second liens on the related property. Home equity mortgage loans can
take the form of a home equity line of credit ("HELOC") or a closed end loan.
Both types of home equity mortgage loans are designed primarily for high credit
quality borrowers and are underwritten according to GPM's criteria for
second-lien mortgage loans. Home equity mortgage loans are originated in some
instances in conjunction with GPM's origination of a first mortgage loan on the
related property.
Limited Documentation Mortgage Loan Product ("No Doc" loans). No Doc loans
serve a particular niche of borrowers willing to pay a premium in the form of
higher interest rates and loan fees and provide larger down payments. In return,
the borrower receives more expedient loan processing by virtue of providing less
income and asset information, as compared to loans underwritten in conformance
with Agency standards. These loans are typically held for investment in the
Company's loan portfolio. As a result of this strategy, combined with strict
appraisal requirements, the Company has achieved higher interest margins and
levels of net interest income compared to typical Agency conforming loans which,
in turn, has resulted in a high level of profitability, despite traditionally
higher levels of loan delinquency.
2
<PAGE>
Credit Parameters
Loan amount limits, maximum loan-to-value ratios and loan pricing are
guided by an evaluation of a borrower's credit history and the loan purpose.
This evaluation results in a borrower being classified in a particular loan
level category, to which lending parameters have been ascribed by GPM. In making
this determination, GPM obtains credit verification from three independent
credit bureaus prior to entering into loan commitments. Factors considered in
making the commitment include the number and length of time credit lines have
been outstanding, prior mortgage loan payment histories, performance on
installment loans and revolving lines of credit, collection and charge-off
experience, and prior bankruptcies and foreclosures. GPM also considers a credit
score ascribed to the borrower under a credit evaluation methodology developed
by Fair, Isaac and Company ("FICO"). This score indicates, based on their
statistical analysis, the percentage of borrowers that would be expected to
become 90 days delinquent on an additional loan.
Mortgage Loan Servicing
GPM also engages in mortgage loan servicing, which includes the processing
of mortgage loan payments and the administration of mortgage loans. GPM's
primary source of servicing rights is the Bank's loan portfolio and mortgage
loans it has originated and sold, and for which it has retained the right to
service. As of December 31, 1999, GPM's mortgage loan servicing portfolio
consisted of approximately 160,000 one- to four-family residential mortgage
loans with an aggregate principal balance of $15.6 billion, including $9.5
billion serviced for GreenPoint and $6.1 billion serviced for other investors.
GPM can realize the value embedded in its mortgage loan servicing portfolio
immediately by selling its mortgage loan servicing rights or, alternatively, it
can realize the value gradually over the life of the mortgage loan servicing
portfolio through the receipt of monthly mortgage loan servicing fees.
Manufactured Housing Activities
Products and Services
During 1998, the Company expanded its lending activities through the
acquisition of BankAmerica Housing Services, which is the second largest lender
nationally in the manufactured housing finance industry. The Company was renamed
GreenPoint Credit. GreenPoint Credit originates a variety of fixed and variable
rate loans in the manufactured housing market. GreenPoint Credit serves 48
states through its principal offices in San Diego, California and service
centers throughout the United States. Manufactured housing ("MH") or a
"manufactured home" is a structure, transportable in one or more sections, which
is designed to be a dwelling with or without a permanent foundation.
GreenPoint Credit pools and securitizes substantially all of the loans it
originates, retaining the servicing on these loans. Such pools are structured
into asset-backed securities, which are primarily sold in the public securities
markets. GreenPoint Credit services these loans, collecting payments from the
borrower and remitting principal and interest payments to the holder of the
contract, or investor certificate backed by the loans. During 1999, the Company
securitized $2.4 billion of manufactured housing loans and sold as whole loans
$0.4 billion of manufactured housing Land/Home loans.
MH financing transactions are originated on either an "indirect" or
"direct" basis. All direct or indirect originations are written on forms
provided or approved by GreenPoint Credit and are originated or purchased on an
individually approved basis in accordance with GreenPoint Credit underwriting
guidelines. Under an indirect financing transaction, a dealer sells a product to
a customer and enters into a sales contract with the customer evidencing a
monetary obligation and providing security for that obligation. Upon
satisfactory review, GreenPoint Credit purchases such sales contracts from
retailers. If a retailer wishes to make such financing available to its
customers, the retailer would apply for retailer approval. Upon satisfactory
results of GreenPoint Credit's investigation of the retailer's creditworthiness
and general business reputation, GreenPoint Credit and the retailer would enter
into a retailer agreement.
Under a direct origination, GreenPoint Credit and the borrower are direct
parties to the loan documentation, which evidences the borrower's obligation to
GreenPoint Credit. GreenPoint Credit originated $3.0 billion of manufactured
housing loans in 1999; 94% indirectly purchased from dealers and 6% directly
originated.
3
<PAGE>
GreenPoint Credit offers a variety of "Home Only" and "Land/Home" products
with fixed and variable rate options. The Home Only loans are secured by the
manufactured home and is a conventional loan program for new and previously
owned manufactured homes. Land/Home loans are secured by both the manufactured
home and the land.
Credit Parameters
GreenPoint Credit believes that the creditworthiness of a potential
borrower should be the most important criterion in determining whether to
approve the purchase or origination of a loan. The borrower's creditworthiness
is measured by custom credit scorecards, which were developed in conjunction
with FICO based on GreenPoint Credit's extensive portfolio. GreenPoint Credit
continually monitors the performance of its scorecards to ensure that they are
correctly rank-ordering the borrowers' credit risk. The borrowers' credit
history, employment history, residence history and debt to income ratio are also
reviewed by GreenPoint Credit personnel as part of the underwriting decision.
GreenPoint Credit's lending criteria also vary by product type to reflect the
risk associated with each product.
Loan Servicing
GreenPoint Credit's servicing responsibilities include collecting
principal and interest payments, taxes, insurance premiums and other payments
from obligors and, when such loans are not owned by GreenPoint Credit, remitting
principal and interest payments to the owners. Collection procedures, which are
managed at the regional office level, include repossession and resale of
manufactured homes securing defaulted loans (and foreclosure if land is
involved). GreenPoint Credit will enter into workout agreements with obligors
under certain defaulted loans, if deemed advisable. Although decisions as to
whether to repossess any manufactured home are made on an individual basis,
GreenPoint Credit's general policy is to institute repossession procedures
promptly after regional office personnel determine that it is unlikely that a
defaulted loan will be brought current, and thereafter to diligently pursue the
resale of such manufactured homes.
GreenPoint Credit services loans on behalf of other entities and its own
portfolio. During 1999, GreenPoint Credit securitized or sold $2.8 billion of
manufactured housing loans in eight transactions that resulted in retained
servicing. At December 31, 1999, GreenPoint Credit serviced approximately
449,700 manufactured housing loans with an outstanding principal balance of
$13.6 billion.
GreenPoint Credit receives a servicing fee equal to approximately 1% of
the outstanding principal balance of each loan serviced for customers.
GreenPoint Credit collects servicing fees out of the borrowers monthly payments.
In addition, GreenPoint Credit recognizes interest income on trust accounts and
late charge fee income on loans serviced for other entities. GreenPoint Credit
is not responsible for repossession costs incurred on loans serviced for other
entities. In 1999, GreenPoint Credit's gross revenues generated from loan
servicing totaled $94.0 million.
Greenpoint credit maintains regular contact with the borrower through
telephone calls, approved mailings and field contact to collect delinquent
accounts. The collection staff work staggered schedules to maximize customer
contact while following the guidelines of the Federal Fair Debt and Collection
Practices Act. On or about the 61st day of delinquency, a notice of default is
sent to the borrower demanding payment in full of all arrears within a 30 day
time period. Collection efforts continue throughout the default period and if
the borrower has not paid by the default deadline, the account is referred to an
attorney to commence repossession proceedings.
At December 31, 1999, GreenPoint Credit serviced approximately 17,900
manufactured housing loans in its own portfolio with an outstanding principal
balance of $622.0 million. GreenPoint Credit does not recognize service fee
income for loans serviced in its own portfolio.
Consumer Banking Activities
The Consumer Branch Network ("Branch Network") consists of 73 full-service
banking offices with 102 automated teller machines. The Branch Network operates
29 branches in Long Island, 40 branches in New York City, and 4 branches in
Westchester County in New York. In addition to its branch system, the Bank's
deposit gathering network includes its telephone banking system. The Branch
Network also offers a variety of financial services to meet the needs of the
communities it serves. Among the services offered are traditional time, savings
and checking accounts, annuity products, mutual funds, mortgages, home equity
loans, credit and debit cards, Savings Bank Life Insurance, safe deposit
services, student loans, installment loans and automatic payroll and Social
Security deposit programs.
4
<PAGE>
Competition
The Company faces significant competition both in making loans and in
attracting deposits. The Company's competition for loans comes principally from
savings banks, commercial banks, savings and loan associations, mortgage banking
companies and credit unions. Its most direct competition for deposits has
historically come from savings and loan associations, savings banks, commercial
banks and credit unions. The New York City metropolitan area has a high density
of financial institutions, many of which are branches of significantly larger
institutions which have greater financial resources than the Company. The Bank
faces additional competition for deposits from non-depository competitors such
as the mutual fund industry, securities and brokerage firms and insurance
companies.
GPM faces intense competition, primarily from commercial banks, savings
and loans and other mortgage lenders. As GPM expands into particular geographic
markets, it will face competition from mortgage lenders with established
positions in such markets. Competition can take place on various levels,
including convenience in obtaining a mortgage loan, service, marketing,
origination channels and pricing. Many of GPM's competitors in the financial
services business are substantially larger and have more capital and other
resources than GPM. Many of GPM's competitors are well established in the
specialty mortgage loan market and a number of others are recent entrants into
that market seeking the relatively attractive profit margins currently
associated with specialty mortgage loan products. Fannie Mae and Freddie Mac are
currently developing technologies and business practices that will expand the
scope of mortgage loans eligible to be Agency mortgage loans, which may include
some Alt A and subprime mortgage loans. To the extent market pricing for GPM's
mortgage loan products becomes more competitive, it may be more difficult to
originate and purchase mortgage loans with attractive yields in sufficient
volume to maintain profitability.
GPM depends primarily on independent mortgage brokers and, to a lesser
extent, on correspondent lenders, for the origination and purchase of its
wholesale mortgage loans, which constitute a significant portion of GPM's
mortgage loan production. These independent mortgage brokers deal with multiple
lenders for each prospective borrower. GPM competes with these lenders for the
independent brokers' business on the basis of price, service, loan fees, costs
and other factors. GPM's competitors also seek to establish relationships with
such brokers, who are not obligated by contract or otherwise to do business with
GPM. GPM's future results of operations and financial condition may be
vulnerable to changes in the volume and costs of its wholesale mortgage loans
resulting from, among other things, competition from other lenders and
purchasers of such mortgage loans.
GreenPoint Credit is directly influenced by consumer demand for new
financing and refinancing of manufactured homes. This demand is driven by
several variables, including regional market trends, economic conditions,
individual preferences and market demographics. GreenPoint Credit's competition
is comprised of a variety of regional and national lending institutions. Finance
companies, banks and credit unions are consistently the primary competitors.
Recently, consolidation has taken place in the retail sector, dominated mainly
by vertically-integrated manufacturers. This consolidation could affect the
competitive environment.
GreenPoint Credit competes by offering competitive interest rates and
flexible financing programs, outstanding service to retailers and customers, as
well as timely credit reviews and decisions. Interest rates are a key component
to overall profitability.
As with traditional, site-built homes, sales of manufactured and modular
homes are subject to seasonal peaks and declines. Sales peak during the spring
and summer months, and decline during fall and winter. Home sales involving land
improvement and/or construction are particularly vulnerable in geographic areas
with inclement winters. To increase home sales during seasonal declines,
GreenPoint Credit frequently offers special incentive and/or loan programs to
retailers and customers.
The types of loans that the Company may originate are subject to federal
and state laws and regulations. Interest rates charged by GreenPoint on loans
are affected principally by the demand for such loans and the supply of money
available for lending purposes and the rates offered by its competitors. These
factors are, in turn, affected by general and economic conditions, monetary
policies of the federal government, including the Federal Reserve Board ("FRB"),
legislative tax policies and governmental budgetary matters.
5
<PAGE>
Market Risk Management
Interest rate risk arises in the ordinary course of the Company's
business, as the repricing characteristics of its loans do not necessarily match
those of its deposit liabilities. The resulting interest rate risk is managed by
careful attention to the mix of asset maturities and deposit offerings and by
adjustments to the Company's investment portfolio and the use of off balance
sheet instruments such as interest rate swaps. The investment strategies are
designed and implemented by the Asset and Liability Management Committee,
("ALCO") within policies and limits approved by the Board of Directors. ALCO
makes use of a variety of tools to measure market risk. Among these are gap
repricing reports and income simulations that provide estimates of the Company's
earnings sensitivities to various interest rate changes.
Market risk also arises as the Company originates and accumulates fixed
rate mortgage and manufactured housing loans prior to their sale or
securitization. As applications are approved, a commitment is made to lend at a
specified interest rate. Should rates rise, either prior to closing or after
closing but prior to sale or securitization, the price at which the loan will be
sold or securitized will decline. Hedging strategies, using forward sales in the
case of residential mortgages, and interest rate swaps in the case of
manufactured housing, are implemented to mitigate the risk of lowered prices in
rising rate environments. Refer to Company's Annual Report to Shareholders for
Fiscal Year ended December 31, 1999, pages 21-26.
Liquidity Management
Liquidity management involves planning to meet anticipated funding needs
at a reasonable cost, as well as developing contingency plans to meet
unanticipated funding needs. Liquidity management is governed by policies
formulated and monitored by ALCO, which take into account the marketability of
assets, the sources and stability of funding, and the level of unfunded
commitments.
Long-term liquidity needs are also provided by a large core deposit base,
which is the most stable source of liquidity a bank can have, due to the
long-term relationship with depositors and the deposit insurance provided by the
FDIC. Deposit funding is supplemented by long-term debt, advances from the
Federal Home Loan Bank of New York ("FHLB-NY") and other borrowings. The
discount window of the Federal Reserve Bank of New York is available to the
Company, to the extent that eligible collateral has been pledged, as a lender of
last resort.
6
<PAGE>
Credit Risk
The Company assumes credit risk primarily in its held-for-investment loan
portfolio, and in the recourse it provides in conjunction with loan sales or
securitizations.
Loans held for Investment Portfolio
The majority of the Company's loan portfolio consists of fixed and ARM
loans secured by one-to four-family residences and to a lesser extent,
multi-family residential loans, commercial real estate loans and other loans
held for investment.
The following tables set forth the composition of the loans receivable
held for investment, in dollar amounts and in percentages of the respective
portfolios at the dates indicated.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------
1999 1998 1997
-------------------- -------------------- --------------------
Percent Percent Percent
Amounts of Total Amounts of Total Amounts of Total
-------- -------- -------- -------- -------- --------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Loans receivable held for investment:
Mortgage loans:
One-to four-family $7,474.6 80.3% $8,023.1 85.3% $7,682.1 86.0%
Multi-family 458.0 4.9 594.4 6.3 621.0 7.0
Commercial 626.9 6.7 573.8 6.1 537.1 6.0
Home equity loans 89.3 1.0 82.1 0.9 66.3 0.7
-------- -------- -------- -------- -------- --------
Total mortgage loans held for investment 8,648.8 92.9 9,273.4 98.6 8,906.5 99.7
-------- -------- -------- -------- -------- --------
Other loans:
Loans secured by depositors' funds 22.8 0.3 24.0 0.3 30.1 0.3
Manufactured housing loans 590.1 6.3 -- -- -- --
Recreational vehicle loans 16.6 0.2 23.7 0.3 -- --
All other loans 29.9 0.3 79.5 0.8 -- --
-------- -------- -------- -------- -------- --------
Total other loans 659.4 7.1 127.2 1.4 30.1 0.3
-------- -------- -------- -------- -------- --------
Total loans receivable held for investment 9,308.2 100.0% 9,400.6 100.0% 8,936.6 100.0%
-------- -------- -------- -------- -------- --------
Less:
Net deferred loan origination fees and
unearned discount (15.0) (14.3) (31.2)
Allowance for possible loan losses (113.0) (113.0) (109.0)
-------- -------- --------
Loans receivable held for investment, net $9,180.2 $9,273.3 $8,796.4
======== ======== ========
<CAPTION>
December 31,
---------------------------------------------
1996 1995
-------------------- --------------------
Percent Percent
Amounts of Total Amounts of Total
-------- -------- -------- --------
(Dollars in millions)
<S> <C> <C> <C> <C>
Loans receivable held for investment:
Mortgage loans:
One-to four-family $6,395.1 85.9% $5,136.5 85.3%
Multi-family 545.5 7.3 475.9 7.9
Commercial 467.9 6.3 376.8 6.3
Home equity loans 16.2 0.2 4.7 0.1
-------- -------- -------- --------
Total mortgage loans held for investment 7,424.7 99.7 5,993.9 99.6
-------- -------- -------- --------
Other loans:
Loans secured by depositors' funds 23.5 0.3 29.5 0.4
Manufactured housing loans -- -- -- --
Recreational vehicle loans -- -- -- --
All other loans -- -- 0.1 --
-------- -------- -------- --------
Total other loans 23.5 0.3 29.6 0.4
-------- -------- -------- --------
Total loans receivable held for investment 7,448.2 100.0% 6,023.5 100.0%
-------- -------- -------- --------
Less:
Net deferred loan origination fees and
unearned discount (48.2) (58.3)
Allowance for possible loan losses (105.0) (105.5)
-------- --------
Loans receivable held for investment, net $7,295.0 $5,859.7
======== ========
</TABLE>
7
<PAGE>
As of December 31, 1999, 63% of the Company's mortgage loan portfolio was
secured by properties located in New York State. The properties securing the
remaining portfolio are dispersed throughout the country, with no state
representing more than 10%.
Loan Maturity and Repricing. The following table shows the contractual
maturities of the Company's loan portfolio, including loans receivable held for
sale, at December 31, 1999. The table does not include prepayments or scheduled
principal amortization. Prepayments and scheduled principal amortization on
mortgage loans totaled $2.2 billion for the year ended December 31, 1999.
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------------------------------
Mortgage Loans
-----------------------------------
One-to Four- Multi- Other Total Loans
Family Family Commercial Loans Receivable
------------ --------- ---------- --------- ----------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Amounts due (1):
Within one year $ 9.5 $ 0.9 $ 2.0 $ 108.2 $ 120.6
One to five years 269.3 43.6 39.0 17.1 369.0
Over five years 7,925.3 389.3 564.7 932.7 9,812.0
--------- --------- --------- --------- ---------
Total amounts due $ 8,204.1 $ 433.8 $ 605.7 $ 1,058.0 $10,301.6
========= ========= ========= ========= =========
</TABLE>
(1) Does not include non-accrual loans.
The following table sets forth, at December 31, 1999, the dollar amount of
all fixed rate loans contractually due and adjustable rate loans repricing after
December 31, 2000.
Due or Repricing After December 31, 2000
----------------------------------------
Fixed Adjustable Total
-------- ---------- --------
(Dollars in millions)
Mortgage loans (1):
One-to four-family $6,295.8 $ 35.5 $6,331.3
Multi-family 419.7 4.4 424.1
Commercial 568.1 9.6 577.7
Other loans (1) 949.8 -- 949.8
-------- -------- --------
Total loans receivable $8,233.4 $ 49.5 $8,282.9
======== ======== ========
(1) Does not include non-accrual loans.
8
<PAGE>
At December 31, 1999, 1998, 1997, 1996 and 1995, loans delinquent 90 days
or more were as follows:
December 31,
----------------------------------------------------
1999 1998
------------------------- -----------------------
90 days or more
----------------------------------------------------
Principal Principal
Number of Balance of Number of Balance of
Loans Loans Loans Loans
---------- ------------ --------- ----------
(Dollars in millions)
Mortgage loans:
One-to four-family 1,379 $ 166.5 1,930 $ 213.1
Multi-family 184 23.6 286 33.7
Commercial real estate 152 21.4 192 24.7
Home equity loans 27 1.9 26 1.6
----- ------- ----- -------
Total mortgage loans 1,742 213.4 2,434 273.1
Other loans 239 2.3 134 1.3
----- ------- ----- -------
Total loans 1,981 $ 215.7 2,568 $ 274.4
===== ======= ===== =======
Delinquent loans to
total loans 2.05% 2.50%
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------
1997 1996 1995
--------------------- --------------------- ---------------------
90 days or more
-----------------------------------------------------------------------
Principal Principal Principal
Number of Balance of Number of Balance of Number of Balance of
Loans Loans Loans Loans Loans Loans
--------- ---------- --------- ---------- --------- ----------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One-to four-family 2,596 $ 254.6 2,559 $ 242.7 2,737 $ 254.3
Multi-family 372 41.0 430 46.0 533 57.9
Commercial real estate 258 34.0 271 35.2 358 46.8
Home equity loans 48 1.1 7 0.5 16 0.8
----- ------- ----- ------- ----- -------
Total mortgage loans 3,274 330.7 3,267 324.4 3,644 359.8
Other loans 84 0.1 168 0.1 -- --
----- ------- ----- ------- ----- -------
Total loans 3,358 $ 330.8 3,435 $ 324.5 3,644 $ 359.8
===== ======= ===== ======= ===== =======
Delinquent loans to
total loans 3.46% 4.25% 5.77%
</TABLE>
9
<PAGE>
The following table sets forth information regarding all non-accrual
loans, including loans in forbearance, loans which are 90 days or more
delinquent but on which the Company is accruing interest and other real estate
owned at the dates indicated. If all non-accrual loans had been performing in
accordance with their original terms, the Company would have recorded interest
income of $30.3 million, as opposed to $27.4 million, which was included in
interest income for the year ended December 31, 1998.
<TABLE>
<CAPTION>
December 31
---------------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Non-accrual mortgage loans $ 219.3 $ 285.1 $ 355.0 $ 356.0 $ 402.1
Non-accrual other loans (1) 0.2 0.1 0.1 0.1 --
Other loans 90 days or more delinquent
and still accruing 2.2 1.2 -- -- --
------- ------- ------- ------- -------
Total non-performing loans (2) 221.7 286.4 355.1 356.1 402.1
------- ------- ------- ------- -------
Other real estate owned, net (3) 7.6 11.5 24.1 29.5 30.9
------- ------- ------- ------- -------
Total non-performing assets $ 229.3 $ 297.9 $ 379.2 $ 385.6 $ 433.0
======= ======= ======= ======= =======
Non-performing loans to total loans
held for investment 2.36% 3.03% 3.97% 4.78% 6.68%
Non-performing assets to total assets 1.47% 1.98% 2.74% 2.83% 2.92%
</TABLE>
(1) Excluding certain other loans delinquent 90 days or more, such as
guaranteed student loans, on which principal and interest are guaranteed
by the U.S. government and certain other loans on which delinquent
principal and interest may be deducted from the borrower's deposit account
balances.
(2) As of December 31, 1999, non-accrual loans included 1,435 one-to
four-family loans, with an aggregate. $171.2 million, 191 multi-family
loans with an aggregate balance of $24.1 million, 156 commercial real
estate loans with an aggregate balance of $22.2 million, 239 other loans
with an aggregate balance of $0.2 million and 27 home equity loans with an
aggregate balance of $1.8 million.
(3) Net of related valuation allowance of $0.3 million, $0.3 million, $0.9
million, $1.3 million, and $2.2 million for foreclosed real estate at
December 31, 1999, 1998, 1997, 1996 and 1995, respectively.
At December 31, 1999, the Company's net other real estate owned totaled
$7.6 million and was held directly by the Company and by subsidiaries of the
Company which were formed for the purpose of holding and maintaining certain
other real estate. See -"Subsidiary Activities." At such date, the aggregate
gross value of other real estate owned was comprised of 49 one-to four-family
properties with an aggregate carrying value of $5.4 million, 11 multi-family
properties with an aggregate carrying value of $1.4 million and 8 commercial
real estate properties with an aggregate carrying value of $1.1 million. The
Company or an independent inspector generally conducts monthly external
inspections on all properties securing loans in foreclosure and generally
conducts external appraisals on all properties prior to taking ownership of the
property. Based upon such inspections and appraisals, the Company will charge
off any loan principal that it deems necessary. The Company or an independent
inspector conducts periodic inspections of its foreclosed real estate and
periodically adjusts its valuation allowance for possible declines in the value
of other real estate owned. The Company's valuation allowance for other real
estate owned at December 31, 1999 totaled $0.3 million, or 3.9% of the aggregate
gross value of other real estate owned. The Company is currently offering for
sale substantially all real estate owned as a result of foreclosure, through
brokers and through its own personnel.
The Company's policies permit the financing of the sale of its foreclosed
real estate on substantially the same terms applicable to its other real estate
mortgage loans with the exception that the Company may loan up to 85% of the
lesser of the appraised value or sales price of the foreclosed property.
10
<PAGE>
Allowance for Possible Loan Losses
The Company 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
susceptible to the effect of future unanticipated changes in general economic
and market conditions that may affect the financial circumstances of borrowers
and/or residential real estate values within the Company's lending areas.
The following table sets forth the Company's allowance for possible loan
losses at the dates and for the periods indicated. The balances below represent
general loan loss reserves and are not allocable to specific loans in the
Company's portfolio.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 113.0 $ 109.0 $ 105.0 $ 105.5 $ 103.0
Provisions charged to income 14.2 13.8 18.9 15.7 9.5
Loans charged-off:
Mortgage loans held for investment (1.0) (1.9) (4.4) (4.7) (5.3)
Other loans (6.8) (1.0) (0.3) (0.2) --
Mortgage loans held for sale -- -- -- -- --
Net loan foreclosure costs (6.9) (7.7) (11.3) (12.6) (10.2)
------- ------- ------- ------- -------
Total charge-offs (14.7) (10.6) (16.0) (17.5) (15.5)
Recoveries 0.5 0.8 1.1 1.3 8.5(1)
------- ------- ------- ------- -------
Balance at end of period $ 113.0 $ 113.0 $ 109.0 $ 105.0 $ 105.5
======= ======= ======= ======= =======
Ratio of net charge-offs during the period to
average loans outstanding during the period 0.15% 0.11% 0.18% 0.25% 0.12%(1)
Ratio of allowance for possible loan losses to
total loans held for investment at the end
of the period 1.21% 1.20% 1.22% 1.41% 1.75%
Ratio of allowance for possible loan losses to
total non-performing loans at the end of
the period 51.48% 39.63% 30.70% 29.48% 26.24%
</TABLE>
(1) Includes a $6.1 million recovery of 1994's bulk sale charge-off. Excluding
the effect of this recovery, the ratio of net charge-offs during the
period to average loans during the period was 0.22%.
11
<PAGE>
In determining the adequacy of the allowance for possible loan losses,
management makes use of statistical analyses of past loss experience for various
categories of loans, assessments of the current economic environment as it
affects borrowers' abilities to meet their obligations and the strength of the
markets in which the Company seeks to recover principal and other costs in the
liquidation of foreclosed and repossessed properties.
With respect to mortgage loans, consideration is given to the proportion of
loans that are current and in various stages of delinquency or foreclosure. In
addition to these factors, the risk of loss is also affected by the type of
property backing the loans, such as single of multi-family or mixed used
commercial. The foregoing considerations assist in determining the likelihood of
default and eventual foreclosure. The strength of the real estate markets in
which the Company lends is assessed to reach judgments on the eventual level of
recoveries.
In considering the potential for losses in the Company's manufactures housing
loan portfolio, several risk factors have been identified related to the type of
loan, the initial down payment, the type of unit financed (single vs.
multi-sectional) and the age of the loan. Using experienced gained from
servicing hundreds of thousands of loans, management makes judgments concerning
the likelihood of defaults for these various risks factors. Current trends in
the local markets for liquidating repossessions form expectations of recoveries.
Management expects the level of charge-offs in the year ahead will exceed those
incurred in recent years. In general, the level of charge-offs on manufactured
housing loans runs substantially higher than those of residential mortgage as a
percentage of outstanding principal. The manufactured housing portfolio was
established in the third quarter of 1999, and will be held for all of the year
2000. However, the Company does not expect to add to the portfolio in the
future.
12
<PAGE>
Other Credit Exposure
GreenPoint securitizes or sells with recourse most of its manufactured
housing loans. At December 31, 1999 total loans outstanding under these
arrangements were $3.4 billion. GreenPoint retains most of the credit risk
inherent in these loans. Expected losses are deducted when estimating the gain
on sale and the initial value of retained interests. The value of retained
interests in the securitizations are reviewed each quarter. Based on recent loss
trends, the values are updated.
Loans Held for Sale
The following table sets forth the composition of the Company's loans
receivable held for sale, at the dates indicated.
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Loans receivable held for sale:
Residential mortgage loans $ 814.1 $ 904.8 $ 646.4 $ 237.5 $ 264.8
Guaranteed student loans 2.4 3.3 4.2 4.5 6.9
Manufactured housing loans 265.8 535.2 -- -- --
Manufactured housing land/home loans 130.6 139.1 -- -- --
Deferred loan origination fees and
unearned discount (4.9) (4.3) 6.7 2.1 0.9
-------- -------- -------- -------- --------
Loans receivable held for sale, net $1,208.0 $1,578.1 $ 657.3 $ 244.1 $ 272.6
======== ======== ======== ======== ========
</TABLE>
Loan Sales
GreenPoint sells those loans it does not place in its portfolio through
either (1) whole loan sales, which involves selling pools of loans to individual
purchasers, or (2) securitization, which involves the private placement or
public offering of pass-through asset-backed securities. This approach allows
GreenPoint to capitalize on favorable conditions in either the securitization or
whole loan sale market when loan production is sold. In addition, this dual
approach allows GreenPoint to diversify its exposure to the volatility of the
capital markets.
Whole Loan Sales. Most mortgage loans and some manufactured housing loans
were sold as whole loans. These sales were predominately done without recourse,
meaning the credit risk on the loans was transferred to the buyer. For those
whole loans with recourse, the Company retains some credit risk. Whole loan
sales may either retain, or transfer to the buyer, the right to service the
loans.
Securitization. The primary funding strategy of GreenPoint Credit is to
securitize manufactured housing loans originated or purchased. Management has
structured the operations and processes specifically for the purpose of
efficiently originating, purchasing, underwriting and servicing loans for
securitization in order to meet the requirements of rating agencies, credit
enhancers, and investors.
13
<PAGE>
Securities Investment Activities
The Board of Directors sets the securities investment policies of the
Company and the Bank. These policies contain guidelines and limits regarding the
credit quality, liquidity and market risk of the securities portfolios.
The Company's investment policy permits investments in various types of
marketable investments including U.S. Treasury obligations, securities of
various federal agencies, mortgage-backed securities, asset-backed securities,
corporate debt securities, money market instruments, CD's, Bank notes, preferred
stock, commercial paper, municipal obligations, and equity. In addition, the
Company, as a member of the FHLB-NY, is required to maintain a specified
investment in the capital stock of the FHLB-NY.
The Company's money market investments consist of interest-bearing
deposits in other banks, federal funds sold and securities purchased under
agreements to resell ("reverse repurchase agreements"). The reverse repurchase
agreements are collateralized by securities having market values of at least
102% of the amount of the funds advanced which are held by a third party
custodian.
The Company designates securities as held to maturity, available for sale,
or held for trading purposes. Securities held for indefinite periods of time for
use in asset/liability management are classified as available for sale and are
carried at fair value with unrealized gains or losses excluded from earnings and
reported in accumulated other comprehensive income as a separate component of
stockholders' equity, net of tax. Securities held for trading purposes are
carried at fair value with market revaluations recognized as realized gains and
losses included in non-interest income.
The Company has, through a third party agent bank/custodian, a securities
lending program whereby the Company receives a fee for lending its U.S.
government and federal agency securities to securities dealers. The securities
are collateralized by other U.S. government and federal agency securities having
a market value of at least 102% of the loaned securities which are held by the
third party bank/custodian. Pursuant to this program, the third party agent bank
indemnifies the Company for losses related to borrower defaults, market risk and
delivery failures.
The table below sets forth certain information regarding the carrying and
market values of the Company's money market investments, securities available
for sale, securities held to maturity, and securities held for trading purposes.
<TABLE>
<CAPTION>
December 31,
========----========----========----========----========----========
1999 1998 1997
========----======== ========----======== ========----========
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
-========- ======== -======== ======== ========- ========
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Money market investments (1) $1,052.8 $1,052.8 $ 924.2 $ 924.2 $1,060.0 $1,060.0
======== ======== ======== ======== ======== ========
Securities:
Securities available for sale:
U. S. Government and Federal
agency obligations:
U. S. Treasury notes/bills $ -- $ -- $ -- $ -- $ 700.6 $ 695.8
Agency notes/asset-backed securities 139.8 138.1 260.5 260.3 125.9 125.8
Mortgage-backed securities 918.1 894.2 561.0 566.4 780.6 779.6
Collateralized mortgage obligations 589.8 583.5 206.2 209.6 113.9 114.4
Trust certificates collateralized by
GNMA securities 16.7 16.7 26.6 26.5 124.5 123.6
Corporate asset-backed securities 25.0 25.0 25.0 24.9 25.0 25.0
Corporate bonds 33.8 33.7 24.3 24.2 -- --
Commercial paper 169.4 169.4 145.7 145.7 113.5 113.5
Other 114.8 114.1 80.0 80.0 30.0 30.0
-------- -------- -------- -------- -------- --------
Total securities available for sale $2,007.4 $1,974.7 $1,329.3 $1,337.6 $2,014.0 $2,007.7
======== ======== ======== ======== ======== ========
Securities held to maturity:
Tax-exempt municipals $ 0.5 $ 0.5 $ 0.6 $ 0.6 $ 0.6 $ 0.6
Financial 1.5 1.5 2.7 2.7 3.4 3.4
-------- -------- -------- -------- -------- --------
Total securities held to maturity $ 2.0 $ 2.0 $ 3.3 $ 3.3 $ 4.0 $ 4.0
======== ======== ======== ======== ======== ========
Trading assets $ -- $ -- $ -- $ -- $ 25.0 $ 25.0
======== ======== ======== ======== ======== ========
</TABLE>
(1) Consists of interest-bearing deposits in other banks, federal funds sold
and securities purchased under agreements to resell.
14
<PAGE>
The table below sets forth certain information regarding the amortized
costs, weighted average yields and maturities of the Company's money market
investments, securities available for sale and held to maturity, and trading
assets at December 31, 1998. There were no securities (exclusive of obligations
of the U.S. government and federal agencies) issued by any one entity with a
total carrying value in excess of 10% of stockholders' equity at December 31,
1999.
<TABLE>
<CAPTION>
at December 31, 1999
---------------------------------------------------------------------------
One Year or Less One to Five Years Five to Ten Years
---------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield
--------- --------- --------- --------- --------- ---------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Money market investments (1) $ 1,052.8 5.89% $ -- --% $ -- --%
========= ========= =========
Securities available for sale:
Bonds and other investment securities
U. S. agency notes and ABS securities $ -- --% $ 139.8 6.71% $ -- --%
Mortgage-backed securities 5.6 6.09 3.1 6.10 79.9 6.20
Commercial paper 169.4 6.15 -- -- -- --
Collateralized mortgage obligations -- -- 134.3 6.81 3.2 6.65
Trust certificates collateralized by
GNMA securities -- -- -- -- 16.7 6.74
Municipal bonds -- -- -- -- -- --
Private asset-backed securities -- -- 25.0 6.28 -- --
Other (2) -- -- -- -- -- --
--------- --------- ---------
Total securities available for sale $ 175.0 6.15% $ 302.2 6.71% $ 99.8 6.31%
========= ========= =========
Securities held to maturity:
Tax-exempt municipals $ -- --% $ -- --% $ 0.5 7.45%
Financial -- -- 0.9 8.08 -- --
--------- --------- ---------
Total bonds and other debt securities $ -- --% $ 0.9 8.08% $ 0.5 7.45%
========= ========= =========
<CAPTION>
at December 31, 1999
---------------------------------------------------------------------------
More Than Ten Years Total Securities
---------------------- ------------------------------------------------
Average
Weighted Remaining Weighted
Amortized Average Years to Amortized Fair Average
Cost Yield Maturity Cost Value Yield
--------- --------- --------- --------- --------- ---------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Money market investments (1) $ -- --% -- $ 1,052.8 $ 1,052.8 5.89%
========= ========= =========
Securities available for sale:
Bonds and other investment securities
U. S. agency notes and ABS securities $ 33.8 6.92% 8.01 $ 173.6 $ 171.8 6.75%
Mortgage-backed securities 829.5 7.03 21.99 918.1 894.2 6.95
Commercial paper -- -- 0.06 169.4 169.4 6.15
Collateralized mortgage obligations 452.3 7.03 21.18 589.8 583.5 6.98
Trust certificates collateralized by
GNMA securities -- -- 5.80 16.7 16.7 6.74
Municipal bonds 64.7 5.46 -- 64.7 64.1 5.46
Private asset-backed securities -- -- 3.40 25.0 25.0 6.28
Other (2) 50.1 5.20 -- 50.1 50.0 5.20
--------- --------- ---------
Total securities available for sale $ 1,430.4 6.89% 17.07 $ 2,007.4 $ 1,974.7 6.77%
========= ========= =========
Securities held to maturity:
Tax-exempt municipals $ -- --% 8.48 $ 0.5 $ 0.5 7.45%
Financial 0.6 8.08 12.61 1.5 1.5 8.08
--------- --------- ---------
Total bonds and other debt securities $ 0.6 8.08% 11.58 $ 2.0 $ 2.0 7.92%
========= ========= =========
</TABLE>
(1) Consists of interest-bearing deposits in other banks, federal funds sold
and securities purchased under agreements to resell.
(2) Consists primarily of U.S. Agency preferred stock with no stated maturity.
During the year ended December 31, 1999, the Company sold available for
sale securities aggregating $102.2 million, resulting in gross realized gains of
$1.8 million and gross realized losses of $0.9 million.
During the year ended December 31, 1998, the Company sold available for
sale securities aggregating $1.0 billion, resulting in gross realized gains of
$3.7 million and gross realized losses of $1.1 million.
During the year ended December 31, 1997, the Company sold available for
sale securities aggregating $2.1 billion, resulting in gross realized gains of
$3.9 million and gross realized losses of $1.9 million.
15
<PAGE>
Sources of Funds
General. The bank's primary sources of funds are deposits, loan sales and
securitizations, payments on loans, mortgage backed and other debt securities,
maturities and redemptions of investment securities, advances from the FHLB-NY,
and borrowings under repurchase agreements. Additionally, the Company has
supplemented its funding sources through the prior acquisition of investment
grade credit ratings from four credit rating agencies. Obtaining investment
grade credit ratings has afforded the Company the ability to access the
investment grade debt markets.
Deposits. The Bank offers a variety of deposit accounts having a range of
interest rates and terms. The Bank's deposits consist of various types of
savings, N.O.W., non-interest bearing checking, money market and certificates of
deposit. The flow of deposits is influenced significantly by general economic
conditions, changes in prevailing interest rates and competition. The Bank's
deposits are obtained primarily from the areas served by its Branch Network.
Management determines the Bank's deposit rates based upon market conditions and
local competition. The Bank relies primarily on competitive rates of interest,
offering promotional rates, marketing and long-standing relationships with
customers to attract and retain deposits. The Bank does not actively solicit
certificates of deposit accounts in excess of $100,000.
FHLB Advances. During 1999, the Company became a member of the FHLB-NY.
The Company obtained advances during 1999, totaling $900 million. At December
31, 1999, the outstanding balance was $675 million. Interest expense related to
these borrowings totaled $15.3 million for the year ended December 31, 1999. The
advances are collateralized by the Bank's $91.8 million investment in FHLB
stock, certain first mortgage loans and certain mortgage-backed securities.
Long Term Debt. In July 1997, the Company published an Offering Circular
under Regulation D authorizing it to issue up to $3 billion of Senior and
Subordinated Bank Notes ("Notes"). Of this allowable capacity, the Company has,
thus far, issued $200 million of 6.70% Senior Notes maturing July 15, 2002.
Interest expense attributed to these Notes for the years ended December 31,
1999, 1998 and 1997 was $13.9 million, $13.9 million and $6.4 million,
respectively.
Guaranteed Preferred Beneficial Interest in Company's Junior Subordinated
Debentures. In June 1997, GreenPoint Capital Trust I, a Delaware statutory
business trust owned by the Company, issued $200 million of 9.10% Guaranteed
Preferred Beneficial Interest in the Company's Subordinated Debentures ("Capital
Securities"). The Junior Subordinated Debentures mature on June 1, 2027.
Interest expense attributable to these Capital Securities was $18.3 million,
$18.3 million and $10.7 million for the years ended December 31, 1999, 1998 and
1997, respectively.
At December 31, 1999, the Company had outstanding $962.5 million in
certificates of deposit in amounts of $100,000 or more, maturing as follows:
Weighted
Amount Average Rate
------------ ------------
(Dollars in millions)
Maturity Period:
Three months or less $ 169.6 4.88%
Over three through six months 116.5 5.16
Over six through twelve months 384.0 5.55
Over twelve months 292.4 5.77
------------
Total $ 962.5 5.45%
============
16
<PAGE>
The following table sets forth the distribution of the Company's deposit
accounts at the dates indicated and the weighted average nominal interest rates
on each category of deposits presented. Management does not believe that the use
of period end balances instead of average balances results in any material
differences to the information presented.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------
1999 1998
------------------------------------ ------------------------------------
Weighted Weighted
Average Percent Average
Nominal of Total Nominal
Amount Percent Rate Amount Deposits Rate
--------- --------- --------- --------- --------- ---------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Account type:
Savings and club $ 1,369.9 11.85% 2.19% $ 1,551.8 13.89% 2.17%
N.O.W. and checking 540.4 4.67 0.99 539.9 4.83 0.99
Variable rate savings 1,981.4 17.14 3.30 1,804.5 16.15 3.26
Money Market 459.5 3.98 3.23 524.3 4.69 3.20
--------- --------- --------- ---------
Total 4,351.2 37.64 2.60 4,420.5 39.56 2.55
--------- --------- --------- ---------
Term certificates of deposit:
Certificates of deposit over $100,000 962.5 8.33 5.45 819.4 7.33 5.32
Certificates of deposit less than
$100,000 with original maturities of:
Six months or less 17.1 0.15 3.98 343.7 3.08 4.97
Six to 12 months 715.0 6.19 4.51 2,074.6 18.57 4.93
12 to 30 months 3,810.6 32.96 5.57 1,722.8 15.42 5.28
30 to 48 months 149.5 1.29 5.69 155.3 1.39 5.79
48 to 72 months 291.1 2.52 5.92 459.1 4.11 6.02
72 to 84 months 55.7 0.48 6.22 75.8 0.68 6.28
IRA and Keoghs less than 3 years 1,207.4 10.44 5.05 1,101.9 9.86 4.99
--------- --------- --------- ---------
Total term certificates of deposit 7,208.9 62.36 5.38 6,752.6 60.44 5.19
--------- --------- --------- ---------
Total deposits $11,560.1 100.00% 4.33% $11,173.1 100.00% 4.14%
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997
------------------------------------
Weighted
Average
Nominal
Amount Percent Rate
--------- --------- ---------
(Dollars in millions)
<S> <C> <C> <C>
Account type:
Savings and club $ 1,739.4 15.85% 2.43%
N.O.W. and checking 533.9 4.87 1.24
Variable rate savings 1,702.1 15.51 3.37
Money Market 478.4 4.36 3.25
--------- ---------
Total 4,453.8 40.59 2.68
--------- ---------
Term certificates of deposit:
Certificates of deposit over $100,000 723.7 6.59 5.51
Certificates of deposit less than
$100,000 with original maturities of:
Six months or less 222.5 2.03 4.44
Six to 12 months 1,243.9 11.33 4.84
12 to 30 months 2,054.9 18.73 5.64
30 to 48 months 334.3 3.05 6.25
48 to 72 months 683.9 6.23 5.51
72 to 84 months 75.3 0.69 6.40
IRA and Keoghs less than 3 years 1,180.7 10.76 5.21
--------- ---------
Total term certificates of deposit 6,519.2 59.41 5.38
--------- ---------
Total deposits $10,973.0 100.00% 4.28%
========= =========
</TABLE>
17
<PAGE>
The following table presents, by various rate categories, the amount of
certificates of deposit outstanding at the dates indicated.
<TABLE>
<CAPTION>
December 31, Maturities at December 31, 1999
-------------------------------- --------------------------------------------
Within One to
1999 1998 1997 One Year Three Years Thereafter Total
-------- -------- -------- -------- -------- -------- --------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Certificates of deposit accounts:
3.99% or less $ 927.5 $1,008.9 $1,064.4 $ 842.0 $ 85.4 $ 0.1 $ 927.5
4.00% to 4.99% 944.7 963.0 343.6 685.4 224.7 34.6 944.7
5.00% to 5.99% 4,145.9 4,234.2 4,300.9 3,052.9 1,090.1 2.9 4,145.9
6.00% to 6.99% 1,161.4 514.8 664.3 201.6 867.8 92.0 1,161.4
7.00% to 7.99% 28.0 28.9 141.2 12.2 15.8 -- 28.0
8.00% to 8.99% 1.4 2.1 3.8 1.4 -- -- 1.4
9.00% or greater -- 0.7 1.0 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total $7,208.9 $6,752.6 $6,519.2 $4,795.5 $2,283.8 $ 129.6 $7,208.9
======== ======== ======== ======== ======== ======== ========
</TABLE>
Personnel
As of December 31, 1999, the Company had 4,093 full-time employees and 111
part-time employees. A collective bargaining unit does not represent the
employees and the Company considers its relationship with its employees to be
good.
Federal Taxation
Generally, the Company and its subsidiaries report income on a
consolidated calendar year basis using the accrual method of accounting and are
subject to federal income taxation in the same manner as other corporations with
certain exceptions, including particularly, the Bank's addition to its tax
reserve for bad debts as discussed below. The following discussion of tax
matters is intended as a summary and does not purport to be a comprehensive
description of the tax rules applicable to the Company and its subsidiaries.
18
<PAGE>
Bad Debt Reserves. For tax years prior to 1996, under the Internal Revenue
Code a special bad debt deduction for additions to the tax bad debt reserve was
allowed. This reserve method was eliminated by Federal legislation enacted in
1996. For tax years beginning after December 31, 1995, the Bank is only
permitted to take federal deductions for bad debts on the basis of actual loan
charge-off activity (specific charge-offs). In addition, this legislation also
required the Bank to recapture into taxable income the portion of existing tax
bad debt reserve created in tax years beginning after December 31, 1987 over a
six-year period. The amount of such reserve subject to recapture at December 31,
1999 is approximately $1.0 million.
Provided the Bank continues to satisfy certain definitional tests and
other conditions, for New York State and City income tax purposes, the Bank is
still permitted to continue to take special reserve method bad debt deductions.
The deductible annual addition to the state reserve may be computed using a
specific formula based on the Bank's loss history ("Experience Method") or a
statutory percentage equal to 32% of the Bank's New York State or City taxable
income ("Percentage Method"). The Bank used the percentage method for 1998 and
expects to use the percentage method for 1999.
Taxable Distributions and Recapture. Under prior federal law, tax bad debt
reserves created prior to January 1, 1988 were subject to recapture into taxable
income should the Bank fail to meet certain thrift asset and definitional tests.
As a result of the 1996 legislation, these thrift related recapture rules were
also eliminated. However, under current law, pre-1988 reserves remain subject to
recapture should the Bank make certain non-dividend distributions or cease to
maintain a bank charter. Management has no intention of taking such actions.
At December 31, 1999, the Bank's total federal pre-1988 reserve was
approximately $140 million. This reserve reflects the cumulative effects of
federal tax deductions by the Bank for which no Federal income tax provision has
been made.
The Bank also maintains a state and local tax reserve for qualifying loans
in excess of the federal reserve for which no state and local tax has been
provided. The amount of the Bank's state and city tax reserve for qualifying
loans in excess of the federal reserve balance as of December 31, 1999 was
approximately $371 million and $380 million, respectively. In the event the Bank
were to allow "qualifying assets" to fall below 60% of total assets or otherwise
fail definitional tests, the Bank would no longer be subject to the New York
State and City reserve method of computing bad debt deductions as described
above. As a result, the Bank would record a charge relating to this balance of
the then existing state and city tax reserves. Future bad debt deductions would
be based on a "5-year experience" method, which is closely reflective of
financial statement loan charge-off activity. Management is not contemplating
any actions that would cause recapture of the qualifying reserves into taxable
income.
Corporate Alternative Minimum Tax. The Internal Revenue Code of 1986, as
amended, imposes a tax on alternative minimum taxable income ("AMTI") at a rate
of 20%. AMTI is calculated as federal taxable income adjusted for certain items
of "tax preference."
Dividends Received Exclusion and Other Matters. The Company may exclude
from its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends received exclusion is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Company will not file a consolidated tax return, except that if
the Company owns more than 20% of the stock of a corporation distributing a
dividend, then 80% of any dividends received may be excluded.
The Company is being audited by the Internal Revenue Service for the
calendar year 1997. Management of the Company believes that any action taken by
the service will not materially affect the financial condition and results of
operation of the Company.
State and Local Taxation
New York State and New York City Taxation. The Company and the Bank report
income on a combined calendar year basis to both New York State and New York
City. New York State Franchise Tax on corporations is imposed in an amount equal
to the greater of (a) 9% of "entire net income" allocable to New York State (b)
3% of "alternative entire net income" allocable to New York State (c) 0.01% of
the average value of assets allocable to New York State or (d) nominal minimum
tax. Entire net income is based on federal taxable income, subject to certain
modifications. Alternative entire net income is equal to entire net income
without certain modifications. The New York City Corporation Tax is imposed
using similar alternative taxable income methods and rates.
A temporary Metropolitan Transportation Business Tax Surcharge on banking
corporations doing business in the Metropolitan District has been applied since
1982. The Company transacts a significant portion of its business within this
district and is subject to this surcharge. For the tax year ended December 31,
1999, the surcharge rate is 17% of the state franchise tax liability. New York
City does not impose surcharges applicable to the Company.
19
<PAGE>
The Company is being audited by the New York State Department of Taxation
and Finance for the tax years 1995 through 1997 and the New York City Department
of Finance for the tax years 1992, 1993 and 1996. Management of the Company
believes that any actions taken by the taxing authorities will not materially
affect the financial condition and results of operations of the Company.
Multi State Taxation. Generally, the Company and its subsidiaries are
subject to tax in a state on the basis of income generating activities occurring
within that state. Generally, state taxes are imposed on allocated income,
average assets or a nominal minimum tax. For the tax year ended December 31,
1999, the Company and its subsidiaries are expected to file returns in most
states using the allocated income alternative.
Delaware State Taxation. As a Delaware holding company not earning income
in Delaware, the Company is exempt from Delaware corporate income tax but is
required to file an annual report with and pay an annual franchise tax to the
State of Delaware. The tax is imposed as a percentage of the capital base of the
Company with an annual maximum of $150,000.
Bank Regulation and Supervision
The following discussion sets forth certain of the material elements of
the regulatory framework applicable to GreenPoint and its subsidiaries. This
regulatory framework is intended primarily for the protection of depositors and
the federal deposit insurance funds and not for the protection of security
holders. To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to those
provisions. A change in the statutes, regulations or regulatory policies
applicable to GreenPoint or its subsidiaries may have a material effect on the
business of GreenPoint.
General. As a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), GreenPoint is subject to
examination and supervision by the FRB. Under the BHCA, bank holding companies
generally may not acquire ownership or control of more than 5% of the voting
shares or substantially all of the assets of any company, including a bank,
without the FRB's prior approval. In addition, bank holding companies generally
may engage, directly or indirectly, only in banking and such other activities as
are determined by the FRB to be closely related to banking.
Subsidiary banks of a bank holding company are subject to certain
quantitative and qualitative restrictions imposed by the Federal Reserve Act on
any extension of credit to, or purchase of assets from, or letter of credit
issued on behalf of, the bank holding company or its non-bank subsidiaries, and
on the investment in or acceptance of stocks or securities of such holding
company or its subsidiaries as collateral for loans. In addition, federal laws
and regulations limit the amounts of, and establish required procedures and
credit standards with respect to, loans and other extensions of credit to
certain officers, directors and principal shareholders of GreenPoint, certain of
its subsidiaries and related interests of such persons.
In addition, if GreenPoint were to acquire another bank or bank holding
company, it could become subject to the bank holding company regulations
promulgated under New York State Banking Law ("State Banking Laws"). GreenPoint
is not currently subject to the bank holding company regulations of State
Banking Laws because a company such as GreenPoint that controls only one banking
institution is not deemed to be a bank holding company under State Banking Laws.
However, the Bank is subject to other State Banking Laws and to extensive
regulation by the Banking Department, as its chartering agency, and by the
Federal Deposit Insurance Corporation (the "FDIC"), as its deposit insurer. The
Bank is also subject to regulation by the FRB. GreenPoint and its subsidiaries
also are affected by the fiscal and monetary policies of the federal government
and the FRB, and by various other governmental requirements and regulations.
Liability for Bank Subsidiaries. Under current FRB policy, a bank holding
company is expected to act as a source of financial and managerial strength to
each of its subsidiary banks and to maintain resources adequate to support each
such subsidiary bank. This support may be required at times when the bank
holding company may not have the resources to provide it. In the event of a bank
holding company's bankruptcy, any commitment by the bank holding company to a
federal bank regulatory agency to maintain the capital of a subsidiary bank
would be assumed by the bankruptcy trustee and entitled to priority of payment.
Similarly, any depository institution insured by the FDIC, including the
Bank, can be held liable for any loss incurred, or reasonably expected to be
incurred, by the FDIC in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) any assistance provided
by the FDIC to a commonly controlled FDIC-insured depository institution in
danger of default. "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a default is likely to occur in
the absence of regulatory assistance. Also, if such a default occurred with
respect to a bank, any capital loans to the bank from its parent holding company
would be subordinate in right of payment to payment of the bank's depositors and
certain of its other obligations.
20
<PAGE>
Capital Requirements. GreenPoint is subject to risk-based capital
requirements and guidelines imposed by the FRB, which are substantially similar
to the capital requirements and guidelines imposed by the FDIC, the Office of
Thrift Supervision and the Office of the Comptroller of the Currency on the
depository institutions within their respective jurisdictions. For this purpose,
a depository institution's or holding company's assets and certain specified
off-balance sheet commitments are assigned to four risk categories, each
weighted differently based on the level of credit risk that is ascribed to such
assets or commitments. A depository institution's or holding company's capital,
in turn, is divided into two tiers: core ("Tier 1") capital, which includes
common equity, non-cumulative perpetual preferred stock and a limited amount of
cumulative perpetual preferred stock and related surplus (excluding auction rate
issues) and a limited amount of cumulative perpetual preferred stock and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill, certain identifiable intangible assets and certain other assets; and
supplementary ("Tier 2") capital, which includes, among other items, perpetual
preferred stock not meeting the Tier 1 definition, mandatory convertible
securities, subordinated debt and allowances for loan and lease losses, subject
to certain limitations, less certain required deductions.
GreenPoint, like other bank holding companies, currently is required to
maintain Tier 1 and "total capital" (the sum of Tier 1 and Tier 2 capital) equal
to at least 4% and 8% of its total risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit), respectively. At
December 31, 1999, GreenPoint met both requirements, with Tier 1 and total
capital equal to 10.77% and 11.75% of its total risk-weighted assets.
The FRB, the FDIC and the Banking Department have adopted rules to
incorporate market and interest rate risk components into their risk-based
capital standards. Amendments to the risk-based capital requirements of the FRB
and the FDIC, incorporating market risk, became effective January 1, 1998. Under
the new market risk requirements, capital will be allocated to support the
amount of market risk related to a financial institution's ongoing trading
activities.
The FRB also requires bank holding companies to maintain a minimum
"leverage ratio" (Tier 1 capital to adjusted total assets) of 3% if the holding
company has the highest regulatory rating and meets certain other requirements,
or of 3% plus an additional cushion of at least 100 to 200 basis points if the
holding company does not meet these requirements. At December 31, 1999,
GreenPoint's leverage ratio was 8.64%.
The FRB may set capital requirements higher than the minimums noted above
for holding companies whose circumstances warrant it. For example, holding
companies experiencing or anticipating significant growth may be expected to
maintain capital positions substantially above the minimum supervisory levels
without significant reliance on intangible assets. Furthermore, the FRB has
indicated that it will consider a "tangible Tier 1 capital leverage ratio"
(deducting all intangibles) and other indicia of capital strength in evaluating
proposals for expansion or new activities.
The Bank is subject to similar risk-based and leverage capital
requirements adopted by the FDIC. The Bank was in compliance with the applicable
minimum capital requirements as of December 31, 1999. The Bank has not been
advised by any federal banking agency or by the Banking Department of any
specific minimum leverage ratio requirement applicable to it.
Failure to meet capital requirements could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, which are described under
"FDICIA."
FDICIA. FDICIA, among other things, identifies five capital categories for
insured depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires federal bank regulatory agencies to implement
systems for "prompt corrective action" for insured depository institutions that
do not meet minimum capital requirements, based on these categories. FDICIA
imposes progressively more restrictive constraints on operations, management and
capital distributions, depending on the category in which an institution is
classified. Unless a bank is "well capitalized," it is subject to restrictions
on its ability to offer brokered deposits and on certain other aspects of its
operations. An "undercapitalized" bank must develop a capital restoration plan
and its parent holding company must guarantee the bank's compliance with the
plan up to the lesser of 5% of the bank's assets at the time it became
undercapitalized and the amount needed to comply with the plan.
As of December 31, 1999, GreenPoint Bank was "well capitalized," based on
the "prompt corrective action" ratios and guidelines described above. It should
be noted, however, that the Bank's capital category is determined solely for the
purpose of applying the FDIC's "prompt corrective action" regulations and that
the capital category may not constitute an accurate representation of the Bank's
overall financial condition or prospects.
21
<PAGE>
Dividend Restrictions. State Banking Laws impose certain restrictions on
the payment of dividends by the Bank to GreenPoint, including a provision that,
without regulatory approval, the Bank cannot declare and pay dividends in any
calendar year in excess of its net profits, as defined by the State Banking
Laws, for that year combined with its retained net profits, as defined by the
State Banking Laws, of the two preceding years, less any required transfer to
surplus. Likewise, the approval of the FDIC is required for any dividend if the
total of all dividends declared by the Bank in any calendar year would exceed
the total of its net profits, as defined by the FDIC, for such year combined
with its retained net profits, as defined by the FDIC, for the preceding two
years. In addition, GreenPoint may not pay a dividend in an amount greater than
its net profits then on hand. At December 31, 1999, $303.4 million of the total
stockholders' equity of the Bank was available for payment of dividends to
GreenPoint without approval by the applicable regulatory authority.
In addition, federal bank regulatory authorities have authority to
prohibit the Bank from engaging in an unsafe or unsound practice in conducting
its business. The payment of dividends, depending upon the financial condition
of the bank in question, could be deemed to constitute such an unsafe or unsound
practice. The ability of the Bank to pay dividends in the future is currently,
and could be further, influenced by bank regulatory policies and capital
guidelines.
Deposit Insurance Assessments. The deposits of the Bank are insured up to
regulatory limits by the FDIC and, accordingly, are subject to deposit insurance
assessments to maintain the Bank Insurance Fund (the "BIF") and the Savings
Association Insurance Fund ("SAIF") administered by the FDIC. The FDIC has
adopted regulations establishing a permanent risk-related deposit insurance
assessment system. Under this system, the FDIC places each insured bank in one
of nine risk categories based on (i) the bank's capitalization and (ii)
supervisory evaluations provided to the FDIC by the institution's primary
federal regulator. Each insured bank's insurance assessment rate is then
determined by the risk category in which it is classified by the FDIC.
Due to the Bank's current risk-based assessment, as of January 1, 2000,
the annual insurance premiums on bank deposits insured by the BIF (approximately
75% of the Bank's deposits) and the SAIF (approximately 25% of the Bank's
deposits) were both zero.
The Deposit Insurance Funds Act of 1996 provides for assessments to be
imposed on insured depository institutions with respect to deposits insured by
the BIF and the SAIF (in addition to assessments currently imposed on depository
institutions with respect to BIF- and SAIF-insured deposits) to pay for the cost
of Financing Corporation ("FICO") funding. The FICO assessment rates as of
January 1, 2000 were $0.02120 per $100 annually for BIF-assessable deposits and
$0.02120 per $100 annually for SAIF-assessable deposits.
Depositor Preference Statute. Federal legislation has been enacted
providing that deposits and certain claims for administrative expenses and
employee compensation against an insured depository institution would be
afforded a priority over other general unsecured claims against such
institution, including federal funds and letters of credit, in the "liquidation
or other resolution" of the institution by any receiver.
Brokered Deposits. Under FDIC regulations, no FDIC-insured depository
institution can accept brokered deposits unless it (i) is well capitalized, or
(ii) is adequately capitalized and receives a waiver from the FDIC. In addition,
these regulations prohibit any depository institution that is not well
capitalized from (a) paying an interest rate on deposits in excess of 75 basis
points over certain prevailing market rates or (b) offering "pass through"
deposit insurance on certain employee benefit plan accounts subject to certain
exceptions.
Interstate Banking And Branching. Under the Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994 ("Riegle-Neal"), subject to certain
concentration limits and other requirements, (i) bank holding companies such as
GreenPoint are permitted to acquire banks and bank holding companies located in
any state; (ii) any bank that is a subsidiary of a bank holding company is
permitted to receive deposits, renew time deposits, close loans, service loans
and receive loan payments as an agent for any other bank subsidiary of that
holding company; and (iii) banks are permitted to acquire branch offices outside
their home states by merging with out-of-state banks, purchasing branches in
other states, and establishing de novo branch offices in other states; provided
that, in the case of any such purchase or opening of individual branches, the
host state has adopted legislation "opting in" to those provisions of
Riegle-Neal; and provided that, in the case of a merger with a bank located in
another state, the host state has not adopted legislation "opting out" of that
provision of Riegle-Neal. GreenPoint could use Riegle-Neal to acquire banks in
additional states.
Control Acquisitions. The Change in Bank Control Act prohibits a person or
group of persons from acquiring "control" of a bank holding company, unless the
Federal Reserve Board has been notified and has not objected to the transaction.
Under a rebuttable presumption established by the Federal Reserve Board, the
acquisition of 10% or more of a class of voting stock of a bank holding company
with a class of securities registered under Section 12 of the securities
Exchange Act of 1934, such as the Company, would, under the circumstances set
forth in the presumption, constitute acquisition of control of the bank holding
company.
22
<PAGE>
In addition, a company is required to obtain the approval of the Federal
Reserve Board under the Bank Holding Company Act before acquiring 25% (5% in the
case of an acquirer that is a bank holding company) or more of any class of
outstanding common stock of a bank holding company, or otherwise obtaining
control or a "controlling influence" over the bank holding company.
Financial Modernization Legislation. On November 12, 1999, President
Clinton signed into law the Gramm-Leach-Bliley Act, which permits bank holding
companies to become financial holding companies and, by doing so, affiliate with
securities firms and insurance companies and engage in other activities that are
financial in nature or complementary thereto. A bank holding company may become
an FHC, if each of its subsidiary banks is well capitalized under the FDICIA
prompt corrective action provisions, well managed and has at least a
satisfactory rating under the Community Reinvestment Act, by filing a
declaration that the bank holding company wishes to become an FHC and meets all
applicable requirements.
No prior regulatory approval will be required for an FHC to acquire a
company, other than a bank or savings association, engaged in activities
permitted under the Gramm-Leach-Bliley Act. Activities cited by the
Gramm-Leach-Bliley Act as being "financial in nature" include:
o securities underwriting, dealing and market making
o sponsoring mutual funds and investment companies
o insurance underwriting and agency
o merchant banking activities
o activities that the Board has determined to be closely relate to banking
The Gramm-Leach-Bliley Act may change the operating environment of the
Company and its subsidiaries in substantial and unpredictable ways. We cannot
accurately predict the ultimate effect that this legislation, or implementing
regulations, will have upon the financial condition or results of operations of
the Company or any of its subsidiaries.
ITEM 2. PROPERTIES
The Company's executive office is located at 90 Park Avenue, New York, New
York. This location contains approximately 41.1 thousand square feet of
commercial office space, located on the 4th floor, which the Company leases. In
addition, TrueWeb, Inc. has leased 33 thousand square feet of commercial office
space on the 19th floor of the same location. The Company also has an operating
center at 1981 Marcus Avenue, Lake Success, New York. This location contains
approximately 105.3 thousand square feet of commercial office space, which the
Company leases. In addition, GreenPoint Mortgage leases an operating center in
Charlotte, North Carolina at 5032 Parkway Plaza Boulevard, which contains 40.6
thousand square feet. GreenPoint Mortgage leases 112.3 thousand square feet of
commercial office space located in Larkspur, California, including 16.3 thousand
square feet at 700 Larkspur Landing Circle, 35.1 thousand square feet at 900
Larkspur Landing Circle and 60.9 thousand square feet at 1100 Larkspur Landing
Circle. The Company maintains a servicing operations center located in Columbus,
Georgia. In Columbus, GreenPoint Mortgage owns the property at 2300 Brookstone
Boulevard, which contains 34.7 thousand square feet of office space. Also in
Columbus is another property which the Company leases, located at 2920 Fourth
Avenue. This property contains 15.4 thousand square feet and is used for office
and storage space. The Company also maintains a servicing operations center at
1435 N. Dutton Avenue in Santa Rosa, California which has 15.2 thousand square
feet and warehouse space of 12.4 thousand square feet at 1160 N. Dutton Avenue
in Santa Rosa, California. Additionally, GreenPoint Credit leases 90.0 thousand
square feet of office space at 10089 Willow Creek Road, San Diego, California.
This location is the headquarters for the manufactured housing operations.
The Bank operates its consumer banking activities out of 73 branches
located throughout the New York metropolitan area.
GreenPoint Mortgage operates its mortgage lending activities from its
Charlotte, North Carolina operating center. Hub offices are located in Arizona,
California, Colorado, Connecticut, Florida, Georgia, Illinois, Massachusetts,
Michigan, New Jersey, Pennsylvania, Texas, Virginia and Washington.
ITEM 3. LEGAL PROCEEDINGS
Pending Litigation
The Company is not involved in any pending legal proceedings other than
routine proceedings occurring in the ordinary course of business which, in the
aggregate, involved amounts that are believed by management to be immaterial to
the consolidated financial statements of the Company.
23
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to the Company's shareholders during the quarter
ended December 31, 1999.
ITEM 4A. EXECUTIVE OFFICERS
The following sets forth-certain information regarding the individuals who
are deemed to be executive officers of the Company.
Thomas S. Johnson, 59, has been Chairman and Chief Executive Officer of
the Corporation since joining the Corporation in August 1993. He was also
President of the Corporation from August 1993 to October 1997. Mr. Johnson has
served as President of both Chemical Bank and Manufacturers Hanover Trust
Company. He is a Director of Alleghany Corporation, a company engaged in the
insurance and reinsurance businesses, RR Donnelley & Sons, Inc., a printing
company, Online Resources & Communications Corporation, and a number of
not-for-profit organizations, including The Institute of International
Education, The Asia Society, The United States Japan Foundation, The Cancer
Research Institute of America and WNET Channel 13, New York. He is Chairman of
the Board of Trustees of Trinity College. A graduate of Trinity, he also has a
masters degree in business administration from Harvard University.
Bharat B. Bhatt, 56, has been a Director of the Corporation since October
1997. Mr. Bhatt joined the Corporation in June 1995 as Vice Chairman and was
appointed as the Corporation's President and Chief Operating Officer in October
1997. Mr. Bhatt served as the Chief Financial Officer of Shawmut National
Corporation from 1992 to 1994, as a Senior Vice President at Mellon Bank from
1989 to 1992 and held various positions at Chemical Bank from 1971-1989. A
graduate of the University of Bombay, Mr Bhatt also attended the Management
Program at the Harvard Business School. Mr. Bhatt is a member of The Institute
of Chartered Accountants.
Peter T. Paul, 56, has been a Director of the Corporation since March
1999. Mr. Paul became a member of the Corporation's management as a Vice
Chairman in March 1999 following the Corporation's acquisition of Headlands
Mortgage Company ("Headlands") and was appointed President and Chief Executive
Officer of GreenPoint Credit in January 2000. Mr. Paul founded Headlands, which
began operation in 1986, and served as its Chairman, Chief Executive officer and
President. He earned a BA in business administration from the University of New
Hampshire and an MBA from Boston University. Mr. Paul is a Director of the
California Mortgage Bankers Association and the Federal Agricultural Mortgage
Corporation (Farmer Mac).
Jean C. Bingham, 48, joined the Company in February 1993 and serves as
Executive Vice President, Risk Management. Prior to that she served as Executive
Vice President and Chief Operating Officer of Barclays American/Mortgage
Corporation from 1993-1995 and Vice President, Retail Bank Mortgage Production
at Anchor Savings Bank from 1989-1993. Previously, she was Senior Vice
President, WeSav Funding Correspondent Division of WeSav Mortgage Corporation
from 1987-1989 and Senior Vice President, National Funding Correspondent
Division of Midland Mortgage Company from 1985-1987. Mrs. Bingham had also held
various positions at Norwest Mortgage Inc. Mrs. Bingham earned a BA from the
University of Minnesota.
Howard C. Bluver, 43, joined GreenPoint in June 1994 and currently serves
as Senior Vice President, General Counsel, and Corporate Secretary. Prior to
joining the Bank, Mr. Bluver held a variety of positions at the Office of Thrift
Supervision in the Treasury Department. His final assignment was as Deputy Chief
Counsel for Corporate Transactions. Prior to that he worked at the Securities
and Exchange Commission and held positions from a Staff Attorney to Branch Chief
of the Division of Corporation Finance. Mr. Bluver earned a BA in Political
Science from SUNY Albany and a JD from SUNY Buffalo, School of Law.
S. A. Ibrahim, 48, joined GreenPoint in March 1997 and was appointed
President and Chief Executive Officer of GreenPoint Mortgage in January 2000.
Prior to that he served as Chief Operating Officer of the combined mortgage
business of GreenPoint Mortgage and Headlands Mortgage upon completion of the
Headlands acquisition. 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 Mortgage Business, Chief of Staff to
the Vice Chairman in charge of Consumer Banking 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 Business Services Division at Bank of
America. Mr. Ibrahim holds a B. E. in Engineering from Osmania University in
Hyderabad, India, and an MBA in Finance from the Wharton School at the
University of Pennsylvania.
24
<PAGE>
Jeffrey R. Leeds, 54, joined the Bank in September 1995 and serves as
Executive Vice President and Chief Financial Officer. Prior to that, he served
as Executive Vice President, Finance, and Treasurer. Before 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 Masters in Business Administration and Master of Philosophy from the
Columbia University Graduate School of Business.
Mary M. Massimo, 54, joined GreenPoint in November 1999 and serves as
Senior Vice President and Human Resources Director of the Bank. Before joining
GreenPoint, she was head of Human Resources and office operations at Rockefeller
& Co., Inc., between 1994-1999. From 1998-1994, she headed Human Resources at
Swiss Bank Corporation North America. Ms. Massimo has also held senior positions
in Human Resources at Drexel, Burnham, Lambert, Inc., and International Paper
Co. Ms. Massimo earned a BA in psychology from the College of New Rochelle, and
she earned both masters and doctorate degrees in psychology from Fordham
University.
Charles P. Richardson, 53, joined the Company in April 1993 and was
appointed Executive Vice President and Chief Financial Officer for GreenPoint
Credit in January 2000. Prior to that he served as the Company's Executive Vice
President, Corporate Development. Prior to joining the Company, Mr. Richardson
was Executive Vice President and Chief Financial Officer for Dollar Dry Dock
Bank (1985-1992) and was a banking and thrift industry consultant (1992-1993).
Mr. Richardson holds a business degree in accounting from Temple University.
Ramesh Shah, 52, joined the Bank in June 1996 and serves as Executive Vice
President, Consumer Banking of the Company and the Bank. Prior to that, he
served as Executive Vice President, Marketing and Product Development. Before
joining the Bank, Mr. Shah was Senior Vice President of NatWest Bancorp. (1994 -
1996); Senior Vice President of Shearson Lehman Brothers (1991-1994) and Senior
Vice President of American Express Company (1988 - 1991). Mr. Shah holds a
Masters in Business Administration from Columbia University and a Bachelor of
Arts degree from Bates College.
25
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is currently listed on the New York Stock
Exchange (NYSE) under the symbol "GPT." Trading in the Company's stock commenced
on January 28, 1994. As of March 27, 2000, 104,008,117 shares of common stock
were issued and outstanding, and held by approximately 3,958 holders of record.
In 1999 the Company paid a cash dividend of $0.22 per share in March, June,
September and December. In 1998 the Company paid a cash dividend of $0.16 per
share in March, June, September and December. In 1997 the Company paid a cash
dividend of $0.125 per share in February, May, August and November.
Information relating to the high, low and quarter-end closing sales prices
of the Common Stock appears on page 57 of the Company's 1999 Annual Report to
Shareholders and is incorporated herein by reference.
On March 30, 1999, the company completed a pooling transaction.
Accordingly, the financial statements for all years presented have been restated
to reflect the impact of the transaction.
ITEM 6. SELECTED FINANCIAL DATA
The above-captioned information appears under "Five Year Selected
Consolidated Data" on pages 17 and 18 in the Company's 1999 Annual Report to
Shareholders and is incorporated herein by reference.
In addition, the Company's ratios of average equity to average assets is
13.31%, 11.25%, and 10.27% for the years ended December 31, 1999, 1998 and 1997,
respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The above captioned information appears under "Management's Discussion and
Analysis" on pages 19 through 30 in the Company's 1999 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ON MARKET RISK
The above captioned information appears under "Management's Discussion and
Analysis" on pages 21 through 26 in the Company's 1999 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The above captioned information appears on pages 31 through 36 in the
Company's 1999 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
26
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information presented under the heading "Information with Respect to
Nominees and Continuing Directors" on pages 3 through 5 in the Company's
definitive Proxy Statement for its Annual Meeting of Shareholders to be held on
May 5, 2000, which was filed with the SEC on March 24, 2000, is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation included under the heading
"Executive Compensation" on pages 10 through 16 (excluding the Stock Performance
Graph on page 13) in the Company's Definitive Proxy Statement for its Annual
Meeting of Shareholders to be held on May 5, 2000, which was filed with the SEC
on March 24, 2000, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to security ownership of certain beneficial owners
and management included under the heading "Securities Owned by Directors and
Executive Officers" on page 6 in the Company's Definitive Proxy Statement for
its Annual Meeting of Shareholders to be held on May 5, 2000, which was filed
with the SEC on March 24, 2000, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
included under the heading "Transactions with Certain Related Persons" on page
17 in the Company's Definitive Proxy Statement for its Annual Meeting of
Shareholders to be held on May 5, 2000, which was filed with the SEC on March
24, 2000, is incorporated herein by reference.
27
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
GreenPoint Financial Corp.
List of Exhibits (filed herewith unless otherwise noted)
(a) The following documents are filed as a part of this report:
(1) Consolidated Financial Statements of the Company are incorporated by
reference to the following indicated pages of the 1999 Annual Report
to Shareholders:
Pages
-----
Consolidated Statements of Financial Condition as of
December 31, 1999 and 1998 31
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997 32
Consolidated Statements of Comprehensive Income for the
years ended December 31, 1999, 1998 and 1997 33
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1999, 1998 and 1997 34
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 35-36
Notes to the Consolidated Financial Statements 37
Report of Independent Accountants 58
28
<PAGE>
Exhibit
Number
- ------
2.1 Purchase of Assets and Liability Assumption Agreement by and
between Home Savings of America, FSB, and GreenPoint Bank (1)
2.2 Stock Purchase Agreement between BankAmerica Corp. and GreenPoint
Bank (2)
2.3 Agreement and Plan of Merger by and among GreenPoint Financial
Corp., GF Acquisition Corp. and Headlands Mortgage Company (3)
3.1 Certificate of Incorporation of GreenPoint Financial Corp. (4)
3.2 Bylaws of GreenPoint Financial Corp. (5)
3.3 Restated Organization Certificate of GreenPoint Bank (6)
3.4 Bylaws of GreenPoint Bank (7)
10.1 Employment Agreement and Change of Control Agreement between
GreenPoint Financial Corp., GreenPoint Bank and Bharat B. Bhatt
(8)
10.2 Amended Employment Agreement between GreenPoint Financial Corp.,
GreenPoint Bank and Thomas S. Johnson (9)
10.3 Change of Control Agreement between GreenPoint Financial Corp.,
GreenPoint Bank and Charles P. Richardson (10)
10.4 GreenPoint Financial Corp. Amended and Restated 1994 Stock
Incentive Plan (11)
10.5 GreenPoint Financial Corp. 1994 Non-Employee Directors Stock
Option Plan (12)
10.6 GreenPoint Financial Corp. 1994 Annual Incentive Plan (13)
10.7 GreenPoint Financial Corp. 1994 Long Term Incentive Plan (14)
10.8 GreenPoint Bank Recognition and Retention Plan for Employees (15)
10.9 GreenPoint Bank Retirement Plan for Independent Directors (16)
10.10 GreenPoint Bank 1993 Directors' Deferred Fee Stock Unit Plan (17)
10.11 GreenPoint Bank Employee Protection Plan for Officers (18)
10.12 GreenPoint Bank Employee Protection Plan for Staff Members (19)
10.13 GreenPoint Financial Corp. 1999 Stock Incentive Plan
10.14 GreenPoint Financial Corp. 1999 Annual Incentive Plan
11.1 Statement Regarding Computation of Per Share Earnings
12.1 Statement Regarding Computation of Ratios
13.1 Annual Report to Shareholders for Fiscal Year ended December 31,
1999
21.1 Subsidiaries of the Company
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
- ----------
(1) Incorporated by reference to Exhibit 2.1 to the Company's Quarterly Report
on Form 10-Q, dated June 30, 1995
(2) Incorporated by reference to Exhibit 2.1 to the Company's Quarterly Report
on Form 10-Q, dated March 31, 1998
(3) Incorporated by reference to Exhibit 2.1 to Company's Registration
Statement on Form S-4, dated February 18, 1999
(4) Incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report
on Form 10-Q, dated March 31, 1995
(5) Incorporated by reference to Exhibit 3.2 to the 1997 10-K
(6) Incorporated by reference to Exhibit 3.3 to the 1994 10-K
(7) Incorporated by reference to Exhibit 3.4 to the 1997 10-K
(8) Incorporated by reference to Exhibit 10.1 to the 1996 10-K
(9) Incorporated by reference to Exhibit 10.1 to the 1994 10-K
(10) Incorporated by reference to Exhibit 10.3 to the 1997 10-K
(11) Incorporated by reference to Exhibit 10.3 to the 1994 10-K
(12) Incorporated by reference to Exhibit 10.4 to the 1994 10-K
(13) Incorporated by reference to Exhibit 10.5 to the 1994 10-K
(14) Incorporated by reference to Exhibit 10.6 to the 1994 10-K
(15) Incorporated by reference to Exhibit 10.7 to the 1994 10-K
(16) Incorporated by reference to Exhibit 10.8 to the 1994 10-K
(17) Incorporated by reference to Exhibit 10.9 to the 1994 10-K
(18) Incorporated by reference to Exhibit 10.10 to the 1994 10-K
(19) Incorporated by reference to Exhibit 10.11 to the 1994 10-K
The Schedules have been omitted as the required information is either not
applicable or has been included in the Notes to the Consolidated Financial
Statements in the Company's Annual Report to Shareholders.
29
<PAGE>
Reports on Form 8-K
On October 1, 1999, GreenPoint Credit Corp., the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following documents: (i) a Pooling and Servicing Agreement,
dated as of September 1, 1999, between GreenPoint Credit Corp., as Contract
Seller and as Servicer and Bank One, National Association as Trustee.
On October 13, 1999, Headlands Mortgage Securities Inc., a subsidiary of
Headlands Mortgage Company, a wholly owned subsidiary of GreenPoint Bank, filed
a current report on Form 8-K in connection with its previous issuance of
Headlands Home Equity Loan Trust 1999-1 Revolving Home Equity Loan Asset-Backed
Notes Series, 1999-1, Class A-1 and Class A-2 Notes.
On October 20, 1999, GreenPoint Credit, LLC, the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following documents: (i) a Pooling and Servicing Agreement,
dated as of March 1, 1999, between GreenPoint Credit, LLC, as Contract Seller
and Servicer and The First National Bank of Chicago as Trustee; and (ii) the
required Monthly Investor Servicing Report.
On October 20, 1999, GreenPoint Credit, LLC, the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following documents: (i) a Pooling and Servicing Agreement,
dated as of February 1, 1999, between GreenPoint Credit, LLC, as Contract Seller
and Servicer and The First National Bank of Chicago as Trustee; and (ii) the
required Monthly Investor Servicing Report.
On October 20, 1999, GreenPoint Credit, LLC, the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following documents: (i) the Underwriting Agreement, dated
November 17, 1998, between GreenPoint Credit, LLC, as Contract Seller and Credit
Suisse First Boston, as the representative of the several underwriters; (ii) a
Pooling and Servicing Agreement, dated as of November 1, 1998, between
GreenPoint Credit, LLC, as Contract Seller and Servicer and The First National
Bank of Chicago as Trustee; and (iii) the required Monthly Investor Servicing
Report.
On October 20, 1999, GreenPoint Credit, LLC, the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following documents: (i) a Pooling and Servicing Agreement,
dated as of May 1, 1999, between GreenPoint Credit, LLC, as Contract Seller and
Servicer and The First National Bank of Chicago as Trustee; and (ii) the
required Monthly Investor Servicing Report.
On October 21, 1999, GreenPoint Credit, LLC, the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following documents: (i) a Pooling and Servicing Agreement,
dated as of September 1, 1999, between GreenPoint Credit, LLC, as Contract
Seller and Servicer and The First National Bank of Chicago as Trustee; and (ii)
the required Monthly Investor Servicing Report.
On November 29, 1999, GreenPoint Credit, LLC filed a current report on
Form 8-K in order to file the following documents: (i) the opinion of Orrick,
Herrington & Sutcliffe LLP ("Orrick") relating to certain tax matters in
connection with the offering of GreenPoint Credit Manufactured Housing Contract
Trust Pass-Through Certificates, Series 1999-5 (the "Publicly Offered
Certificates"), which contains Orrick's consent to use of its name in the
Prospectus Supplement ("Prospectus Supplement") dated November 23, 1999 together
with the related Prospectus dated November 23, 1999; (ii) External Computational
Materials prepared by Credit Suisse First Boston Corporation.
On December 2, 1999, GreenPoint Credit, LLC, the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following documents: (i) a Pooling and Servicing Agreement,
dated as of May 1, 1999, between GreenPoint Credit, LLC, as Contract Seller and
Servicer and The First National Bank of Chicago as Trustee; and (ii) the
required Monthly Investor Servicing Report.
On December 2, 1999, GreenPoint Credit, LLC, the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following documents: (i) a Pooling and Servicing Agreement,
dated as of February 1, 1999, between GreenPoint Credit, LLC, as Contract Seller
and Servicer and The First National Bank of Chicago as Trustee; and (ii) the
required Monthly Investor Servicing Report.
30
<PAGE>
On December 2, 1999, GreenPoint Credit, LLC, the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following documents: (i) the Underwriting Agreement, dated
November 17, 1998, between GreenPoint Credit, LLC, as Contract Seller and Credit
Suisse First Boston, as the representative of the several underwriters; (ii) a
Pooling and Servicing Agreement, dated as of November 1, 1998, between
GreenPoint Credit, LLC, as Contract Seller and Servicer and The First National
Bank of Chicago as Trustee; and (iii) the required Monthly Investor Servicing
Report.
On December 2, 1999, GreenPoint Credit, LLC, the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following documents: (i) a Pooling and Servicing Agreement,
dated as of September 1, 1999, between GreenPoint Credit, LLC, as Contract
Seller and Servicer and The First National Bank of Chicago as Trustee; and (ii)
the required Monthly Investor Servicing Report.
On December 2, 1999, GreenPoint Credit, LLC, the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following documents: (i) a Pooling and Servicing Agreement,
dated as of March 1, 1999, between GreenPoint Credit, LLC, as Contract Seller
and Servicer and The First National Bank of Chicago as Trustee; and (ii) the
required Monthly Investor Servicing Report.
On December 9, 1999, GreenPoint Credit, LLC, the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following document: a Pooling and Servicing Agreement dated
November 1, 1999 between GreenPoint, as Contract Seller and as Servicer and Bank
One, National Association as the Trustee in connection with the sale of
approximately $540,000,000 of GreenPoint Credit Manufactured Housing Contract
Trust Pass-Through Certificates, Series 1999-5, on November 30, 1999.
On December 15, 1999, GreenPoint Credit, LLC filed a current report on
Form 8-K in order to file the following documents: (i) the opinion of Orrick,
Herrington & Sutcliffe LLP ("Orrick") relating to certain tax matters in
connection with the offering of GreenPoint Credit Manufactured Housing Contract
Trust Pass-Through Certificates, Series 1999-6 (the "Publicly Offered
Certificates"), which contains Orrick's consent to use of its name in the
Prospectus Supplement ("Prospectus Supplement") dated December 9, 1999 together
with the related Prospectus dated December 9, 1999; (ii) the consent of
PricewaterhouseCoopers LLP to the use of its name in the "Experts" section of
the Prospectus Supplement; and (iii) External Computational Materials prepared
by Salomon Smith Barney Inc.
On December 21, 1999, GreenPoint Mortgage Securities Inc., a subsidiary of
Headlands Mortgage Company, a wholly owned subsidiary of GreenPoint Bank, filed
a current report on Form 8-K in connection with its name change of its national
mortgage business.
On December 30, 1999, GreenPoint Credit, LLC, the manufactured housing
finance subsidiary of GreenPoint Bank, filed a current report on Form 8-K in
order to file the following document: a Pooling and Servicing Agreement dated
December 1, 1999 between GreenPoint, as Contract Seller and as Servicer and Bank
One, National Association as the Trustee in connection with the sale of
approximately $140,000,000 of GreenPoint Credit Manufactured Housing Contract
Trust Pass-Through Certificates, Series 1999-6, on December 16, 1999.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GreenPoint Financial Corp.
By: /s/ Thomas S. Johnson
----------------------------------------
Thomas S. Johnson
Chairman of the Board
and Chief Executive Officer
Dated: March 27, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Thomas S. Johnson Chairman of the Board March 27, 2000
- --------------------------- and Chief Executive Officer
Thomas S. Johnson
/s/ Bharat B. Bhatt Member of the Board, March 27, 2000
- --------------------------- President and Chief
Bharat B. Bhatt Operating Officer
/s/ Peter T. Paul Vice Chairman, President March 27, 2000
- --------------------------- and Chief Executive Officer
Peter T. Paul of GreenPoint Credit
/s/ Dan F. Huebner Director March 27, 2000
- ---------------------------
Dan F. Huebner
/s/ William M. Jackson Director March 27, 2000
- ---------------------------
William M. Jackson
32
<PAGE>
Signature Title Date
- --------- ----- ----
Director March 27, 2000
- ---------------------------
Susan J. Kropf
/s/ Robert M. McLane Director March 27, 2000
- ---------------------------
Robert M. McLane
/s/ Charles B. McQuade Director March 27, 2000
- ---------------------------
Charles B. McQuade
/s/ Alvin N. Puryear Director March 27, 2000
- ---------------------------
Alvin N. Puryear
/s/ Robert P. Quinn Director March 27, 2000
- ---------------------------
Robert P. Quinn
Director March 27, 2000
- ---------------------------
Edward C. Schmults
/s/ Robert F. Vizza Director March 27, 2000
- ---------------------------
Robert F. Vizza
/s/ Jules Zimmerman Director March 27, 2000
- ---------------------------
Jules Zimmerman
/s/ Jeffrey R. Leeds Executive Vice President March 27, 2000
- --------------------------- and Chief Financial Officer
Jeffrey R. Leeds
33
EXHIBIT 10.13
GREENPOINT FINANCIAL CORP.
1999 STOCK INCENTIVE PLAN
SECTION 1
PURPOSE; DEFINITIONS
The purpose of the Plan is to give the Company a competitive advantage in
attracting, retaining and motivating officers, employees and/or consultants and
to provide the Company and its Subsidiaries and Affiliates with a stock plan
providing incentives directly linked to the profitability of the Company's
businesses and increases in the Company's shareholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "Affiliate" means a corporation or other entity controlled by,
controlling or under common control with the Company and designated by the
Committee from time to time as such.
b. "Award" means a Stock Appreciation Right, Stock Option, Restricted
Stock, Performance Unit, or other stock-based award.
c. "Award Cycle" shall mean a period of consecutive fiscal years or
portions thereof designated by the Committee over which Performance Units are to
be earned.
d. "Board" means the Board of Directors of the Company.
e. "Cause" means, unless otherwise provided by the Committee, (1) "Cause"
as defined in any Individual Agreement to which the participant is a party, or
(2) if there is no such Individual Agreement or if it does not define Cause: an
intentional failure to perform stated duties, willful misconduct, breach of a
fiduciary duty involving personal profit, or acts or omissions of personal
dishonesty, any of which results in material loss to the Company or any of its
Subsidiaries or Affiliates or, any willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order which results in material loss to the Company or any of
its Subsidiaries or Affiliates. The Committee shall, unless otherwise provided
in an Individual Agreement with the participant, have the sole discretion to
determine whether "Cause" exists, and its determination shall be final.
f. "Change in Control" and "Change in Control Price" have the meanings set
forth in Sections 11(b) and (c), respectively.
g. "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
h. "Commission" means the Securities and Exchange Commission or any
successor agency.
i. "Committee" means the Committee referred to in Section 2.
j. "Common Stock" means common stock, par value $.01 per share, of the
Company (or as may be converted pursuant to Section 3 hereof).
35
<PAGE>
k. "Company" means GreenPoint Financial Corp., a bank holding company
registered under federal law and incorporated in Delaware.
l. "Covered Employee" means a participant designated prior to the grant of
Restricted Stock or Performance Units by the Committee who is or may be a
"covered employee" within the meaning of Section 162(m)(3) of the Code in the
year in which Restricted Stock or Performance Units are expected to be taxable
to such participant.
m. "Disability" means, unless otherwise provided by the Committee,
disability as defined in the Company's retirement plan, or if not so defined,
shall mean the permanent and total inability of a participant by reason of
mental or physical infirmity, or both, to perform the work customarily assigned
to him or her. In order to qualify as a Disability, a medical doctor selected or
approved by the Board, and knowledgeable in the field of such infirmity, must
advise the Committee either that it is not possible to determine when such
Disability will terminate or that it appears probable that such Disability will
be permanent during the remainder of said participant's lifetime.
n. "Eligible Individuals" mean officers, employees and consultants of the
Company or any of its Subsidiaries or Affiliates, and prospective employees and
consultants who have accepted offers of employment or consultancy from the
Company or its Subsidiaries or Affiliates, who are or will be responsible for or
contribute to the management, growth or profitability of the business of the
Company, or its Subsidiaries or Affiliates.
o. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
p. "Fair Market Value" means, as of any given date, the closing price on
such date or, if there are no reported sales on such date, on the last day prior
to such date on which there were sales of the Common Stock on the New York Stock
Exchange or, if not listed on such exchange, on any other national securities
exchange on which the Common Stock is listed or on NASDAQ. If there is no
regular public trading market for such Common Stock, the Fair Market Value of
the Common Stock shall be determined by the Committee in good faith.
q. "Incentive Stock Option" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of Section 422 of
the Code.
r. "Individual Agreement" means an employment, consulting or similar
agreement between a participant and the Company or one of its Subsidiaries or
Affiliates.
s. "NonQualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
t. "Qualified Performance-Based Award" means an Award of Restricted Stock
or Performance Units designated as such by the Committee at the time of grant,
based upon a determination that (i) the recipient is or may be a "covered
employee" within the meaning of Section 162(m)(3) of the Code in the year in
which the Company would expect to be able to claim a tax deduction with respect
to such Restricted Stock or Performance Units and (ii) the Committee wishes such
Award to qualify for the Section 162(m) Exemption.
36
<PAGE>
u. "Performance Goals" means the performance goals established by the
Committee in connection with the grant of Restricted Stock or Performance Units.
In the case of Qualified Performance-Based Awards, (i) such goals shall be based
on the attainment of specified levels of one or more of the following measures:
return on equity, return on assets, earnings per share, net income and/or
achievement of predetermined strategic milestones and (ii) such Performance
Goals shall be set by the Committee within the time period prescribed by Section
162(m) of the Code and related regulations. Performance Goals may be stated in
the alternative or in combination.
v. "Performance Units" means an Award granted under Section 8.
w. "Plan" means the GreenPoint Financial Corp. 1999 Stock Incentive Plan,
as set forth herein and as hereinafter amended from time to time.
x. "Restricted Stock" means an Award granted under Section 7.
y. "Retirement" means retirement from the employ of the Company or its
Subsidiaries or Affiliates at the normal or early retirement date as set forth
in any tax-qualified retirement/pension plan of the Company.
z. "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission under
Section 16(b) of the Exchange Act, as amended from time to time.
aa. "Section 162(m) Exemption" means the exemption from the limitation on
deductibility imposed by Section 162(m) of the Code that is set forth in Section
162(m)(4)(C) of the Code.
bb. "Stock Appreciation Right" means an Award granted under Section 6.
cc. "Stock Option" means an Award granted under Section 5.
dd. "Subsidiary" means any corporation, partnership, joint venture or
other entity during any period in which at least a 50% voting or profits
interest is owned, directly or indirectly, by the Company or any successor to
the Company.
ee. "Termination of Employment" means the termination of the participant's
employment with, or performance of services for, the Company and any of its
Subsidiaries or Affiliates. A participant employed by, or performing services
for, a Subsidiary or an Affiliate shall also be deemed to incur a Termination of
Employment if the Subsidiary or Affiliate ceases to be such a Subsidiary or an
Affiliate, as the case may be, and the participant does not immediately
thereafter become an employee of, or service-provider for, the Company or
another Subsidiary or Affiliate. Temporary absences from employment because of
illness, vacation or leave of absence and transfers among the Company and its
Subsidiaries and Affiliates shall not be considered Terminations of Employment.
For purposes of the Plan, a participant's employment shall be deemed to have
terminated at the close of business on the day preceding the first date on which
he or she is no longer for any reason whatsoever employed by the Company or any
of its Subsidiaries or Affiliates.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
37
<PAGE>
SECTION 2
ADMINISTRATION
The Plan shall be administered by the Compensation Committee or such other
committee of the Board as the Board may from time to time designate (the
"Committee"), which shall be composed of not less than two directors, and shall
be appointed by and serve at the pleasure of the Board.
The Committee shall have plenary authority to grant Awards pursuant to the
terms of the Plan to Eligible Individuals.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan:
(a) To select the Eligible Individuals to whom Awards may from time to
time be granted;
(b) To determine whether and to what extent Incentive Stock Options,
NonQualified Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Units and other stock-based awards or any combination thereof are to
be granted hereunder;
(c) To determine the number of shares of Common Stock to be covered by
each Award granted hereunder;
(d) To determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price (subject to Section 5(a)), any
vesting condition, restriction or limitation (which may be related to the
performance of the participant, the Company or any Subsidiary or Affiliate) and
any vesting acceleration or forfeiture waiver regarding any Award and the shares
of Common Stock relating thereto, based on such factors as the Committee shall
determine;
(e) To modify, amend or adjust the terms and conditions of any Award, at
any time or from time to time, including but not limited to Performance Goals;
provided, however, that the Committee may not (i) subject to the last paragraph
of Section 3, reduce the exercise price or cancel and regrant a Stock Option
theretofore granted and (ii) adjust upwards the amount payable with respect to a
Qualified Performance-Based Award or waive or alter the Performance Goals
associated therewith;
(f) To determine to what extent and under what circumstances Common Stock
and other amounts payable with respect to an Award shall be deferred; and
(g) To determine under what circumstances an Award may be settled in cash
or Common Stock under Sections 5(j), 6(b)(ii) and 8(b)(iv).
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
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The Committee may act only by a majority of its members then in office,
except that the Committee may, except to the extent prohibited by applicable law
or the applicable rules of a stock exchange, allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities and powers to any person or persons
selected by it; provided that no such delegation may be made that would cause
Awards or other transactions under the Plan to cease to be exempt from Section
16(b) of the Exchange Act or cause an Award designated as a Qualified
Performance-Based Award not to qualify for the Section 162(m) Exemption. Any
such allocation or delegation may be revoked by the Committee at any time.
Any determination made by the Committee or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Award shall be made
in the sole discretion of the Committee or such delegate at the time of the
grant of the Award or, unless in contravention of any express term of the Plan,
at any time thereafter. All decisions made by the Committee or any appropriately
delegated officer pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Company and Plan participants.
Any authority granted to the Committee may also be exercised by the full
Board, except to the extent that the grant or exercise of such authority would
cause any Award or transaction to become subject to (or lose an exemption under)
the short-swing profit recovery provisions of Section 16 of the Exchange Act or
cause an Award designated as a Qualified Performance-Based Award not to qualify
for, or to cease to qualify for, the Section 162(m) Exemption. To the extent
that any permitted action taken by the Board conflicts with action taken by the
Committee, the Board action shall control.
SECTION 3
COMMON STOCK SUBJECT TO PLAN
The maximum number of shares of Common Stock that may be delivered to
participants and their beneficiaries under the Plan shall be 4,700,000, which
number includes 200,000 of the shares of Common Stock remaining available for
awards as of the date of adoption of this Plan under the Company's Amended and
Restated 1994 Stock Incentive Plan. No participant may be granted Stock Options
and Stock Appreciation Rights covering in excess of 800,000 shares of Common
Stock in any calendar year. Shares subject to an Award under the Plan may be
authorized and unissued shares or may be treasury shares.
If any Award is forfeited, or if any Stock Option (and related Stock
Appreciation Right, if any) terminates, expires or lapses without being
exercised, or if any Stock Appreciation Right is exercised for cash, shares of
Common Stock subject to such Awards shall again be available for distribution in
connection with Awards under the Plan.
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In the event of any change in corporate capitalization (including, but not
limited to, a change in the number of shares of Common Stock outstanding), such
as a stock split or a corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock or property of
the Company, any reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Company, the Committee or Board may make such
substitution or adjustments in the aggregate number and kind of shares reserved
for issuance under the Plan, and the maximum limitation upon Stock Options and
Stock Appreciation Rights and Qualified Performance-Based Awards to be granted
to any participant, in the number, kind and option price of shares subject to
outstanding Stock Options, Stock Appreciation Rights and Restricted Stock, in
the number and kind of shares subject to other outstanding Awards granted under
the Plan and/or such other equitable substitution or adjustments as it may
determine to be appropriate in its sole discretion; provided, however, that the
number of shares subject to any Award shall always be a whole number. Such
adjusted option price shall also be used to determine the amount payable by the
Company upon the exercise of any Stock Appreciation Right associated with any
Stock Option.
SECTION 4
ELIGIBILITY
Awards may be granted under the Plan to Eligible Individuals. No grant
shall be made under this Plan to a director who is not an officer or a salaried
employee of the Company or its Subsidiaries or Affiliates.
SECTION 5
STOCK OPTIONS
Stock Options may be granted alone or in addition to other Awards granted
under the Plan and may be of two types: Incentive Stock Options and NonQualified
Stock Options. Any Stock Option granted under the Plan shall be in such form as
the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, NonQualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights); provided, however, that
grants hereunder are subject to the aggregate limit on grants to individual
participants set forth in Section 3. Incentive Stock Options may be granted only
to employees of the Company and its subsidiaries or parent corporation (within
the meaning of Section 424(f) of the Code). To the extent that any Stock Option
is not designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option on or subsequent to its grant date, it
shall constitute a NonQualified Stock Option.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
NonQualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee by resolution selects an Eligible Individual to receive a grant of
a Stock Option, determines the number of shares of Common Stock to be subject to
such Stock Option to be granted to such Eligible Individual and specifies the
terms and provisions of the Stock Option. The Company shall notify an Eligible
Individual of any grant of a Stock Option, and a written option agreement or
agreements shall be duly executed and delivered by the Company to the
participant. Such agreement or agreements shall become effective upon execution
by the Company and the participant.
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Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:
(a) Option Price. The option price per share of Common Stock purchasable
under a Stock Option shall be determined by the Committee and set forth in the
option agreement, and shall not be less than the Fair Market Value of the Common
Stock subject to the Stock Option on the date of grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than 10 years after the
date the Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part, based
on such factors as the Committee may determine. In addition, the Committee may
at any time accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section 5, Stock
Options may be exercised, in whole or in part, at any time during the option
term by giving written notice of exercise to the Company specifying the number
of shares of Common Stock subject to the Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the purchase price
by certified or bank check or such other instrument as the Company may accept.
If approved by the Committee, payment, in full or in part, may also be made in
the form of unrestricted Common Stock (by delivery of such shares or by
attestation) already owned by the optionee of the same class as the Common Stock
subject to the Stock Option (based on the Fair Market Value of the Common Stock
on the date the Stock Option is exercised); provided, however, that, in the case
of an Incentive Stock Option, the right to make a payment in the form of already
owned shares of Common Stock of the same class as the Common Stock subject to
the Stock Option may be authorized only at the time the Stock Option is granted
and provided, further, that such already owned shares have been held by the
optionee for at least six months at the time of exercise or had been purchased
on the open market.
If approved by the Committee, payment in full or in part may also be made
by delivering a properly executed exercise notice to the Company, together with
a copy of irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds necessary to pay the purchase price,
and, if requested, reduced by the amount of any federal, state, local or foreign
withholding taxes. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
In addition, if approved by the Committee, payment in full or in part may
also be made by instructing the Committee to withhold a number of such shares
having a Fair Market Value on the date of exercise equal to the aggregate
exercise price of such Stock Option.
No shares of Common Stock shall be issued until full payment therefor has
been made. Except as otherwise provided in Section 5(l) below, an optionee shall
have all of the rights of a shareholder of the Company holding the class or
series of Common Stock that is subject to such Stock Option (including, if
applicable, the right to vote the shares and the right to receive dividends),
when the optionee has given written notice of exercise, has paid in full for
such shares and, if requested, has given the representation described in Section
14(a).
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If determined by the Committee at or, with respect to a NonQualified Stock
Option, subsequent to the date of grant of a Stock Option, in the event an
optionee who has not incurred a Termination of Employment pays the option price
of such Stock Option (in whole or in part) by delivering (or attesting to
ownership of) shares of Common Stock previously owned by the optionee, such
optionee shall automatically be granted a reload Stock Option (a "Reload
Option") for the number of shares of Common Stock used to pay the option price.
Unless otherwise determined by the Committee, the Reload Option shall be subject
to the same terms and conditions as the Stock Option, except that the Reload
Option shall be a NonQualified Stock Option, have an option price equal to the
Fair Market Value of the Common Stock on the date the Reload Option is granted,
expire the same date as the expiration date of the Stock Option so exercised,
shall vest and become exercisable 6 months following the date of grant of such
Reload Option and shall not have the rights set forth in Section 5(k) hereof.
Additional Reload Options may only be granted upon exercise of a Reload Option
if the Fair Market Value of the Common Stock on the date of such exercise is 25%
or more higher than the Fair Market Value of the Common Stock on the date of
grant of the Reload Option being exercised. Reload Options shall not be treated
as grants for purposes of the limitations set forth in the second sentence of
Section 3 of the Plan.
(e) Nontransferability of Stock Options. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of descent
and distribution; or (ii) in the case of a NonQualified Stock Option, as
otherwise expressly permitted by the Committee including, if so permitted,
pursuant to a transfer to such optionee's immediate family, whether directly or
indirectly or by means of a trust or partnership or otherwise. For purposes of
this Plan, unless otherwise determined by the Committee, "immediate family"
shall mean the optionee's children, spouse and grandchildren. All Stock Options
shall be exercisable, subject to the terms of this Plan, only by the optionee,
the guardian or legal representative of the optionee, or any person to whom such
option is transferred pursuant to this paragraph, it being understood that the
term "holder" and "optionee" include such guardian, legal representative and
other transferee.
(f) Additional Rules for Incentive Stock Options. Notwithstanding anything
contained herein to the contrary, no Stock Option which is intended to qualify
as an Incentive Stock Option may be granted to an Eligible Employee who at the
time of such grant owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of any Subsidiary, unless
at the time such Stock Option is granted the option price is at least 110% of
the Fair Market Value of a share of Common Stock and such Stock Option by its
terms is not exercisable after the expiration of five years from the date such
Stock Option is granted. In addition, the aggregate Fair Market Value of the
Common Stock (determined at the time a Stock Option for the Common Stock is
granted) for which Incentive Stock Options are exercisable for the first time by
an optionee during any calendar year, under all of the incentive stock option
plans of the Company and of any Subsidiary, may not exceed $100,000. To the
extent a Stock Option that by its terms was intended to be an Incentive Stock
Option exceeds this $100,000 limit, the portion of the Stock Option in excess of
such limit shall be treated as a NonQualified Stock Option.
(g) Termination by Death. Unless otherwise determined by the Committee, if
an optionee incurs a Termination of Employment by reason of death, any Stock
Option held by such optionee may thereafter be exercised, to the extent then
exercisable, or on such accelerated basis as the Committee may determine, for a
period of one year (or such other period as the Committee may specify in the
option agreement) from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
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(h) Termination by Reason of Disability or Retirement. Unless otherwise
determined by the Committee, if an optionee incurs a Termination of Employment
by reason of Disability or Retirement, any Stock Option held by such optionee
may thereafter be exercised by the optionee, to the extent it was exercisable at
the time of termination, or on such accelerated basis as the Committee may
determine, for a period of one year (or such other period as the Committee may
specify in the option agreement) from the date of such Termination of Employment
or until the expiration of the stated term of such Stock Option, whichever
period is the shorter; provided, however, that if the optionee dies within such
period, any unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such period, continue to be exercisable to the
extent to which it was exercisable at the time of death for a period of 12
months from the date of such death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter. In the event of Termination
of Employment by reason of Disability or Retirement, if an Incentive Stock
Option is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a NonQualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee: (A)
if an optionee incurs a Termination of Employment for Cause, all Stock Options
held by such optionee shall thereupon terminate; and (B) if an optionee incurs a
Termination of Employment for any reason other than death, Disability,
Retirement or for Cause, any Stock Option held by such optionee, to the extent
it was then exercisable at the time of termination, or on such accelerated basis
as the Committee may determine, may be exercised for the lesser of three months
from the date of such Termination of Employment or the balance of such Stock
Option's term; provided, however, that if the optionee dies within such
three-month period, any unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such three-month period, continue to be
exercisable to the extent to which it was exercisable at the time of death for a
period of 12 months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
Notwithstanding any other provision of this Plan to the contrary, in the event
an optionee incurs a Termination of Employment other than for Cause during the
24-month period following a Change in Control, any Stock Option held by such
optionee may thereafter be exercised by the optionee, to the extent it was
exercisable at the time of termination, including on such accelerated basis as
provided in Section 11(a), for (x) the longer of (i) one year from such date of
termination or (ii) such other period as may be provided in the Plan for such
Termination of Employment or as the Committee may provide in the option
agreement, or (y) until expiration of the stated term of such Stock Option,
whichever period is the shorter. If an Incentive Stock Option is exercised after
the expiration of the post-termination exercise periods that apply for purposes
of Section 422 of the Code, such Stock Option will thereafter be treated as a
NonQualified Stock Option.
(j) Cashing Out of Stock Option. On receipt of written notice of exercise,
the Committee may elect to cash out all or part of the portion of the shares of
Common Stock for which a Stock Option is being exercised by paying the optionee
an amount, in cash or Common Stock, equal to the excess of the Fair Market Value
of the Common Stock over the option price times the number of shares of Common
Stock for which the Option is being exercised on the effective date of such
cash-out.
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(k) Change in Control Cash-Out. Notwithstanding any other provision of the
Plan, during the 60-day period from and after a Change in Control (the "Exercise
Period"), if the Committee shall determine at the time of grant or thereafter,
an optionee shall have the right, whether or not the Stock Option is fully
exercisable and in lieu of the payment of the option price for the shares of
Common Stock being purchased under the Stock Option and by giving notice to the
Company, to elect (within the Exercise Period) to surrender all or part of the
Stock Option to the Company and to receive cash, within 5 days of such election,
in an amount equal to the amount by which the Change in Control Price per share
of Common Stock on the date of such election shall exceed the exercise price per
share of Common Stock under the Stock Option multiplied by the number of shares
of Common Stock granted under the Stock Option as to which the right granted
under this Section 5(k) shall have been exercised. Notwithstanding the
foregoing, if any right granted pursuant to this Section 5(k) would make a
Change in Control transaction ineligible for pooling-of-interests accounting
under APB No. 16 that but for the nature of such grant would otherwise be
eligible for such accounting treatment, the Committee shall have the ability to
substitute for the cash payable pursuant to such right Common Stock with a Fair
Market Value (as of the date of such election) equal to the cash that would
otherwise be payable hereunder or, if necessary to preserve such accounting
treatment, otherwise modify or eliminate such right.
(l) Deferral of Option Shares. The Committee may from time to time
establish procedures pursuant to which an optionee may elect to defer, until a
time or times later than the exercise of an Option, receipt of all or a portion
of the shares of Common Stock subject to such Option and/or to receive cash at
such later time or times in lieu of such deferred shares, all on such terms and
conditions as the Committee shall determine. If any such deferrals are
permitted, then notwithstanding Section 5(d) above, an optionee who elects such
deferral shall not have any rights as a stockholder with respect to such
deferred shares unless and until shares are actually delivered to the optionee
with respect thereto, except to the extent otherwise determined by the
Committee.
SECTION 6
STOCK APPRECIATION RIGHTS
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a NonQualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in accordance
with Section 6(b) by surrendering the applicable portion of the related Stock
Option in accordance with procedures established by the Committee. Upon such
exercise and surrender, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(b). Stock Options, which have
been so surrendered, shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Stock Options to which they relate are
exercisable in accordance with the provisions of Section 5 and this
Section 6.
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(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash, shares of Common Stock or
both, in value equal to the excess of the Fair Market Value of one share
of Common Stock over the option price per share specified in the related
Stock Option multiplied by the number of shares in respect of which the
Stock Appreciation Right shall have been exercised, with the Committee
having the right to determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in accordance with
Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right is related
shall be deemed to have been exercised for the purpose of the limitation
set forth in Section 3 on the number of shares of Common Stock to be
issued under the Plan, but only to the extent of the number of shares
covered by the Stock Appreciation Right at the time of exercise based on
the value of the Stock Appreciation Right at such time.
SECTION 7
RESTRICTED STOCK
(a) Administration. Shares of Restricted Stock may be awarded either alone
or in addition to other Awards granted under the Plan. The Committee shall
determine the Eligible Individuals to whom and the time or times at which grants
of Restricted Stock will be awarded, the number of shares to be awarded to any
Eligible Individual, the conditions for vesting, the time or times within which
such Awards may be subject to forfeiture and any other terms and conditions of
the Awards, in addition to those contained in Section 7(c); provided, however,
that, subject to Section 7(c)(i) and Section 11(a)(ii), no shares of Restricted
Stock shall vest prior to three years from the date of grant. Notwithstanding
the previous sentence, the Committee shall have discretion to permit vesting of
shares of Restricted Stock prior to three years from the date of grant in the
event of a participant's Termination of Employment by reason of Retirement,
Disability or death, or under other limited circumstances if the Committee
determines that such earlier vesting is necessary to fulfill a legitimate
corporate purpose such as the hiring or retention of a key employee; provided,
however, that the Committee shall exercise its discretion (under this Section
7(a) and Section 7(c)(i)) in these other limited circumstances with respect to
shares of Restricted Stock which in the aggregate do not exceed 10% of the
maximum number of shares of Common Stock authorized for issuance in Section 3.
(b) Awards and Certificates. Shares of Restricted Stock shall be evidenced
in such manner as the Committee may deem appropriate, including book-entry
registration or issuance of one or more stock certificates. Any certificate
issued in respect of shares of Restricted Stock shall be registered in the name
of such participant and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award, substantially in the
following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the GreenPoint Financial Corp. 1999 Stock Incentive Plan
and a Restricted Stock Agreement. Copies of such Plan and Agreement are on
file at the offices of GreenPoint Financial Corp., 90 Park Avenue, New
York, New York 10016-1303."
The Committee may require that the certificates evidencing such shares be held
in custody by the Company until the restrictions thereon shall have lapsed and
that, as a condition of any Award of Restricted Stock, the participant shall
have delivered a stock power, endorsed in blank, relating to the Common Stock
covered by such Award.
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(c) Terms and Conditions. Shares of Restricted Stock shall be subject to
the following terms and conditions:
(i) The Committee may, prior to or at the time of grant, designate
an Award of Restricted Stock as a Qualified Performance-Based Award, in
which event it shall condition the grant or vesting, as applicable, of
such Restricted Stock upon the attainment of Performance Goals. If the
Committee does not designate an Award of Restricted Stock as a Qualified
Performance-Based Award, it may also condition the grant or vesting
thereof upon the attainment of Performance Goals. Subject to Section
11(a)(ii), no shares of Restricted Stock, the vesting of which is
conditioned upon the attainment of Performance Goals, shall vest prior to
one year from the date of grant. Notwithstanding the previous sentence,
the Committee shall have discretion to permit vesting of shares of
Restricted Stock, the vesting of which is conditioned upon the attainment
of Performance Goals, prior to one year from the date of grant in the
event of a participant's Termination of Employment by reason of
Retirement, Disability or death, or under other limited circumstances if
the Committee determines that such earlier vesting is necessary to fulfill
a legitimate corporate purpose such as the hiring or retention of a key
employee; provided, however, that the Committee shall exercise its
discretion (under this Section 7(c)(i) and Section 7(a)) in these other
limited circumstances with respect to shares of Restricted Stock which in
the aggregate do not exceed 10% of the maximum number of shares of Common
Stock authorized for issuance in Section 3. Regardless of whether an Award
of Restricted Stock is a Qualified Performance-Based Award, the Committee
may also condition the grant or vesting thereof upon the continued service
of the participant. The conditions for grant or vesting and the other
provisions of Restricted Stock Awards (including without limitation any
applicable Performance Goals) need not be the same with respect to each
recipient. The Committee may at any time, in its sole discretion,
accelerate or waive, in whole or in part, any of the foregoing
restrictions, other than the restriction period minimums described in
Section 7(a) and this Section 7(c)(i); provided, however, that in the case
of Restricted Stock that is a Qualified Performance-Based Award, the
applicable Performance Goals have been satisfied with respect to each
participant who is a Covered Employee (other than in the case of the
participant's Disability or death).
(ii) Subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 7(c)(vi), during the period, if any, set
by the Committee, commencing with the date of such Award for which such
participant's continued service is required (the "Restriction Period"),
and until the later of (A) the expiration of the Restriction Period and
(B) the date the applicable Performance Goals (if any) are satisfied, the
participant shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber shares of Restricted Stock.
(iii) Except as provided in Section 7(c)(i) through 7(c)(iii), the
Restricted Stock Agreement, or as otherwise determined by the Committee,
the participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a stockholder of the Company holding the class
or series of Common Stock that is the subject of the Restricted Stock,
including, if applicable, the right to vote the shares and the right to
receive any cash dividends. If so determined by the Committee in the
applicable Restricted Stock Agreement and subject to Section 14(e) of the
Plan, (A) cash dividends on the class or series of Common Stock that is
the subject of the Restricted Stock Award shall be automatically deferred
and reinvested in additional Restricted Stock, held subject to the vesting
of the underlying Restricted Stock, or held subject to meeting Performance
Goals applicable only to dividends, and (B) dividends payable in Common
Stock shall be paid in the form of Restricted Stock of the same class as
the Common Stock with which such dividend was paid, held subject to the
vesting of the underlying Restricted Stock, or held subject to meeting
Performance Goals applicable only to dividends.
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(iv) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement or Section 7(c)(i), 7(c)(ii) or 11(a)(ii), upon
a participant's Termination of Employment for any reason during the
Restriction Period or before the applicable Performance Goals are
satisfied, all shares still subject to restriction shall be forfeited by
the participant; provided, however, that the Committee shall have the
discretion to waive, in whole or in part, any or all remaining
restrictions (other than the restriction period minimums set forth in
Sections 7(a) and 7(c)(i), and, in the case of Qualified Performance-Based
Awards with respect to which a participant is a Covered Employee,
satisfaction of the applicable Performance Goals unless the participant's
employment is terminated by reason of death or Disability) with respect to
any or all of such participant's shares of Restricted Stock.
(v) If and when any applicable Performance Goals are satisfied and
the Restriction Period expires without a prior forfeiture of the
Restricted Stock, unlegended certificates for such shares shall be
delivered to the participant upon surrender of the legended certificates.
(vi) Each Award shall be confirmed by, and be subject to, the terms
of a Restricted Stock Agreement.
SECTION 8
PERFORMANCE UNITS
(a) Administration. Performance Units may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the Eligible Individuals to whom and the time or times at which Performance
Units shall be awarded, the number of Performance Units to be awarded to any
Eligible Individual, the duration of the Award Cycle and any other terms and
conditions of the Award, in addition to those contained in Section 8(b).
(b) Terms and Conditions. Performance Units Awards shall be subject to the
following terms and conditions:
(i) The Committee may, prior to or at the time of the grant,
designate Performance Units as Qualified Performance-Based Awards, in
which event it shall condition the settlement thereof upon the attainment
of Performance Goals. If the Committee does not designate Performance
Units as Qualified Performance-Based Awards, it may also condition the
settlement thereof upon the attainment of Performance Goals. Regardless of
whether Performance Units are Qualified Performance-Based Awards, the
Committee may also condition the settlement thereof upon the continued
service of the participant. The provisions of such Awards (including
without limitation any applicable Performance Goals) need not be the same
with respect to each recipient. Subject to the provisions of the Plan and
the Performance Units Agreement referred to in Section 8(b)(v),
Performance Units may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Award Cycle. Subject to Section
11(a)(iii), no Performance Units may be earned prior to three years from
the date of grant (or one year from the date of grant if the settlement
thereof is conditioned upon the attainment of Performance Goals).
Notwithstanding the previous sentence, the Committee shall have the
discretion to permit Performance Units to be earned and payable in full in
the event the participant's employment is terminated by reason of
Disability or death. No more than 100,000 shares of Common Stock may be
granted as Qualified Performance-Based Awards to any participant in any
calendar year.
47
<PAGE>
(ii) Except to the extent otherwise provided in the applicable
Performance Units Agreement or Section 8(b)(iii) or 11(a)(iii), upon a
participant's Termination of Employment for any reason during the Award
Cycle or before any applicable Performance Goals are satisfied, all rights
to receive cash or stock in settlement of the Performance Units shall be
forfeited by the participant; provided, however, that the Committee shall
have the discretion to waive, in whole or in part, any or all remaining
payment limitations (other than the restriction period minimums set forth
in Section 8(b)(i), and, in the case of Performance Units that are
Qualified Performance-Based Awards, satisfaction of the applicable
Performance Goals unless the participant's employment is terminated by
reason of Disability or death) with respect to any or all of such
participant's Performance Units.
(iii) A participant may elect to further defer receipt of cash or
shares in settlement of Performance Units for a specified period or until
a specified event, subject in each case to the Committee's approval and to
such terms as are determined by the Committee. Subject to any exceptions
adopted by the Committee, such election must generally be made prior to
commencement of the Award Cycle for the Performance Units in question.
(iv) At the expiration of the Award Cycle, the Committee shall
evaluate the Company's performance in light of any Performance Goals for
such Award, and shall determine the number of Performance Units granted to
the participant which have been earned, and the Committee shall then cause
to be delivered (A) a number of shares of Common Stock equal to the number
of Performance Units determined by the Committee to have been earned, or
(B) cash equal to the Fair Market Value of such number of shares of Common
Stock to the participant, as the Committee shall elect (subject to any
deferral pursuant to Section 8(b)(iii)).
(v) Each Award shall be confirmed by, and be subject to, the terms
of a Performance Units Agreement.
SECTION 9
TAX OFFSET BONUSES
At the time an Award is made hereunder or at any time thereafter, the
Committee may grant to the participant receiving such Award the right to receive
a cash payment in an amount specified by the Committee, to be paid at such time
or times (if ever) as the Award results in compensation income to the
participant, for the purpose of assisting the participant to pay the resulting
taxes, all as determined by the Committee and on such other terms and conditions
as the Committee shall determine.
SECTION 10
OTHER STOCK-BASED AWARDS
Other Awards of Common Stock and other Awards that are valued in whole or
in part by reference to, or are otherwise based upon, Common Stock, including
(without limitation) dividend equivalents and convertible debentures, may be
granted either alone or in conjunction with other Awards granted under the Plan.
In the event that an Award is granted under this Section 10 to a participant who
is an officer, the Award shall be granted in lieu of additional cash
compensation to the officer for services.
48
<PAGE>
SECTION 11
CHANGE IN CONTROL PROVISIONS
(a) Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control:
(i) Any Stock Options and Stock Appreciation Rights outstanding as of the
date such Change in Control is determined to have occurred, and which are not
then exercisable and vested, shall become fully exercisable and vested to the
full extent of the original grant.
(ii) The restrictions and deferral limitations applicable to any
Restricted Stock shall lapse, and such Restricted Stock shall become free of all
restrictions and become fully vested and transferable to the full extent of the
original grant.
(iii) All Performance Units shall be considered to be earned and payable
in full based upon maximum performance, and any deferral or other restriction
shall lapse and such Performance Units shall be settled in cash (or shares of
Common Stock at the Committee's election) as promptly as is practicable.
(iv) The Committee may also make additional adjustments and/or settlements
of outstanding Awards as it deems appropriate and consistent with the Plan's
purposes.
(b) Definition of Change in Control. For purposes of the Plan, a "Change
in Control" shall mean the happening of any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (A) the then outstanding
shares of common stock of the Company (the "Outstanding Company Common
Stock") or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change in Control: (1) any acquisition
directly from the Company, (2) any acquisition by the Company, (3) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or
(4) any acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (iii) of this Section
11(b); or
(ii) Individuals who, as of the effective date of the Plan,
constitute the Board (the "Incumbent Board") cease for any reason not to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the effective date of the
Plan whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
49
<PAGE>
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior
to such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (C) at least a
majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(c) Change in Control Price. For purposes of the Plan, "Change in Control
Price" means the higher of (i) the highest reported sales price, regular way, of
a share of Common Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national exchange on which such shares are
listed or on NASDAQ during the 60-day period prior to and including the date of
a Change in Control or (ii) if the Change in Control is the result of a tender
or exchange offer or a Corporate Transaction, the highest price per share of
Common Stock paid in such tender or exchange offer or Corporate Transaction;
provided, however, that in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, the Change in Control
Price shall be in all cases the Fair Market Value of the Common Stock on the
date such Incentive Stock Option or Stock Appreciation Right is exercised. To
the extent that the consideration paid in any such transaction described above
consists all or in part of securities or other noncash consideration, the value
of such securities or other noncash consideration shall be determined in the
sole discretion of the Board.
50
<PAGE>
SECTION 12
TERM, AMENDMENT AND TERMINATION
The Plan will terminate on the tenth anniversary of the effective date of
the Plan. Under the Plan, Awards outstanding as of such date shall not be
affected or impaired by the termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of an
optionee under a Stock Option or a recipient of a Stock Appreciation Right,
Restricted Stock Award, Performance Unit Award or other stock-based Award
theretofore granted without the optionee's or recipient's consent, except such
an amendment made to comply with applicable law, stock exchange rules or
accounting rules. In addition, no such amendment shall be made without the
approval of the Company's stockholders to the extent such approval is required
by applicable law or stock exchange rules; provided, however, that stockholder
approval shall be required for any amendment which (i) increases the maximum
number of shares for which Awards may be granted under the Plan (subject,
however, to the provisions of Section 3 hereof), (ii) reduces the exercise price
at which Stock Options may be granted (subject, however, to the provisions of
Section 3 hereof), (iii) extends the period during which Stock Options may be
granted or exercised beyond the times originally prescribed, (iv) changes the
persons eligible to participate in the Plan, or (v) materially increases the
benefits accruing to participants under the Plan.
Subject to the repricing restrictions in Section 2(e)(i) and the
restriction period minimums described in Sections 7(a), 7(c)(i) and 8(b)(i), the
Committee may amend the terms of any Stock Option or other Award theretofore
granted, prospectively or retroactively, but no such amendment shall cause a
Qualified Performance-Based Award to cease to qualify for the Section 162(m)
Exemption or impair the rights of any holder without the holder's consent except
such an amendment made to cause the Plan or Award to comply with applicable law,
stock exchange rules or accounting rules.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules as
well as other developments, and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval.
SECTION 13
UNFUNDED STATUS OF PLAN
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Common Stock or make payments; provided, however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 14
GENERAL PROVISIONS
(a) The Committee may require each person purchasing or receiving shares
pursuant to an Award to represent to and agree with the Company in writing that
such person is acquiring the shares without a view to the distribution thereof.
The certificates for such shares may include any legend that the Committee deems
appropriate to reflect any restrictions on transfer.
51
<PAGE>
Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock under the Plan prior to
fulfillment of all of the following conditions:
(1) Listing or approval for listing upon notice of issuance, of such
shares on the New York Stock Exchange, Inc., or such other securities
exchange as may at the time be the principal market for the Common Stock;
(2) Any registration or other qualification of such shares of the
Company under any state or federal law or regulation, or the maintaining
in effect of any such registration or other qualification which the
Committee shall, in its absolute discretion upon the advice of counsel,
deem necessary or advisable; and
(3) Obtaining any other consent, approval, or permit from any state
or federal governmental agency, which the Committee shall, in its absolute
discretion after receiving the advice of counsel, determine to be
necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Company or any
Subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) The Plan shall not constitute a contract of employment, and adoption
of the Plan shall not confer upon any employee any right to continued
employment, nor shall it interfere in any way with the right of the Company or
any Subsidiary or Affiliate to terminate the employment of any employee at any
time.
(d) No later than the date as of which an amount first becomes includible
in the gross income of the participant for federal income tax purposes with
respect to any Award under the Plan, the participant shall pay to the Company,
or make arrangements satisfactory to the Company regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Company, withholding obligations may be settled with Common Stock, including
Common Stock that is part of the Award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be conditional
on such payment or arrangements, and the Company and its Subsidiaries and
Affiliates shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the participant. The Committee may
establish such procedures as it deems appropriate, including making irrevocable
elections, for the settlement of withholding obligations with Common Stock.
(e) Reinvestment of dividends in additional Restricted Stock at the time
of any dividend payment shall only be permissible if sufficient shares of Common
Stock are available under Section 3 for such reinvestment (taking into account
then outstanding Stock Options and other Awards).
(f) The Committee shall establish such procedures as it deems appropriate
for a participant to designate a beneficiary to whom any amounts payable in the
event of the participant's death are to be paid or by whom any rights of the
participant, after the participant's death, may be exercised.
(g) In the case of a grant of an Award to any employee of a Subsidiary of
the Company, the Company may, if the Committee so directs, issue or transfer the
shares of Common Stock, if any, covered by the Award to the Subsidiary, for such
lawful consideration as the Committee may specify, upon the condition or
understanding that the Subsidiary will transfer the shares of Common Stock to
the employee in accordance with the terms of the Award specified by the
Committee pursuant to the provisions of the Plan. All shares of Common Stock
underlying Awards that are forfeited or canceled should revert to the Company.
52
<PAGE>
(h) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware,
without reference to principles of conflict of laws.
(i) Except as otherwise provided in Section 5(e) or 6(b)(iii) or by the
Committee, Awards under the Plan are not transferable except by will or by the
laws of descent and distribution.
(j) In the event an Award is granted to an Eligible Individual who is
employed or providing services outside the United States and who is not
compensated from a payroll maintained in the United States, the Committee may,
in its sole discretion, modify the provisions of the Plan as they pertain to
such individual to comply with applicable foreign law.
SECTION 15
EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the date it is adopted by the Board,
subject to the approval of the Company's stockholders.
53
Exhibit 10.14
GREENPOINT FINANCIAL CORP. 1999 ANNUAL INCENTIVE PLAN
I
PURPOSE
The GreenPoint Financial Corp. 1999 Annual Incentive Plan (the "Plan"),
which, subject to approval by the Company's stockholders, shall be effective as
of January 1, 1999, is designed to provide a significant and variable economic
opportunity to selected officers and employees of the Company as a reflection of
their individual and group contributions to the success of GreenPoint Financial
Corp. and its subsidiaries (the "Company"). The payments pursuant to Article IX
of the Plan are intended to qualify under Section 162(m)(4)(C) of the Code (as
defined below) as excluded from the term "applicable employee remuneration".
II
DEFINITIONS
For purposes of the Plan, the following terms are defined as set forth
below. In addition, certain other terms used herein have the definitions given
to them in the first place in which they are used.
"Board" shall mean the Board of Directors of the Company.
"Bonus" shall mean a cash award payable to a Participant pursuant to the
terms of the Plan, including an Incentive Award (as defined in Article IX
hereof).
"Cause" shall mean personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or any willful violation of any law, rule, regulation (other than
traffic violations or similar offenses) or final cease and desist order.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Committee referred to in Article III hereof.
"Covered Employees" shall mean Participants (as defined in Article IV
hereof) designated by the Committee who are or are expected to be "covered
employees" within the meaning of Section 162(m)(3) of the Code for the year in
which a Bonus hereunder is payable.
"Disinterested Person" means a member of the Board who qualifies as an
"outside director" for purposes of Section 162(m) of the Code.
"Payment Date" shall mean the date following the conclusion of a
particular Measurement Period (as such term is defined in Article IX) on which
the Committee certifies that applicable Performance Objectives (as such term is
defined in Article IX) have been satisfied and authorizes payment of
corresponding Incentive Awards.
"Target Bonus" shall mean the amount determined by the Committee at the
time of grant in its sole discretion, which need not be the same for each
Participant.
54
<PAGE>
III
ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the Board
or such other committee of the Board, composed of not less than two
Disinterested Persons, each of whom shall be appointed by and serve at the
pleasure of the Board.
In administering the Plan, the Committee may at its option employ
compensation consultants, accountants and counsel (who may be the independent
auditors and outside counsel and compensation consultants of the Company) and
other persons to assist or render advice to the Committee, all at the expense of
the Company.
IV
ELIGIBILITY
The Committee shall, in its sole discretion, determine each fiscal year
those officers and employees of the Company who shall be eligible to participate
in the Plan (the "Participants") for such fiscal year based upon such
Participants' opportunity to have a substantial impact on the Company's
operating results. Nothing contained in the Plan shall be construed as or be
evidence of any contract of employment with any Participant for a term of any
length nor shall participation in the Plan in any year by any Participant
require continued participation by such Participant in any subsequent year.
V
DETERMINATION OF BONUS
Subject to Article IX hereof, the form and amount of each Bonus award to a
Participant shall be determined by and in the discretion of the Committee.
Subject to Article IX, the Committee may condition the earning of a Bonus upon
the attainment of specified performance goals measured over a period not greater
than one year relating to the Participant or the Company or subsidiary, division
or department of the Company for or within which the Participant is primarily
employed, or upon such other factors or criteria as the Committee shall
determine, which goals may be different for each award recipient. Bonuses under
the Plan will consist of an award, payable in cash from the Company, based upon
a percentage or multiple of the Target Bonus, payable based upon the degree of
achievement of such predetermined performance objectives over the specified
Measurement Period. Bonuses under this Plan for Covered Employees shall be
subject to pre-established performance goals in accordance with Article IX
hereof. Subject to Article IX, the Committee may, in its sole discretion,
increase or decrease the amount of any Bonus payable to a Participant and may
award Bonuses to Participants (other than Covered Employees) even though the
Bonuses are not earned. Bonuses earned or otherwise awarded will be paid on the
Payment Date.
55
<PAGE>
VI
TERMINATION OF EMPLOYMENT
In the event that a Participant's employment with the Company terminates
for any reason prior to the Payment Date with respect to any Bonus, the balance
of any Bonus which remains unpaid at the time of such termination, shall be
payable to the Participant, or forfeited by the Participant, in accordance with
the terms of the award established by the Committee at the time of grant;
provided, however, that in the case of a Covered Employee, no amount shall be
payable unless the Performance Objectives (as defined below) are satisfied
unless the termination of employment of the Covered Employee is due to the death
or disability of the Participant. Participants who remain employed through the
Measurement Period but are terminated prior to the Payment Date shall be
entitled to receive Bonuses payable with respect to such Measurement Period,
unless terminated for Cause.
VII
AMENDMENT AND TERMINATION
The Board shall have the right to amend, modify or terminate the Plan from
time to time but no such amendment or modification shall, without prior approval
of the stockholders, change Article IX of this Plan so as to alter the business
criteria on which the Performance Objectives are based or to increase the amount
set forth in Section (e) of Article IX, materially increase the amount available
for awards, materially increase the benefits accruing to Participants who are
Covered Employees hereunder, materially modify the requirements regarding
eligibility for participation in the Plan or, without the consent of the
Participant affected, impair any award made prior to the effective date of the
amendment, modification or termination.
VIII
MISCELLANEOUS
Bonus payments shall be made from the general funds of the Company and no
special or separate fund shall be established or other segregation of assets
made to assure payment. No Participant or other person shall have under any
circumstances any interest in any particular property or assets of the Company.
The Plan shall be governed by and construed in accordance with the laws of the
State of Delaware, without regard to its principles of conflict of laws.
IX
PROCEDURES FOR CERTAIN DESIGNATED EMPLOYEES
Bonuses under the Plan to Participants who are Covered Employees shall be
subject to pre-established performance goals as set forth herein.
Notwithstanding Article V hereof, the Committee shall not have discretion to
modify the terms of awards to such Participants except as specifically set forth
in this Article IX.
56
<PAGE>
(a) Target Bonus. Prior to the commencement of a Measurement Period (as
defined below), the Committee shall grant bonus award opportunities ("Incentive
Awards") to such of the Participants who may be Covered Employees payment of
which shall be conditioned upon satisfaction of specific Performance Objectives
(as defined below) measured over a period not greater than one year established
by the Committee in writing at the time of grant. An Incentive Award shall
consist of an award payable in cash from the Company, based upon a percentage or
multiple of a Target Bonus. The extent, if any, to which an Incentive Award
based upon the Target Bonus will be payable will be based upon the degree of
achievement of predetermined Performance Objectives (as defined below) over a
specified Measurement Period (as defined below); provided, however, that the
Committee may, in its sole discretion, reduce the amount which would otherwise
be payable upon expiration of the Measurement Period (under which circumstances
the Participant will have no right to receive the amount of such reduction even
if the Performance Objectives are met).
(b) Measurement Period. The measurement period will be a period of one
fiscal year, unless a shorter period is otherwise selected and established in
writing by the Committee at the time the Performance Objectives are established
with respect to a particular Incentive Award (the period so specified being
hereinafter referred to as the "Measurement Period").
(c) Performance Objectives. The performance objectives ("Performance
Objectives") established by the Committee at the time the Incentive Award is
granted will be based on return on equity, return on assets, earnings per share,
net income and/or achievement of predetermined strategic milestones during the
Measurement Period. Performance Objectives may be specified relative to budgeted
or other internal goals, or relative to the performance of one or more peer
groups. Performance Objectives may be stated in the alternative or in
combination.
(d) Payment of an Incentive Award. At the time the Incentive Award is
granted, the Committee shall prescribe a formula to determine the percentage of
the Target Bonus which may be payable based upon the degree of attainment of the
Performance Objectives which shall be determined as of the last day of the
Measurement Period. If the minimum Performance Objectives established by the
Committee are not met, no Incentive Award payment will be made to the
Participant. To the extent that the minimum Performance Objectives are surpassed
and upon written certification by the Committee that the Performance Objectives
have been satisfied to a particular extent and any other material terms and
conditions of the Incentive Awards have been satisfied, payment shall be made on
the Payment Date in accordance with the prescribed formula based upon a
percentage or multiple of the Target Bonus unless the Committee determines, in
its sole discretion, to reduce the payment to be made. The Committee may provide
in writing at the time of grant that Incentive Awards shall be payable at a
fixed time following a Measurement Period and it may impose forfeiture or
vesting requirements. In no event shall an Incentive Award be paid to a Covered
Employee unless and until the Plan has been approved by the Company's
stockholders.
(e) Maximum Payable. The maximum amount payable to a Covered Employee is
$3,000,000.
X
DEFERRAL ELECTIONS
The Committee may at its option establish procedures pursuant to which
Participants are permitted to defer the receipt of Bonuses payable hereunder.
57
Exhibit 11.1
Statement Regarding Computation of Per Share Earnings
(In millions, except share and per share amounts)
Year Ended December 31,
---------------------------
1999 1998 1997
------- ------- -------
Net income $ 215.5 $ 159.1 $ 184.9
Weighted average number of common shares
outstanding during each year - basic* 94.8 87.1 84.0
Weighted average number of common shares
and common stock equivalents outstanding during
each year - diluted* 96.5 89.9 88.0
------- ------- -------
Basic earnings per share* $ 2.27 $ 1.83 $ 2.20
======= ======= =======
Diluted earnings per share* $ 2.23 $ 1.77 $ 2.10
======= ======= =======
* Share and per share data have been restated to reflect the impact of a
2-for-1 split of the Company's stock on March 4, 1998.
Exhibit 12.1
Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends
(Dollars in millions)
The Company's consolidated ratios of earnings to combined fixed charges and
preferred stock dividends for each of the periods indicated are set forth below:
<TABLE>
<CAPTION>
Year Ended
-------------------------------
Dec. 31, Dec. 31, Dec. 31,
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Income before income taxes $370.8 $293.6 $280.6
Combined fixed charges and preferred stock dividends:
Interest expense on deposits 481.4 465.5 473.0
Interest expense on long-term debt 13.9 13.9 6.4
Interest expense on guaranteed preferred beneficial
interest in Company's junior subordinated debentures 18.3 18.3 10.7
Appropriate portion (1/3) of rent expense 7.7 5.5 4.3
Preferred stock dividend requirements -- -- 0.4
------ ------ ------
Total combined fixed charges and
preferred stock dividends $521.3 $503.2 $494.8
====== ====== ======
Earnings before income taxes and combined fixed
charges and preferred stock dividends $892.1 $796.8 $775.4
====== ====== ======
Ratio of earnings to combined fixed charges and
preferred stock dividends (including interest expense
on deposits) 1.71x 1.58x 1.57x
====== ====== ======
</TABLE>
Exhibit 13.1
================================================================================
Selected Consolidated Financial Condition Data
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------------------------------
(In millions) 1999 1998 1997 1996 1995
================================================================================================
<S> <C> <C> <C> <C> <C>
Total assets $15,401.1 $15,015.9 $13,819.6 $13,613.8 $14,817.7
Loans receivable held for sale 1,208.0 1,578.1 657.3 244.1 272.6
Loans receivable held for investment, net 9,180.2 9,273.3 8,796.4 7,295.0 5,859.7
Allowance for possible loan losses 113.0 113.0 109.0 105.0 105.5
Securities and related assets 2,101.3 1,408.2 2,069.3 4,374.5 5,901.4
Money market investments 1,052.8 924.2 1,060.0 494.1 1,550.7
Goodwill 941.7 1,014.3 577.1 623.6 670.2
Deposits 11,560.1 11,173.1 10,973.0 11,452.3 12,898.3
Stockholders' equity 1,986.7 1,922.6 1,336.1 1,488.9 1,577.2
================================================================================================
</TABLE>
================================================================================
Selected Consolidated Operating Data
<TABLE>
<CAPTION>
For the
Year Ended
December 31,
- ------------------------------------------------------------------------------------------------
(In millions) 1999 1998 1997 1996 1995
================================================================================================
<S> <C> <C> <C> <C> <C>
Interest income $ 1,090.8 $ 1,061.4 $ 1,010.4 $ 989.5 $ 701.9
Interest expense 550.9 551.9 522.9 537.4 349.4
Provision for possible loan losses 14.2 13.8 18.9 15.7 9.5
Non-interest income 391.7 174.8 129.7 104.8 70.1
Non-interest expense 546.6 376.9 317.7 298.4 207.5
Income taxes 155.3 134.5 95.7 92.6 91.1
Net income $ 215.5 $ 159.1 $ 184.9 $ 150.2 $ 114.5
================================================================================================
</TABLE>
16/17
<PAGE>
================================================================================
Selected Consolidated Financial Ratios and Other Data
<TABLE>
<CAPTION>
At or For the
Year Ended
December 31,
- -------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share data) 1999 1998 1997 1996 1995
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Performance Ratios:
Return on average assets(1) 1.58% 1.30% 1.39% 1.10% 1.25%
Core cash return on average assets(1) 2.24 1.84 1.87 1.54 1.56
Return on average equity(1) 11.86 11.51 13.50 10.40 7.31
Core cash return on average equity(1) 16.83 16.34 18.24 14.47 9.16
Net interest margin 4.02 3.95 3.91 3.51 4.04
Operating expense to average assets(2) 2.84 2.27 1.99 1.77 2.06
Efficiency ratio(3) 46.7 46.8 43.8 45.1 44.7
Per Share Data(4):
Basic earnings per share $ 2.27 $ 1.83 $ 2.20 $ 1.60 $ 1.13
Diluted earnings per share 2.23 1.77 2.10 1.56 1.12
Core cash earnings per share(1)(5) 3.49 2.89 2.89 2.25 1.40
Book value per common share 21.40 19.99 16.03 16.07 15.89
Tangible book value per common share 11.26 9.45 9.10 9.34 9.14
Dividends per share 0.88 0.64 0.50 0.40 0.40
Dividend payout ratio 39.46% 36.16% 23.80% 25.70% 35.85%
Asset Quality Ratios:
Non-performing loans to loans held
for investment 2.36 3.03 3.97 4.78 6.68
Non-performing assets to total assets 1.47 1.98 2.74 2.83 2.92
Allowance for possible loan losses to
non-performing loans 51.48 39.63 30.70 29.49 26.24
Allowance for possible loan losses
to loans held for investment 1.21 1.20 1.22 1.41 1.75
Net loan charge-off
experience to average total loans 0.15 0.11 0.18 0.25 0.22
Ratio of allowance for possible
loan losses to net charge-offs 7.96x 11.53x 7.32x 6.48x 8.05x
Capital Data:
Tier 1 Capital (to risk weighted assets) 10.77% 12.65% 14.18% 15.44% 16.10%
Total risk based capital (to risk weighted assets) 11.75 13.90 15.43 16.69 17.36
Tier 1 Capital (to average assets) 8.64 7.90 7.37 6.85 6.32
Purchase of treasury stock $ 141.4 $ 219.6 $ 355.5 $ 169.5 $ 73.8
Other Data:
Mortgage loan originations 10,717.2 10,987.8 6,604.9 4,636.8 2,379.1
Manufactured housing loan originations 3,045.7 656.4 N/A N/A N/A
Full-service consumer bank offices 73 73 74 76 84
Full-time equivalent employees (FTE) 4,204 4,544 2,640 2,647 2,428
===================================================================================================================
</TABLE>
(1) Excludes Headlands' acquisition expense, restructuring charge and
non-recurring personnel expense, one-time charitable foundation expense,
income taxes related to S corporation conversion and gains on sales of
branches, assets and a lease.
(2) Operating expense excludes goodwill expense, ORE operating income,
Headlands' acquisition expense, restructuring charge and non-recurring
personnel expense and one-time charitable foundation expense.
(3) The efficiency ratio is calculated by dividing operating expense by the
sum of net interest income and non-interest income, excluding pre-tax
gains on sales of branches, assets and a lease.
(4) The per share data has been restated to reflect the impact of a 2-for-1
split of the Company's common stock on March 4, 1998.
(5) Based on the weighted average shares used to calculate earnings per share.
<PAGE>
================================================================================
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- --------------------------------------------------------------------------------
GreenPoint Financial Corp.
- --------------------------------------------------------------------------------
GreenPoint Financial Corp. (the "Company" or "GreenPoint") is a leading national
specialty housing finance company with three principal businesses. GreenPoint
Mortgage ("GPM"), a national mortgage banking company headquartered in Larkspur,
California, is the leading national lender in no documentation ("NoDoc") and
alternative A ("Alt A") residential mortgages. GreenPoint Credit LLC
("GreenPoint Credit"), headquartered in San Diego, California, is the second
largest lender nationally in the manufactured housing finance industry.
GreenPoint Bank (the "Bank"), a New York State chartered savings bank, has $11.6
billion in deposits in 73 branches serving more than 400,000 households in the
Greater New York City area.
- ----------------------------------
Overview of 1999 Financial Results
o Net income per diluted share for the year was $2.23, a 26.0% increase over
1998.
o Diluted core cash earnings per share for the year increased by 20.8% to
$3.49.
o GreenPoint completed the acquisition of Headlands Mortgage Company
("Headlands") on March 30, 1999 which was recorded as a pooling of
interests. As a result, the operations of GreenPoint Mortgage Corp.
("GreenPoint Mortgage") and Headlands were combined and renamed GreenPoint
Mortgage.
o GPM securitized or sold $9.04 billion of mortgage loans during the year,
an increase of 13% from $7.99 billion for 1998.
o GreenPoint Credit securitized or sold $2.76 billion of manufactured
housing loans during the year.
o Mortgage loan originations were $10.72 billion for the year, down 2% from
$10.99 billion for 1998.
o GreenPoint continues to maintain a strong capital position with a leverage
ratio of 8.64%, a Tier 1 risk-based ratio of 10.77% and a total risk-based
ratio of 11.75% at December 31, 1999.
- --------------------------------------------------------------------------------
Comparison of Operating Results for the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
- ------------------
Core Cash Earnings
Core cash earnings are net of non-recurring items and include certain non-cash
charges related to goodwill and the Company's ESOP. The non-cash expenses,
unlike GreenPoint's other expenses, do not reduce the Company's tangible capital
thereby enabling the Company to increase shareholder value through growth of
earning assets and increases of cash dividends.
For the Year Ended December 31,
- --------------------------------------------------------------------------------
(In millions, except per share amounts) 1999 1998
================================================================================
Net income (excluding
non-recurring items)(1) $ 237.6 $ 182.7
Add back:
Goodwill amortization(2) 79.6 54.4
Employee stock plans expense(3) 19.8 22.3
- --------------------------------------------------------------------------------
Core cash earnings $ 337.0 $ 259.4
================================================================================
Core cash earnings per share(4) $ 3.49 $ 2.89
================================================================================
(1) Non-recurring items include Headlands acquisition expense, restructuring
charge and non-recurring personnel expense, gains on sales of branch,
assets and a lease, one time charitable foundation expense and income
taxes related to S corporation conversion.
(2) Goodwill amortization relates to the 1995 and 1998 acquisitions. The
projected annual expense will be approximately $79.0 million for 2000
through 2010 and $32.8 million for 2011 through 2013.
(3) Includes ESOP amortization expense of $18.5 million for 1999 and $20.9
million for 1998, and stock plans share amortization expense of $1.3
million for 1999 and $1.4 million for 1998. ESOP amortization expense is
scheduled to occur through the year 2018 and will vary from year to year
based on changes in the average annual market price of GreenPoint's stock
and by changes in annual allocations to plan participants. Stock plans
share amortization expense is scheduled to occur through the year 2002 and
will be approximately $5.7 million.
(4) Based on the weighted average shares used to calculate diluted earnings
per share.
- -------------------
Net Interest Income
Net interest income on a fully taxable-equivalent basis increased by $29.6
million, or 5.8%, to $544.3 million for 1999 from $514.7 million for 1998. The
increase resulted from a $501 million rise in average earning assets coupled
with an increase in the net interest margin to 4.02% from 3.95% in 1998.
The increase in average earning assets resulted from increases in loans
held for investment and held for sale. Mortgage loans held for investment were
flat from 1998, while other loans increased by $289.4 million, reflecting the
addition of $604 million in manufactured housing loans during the third quarter
of 1999. Loans held for sale rose $679.3 million, principally reflecting the
full-year impact of GreenPoint Credit.
Interest income on mortgages held for investment decreased by $24.9
million, or 3.1%, to $774.7 million for 1999 from $799.6 million for 1998. The
decrease reflects a flat average mortgage portfolio in 1999 and a 28 basis point
decline in the average yield on the portfolio. The decline in the average yield
on mortgages reflects a generally low interest rate environment in 1998 and
early 1999 which reduced the yield on new originations and prompted higher
prepayment rates on portfolio loans with higher interest rates.
18/19
<PAGE>
================================================================================
Interest income on other loans rose by $27.8 million to $32.1 million for
1999 from $4.3 million for 1998 due entirely to the addition of GreenPoint
Credit's manufactured housing loans to the portfolio during the third quarter of
1999.
Interest income on securities and money market investments declined by a
combined $35.2 million, or 21.9%, to $125.7 million for 1999 from $160.9 million
for 1998 as GreenPoint reduced these investments to fund loan growth. The
combined average balance of securities and money market investments dropped by
$607 million during 1999.
The average cost of funds fell by 15 basis points to 4.43% from 4.58% in
1998. The average cost of deposits declined by 7 basis points, reflecting a
generally lower interest rate environment. Other borrowed funds were reduced by
$164.2 million, and the rate fell by 92 basis points, as a result of internal
funding of mortgage loans held for sale following the Headlands merger in the
first quarter of 1999.
- ----------------------------------
Provision for Possible Loan Losses
The provision for possible loan losses increased by 2.9% to $14.2 million for
1999 from $13.8 million for 1998. Continued good economic conditions in the New
York City area during 1999 helped to reduce the Bank's net charge-offs on the
Bank's mortgage portfolio to $7.3 million in 1999 from $8.5 million in 1998.
GreenPoint Credit's charge-offs increased to $6.9 million in 1999 from $1.3
million during 1998. The increase is primarily attributable to the $604 million
of manufactured housing loans that was retained during the 3rd quarter of 1999.
The 1999 provision equaled net charge-offs for the year and the 1998 provision
includes a $4.0 million addition to the allowance for possible loan losses.
- -------------------
Non-Interest Income
Non-interest income increased by $216.9 million, or 124%, to $391.7 million for
1999 from $174.8 million for 1998. The 1999 figure includes a $15.8 million
non-recurring gain on the sale of leasehold rights.
Loan servicing fees totaled $100.2 million for 1999 compared to $23.5
million for 1998. The $76.7 million increase is primarily the result of a full
year of servicing fee income on manufactured housing loans related to the
GreenPoint Credit acquisition in 1998.
Banking service fees and commissions rose to $31.1 million for 1999 from
$26.1 million in 1998, an increase of $5.0 million or 19.2%. The improvement is
primarily attributable to increased annuity sales of $2.0 million and consumer
banking fees of $2.8 million.
Gain on sale of loans increased by $121.7 million, or 114%, to $228.3
million for 1999 compared to $106.6 million for 1998. The increase was due to
gains on sale of manufactured housing loans of $72.1 million in 1999, consisting
of gains of $16.0 million for whole loan sales and gains of $56.1 million from
securitization. The increase in the gain on sale of mortgages for GPM of $49.6
million is due to higher volume and more favorable pricing.
The Company sold or securitized $9.0 billion of residential mortgage loans
and $2.8 billion of manufactured housing loans in 1999, versus $8.0 billion and
$728 million, respectively in 1998. The $728 million of manufactured housing
loans securitized in the fourth quarter of 1998 were acquired by the Company as
part of the GreenPoint Credit purchase and were recorded at their fair value.
Therefore, the Company did not recognize a gain on the sale through current
income.
The increases in gain on sale and securitization of loans between 1999 and
1998 reflected increases in volumes sold and wider average margins received. The
improved average margins for mortgage loan sales resulted in part from a shift
in mix toward higher-margin specialty products such as Alt A, HELOC's and second
mortgages.
Loan Sales For the Year Ended December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998
================================================================================
Whole loans-mortgage
- --------------------------------------------------------------------------------
Volume $ 8,362.4 $ 6,739.2
Gain on sale 144.8 94.6
Average margin 1.73% 1.40%
- --------------------------------------------------------------------------------
Securitizations-mortgage
- --------------------------------------------------------------------------------
Volume $ 675.6 $ 1,246.4
Gain on sale 11.4 12.0
Average margin 1.70% 0.96%
- --------------------------------------------------------------------------------
Whole loans-
manufactured housing
- --------------------------------------------------------------------------------
Volume $ 351.4 $ --
Gain on sale 16.0 --
Average margin 4.56% --
- --------------------------------------------------------------------------------
Securitizations-
manufactured housing
- --------------------------------------------------------------------------------
Volume $ 2,411.0 $ 728.0
Gain on sale 56.1 N/A
Average margin 2.33% N/A
================================================================================
- --------------------
Non-Interest Expense
Total non-interest expense increased $169.7 million, or 45.0% to $546.6 million
in 1999 from $376.9 million in 1998. Included in 1999 are GreenPoint Credit's
operating expenses of $143.8 million which for 1998 only included expenses for
the fourth quarter of $37.5 million.
GreenPoint Credit Operating Expenses
- --------------------------------------------------------------------------------
(In millions) 1999
================================================================================
Salaries and benefits $ 59.3
Net expense of premises and equipment 11.5
Other administrative expenses 39.7
Goodwill amortization 33.3
- --------------------------------------------------------------------------------
Total $ 143.8
================================================================================
<PAGE>
================================================================================
Also, the Company incurred non-recurring expenses of $25.1 million related
to the acquisition of Headlands on March 30, 1999. The expenses directly
associated with the acquisition consisted of $10.2 million in transaction fees
and $1.9 million in stock option acceleration expense. The Company also recorded
a $5.0 million contingent liability reserve. The $25.1 million in non-recurring
charges also includes $2.0 million in relocation expense and $6.0 million in
restructuring charges for severance expense related to the integration of
Headlands and GreenPoint Mortgage into GPM. In 1998, the Company recognized an
$8.3 million non-recurring personnel charge related to the retirement of senior
executives.
During the fourth quarter of 1999, the Company recorded a one-time
charitable and educational foundation expense of $17.6 million to complete the
Bank's funding commitment to the Foundation of $50 million.
Excluding GreenPoint Credit operating expenses, non-recurring expenses and
one-time charitable and educational foundation expense, total non-interest
expense for 1999 increased $29.0 million, or 8.8% to $360.1 million as compared
to $331.1 million in 1998. Salaries and benefits expense rose $14.8 million, or
11.1%, net expense of premises and equipment rose $8.9 million, or 15.9%; and
other administrative expense rose $5.0 million, or 7.3%. GPM continued to expand
its operations during the first half of 1999, increasing staff as a result of
rising origination volume. Origination volume for the second half of 1999 slowed
and total volume for the year decreased $271 million, or 2.5% to $10.7 billion
versus $11.0 billion for 1998. As a result of the diminished origination volume,
GPM took steps to reduce staffing levels and overall expenses. The Bank's
operating expenses for 1999 decreased $7.2 million, or 5.2% as a result of
continued emphasis on tight expense controls, which again resulted in reductions
in virtually all operating expense categories.
Employee stock ownership and stock plans expense decreased by $2.5
million, or 11.2%, due to the lower average price of GreenPoint's stock during
1999 versus 1998.
Other real estate owned operating income, net, decreased by $2.7 million,
or 45.0% to $3.3 million for 1999 from $6.0 million for 1998. The income is
primarily the result of the continued strong real estate market in the New York
City area that allowed GreenPoint to reduce the number of properties owned.
- ------------------
Income Tax Expense
Total income tax expense increased $20.8 million, or 15.5%, to $155.3 million
for 1999 from $134.5 million for 1998. The rise in the current year compared to
1998 is due to a $77.2 million, or 26.3% increase in income before income taxes
and an increase in the effective tax rate from 39.5% in 1998 to 41.9% in 1999.
The Company incurred approximately $14.1 million in non-recurring charges, for
which no tax benefit was recognized in 1999, which served to increase the
effective tax rate for 1999. Included in total taxes for 1998 is $18.5 million
in non-recurring income tax expense related to Headlands' conversion from a
non-taxable subchapter S corporation ("S corporation") to a taxable corporation.
- -------------------
Financial Condition
Total assets increased by $385.2 million, or 2.6%, to $15.40 billion at December
31, 1999 from $15.02 billion at December 31, 1998. The increase primarily
reflects the additional new deposit liabilities.
- --------------------------------------------------------------------------------
Risk Management
- --------------------------------------------------------------------------------
In 1999, the Company established the Corporate Risk Oversight Committee to
monitor and supervise the wide variety of risks encountered in the course of
business. The Committee is chaired by the President and Chief Operating Officer
and includes the heads of its three businesses, the Chief Financial Officer, the
Head of Risk Management and the General Counsel. The Committee meets
periodically to review credit risk, including both on-balance sheet and
off-balance sheet exposure, market risk and operating and business risks which
include, but are not limited to, legal and systems risks. These individual types
of risks are also analyzed and monitored by separate committees comprised of
experts within the business units and on the corporate staff. The major risks
and efforts to mitigate or manage them are described fully below.
20/21
<PAGE>
================================================================================
Market Risk Management
- --------
Overview
The Company's market risk exposure is limited solely to 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 loans do not match those of its liabilities. The
resulting interest rate risk is managed by adjustments to the Company's
investment portfolio and through the use of off-balance sheet instruments such
as interest rate swaps.
- ------------------------------
Market Risk Management Process
Management responsibility for interest rate risk resides with the Asset and
Liability Management Committee ("ALCO"). The committee is chaired by the Chief
Financial Officer and includes the Treasurer, the Head of Risk Management and
the Company's senior business-unit and financial executives. Interest rate risk
management strategies are formulated and monitored by ALCO within policies and
limits approved by the Board of Directors. These policies and limits set forth
the maximum risk which the Board of Directors deems prudent, govern permissible
investment securities and off-balance sheet instruments and identify acceptable
counterparties to securities and off-balance sheet transactions.
ALCO risk management strategies allow for the assumption of interest rate
risk within the Board approved limits. The strategies are formulated based upon
ALCO's assessments of likely market developments and trends in the Company's
lending 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.
- ---------------------------
Interest Rate Risk Position
The Company's income is affected by changes in the level of market interest
rates based upon mismatches between the repricing of its assets and liabilities.
One measure of interest rate sensitivity is provided by the accompanying net gap
analysis, which organizes assets and liabilities according to the time period in
which they reprice or mature. For many of the Company's assets and liabilities,
the maturity or repricing date is not determinable with certainty. For example,
the Company's mortgage and manufactured housing 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 table 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
liabilities repricing in a period (a positive gap) implies earnings will rise as
interest rates rise, and decline as interest rates decline. More liabilities
repricing than assets implies declining income as rates rise.
The use of interest rate instruments such as interest rate swaps is
integrated into the Company's interest rate risk management. The notional
amounts of these instruments are not reflected in the Company's balance sheet.
These instruments are included in the interest rate sensitivity table for
purposes of analyzing interest rate risk.
These relationships do not consider the impact that rate movements might
have on other components of the Bank's risk profile; for example, an increase in
interest rates, while implying that earnings will rise in a positive gap period,
might also result in higher credit or default risk due to a higher probability
of borrowers being unable to pay the contractual payments on loans. Likewise, a
decrease in rates might result in an increase in the risk that funds received
from loan prepayments cannot be reinvested at rates and spreads on earlier
investments and loan originations.
<PAGE>
================================================================================
The following table presents the Company's interest rate sensitivity gap
position as of December 31, 1999:
Interest Rate Sensitivity Gap Analysis
<TABLE>
<CAPTION>
At December 31, 1999
- -------------------------------------------------------------------------------------------------------------------------------
More Than More Than More Than More
Within 1 Year to 3 Years to 5 Years to Than
(Dollars in millions) One Year 3 Years 5 Years 9 Years 9 Years Total
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Total loans, net $ 3,847.3 $ 2,259.8 $ 1,460.9 $ 1,555.5 $ 1,264.7 $ 10,388.2
Money market investments(1) 1,052.8 -- -- -- -- 1,052.8
Securities held to maturity -- -- -- 0.5 93.3 93.8
Securities available for sale 575.2 434.3 246.0 323.9 395.3 1,974.7
Retained interests in securitizations 58.7 22.0 24.1 19.0 0.8 124.6
Other interest-earning assets 123.4 -- -- -- -- 123.4
- -------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets $ 5,657.4 $ 2,716.1 $ 1,731.0 $ 1,898.9 $ 1,754.1 $ 13,757.5
- -------------------------------------------------------------------------------------------------------------------------------
Cash and due from banks 179.5 -- -- -- -- 179.5
Servicing assets 18.1 33.0 27.0 40.6 61.9 180.6
Goodwill 80.1 160.3 160.3 320.6 220.4 941.7
Other non-earning assets 341.8 -- -- -- -- 341.8
- -------------------------------------------------------------------------------------------------------------------------------
Total assets $ 6,276.9 $ 2,909.4 $ 1,918.3 $ 2,260.1 $ 2,036.4 $ 15,401.1
- -------------------------------------------------------------------------------------------------------------------------------
Term certificates of deposit $ 4,795.5 $ 2,283.8 $ 129.6 $ -- $ -- $ 7,208.9
Core deposits 1,221.6 2,001.3 957.4 266.4 -- 4,446.7
- -------------------------------------------------------------------------------------------------------------------------------
Total deposits 6,017.1 4,285.1 1,087.0 266.4 -- 11,655.6
- -------------------------------------------------------------------------------------------------------------------------------
Securities sold under
agreements to repurchase 0.3 -- -- -- -- 0.3
Federal Home Loan Bank advances 225.0 100.0 200.0 150.0 -- 675.0
Notes payable 5.1 -- -- -- -- 5.1
Long term debt -- 199.9 -- -- -- 199.9
Guaranteed preferred beneficial
interest in Company's junior
subordinated debentures -- -- -- -- 199.7 199.7
- -------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 6,247.5 4,585.0 1,287.0 416.4 199.7 12,735.6
- -------------------------------------------------------------------------------------------------------------------------------
Other liabilities 678.8 -- -- -- -- 678.8
Stockholders' equity -- -- -- -- 1,986.7 1,986.7
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities and equity $ 6,926.3 $ 4,585.0 $ 1,287.0 $ 416.4 $ 2,186.4 $ 15,401.1
- -------------------------------------------------------------------------------------------------------------------------------
Off balance sheet
financial instruments 350.0 (100.0) (250.0) -- -- --
===============================================================================================================================
Interest rate sensitivity gap $ (299.4) $ (1,775.6) $ 381.3 $ 1,843.7 $ (150.0)
===============================================================================================================================
Cumulative interest rate
sensitivity gap $ (299.4) $ (2,075.0) $ (1,693.7) $ 150.0
===============================================================================================================================
Cumulative interest rate sensitivity
gap as a percentage of total assets
at December 31, 1999 (1.9%) (13.5%) (11.0%) 1.0%
===============================================================================================================================
</TABLE>
(1) Consists of interest-bearing deposits in other banks, federal funds sold
and securities purchased under agreements to resell.
As of December 31, 1999, the cumulative volume of liabilities maturing or
repricing within one year exceeded assets by $299.4 million, or 1.9% of assets.
- -------------------------------------
Earnings at Risk Sensitivity Analysis
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 and manufactured housing loans and mortgage backed securities
portfolios. The behavior of deposit balances will vary with changes in the
general level of interest rates and management's pricing strategies. The gap
analysis does not provide a clear presentation of the risks to income arising
from options embedded 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 variety of hypothetical interest rate scenarios. These
hypothetical scenarios incorporate interest rate increases and decreases of 200
basis points. Actual interest 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.
The most crucial management assumptions concern prepayments on the
Company's mortgage loan portfolio and the
22/23
<PAGE>
================================================================================
pricing of consumer deposits in various interest rate environments. As interest
rates decline, mortgage prepayments tend to increase, reducing loan portfolio
growth and lowering the portfolio's average yield. Rates on non-maturity
deposits rise and fall with the general level of interest rates, but tend to
move less than proportionately. Rates offered on consumer certificates of
deposits tend to move in close concert with market rates, though history
suggests they increase less rapidly when market rates rise. Analysis shows that
the Company's deposit volumes are relatively insensitive to interest rate
movements within the range encompassed in the scenarios.
At December 31, 1999, based on this model, the Company's potential
earnings at risk to a gradual, parallel 200 basis point decline in market
interest rates over the next twelve months on instruments held for other than
trading purposes was a decline of approximately 3.0% of projected 2000 net
income. Conversely, a similar gradual 200 basis point increase in interest rates
would result in no change to projected net income over what would be earned if
rates remained constant. At December 31, 1998 GreenPoint, on an un-pooled basis,
reported earnings sensitivity of -4.9% and 1.0% of projected 1999 earnings in
the event of a 200 basis point decline or rise in interest rates, respectively.
Given the short-term nature of Headlands assets and liabilities, management
believes the pooling effect of Headlands would not materially affect the
sensitivities. GreenPoint does not have significant exposure to risk on
instruments held for trading purposes.
Management has included all derivative and other financial instruments
that have a material effect in calculating the Company's potential earnings at
risk.
These measures of risk represent the Company's exposure to interest rate
movements at a particular point in time. The risk position is always changing.
ALCO continuously monitors the Company's risk profile as it changes, and alters
the rate sensitivity to ensure limits are adhered to, and that the resulting
risk profile is appropriate to its views on the likely course of interest rates
and developments in its core businesses.
The Company is exposed to interest rate risk during the accumulation of
mortgage loans prior to sale or securitization. Prior to the closing of the
loan, the Company generally extends an interest rate lock commitment to the
borrower. The Company is exposed to subsequent changes in the level of market
interest rates, and the spread over Treasuries required by investors. An
increase in market interest rates or a widening of spreads will reduce the
prices paid by investors and the resultant gain on sale. To mitigate this risk,
at the time the Company extends the interest rate lock commitment to the
borrower, the Company will enter into mandatory commitments to deliver mortgage
whole loans to various investors, or to issue private securities and/or Fannie
Mae and Freddie Mac securities (forward delivery commitments). These commitments
effectively establish the price the Company will receive for the related
mortgage loan thereby minimizing the risk of subsequent changes in interest
rates. At December 31, 1999, the Company had mandatory forward delivery
commitments outstanding amounting to $443.8 million, with an unrealized gain of
$2.5 million.
During 1998, the Company entered the manufactured housing finance
business, which introduced additional market risk. One set of risks results from
the accumulation of fixed rate manufactured housing loans prior to sale or
securitization of those loans. The level of market interest rates, and the
spread over treasuries required by investors determines the prices of the
securities backed by the Company's manufactured housing loans. A rise in market
interest rates, or a widening of spreads on manufactured housing-backed
securities during the accumulation period will reduce the prices paid for the
securities backed by the Company's manufactured housing loans and the gain on
sale.
The Company mitigates these risks by hedging fixed-rate manufactured
housing loan production prior to sale or securitization. Historical analysis
indicates that interest rate swap rates correlate highly with rates paid on
manufactured housing securities. Reports are prepared on the origination of
fixed rate manufactured housing loans on a daily and weekly basis. As the loans
are accumulated, the Bank enters into swaps in which it agrees to pay a fixed
rate and receive a floating rate. The amount and duration of the swaps entered
into are selected so the change in fair value correlates closely with the
changes in the fair value of securities backed by manufactured housing loans
similar to the Company's loan inventory. The loans and the resultant hedging
relationship are monitored throughout the accumulation period. At the time a
securitization is priced, establishing the gain on sale, the swap transactions
are unwound. The gain or loss on the swap position is included as part of the
gain on sale from the sale or securitization. At December 31, 1999, the Company
had swaps in the notional amount of $175 million, with an unrealized gain of
$1.7 million.
The Company acquired servicing assets as part of the GreenPoint Credit
acquisition and holds retained interests in the manufactured housing
securitizations completed in 1998 and 1999.
The fair value of the Company's servicing assets and retained interests
from securitizations are directly affected by the level of prepayments
associated with the underlying loans. However, manufactured housing contracts
historically have exhibited far less prepayment sensitivity to changing interest
rate levels than do residential mortgage loans. Much of this reduced prepayment
sensitivity can be attributed to lower borrower equity against which to
refinance, and smaller loan sizes which reduce the incentive to refinance. Thus,
in management's judgment, there is little earnings sensitivity solely
attributable to the effect of changes in general market interest rates on
servicing assets.
Prepayment rates have shown modest declines during 1999. Recently, several
competitors have exited the industry, providing borrowers fewer opportunities to
refinance. However, exposure to increases of 10% and 20% in prepayments speeds,
whatever the cause, is 4.45% and 8.76%, respectively, of the combined servicing
assets and retained interests in securitizations.
<PAGE>
================================================================================
- -------------------------
Liquidity Risk Management
The Company's primary sources of funds are deposits, proceeds from loans sales
and securitizations and proceeds from principal and interest payments on loans,
mortgage-backed securities and other securities. While maturities and scheduled
amortization of loans and securities are a predictable source of funds, deposit
flows and mortgage prepayments are greatly influenced by general interest rate
levels, economic conditions and competition.
In May 1999, the Bank became a member of the Federal Home Loan Bank of New
York ("FHLB"). The membership allows the Bank to receive advances in proportion
to its investment in FHLB stock and the size of the Bank's mortgage portfolio.
At December 31, 1999 the Bank had $675 million in outstanding advances and $1.2
billion in additional funding available.
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 operating, financing, lending, and investing activities during any
given period. Cash and cash equivalents, including money market investments,
totaled $1.2 billion at December 31, 1999 compared to $1.1 billion at December
31, 1998.
The Company had outstanding mortgage loan commitments of $2.09 billion at
December 31, 1999. The Company also had outstanding commitments to originate
manufactured housing loans of $337.8 million, as adjusted for historical
estimates of fallout. The Company anticipates that it will have sufficient funds
available to meet its current loan commitments.
- -----------------------
Capital Risk Management
The Company and the Bank are subject to minimum regulatory capital requirements
imposed by various federal and state banking authorities, including the Federal
Reserve Board, the FDIC and the New York State Banking Department. These capital
requirements vary according to an institution's capital level and the
composition of its assets. Furthermore, pursuant to the FDIC Improvement Act of
1991 ("FDICIA"), the federal banking regulators have set the minimum capital
ratios for a well-capitalized banking institution at 6% Tier 1 risk-based
capital, 10% total risk-based capital and 5% Tier 1 leverage capital. At
December 31, 1999, the Company and the Bank exceeded these levels and expect to
be in excess of the minimum ratios required of well-capitalized institutions in
the future.
Following is a table of the components of regulatory capital as defined by
the banking regulators for risk-based capital and leverage ratio guidelines.
Components of Capital At December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998
================================================================================
Tier 1 Capital:
Common stockholders' equity $ 2,095.1 $ 2,037.2
Unallocated ESOP shares (105.1) (110.1)
Unearned stock plans shares (3.3) (4.5)
Guaranteed preferred beneficial
interest in Company's junior
subordinated debentures 199.7 199.7
Goodwill (941.7) (1,014.3)
Accumulated other comprehensive
income, net 11.8 (4.7)
Servicing assets fair value limitation (18.1) (14.6)
- --------------------------------------------------------------------------------
Tier 1 Capital 1,238.4 1,088.7
- --------------------------------------------------------------------------------
Tier 2 Capital:
Qualifying allowance
for possible loan losses 113.0 107.7
- --------------------------------------------------------------------------------
Tier 2 Capital 113.0 107.7
- --------------------------------------------------------------------------------
Total qualifying capital 1,351.4 1,196.4
- --------------------------------------------------------------------------------
Risk-weighted assets $ 11,499.4 $ 8,607.9
================================================================================
GreenPoint remains committed to maintaining its capital at levels sufficient to
provide for the continued growth of the Company through prudent investments and
acquisitions while also providing shareholder value. The Company manages its
capital based on its near and long term needs. GreenPoint's total stockholders'
equity increased by $64.1 million to $1.99 billion at December 31, 1999 from
$1.92 billion at December 31, 1998. The increase is primarily the result of the
reissuance of 12.3 million shares for the acquisition of Headlands in a pooling
transaction and retained 1999 net income (net income less dividends declared) of
$134.9 million. These amounts were partially offset by the $141.4 million cost
of the Company's common stock repurchase program.
GreenPoint's Board of Directors authorized the Company to purchase up to
5%, or approximately 5.5 million of its outstanding shares. The program began
during the fourth quarter of 1999 and was completed in January 2000. At December
31, 1999 approximately 5.4 million shares had been repurchased.
- ----------------------
Credit Risk Management
The Company originates mortgage and manufactured housing loans for its own
portfolio and for disposition in the secondary markets in the form of whole loan
sales and securitizations. In general, whole loan sales transfer the credit risk
to the purchasers. In contrast, for loans placed in the portfolio, or for loans
securitized, the Company retains all or much of the credit risk.
Individual underwriting policies, procedures and authorities reside in the
business units, either GPM or GreenPoint Credit. In each case, the chief
underwriter or credit executive reports directly to the chief executive of the
business, outside of the production organization. With respect to loans
originated for whole loan sale to the secondary markets, where credit risk is
transferred, underwriting criteria are established to meet investor
requirements. A comprehensive quality control process is in place to ensure that
loans being originated meet the Company's underwriting standards.
24/25/
<PAGE>
================================================================================
In the case of loans originated for GreenPoint's portfolio, an independent
executive-level Risk Management Division determines the characteristics of the
borrowers and the property and loan types acceptable for portfolio investment.
Traditional NoDoc loans continue to be originated based on the borrower's level
of equity in the property securing the loans. Strict appraisal standards are
maintained, requiring all appraisers to be state certified, and all appraisals
are subject to additional levels of review by senior management. Alt-A and other
non-conforming loans, which may be placed in portfolio, have separate limits
with regard to borrower and property characteristics established by the Risk
Management Division.
GreenPoint Credit lends funds primarily based on the credit worthiness of
the borrower. Sophisticated custom scoring models are used to determine the
borrower's ability to repay. Additional security is provided by the housing
collateral securing the loan.
Since most manufactured housing loans are securitized or sold with
recourse, the Risk Management Division monitors closely the performance of all
loans on which the Company retains credit risk. On securitization or sale,
expectations are set on the default, recovery and voluntary prepayment rates by
the independent Risk Management Division. Each pool of loans is reviewed monthly
to ensure that performance is meeting those expectations. In the event
performance does not meet expectations, the assumptions are revised.
Responsibility for these judgments resides with executive management,
independent of GreenPoint Credit.
Risk Management reviews monthly the delinquency and loss trends in all the
mortgage and manufactured housing loans serviced by the Company, whether or not
it retains credit exposure. These reviews are intended to identify significant
changes in credit quality which may indicate changes to the Company's exposures
or to the efficacy of its underwriting of loans sold to other investors. Such
changes could prompt adjustments to the Company's underwriting criteria or
servicing procedures.
GreenPoint's loan origination activity is geographically diversified
throughout the U.S. GreenPoint began originating loans outside of New York State
in 1995. At December 31, 1999, approximately 37% of the Company's mortgage loan
portfolio was secured by such properties. The Company tracks economic and
housing market trends to identify areas for expansion and as an early warning
mechanism. The Company also closely monitors trends in delinquent and
non-performing loans through cycles in the economy and in the real estate
market. These economic and performance trends are analyzed in the ongoing
fine-tuning of lending practices.
The Company uses various collection procedures and works to maintain
contact with the borrowers to obtain repayment. Collection activities for
GreenPoint Mortgage are centralized in a servicing unit in Columbus, Georgia
with strong expertise in NoDoc mortgages. GreenPoint Credit's collection
activities are decentralized among its 45 regional offices that can quickly
repossess and liquidate collateral, thereby minimizing the loss severity. In
addition, the Company reviews the trends in amount and frequency of loans that
were transferred to other real estate owned, trends in sales activity of its
foreclosed property including average principal loss experienced and the holding
period for such properties.
The Company 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 costs related to problem loans. Management believes that
the allowance for loan losses is adequate. However, such determination is
susceptible to the effect of future unanticipated changes in general economic
and market conditions that may affect the financial circumstances of borrowers
and/or residential real estate values within the Company's lending areas.
- ----------------------------------
Allowance for Possible Loan Losses
The allowance for possible loan losses was $113.0 million at December 31, 1999
and 1998.
- ---------------------
Non-Performing Assets
Non-performing assets consist of non-performing mortgage loans and other real
estate owned. Total non-performing assets were $227.1 million at December 31,
1999 compared with $296.6 million at December 31, 1998. GreenPoint attempts to
convert these assets to interest-earning assets as quickly as possible, while
minimizing potential losses on the conversion.
The continued strong real estate market during 1999 in the New York City
area, where most of the Company's non-performing assets are located, facilitated
the disposition of such assets. The tables in Notes 6 and 8 to the consolidated
financial statements present further information about GreenPoint's
non-performing assets.
- ------------------------------------------
Impact of Recent Accounting Pronouncements
On June 15, 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivatives
and Hedging Activities ("SFAS 133"). As amended, SFAS 133 is effective for all
fiscal years beginning after June 15, 2000 (January 1, 2001 for the Company).
SFAS 133 requires that all derivative instruments be recorded on the balance
sheet at fair value. Changes in the fair value of derivatives are recorded in
each period in current earnings or comprehensive income, depending on whether
the derivative is designated as part of a hedge transaction and, if it is, the
type of hedge transaction. Management of the Company is in the process of
assessing the impact of the adoption of SFAS 133 on the Company's earnings and
financial position.
<PAGE>
================================================================================
- -----------------------
Impact of the Year 2000
As of the date of this Annual Report, the Company has not experienced any
disruption of operations or other material adverse consequences as a result of
its computers or those of its suppliers and service providers turning the
calendar to the Year 2000. The Company does not expect to experience such
disruptions or material adverse consequences in the future. The total cost of
the Year 2000 project is not material to the Company's financial statements and
is expensed as incurred.
- --------------------------------------------------------------------------------
Comparison of Operating Results for the Years Ended December 31, 1998 and 1997
- --------------------------------------------------------------------------------
- -------
General
Net income for 1998 was $159.1 million, or $1.77 per diluted share, a 14%
decrease over the $184.9 million, or $2.10 per diluted share, earned in 1997.
Core cash earnings rose to $259.4 million, or $2.89 per diluted share, in
1998 compared to $254.5 million, or $2.89 per diluted share, in the prior year.
- -------------------
Net Interest Income
Net interest income on a taxable-equivalent basis increased by $20.1 million, or
4.1%, to $514.7 million for 1998 from $494.6 million for 1997. The increase
reflects a rise in the average yield on interest-earning assets due to a
reduction in the lower yielding securities portfolio to fund growth in the
higher yielding loan portfolio, partially offset by a higher average cost of
funds due to GreenPoint's use of longer term funding sources. The average yield
on interest-earning assets was 8.19% for 1998 versus 8.05% for 1997 and the
average cost of funds was 4.58% for 1998 versus 4.44% for 1997. The net interest
margin increased slightly to 3.95% for 1998 from 3.91% for 1997.
Interest income on mortgages increased by $70.7 million, or 9.7%, to
$799.6 million for 1998 from $728.9 million for 1997. The increase reflects
average mortgage portfolio growth of $911.6 million in 1998 partially offset by
an 11 basis point decline in the average yield on the portfolio. The decline in
the average yield on mortgages reflects a high loan prepayment rate experienced
by GreenPoint in 1998 due to the relatively low interest rate environment.
Interest income on loans held for sale rose by $48.4 million to $84.9
million for 1998 from $36.5 million for 1997 due to growth in GPM lending
volumes.
Interest income on securities and money market investments declined by a
combined $77.5 million, or 32.5%, to $160.9 million for 1998 from $238.4 million
for 1997 as GreenPoint reduced the average balance of these investments to fund
loan portfolio growth. The combined average balance of securities and money
market investments dropped by $1.2 billion during 1998.
GreenPoint's average cost of funds increased by 14 basis points to 4.58%
for 1998 from 4.44% for 1997. The rise is due to the Company's issuance of long
term debt and guaranteed preferred beneficial interest in Company's junior
subordinated debentures, in mid-1997 as an alternative funding source to
deposits. The combined average balance of long term debt and guaranteed
preferred beneficial interest in Company's junior subordinated debentures
increased by $191.7 million during 1998 reflecting a full year impact of the
1997 issuances. In addition, due to the expansion of its mortgage business, GPM
increased its third party borrowings by $275.1 million, to $801.1 million in
1998, from $526.0 million in 1997.
GreenPoint maintained an average cost of deposits of 4.29% for 1998
compared with 4.28% for 1997.
- ----------------------------------
Provision for Possible Loan Losses
The provision for possible loan losses decreased by 27.0% to $13.8 million for
1998 from $18.9 million for 1997. The decrease is the result of improved asset
quality in 1998 versus 1997. Continued good economic conditions in the New York
City area during 1998 helped to reduce net charge-offs to $9.8 million in 1998
from $14.9 million in 1997. The 1998 net charge-offs include $1.3 million from
GreenPoint Credit's operations. The provisions for both 1998 and 1997 include
$4.0 million net additions to the allowance for possible loan losses.
- -------------------
Non-Interest Income
Non-interest income increased by $45.1 million, or 34.8%, to $174.8 million from
$129.7 million. The 1997 figure includes non-recurring gains of $2.4 million on
the sale of assets and $5.9 million on branch sales.
Mortgage loan-related fee income increased by $2.9 million, or 18.5%, to
$18.6 million for 1998 from $15.7 million for 1997 primarily due to higher fee
income recognized on cancelled loan applications and commitments.
Loan servicing fees totaled $23.5 million for 1998 compared to $11.2
million for 1997. The $12.3 million increase is the result of the additional
$21.7 million of net manufactured housing loan servicing income in 1998 offset
by a $9.4 million decrease in net mortgage loan servicing income at GPM. The
decrease was primarily the result of an increase in impairment charges resulting
from a decline in the value of originated mortgage servicing rights due to
higher prepayment assumptions because of the decline in interest rates during
1998. The increase in impairment charges was partially offset by additional loan
servicing fee income of $3.6 million in 1998 over 1997.
Banking service fees and commissions rose by $4.2 million, or 19.2%, to
$26.1 million for 1998 from $21.9 million for 1997. The increase is primarily
the result of several successful initiatives implemented by GreenPoint to
generate additional fee income through the consumer branch network. Sales of
annuities and mutual funds, a program introduced in March 1996, accounted for
$2.0
26/27
<PAGE>
================================================================================
million of the increase over 1997. Also, in November 1997, GreenPoint began
surcharging non depositors who use the Bank's ATM's. ATM surcharges totaled $2.0
million for 1998 compared to $0.3 million for 1997.
The net gain on securitizations and sale of mortgage loans increased $47.9
million to $106.6 million in 1998 from $58.7 million in 1997. The increase in
gains on sales of loans is a result of rising origination volume. The total
volume of loans sold or securitized increased $4.7 billion to $8.0 billion
during 1998 compared to $3.3 billion in 1997.
The Company securitized and sold $728 million of manufactured housing
loans in November 1998. These loans were acquired by the Company as part of the
GreenPoint Credit purchase and were recorded at their fair value in accordance
with generally accepted accounting principles. Therefore, the Company did not
recognize a gain on the sale through current income.
- --------------------
Non-Interest Expense
Total non-interest expense includes operating expenses of GreenPoint Credit
totaling $37.5 million in the fourth quarter of 1998.
GreenPoint Credit Operating Expenses
- --------------------------------------------------------------------------------
(In millions) 1998
================================================================================
Salaries and benefits $ 15.8
Net expense of premises and equipment 2.6
Other administrative expenses 11.0
Goodwill amortization 8.1
- --------------------------------------------------------------------------------
Total $ 37.5
================================================================================
Excluding the GreenPoint Credit operating expenses, total non-interest
expense increased by $21.7 million, or 6.8%. Salaries and benefits expense grew
by $9.7 million, or 7.8%; net expense of premises and equipment grew by $2.8
million, or 5.3%; and other administrative expense grew by $5.3 million, or
8.3%. The increase in expenses is attributable to the expansion of the mortgage
operations, primarily the increasing of staff to 1,148 employees at December 31,
1998 from 689 employees at December 31, 1997. Also, an $8.3 million
non-recurring personnel expense was incurred in 1998 relating to the retirement
of senior executives. In 1997, the Company recognized a $2.5 million
non-recurring restructuring charge relating to the transfer of mortgage
servicing from New York to Columbus, Georgia. Other real estate owned operating
income, net, rose by $4.2 million to $6.0 million for 1998 from $1.8 million for
1997, primarily due to the strong real estate market in the New York City area.
Employee stock ownership and stock plans expense increased by $2.6 million, or
13.2%, due to the higher average price of GreenPoint's stock during 1998 versus
1997.
- ------------------
Income Tax Expense
Total income tax expense increased $38.8 million, or 40.5%, to $134.5 million
for 1998 from $95.7 million for 1997. The rise in 1998 compared to 1997 is due
to a $13.0 million, or 4.6%, increase in income before income taxes and an
increase in the effective tax rate from 34.1% in 1997 to 39.5% in 1998. Total
taxes for 1998 includes a non-recurring charge of $18.5 million related to
Headlands' conversion from a Subchapter S corporation ("S corporation") which is
not subject to corporate level income tax to a Subchapter C corporation ("C
corporation"). As a C corporation, the Company bears the federal, state and
local tax obligation relating to its net income. The result of this change in
tax status gave rise to the increase in the effective tax rate from 1997 to
1998.
- --------------------------------------------------------------------------------
Forward Looking Statements
- --------------------------------------------------------------------------------
This Annual Report to the Stockholders contains certain forward-looking
statements which are based on management's current expectations. These
forward-looking statements include information concerning possible or assumed
future results of operations and business plans, including those relating to
earnings growth (on both a GAAP and cash basis); revenue growth; origination
volume in both the Company's mortgage and manufactured housing finance
businesses; tangible capital generation; market share; expense levels; and other
business operations and strategies. For these statements, GreenPoint claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 to the extent provided by
applicable law. Forward-looking statements involve inherent risks and
uncertainties. We caution you that a number of important factors could cause
actual results to differ materially from those contained in any forward-looking
statement. Such factors include, but are not limited to: risks and uncertainties
related to acquisitions and related integration activities; prevailing economic
conditions; changes in interest rates, loan demand, real estate values, and
competition, which can materially affect origination levels in the Company's
mortgage and manufactured housing finance businesses; the level of defaults and
prepayments on loans made by the Company and each of its affiliates; changes in
accounting principles, policies, and guidelines; adverse changes or conditions
in capital or financial markets which could adversely affect the ability of the
Company to sell or securitize mortgage and manufactured housing originations on
a timely basis or at prices which are acceptable to the Company; changes in any
applicable law, rule, regulation or practice with respect to tax or legal
issues; and other economic, competitive, governmental, regulatory, and
technological factors affecting the Company's operations, pricing, products, and
services. The forward-looking statements are made as of the date of this Report,
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.
<PAGE>
================================================================================
Average Consolidated Balance Sheet, Interest and Rates
<TABLE>
<CAPTION>
(Taxable-Equivalent Interest and Rates, in millions)(1) Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Average Average Average
Yield/ Yield/ Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Mortgage loans held
for investment(2) $ 9,080.2 $ 774.7 8.53% $ 9,079.4 $ 799.6 8.81% $ 8,167.8 $ 728.9 8.92%
Other loans(2) 343.0 32.1 9.35 53.6 4.3 8.01 28.9 2.3 7.94
Loans held for sale 1,573.9 136.2 8.66 894.6 84.9 9.49 349.9 36.5 10.44
Money market investments(3) 926.4 47.6 5.14 956.2 52.7 5.52 740.3 41.4 5.59
Securities(4) 1,246.3 78.1 6.26 1,823.5 108.2 5.93 3,212.9 197.0 6.13
Trading assets 5.4 0.3 5.56 3.4 0.2 5.49 3.9 0.2 5.93
Other interest-earning assets 356.9 26.2 7.36 220.2 16.7 7.60 133.9 11.2 8.37
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning
assets 13,532.1 1,095.2 8.09 13,030.9 1,066.6 8.19 12,637.6 1,017.5 8.05
- ------------------------------------------------------------------------------------------------------------------------------------
Non-interest earning assets(5) 1,514.2 1,078.1 950.0
Total assets $ 15,046.3 $ 14,109.0 $ 13,587.6
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
====================================================================================================================================
Savings $ 1,468.0 $ 32.4 2.21 $ 1,638.8 $ 39.3 2.40 $ 1,830.1 $ 46.7 2.55
N.O.W 309.8 3.0 0.98 323.7 3.8 1.18 330.5 5.3 1.61
Money market and variable
rate savings 2,415.5 79.8 3.30 2,203.4 72.7 3.30 2,273.7 76.5 3.36
Term certificates of deposit 7,079.1 364.5 5.15 6,543.0 348.2 5.32 6,512.8 343.1 5.26
Mortgagors' escrow 115.4 1.6 1.43 144.6 1.5 1.02 98.3 1.3 1.36
Other borrowed funds 636.9 37.3 5.84 801.1 54.1 6.76 526.0 32.8 6.22
Trading liabilities 2.6 0.1 5.39 1.8 0.1 5.26 1.9 0.1 5.89
Long term debt 199.9 13.9 6.94 199.8 13.9 6.94 92.4 6.4 6.92
Guaranteed preferred
beneficial interest in
Company's junior
subordinated debentures 199.7 18.3 9.16 199.7 18.3 9.16 115.4 10.7 9.29
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 12,426.9 550.9 4.43 12,055.9 551.9 4.58 11,781.1 522.9 4.44
Other liabilities(6) 616.1 465.6 408.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 13,043.0 12,521.5 12,189.2
Preferred shares of
subsidiary -- -- 3.4
Stockholders' equity 2,003.3 1,587.5 1,395.0
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities &
stockholders' equity $ 15,046.3 $ 14,109.0 $ 13,587.6
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income/interest
rate spread(7) $ 544.3 3.66% $ 514.7 3.61% $ 494.6 3.61%
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest-earning assets/
net interest margin(8) $ 1,105.2 4.02% $ 975.0 3.95% $ 856.5 3.91%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of interest-earning
assets to interest-
bearing liabilities 1.09x 1.08x 1.07x
====================================================================================================================================
</TABLE>
(1) Net interest income is calculated on a taxable-equivalent basis.
(2) In computing the average balances and average yield on loans, non-accruing
loans 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, servicing assets,
deferred tax assets, accrued interest receivable, and other miscellaneous
non-interest earning assets.
(6) Includes accrued interest payable, accounts payable, and other
miscellaneous non-interest bearing 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
liabilities.
(8) Net interest margin represents net interest income divided by average
interest-earning assets.
28/29
<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 indicated.
The changes attributable to the combined impact of volume and rate have been
allocated proportionately to volume and rate.
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
Compared to Compared to
Year Ended December 31, 1998 Year Ended December 31, 1997
Increase/(Decrease) Increase/(Decrease)
- ---------------------------------------------------------------------------------------------------------------
Due to Due to
- ---------------------------------------------------------------------------------------------------------------
Average Average Net Average Average Net
(Dollars in millions) Volume Rate Change Volume Rate Change
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans held for investment(1) $ 0.1 $(25.0) $(24.9) $80.4 $(9.7) $70.7
Other loans(1) 26.9 0.9 27.8 2.0 -- 2.0
Loans held for sale 59.4 (8.1) 51.3 52.0 (3.6) 48.4
Money market investments(2) (1.6) (3.5) (5.1) 11.9 (0.6) 11.3
Securities (35.9) 5.8 (30.1) (82.4) (6.4) (88.8)
Trading assets 0.1 -- 0.1 -- -- --
Other interest-earning assets 10.1 (0.6) 9.5 6.6 (1.1) 5.5
- ---------------------------------------------------------------------------------------------------------------
Total interest earned on assets 59.1 (30.5) 28.6 70.5 (21.4) 49.1
- ---------------------------------------------------------------------------------------------------------------
Savings (3.9) (3.0) (6.9) (4.6) (2.8) (7.4)
N.O.W (0.2) (0.6) (0.8) (0.1) (1.4) (1.5)
Money market and variable
rate savings 7.1 -- 7.1 (2.0) (1.8) (3.8)
Term certificates of deposit 27.8 (11.5) 16.3 2.6 2.5 5.1
Mortgagors' escrow (0.4) 0.5 0.1 0.5 (0.3) 0.2
Other borrowed funds (10.2) (6.6) (16.8) 18.3 3.0 21.3
Trading liabilities -- -- -- -- -- --
Long term debt -- -- -- 7.5 -- 7.5
Guaranteed preferred beneficial
interest in Company's junior
subordinated debentures -- -- -- 7.7 (0.1) 7.6
- ---------------------------------------------------------------------------------------------------------------
Total interest paid on liabilities 20.2 (21.2) (1.0) 29.9 (0.9) 29.0
- ---------------------------------------------------------------------------------------------------------------
Net change in net interest income $38.9 $(9.3) $29.6 $40.6 $(20.5) $20.1
===============================================================================================================
</TABLE>
(1) In computing the volume and rate components of net interest income for
loans, non-accrual loans have been included.
(2) Includes interest-bearing deposits in other banks, federal funds sold and
securities purchased under agreements to resell.
<PAGE>
================================================================================
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
December 31,
- ---------------------------------------------------------------------------------------------------------
(In millions, except share amounts) 1999 1998
==========================================================================================================
<S> <C> <C>
Assets:
Cash and due from banks $ 179.5 $ 164.2
Money market investments:
Interest-bearing deposits in other banks 2.2 7.3
Federal funds sold and securities purchased under agreements to resell 1,050.6 916.9
- ---------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 1,232.3 1,088.4
- ---------------------------------------------------------------------------------------------------------
Loans receivable held for sale 1,208.0 1,578.1
Federal Home Loan Bank of New York stock 91.8 --
Securities available for sale 1,974.7 1,337.6
Retained interests in securitizations 124.6 67.3
Securities held to maturity (fair value of $2.0 and $3.3, respectively) 2.0 3.3
Loans receivable held for investment (net of allowance for possible loan
losses of $113.0 in 1999 and 1998) 9,180.2 9,273.3
Other interest-earning assets 123.4 118.3
Accrued interest receivable 72.2 87.0
Banking premises and equipment, net 129.0 140.2
Servicing assets 180.6 145.9
Deferred income taxes, net 45.3 47.4
Goodwill (net of accumulated amortization of $240.3 and $160.7, respectively) 941.7 1,014.3
Other assets 95.3 114.8
- ---------------------------------------------------------------------------------------------------------
Total assets $15,401.1 $15,015.9
- ---------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
Liabilities:
Deposits:
N.O.W. and checking $ 540.4 $ 539.9
Savings 1,369.9 1,551.8
Variable rate savings 1,981.4 1,804.5
Money market 459.5 524.3
Term certificates of deposit 7,208.9 6,752.6
- ---------------------------------------------------------------------------------------------------------
Total deposits 11,560.1 11,173.1
- ---------------------------------------------------------------------------------------------------------
Notes payable 5.1 608.0
Mortgagors' escrow 95.5 128.1
Securities sold under agreements to repurchase 0.3 384.9
Federal Home Loan Bank advances 675.0 --
Long term debt 199.9 199.9
Guaranteed preferred beneficial interest in Company's
junior subordinated debentures 199.7 199.7
Accrued income taxes payable 27.2 56.9
Other liabilities 651.6 342.7
- ---------------------------------------------------------------------------------------------------------
Total liabilities 13,414.4 13,093.3
- ---------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 17)
Stockholders' Equity:
Preferred stock ($0.01 par value; 50,000,000 shares authorized; none issued) -- --
Common stock ($0.01 par value; 220,000,000 shares authorized;
110,261,164 shares issued) 1.1 1.1
Additional paid-in capital 857.8 1,278.8
Unallocated Employee Stock Ownership Plan (ESOP) shares (105.1) (110.1)
Unearned stock plans shares (3.3) (4.5)
Retained earnings 1,408.2 1,273.3
Accumulated other comprehensive income, net (11.8) 4.7
Treasury stock, at cost (6,058,244 shares and 15,618,745 shares, respectively) (160.2) (520.7)
- ---------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,986.7 1,922.6
- ---------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $15,401.1 $15,015.9
=========================================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
30/31
<PAGE>
================================================================================
Consolidated Statements of Income
<TABLE>
<CAPTION>
For the Year Ended December 31,
- -----------------------------------------------------------------------------------------------------
(In millions, except per share amounts) 1999 1998 1997
=====================================================================================================
<S> <C> <C> <C>
Interest income:
Mortgage loans held for investment $ 774.7 $ 799.6 $ 728.9
Loans held for sale 136.2 84.9 36.5
Money market investments 47.5 52.7 41.3
Securities 76.8 106.5 193.6
Other 55.6 17.7 10.1
- -----------------------------------------------------------------------------------------------------
Total interest income 1,090.8 1,061.4 1,010.4
- -----------------------------------------------------------------------------------------------------
Interest expense:
Deposits 481.4 465.5 473.0
Trading liabilities 0.1 0.1 0.1
Securities sold under agreements to repurchase 13.5 39.1 7.8
Notes payable 23.7 15.0 24.9
Long-term debt 32.2 32.2 17.1
- -----------------------------------------------------------------------------------------------------
Total interest expense 550.9 551.9 522.9
- -----------------------------------------------------------------------------------------------------
Net interest income 539.9 509.5 487.5
Provision for possible loan losses (14.2) (13.8) (18.9)
- -----------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 525.7 495.7 468.6
- -----------------------------------------------------------------------------------------------------
Non-interest income:
Income from fees and commissions:
Mortgage loan operations fee income 4.6 18.6 15.7
Loan servicing fees 100.2 23.5 11.2
Banking services fees and commissions 31.1 26.1 21.9
Other income 8.7 (3.3) 10.8
Net gain on securities 0.9 2.6 2.0
Net gain on sales of loans 228.3 106.6 58.7
Net gain on sale of lease 15.8 -- --
Gain on sale of mortgage servicing rights 2.1 0.7 9.4
- -----------------------------------------------------------------------------------------------------
Total non-interest income 391.7 174.8 129.7
- -----------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and benefits 207.5 149.2 123.7
Employee Stock Ownership and
stock plans expense 19.8 22.3 19.7
Net expense of premises and equipment 76.5 58.7 53.3
Federal deposit insurance premiums 2.7 2.6 2.8
Charitable and educational foundation 25.1 7.5 7.5
Other administrative expenses 132.7 79.9 63.6
Other real estate owned operating income (3.3) (6.0) (1.8)
Goodwill amortization 79.6 54.4 46.4
Restructuring charge and non-recurring personnel expense 6.0 8.3 2.5
- -----------------------------------------------------------------------------------------------------
Total non-interest expense 546.6 376.9 317.7
- -----------------------------------------------------------------------------------------------------
Income before income taxes 370.8 293.6 280.6
Income taxes related to earnings 155.3 116.0 95.7
Income taxes related to S corporation conversion -- 18.5 --
- -----------------------------------------------------------------------------------------------------
Net income $ 215.5 $ 159.1 $ 184.9
=====================================================================================================
Basic earnings per share $ 2.27 $ 1.83 $ 2.20
=====================================================================================================
Diluted earnings per share $ 2.23 $ 1.77 $ 2.10
=====================================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
================================================================================
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
For the Year Ended December 31,
- -------------------------------------------------------------------------------------------
(In millions) 1999 1998 1997
===========================================================================================
<S> <C> <C> <C>
Net income $215.5 $159.1 $184.9
- -------------------------------------------------------------------------------------------
Other comprehensive income, before tax:
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains arising during period (28.4) 17.5 38.0
Less: reclassification adjustment for gains
included in net income (0.9) (2.6) (2.0)
Minimum pension liability adjustment 0.1 (0.4) --
- -------------------------------------------------------------------------------------------
Other comprehensive income, before tax (29.2) 14.5 36.0
Income tax expense related to items of other
comprehensive income 12.7 (6.2) (16.3)
- -------------------------------------------------------------------------------------------
Other comprehensive income, net of tax (16.5) 8.3 19.7
- -------------------------------------------------------------------------------------------
Total comprehensive income, net of tax $199.0 $167.4 $204.6
===========================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
32/33
<PAGE>
================================================================================
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
For the Year Ended December 31,
- -----------------------------------------------------------------------------------------------
(In millions) 1999 1998 1997
===============================================================================================
<S> <C> <C> <C>
Common stock
Balance at beginning of year $ 1.1 $ 1.1 $ 1.1
Balance at end of year 1.1 1.1 1.1
- -----------------------------------------------------------------------------------------------
Additional paid-in capital
Balance at beginning of year 1,278.8 830.5 809.6
Reissuance of treasury stock (440.7) 322.6 0.1
Stock issued by pooled company -- 62.4 0.8
Recapitalization of undistributed earnings -- 29.4 --
Amortization of ESOP shares committed to be released 13.5 16.1 12.4
Amortization of stock plans shares 0.1 1.0 0.5
Tax benefit for vested stock plans shares 6.1 16.8 7.1
- -----------------------------------------------------------------------------------------------
Balance at end of year 857.8 1,278.8 830.5
- -----------------------------------------------------------------------------------------------
Unallocated ESOP shares
Balance at beginning of year (110.1) (114.9) (119.6)
Amortization of ESOP shares committed to be released 5.0 4.8 4.7
- -----------------------------------------------------------------------------------------------
Balance at end of year (105.1) (110.1) (114.9)
- -----------------------------------------------------------------------------------------------
Unearned stock plans shares
Balance at beginning of year (4.5) (7.0) (8.3)
Issuance of common stock to stock plans -- -- (0.8)
Amortization of stock plans shares 1.2 2.5 2.1
- -----------------------------------------------------------------------------------------------
Balance at end of year (3.3) (4.5) (7.0)
- -----------------------------------------------------------------------------------------------
Retained earnings
Balance at beginning of year 1,273.3 1,208.8 1,067.1
Net income 215.5 159.1 184.9
Recapitalization of undistributed earnings -- (29.4) --
Dividends paid (80.6) (46.5) (37.7)
Distribution to pooled company stockholders -- (13.7) --
Reissuance of treasury stock -- (5.0) (5.5)
- -----------------------------------------------------------------------------------------------
Balance at end of year 1,408.2 1,273.3 1,208.8
- -----------------------------------------------------------------------------------------------
Accumulated other comprehensive income, net
Balance at beginning of year 4.7 (3.6) (23.3)
Net change in accumulated other comprehensive income, net (16.5) 8.3 19.7
- -----------------------------------------------------------------------------------------------
Balance at end of year (11.8) 4.7 (3.6)
- -----------------------------------------------------------------------------------------------
Treasury stock
Balance at beginning of year (520.7) (578.8) (237.7)
Reissuance of treasury stock 501.9 277.7 14.4
Purchase of treasury stock (141.4) (219.6) (355.5)
- -----------------------------------------------------------------------------------------------
Balance at end of year (160.2) (520.7) (578.8)
- -----------------------------------------------------------------------------------------------
Total stockholders' equity $1,986.7 $1,922.6 $1,336.1
===============================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
================================================================================
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Year Ended December 31,
- ------------------------------------------------------------------------------------------------------
(In millions) 1999 1998 1997
======================================================================================================
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 215.5 $ 159.1 $ 184.9
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses 14.2 13.8 18.9
Depreciation and amortization of premises and equipment 31.8 21.4 19.4
Goodwill amortization 79.6 54.4 46.4
Accretion of discount on securities, net of premium amortization (5.1) (9.2) (5.2)
Gain on sale of lease (15.8) -- --
Net change in trading assets -- 25.0 (25.0)
Net change in trading liabilities -- (10.6) 10.6
ESOP and stock plans expense 19.8 22.3 19.7
Non-recurring personnel expense -- 8.3 --
Gain on securities transactions (1.8) -- --
Net change in loans held for sale (234.3) (170.4) (412.5)
Capitalization of servicing assets, net of sales (82.6) (31.2) (5.6)
Amortization of servicing assets 47.9 25.7 6.7
Net change in retained interests in securitizations (47.9) (34.3) (17.4)
Net gain on sales of other real estate owned (5.3) (8.1) (7.3)
Deferred income taxes 6.1 16.1 (6.5)
Decrease (increase) in other assets 24.6 (39.8) 9.3
Increase (decrease) in other liabilities 305.0 77.9 (78.9)
Other, net (27.2) (0.2) 5.0
- ------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 324.5 120.2 (237.5)
- ------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Loan originations and principal repayments, net 680.0 (396.5) (1,522.2)
Proceeds from sales of other real estate owned 19.2 27.2 21.3
Purchases of securities available for sale (3,052.1) (4,821.4) (1,916.8)
Purchases of securities held to maturity -- (0.6) (0.2)
Proceeds from maturities of securities available for sale 2,071.2 4,239.9 1,933.0
Proceeds from sales of securities available for sale 104.0 1,039.0 2,065.1
Investment in corporate officer life insurance policy -- -- (102.7)
Principal repayments on securities 207.0 290.2 259.9
Purchase of Federal Home Loan Bank stock (91.8) -- --
Proceeds from sale of lease 34.8 -- --
Purchases of premises and equipment (32.7) (26.4) (17.4)
- ------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (60.4) 351.4 720.0
======================================================================================================
</TABLE>
Statements continued on following page.
See accompanying notes to the consolidated financial statements.
34/35
<PAGE>
================================================================================
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
For the Year Ended December 31,
- ------------------------------------------------------------------------------------------------
(In millions) 1999 1998 1997
================================================================================================
<S> <C> <C> <C>
Cash flows from financing activities:
Net deposits (withdrawals) from depositors' accounts 385.7 199.6 (348.9)
Cash paid on transfer of deposit liabilities -- -- (124.8)
Borrowing on notes payable 3,230.8 8,192.8 3,544.2
Payments on notes payable (3,832.5) (7,786.8) (3,514.9)
Net (decrease) increase on lease payable (1.2) 0.8 5.6
Proceeds from Federal Home Loan Bank advance 675.0 -- --
Payments for cash dividends (80.6) (46.5) (37.7)
Proceeds from common stock offering 47.4 645.6 --
Net cash used in acquisitions -- (1,376.2)(1) --
Exercise of stock options 13.8 -- --
Purchase of treasury stock (141.4) (219.6) (355.5)
Securities sold under agreements to repurchase (384.6) (162.0) 472.0
Proceeds from issuance of long term debt -- -- 199.8
Proceeds from issuance of guaranteed
preferred beneficial interest in Company's
junior subordinated debentures -- -- 199.7
Net (decrease) increase in mortgagors' escrow (32.6) 10.0 51.1
Other, net -- 1.6 5.7
- ------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (120.2) (540.7) 96.3
- ------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 143.9 (69.1) 578.8
Cash and cash equivalents at beginning of year 1,088.4 1,157.5 578.7
- ------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $1,232.3 $1,088.4 $1,157.5
- ------------------------------------------------------------------------------------------------
Non-cash activities:
Additions to other real estate owned, net $ (10.1) $ 15.8 $ 28.3
Loans to facilitate sales of other real estate $ -- $ 8.2 $ 18.7
Unsettled trades $ 284.1 $ -- $ 68.1
- ------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 154.8 $ 121.1 $ 75.6
Interest paid $ 477.3 $ 493.2 $ 488.9
================================================================================================
</TABLE>
(1) GreenPoint purchased the manufactured housing lending business of BAHS and
also acquired the dealer origination segment of NationsCredit's
manufactured housing business. In conjunction with these acquisitions,
liabilities were assumed as follows:
Fair value of assets acquired $ 1,000.5
Excess of cost over fair value of net assets acquired 485.6
Cash paid (1,376.2)
---------
Liabilities assumed $ 109.9
=========
See accompanying notes to the consolidated financial statements.
<PAGE>
================================================================================
Notes to the Consolidated Financial Statements
- --------------------------------------------------------------------------------
NOTE 1
- --------------------------------------------------------------------------------
GreenPoint Financial Corp. (the "Company" or "GreenPoint") is a bank holding
company organized in 1993 under the laws of the state of Delaware and registered
under the Bank Holding Company Act of 1956, as amended. The Company acquired
100% of the outstanding capital stock of GreenPoint Bank (the "Bank"), a New
York State chartered savings bank, upon its conversion from the mutual to the
capital stock form of ownership on January 28, 1994. The Company is a leading
national specialty housing finance company with three principal businesses.
GreenPoint Mortgage ("GPM"), headquartered in Larkspur, California, is the
leading national lender in no documentation ("NoDoc") and alternative A ("Alt
A") residential mortgages. Alt A borrowers have strong credit backgrounds but
require loan terms that do not meet other agency criteria. GPM is a result of
the combination during the second quarter of 1999, of GreenPoint Mortgage Corp.
("GreenPoint Mortgage"), and Headlands Mortgage Company ("Headlands") (see note
2). GreenPoint Credit LLC ("GreenPoint Credit"), headquartered in San Diego,
California, is the second largest lender nationally in the manufactured housing
finance industry. The Bank, a New York state chartered savings bank, has $11.6
billion in deposits in 73 branches serving more than 400,000 households in the
Greater New York City area.
- -------------------------
(a) Basis of Presentation
The consolidated financial statements include the accounts of the Company, the
Bank and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. When necessary, certain
reclassifications of prior year financial statement amounts have been made to
conform to the current year presentation.
In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the statement of condition and revenues and expenses for the period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
(b) Securities Purchased Under Agreements to Resell and Securities Sold Under
Agreements to Repurchase
The Company enters into short-term purchases of securities under agreements to
resell ("reverse repurchase agreements") and sales of securities under
agreements to repurchase substantially identical securities ("repurchase
agreements"). The amounts advanced under reverse repurchase agreements and the
amounts borrowed under repurchase agreements are carried on the balance sheet at
the amount advanced or borrowed, respectively plus accrued interest. Interest
earned on reverse repurchase agreements and interest incurred on repurchase
agreements are reported as interest income and interest expense, respectively.
- -----------------------------------------------------------------
(c) Securities Held to Maturity and Securities Available for Sale
Securities classified as held to maturity are carried at amortized cost. The
Company has the positive intent and ability to hold these securities to
maturity.
Securities that may be sold in response to or in anticipation of changes
in interest rates and resulting prepayment risk, or other factors, are
classified as available for sale and are carried at fair value. Unrealized gains
and losses on these securities are reported, net of applicable taxes, in
accumulated other comprehensive income, as a separate component of stockholders'
equity.
Amortization of premiums and accretion of discounts are reported in
interest income, using a method which results in a level yield over the
estimated life of the security.
Gains and losses on the sale of securities are determined using the
specific identification method.
- ----------------------------------------
(d) Loans Receivable Held for Investment
Loans receivable held for investment are stated at the aggregate of their
remaining unpaid principal balances, less any related charge-offs, net deferred
loan fees, unearned discount and allowance for possible loan losses.
Interest income on loans receivable is recognized on an accrual basis
except when a mortgage loan has been past due 90 days or upon determination that
collection is doubtful. When a mortgage loan is placed on non-accrual status,
all accrued but unpaid interest receivable is reversed and charged against
current interest income. Thereafter, interest income on non-accrual loans is
recorded only when received in cash. A loan is returned to accrual status when
the principal and interest are no longer past due and the borrower's ability to
make periodic principal and interest payments is reasonably assured.
Loan fees and certain direct loan origination costs are deferred. Net
deferred fees are amortized into interest income over the contractual life of
the loan using the level-yield method.
- --------------------------------------
(e) Allowance for Possible Loan Losses
Management's periodic evaluation of the adequacy of the allowance for possible
loan losses is based on the Company's past loan loss experience, known and
inherent risks in the loan portfolio, adverse situations which may affect the
borrowers' ability to repay, the estimated value of the underlying real estate
collateral and current economic and market conditions within the geographic
areas surrounding the underlying real estate.
The allowance for possible loan losses is increased by provisions for
possible loan losses charged to income and is reduced by charge-offs, net of
recoveries.
- ----------------------------------
(f) Loans Receivable Held for Sale
Loans receivable held for sale are carried at the lower of cost or estimated
fair value in the aggregate. Net unrealized losses are provided for in a
valuation allowance created through charges to income. Transfers from loans held
for
36/37
<PAGE>
================================================================================
investment to loans held for sale are recorded at the lower of cost or estimated
fair value in the aggregate.
- ------------
(g) Goodwill
Goodwill arising from the 1995 acquisition of the New York branches of Home
Savings of America and the 1998 acquisition of the manufactured housing finance
business of BankAmerica Housing Services ("BAHS") is being amortized using the
straight-line method over 15 years. The goodwill associated with the 1995
BarclaysAmerican/Mortgage acquisition is being amortized using the straight-line
method over 5 years. These intangible assets are evaluated for recoverability by
management on a periodic basis.
- ---------------------------
(h) Other Real Estate Owned
Other real estate owned ("ORE") consists of real estate acquired through
foreclosure or deed in lieu of foreclosure. ORE is recorded at the lower of cost
or estimated fair value less estimated selling costs at the time of foreclosure.
Valuation write downs made at or shortly after the acquisition date are charged
against the Company's allowance for possible loan losses.
Subsequent declines in the estimated fair value, net operating results,
and gains and losses on the disposition of the related properties are charged
against the Company's operating results as incurred.
- ------------------------------------
(i) Derivative Financial Instruments
The Company uses various hedging instruments to manage interest rate exposure as
discussed below. On a prospective basis, the Company performs various analyses
to establish an expectation that the results of the hedging instrument will
substantially offset the effects of changes in the fair value of the hedged
item. Throughout the reporting period, the Company evaluates the hedging
relationship to assess whether high correlation has been achieved. The
accounting for the hedging instruments that meet high correlation is discussed
below. If high correlation is not achieved, the hedging instruments are
redesignated as trading instruments and marked to market through earnings.
The Company uses interest rate swaps to manage interest rate exposure
associated with its fixed rate mortgage loan portfolio held for investment. At
the inception of the transactions, the Company designates these instruments as
hedges of specific pools of mortgage loans. These swaps are accounted for under
the accrual method, whereby interest income (expense) associated with the swaps
is accrued and reported as an adjustment to mortgage loan interest income.
Realized gains or losses from the settlement or of the swaps are deferred on the
balance sheet as a component of mortgage loans and are amortized to interest
income over the remaining life of the hedged item. Amortization commences when
the contract is settled or terminated. If the related mortgage loans are sold or
otherwise disposed, any deferred gain or loss on the swap is recognized as an
adjustment to the gain or loss on disposition of the mortgage loans.
The Company also uses interest rate swaps to manage the interest rate
exposure associated with manufactured housing loans during the accumulation
period prior to sale or securitization. The Company uses mandatory forward
delivery commitments to manage the interest rate exposure associated with
mortgage loans and mortgage loan interest rate lock commitments during the
accumulation period prior to sale or securitization. Realized gains or losses on
the termination or settlement of the swaps or the mandatory forward delivery
commitments are reported as a component of the gain on sale of the related
loans. Unrealized gains or losses are deferred and considered in the lower of
cost or fair value analysis performed on related loans receivable held for sale
and the analysis for potential accruals on interest rate lock commitments. The
effect of current period payments under the swap contracts is included as an
adjustment to interest income on loans receivable held for sale.
- ----------------------------------
(j) Banking Premises and Equipment
Buildings, equipment, improvements and furniture and fixtures are carried at
cost, less accumulated depreciation and amortization. Buildings, equipment and
furniture and fixtures are depreciated over their estimated useful lives using
the straight-line method. Leasehold improvements are amortized using the
straight-line method over the shorter of their estimated useful lives or the
terms of related leases.
- ----------------------------------
(k) Stock-Based Compensation Plans
Deferred compensation for stock award plans is recorded as a reduction of
stockholders' equity and is calculated as the cost of the shares purchased by
the Bank and contributed to the plan. Compensation expense is recognized over
the vesting period of actual stock awards based upon the fair value of shares at
the award date.
Compensation expense for the Employee Stock Ownership Plan and Trust
("ESOP") is recognized for the number of shares allocated to ESOP participants
as they are committed to be released. The difference between the fair value of
the shares allocated and the cost of the shares to the ESOP is charged or
credited to additional paid-in capital.
The Company adopted the disclosure approach under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123") under which the Company discloses in the notes to the financial statements
the pro forma effects on net income and earnings per share, determined as if the
fair value-based method had been applied in measuring compensation cost. The
Company continues to apply APB Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") in accounting for its plans. Accordingly, no compensation
cost has been recognized for the Company's stock option plans.
- -----------------------------
(l) Accounting for Loan Sales
The Company sells loans both in the whole loan market as well as through various
securitization vehicles.
When the Company sells mortgages or manufactured housing loans on a whole
loan basis, in some cases it retains the servicing rights related to the loans.
In instances where the Company does not retain the servicing rights to the
loans, the gain or loss on the sale is equal to the differ-
<PAGE>
================================================================================
ence between the proceeds received and the book basis of the loans sold. In
instances where the Company does retain the servicing rights, the gain or loss
also depends in part on the fair value attributed to the servicing rights.
When the Company securitizes manufactured housing loans and mortgages it
may retain servicing rights and one or more retained interests. In addition, the
Company may provide a corporate guarantee issued by the Bank and backed by a
letter of credit. In calculating the gain or loss on the sale, the Company
allocates the cost basis of the loans sold between the assets sold, and the
retained interests and servicing rights based on their relative fair values at
the date of sale. The corporate guarantee is recorded at its estimated fair
value at the date of sale. The liabilities associated with these guarantees are
reported as a component of other liabilities. A gain or loss is recognized as
the difference between the cash proceeds from the sale and the allocated cost
basis of the assets sold, less the estimated fair value of the corporate
guarantee.
- -----------------------------------------
(m) Retained Interests in Securitizations
Retained interests in securitizations include interest-only strips, subordinated
certificates and transferor interests, including overcollateralization accounts.
Retained interests in securitizations are amortized using the interest
method. The Company classifies its retained interests in securitizations as
available for sale and carries these securities at fair value. Unrealized gains
and losses are reported, net of applicable taxes, in accumulated other
comprehensive income, as a separate component of stockholders' equity.
To obtain fair values, quoted market prices are used if available. Because
market quotes are generally not available for retained interests, the Company
generally estimates fair value based upon the present value of estimated future
cash flows using assumptions of prepayments, defaults, loss severity rates, and
discount rates that the Company believes market participants would use for
similar assets and liabilities.
- --------------------
(n) Servicing Assets
Servicing assets are carried at the lower of cost or fair value and are
amortized in proportion to and over the period of net servicing income.
The Company stratifies its servicing assets based on the risk
characteristics of the underlying loan pools. Servicing assets are evaluated for
impairment based on the risk characteristics of these pools to determine whether
any valuation allowances are required. A valuation allowance is recognized
through a charge to current earnings for servicing assets that have an amortized
balance in excess of the current fair value.
The fair value of the servicing assets is determined by calculating the
present value of estimated future net servicing cash flows, using assumptions of
prepayments, defaults, servicing costs and discount rates that the Company
believes market participants would use for similar assets.
- ----------------
(o) Income Taxes
The Company and certain of its subsidiaries file consolidated tax returns with
the Federal, state and local taxing authorities. Other subsidiaries file
separate domestic tax returns as required.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases ("temporary differences"). Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which temporary differences are expected to be recovered or settled. A
valuation allowance is provided for deferred tax assets where realization is not
considered "more likely than not." The effect of changes in tax laws or rates on
deferred tax assets and liabilities is recognized in the period that includes
the enactment date.
- ----------------------
(p) Earnings per Share
Basic earnings per share ("EPS") is calculated by dividing net income by the
weighted average number of common shares outstanding, with no consideration of
potential outstanding shares. Diluted EPS is calculated using the same method as
basic EPS, but reflects the potential dilution that would occur if stock options
or other contracts were exercised and converted into common stock. Common stock
equivalents are computed using the treasury stock method. ESOP shares that have
been allocated to participants' accounts or are committed to be released for
allocation are considered outstanding for EPS calculation.
- ---------------------------
(q) Statement of Cash Flows
For the purpose of reporting cash flows, cash and cash equivalents include cash
and due from banks, interest-bearing deposits in other banks, federal funds sold
and reverse repurchase agreements, all of which have initial maturities of less
than ninety days.
- --------------------------------------------------------------------------------
NOTE 2 Business Acquisitions
- --------------------------------------------------------------------------------
On April 30, 1997, the Company purchased the Columbus, Georgia mortgage
servicing operations of Citizens Financial Group, for a net purchase price of
approximately $4 million. The purchase of the Georgia facility gives the Company
a more efficient platform for servicing its national mortgage portfolio.
On September 30, 1998, the Company purchased the manufactured housing
finance business of BAHS, a division of Bank of America, FSB, for a cash premium
of $605 million. The purchase includes BAHS' loan origination and servicing
platforms, its servicing portfolio of $11.2 billion and related revenue stream,
and $766.4 million of loans held for sale. The acquisition was treated as a
purchase for accounting and financial reporting purposes, resulting in $478.6
million of tax-deductible goodwill, which will be
38/39
<PAGE>
================================================================================
amortized over 15 years. The acquisition was financed through available capital
and the proceeds of an offering of GreenPoint common stock.
On December 7, 1998, the Company acquired the dealer origination segment
of NationsCredit's manufactured housing business. The purchase provides the
Company with access to NationsCredit's dealer business throughout the United
States.
On March 30, 1999, the Company completed the acquisition of Headlands. The
acquisition was accounted for as a tax-free pooling of interests, with 0.62
shares of the Company's stock being exchanged for each share of Headlands stock.
Accordingly, the Company's consolidated financial statements have been restated
for all periods prior to the business combination to include the combined
financial results of GreenPoint and Headlands.
There were no transactions between GreenPoint and Headlands prior to the
acquisition. Certain reclassifications were made to the Headlands financial
statements to conform to GreenPoint's presentations.
- --------------------------------------------------------------------------------
NOTE 3 Restrictions on Cash and Due from Banks
- --------------------------------------------------------------------------------
The Company is required to maintain reserves on deposit with the Federal Reserve
Bank of New York. The amount of required reserves on deposit at December 31,
1999 was $8.1 million. The average amount of those reserve deposits was
approximately $26.6 million for the year ended December 31, 1999.
- --------------------------------------------------------------------------------
NOTE 4 Securities Purchased Under Agreements to Resell
- --------------------------------------------------------------------------------
The maximum amounts of reverse repurchase agreements outstanding on any day
during the years ended December 31, 1999 and 1998, were $0.87 billion and $1.62
billion, respectively. The average amounts of these agreements outstanding
during the years ended December 31, 1999 and 1998, were $463.1 million and
$617.1 million, respectively.
During 1999 and 1998, the underlying securities purchased under resale
agreements were delivered into a third-party account that recognizes the
Company's rights and interests in these securities.
- --------------------------------------------------------------------------------
NOTE 5 Securities
- --------------------------------------------------------------------------------
- -----------------------------
Securities Available for Sale
The amortized cost and estimated fair value of securities available for sale at
December 31, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(In millions) Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------------------
Securities Available for Sale December 31, 1999
===========================================================================================================
<S> <C> <C> <C> <C>
U.S. Government and Federal Agency Obligations:
Agency notes/Asset-backed securities $ 139.8 $ -- $ (1.7) $ 138.1
Mortgage-backed securities 918.1 -- (23.9) 894.2
Collateralized mortgage obligations 589.8 -- (6.3) 583.5
Trust certificates collateralized by GNMA securities 16.7 -- -- 16.7
Corporate asset-backed securities 25.0 -- -- 25.0
Corporate bonds 33.8 0.1 (0.2) 33.7
Commercial paper 169.4 -- -- 169.4
Other 114.8 -- (0.7) 114.1
- -----------------------------------------------------------------------------------------------------------
Total securities available for sale $2,007.4 $ 0.1 $ (32.8) $1,974.7
===========================================================================================================
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(In millions) Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------------------
Securities Available for Sale December 31, 1998
===========================================================================================================
<S> <C> <C> <C> <C>
U.S. Government and Federal Agency Obligations:
Agency notes/Asset-backed securities $ 260.5 $ 0.1 $ (0.3) $ 260.3
Mortgage-backed securities 561.0 5.5 (0.1) 566.4
Collateralized mortgage obligations 206.2 3.5 (0.1) 209.6
Trust certificates collateralized by GNMA securities 26.6 -- (0.1) 26.5
Corporate asset-backed securities 25.0 -- (0.1) 24.9
Corporate bonds 24.3 -- (0.1) 24.2
Commercial paper 145.7 -- -- 145.7
Other 80.0 -- -- 80.0
- -----------------------------------------------------------------------------------------------------------
Total securities available for sale $1,329.3 $ 9.1 $ (0.8) $1,337.6
===========================================================================================================
</TABLE>
<PAGE>
================================================================================
During the year ended December 31, 1999, the Company sold available for
sale securities aggregating $102.2 million, resulting in gross realized gains of
$1.8 million and gross realized losses of $0.9 million.
During the year ended December 31, 1998, the Company sold available for
sale securities aggregating $1.0 billion, resulting in gross realized gains of
$3.7 million and gross realized losses of $1.1 million.
During the year ended December 31, 1997, the Company sold available for
sale securities aggregating $2.1 billion, resulting in gross realized gains of
$3.9 million and gross realized losses of $1.9 million.
Mortgage-backed securities and collateralized mortgage obligations, most
of which have contractual maturities of more than 10 years, are subject to
scheduled and nonscheduled principal payments which shorten the average life to
an estimated 6.0 years. The amortized cost and estimated fair value of
securities at December 31, 1999 by contractual maturity are summarized below:
<TABLE>
<CAPTION>
Securities Available for Sale Securities Held to Maturity
- -------------------------------------------------------------------------------------------------------
Amortized Fair Amortized Fair
(In millions) Cost Value Cost Value
- -------------------------------------------------------------------------------------------------------
Maturity schedule of securities December 31, 1999
=======================================================================================================
<S> <C> <C> <C> <C>
Due in one year or less $ 175.0 $ 175.0 $ -- $ --
Due after one year through five years 302.2 298.4 0.9 0.9
Due after five years through ten years 99.8 96.7 0.5 0.5
Due after ten years 1,430.4 1,404.6 0.6 0.6
- -------------------------------------------------------------------------------------------------------
Total securities $2,007.4 $1,974.7 $ 2.0 $ 2.0
=======================================================================================================
</TABLE>
The Company lends portions of its investment in U.S. government and agency
securities to pre-authorized securities dealers in return for a securities
lending fee. These loaned securities are collateralized at 102% of their fair
value with government and/or agency securities. To protect the Company's
investment, the agreements contain provisions to increase the collateral
obtained, should the value of the collateral decline or the fair value of the
securities loaned increase. Upon maturity or early termination of a loan, the
Company's securities are returned. At December 31, 1999, the Company had $43.9
million of securities on loan to securities dealers. At December 31, 1998 there
were no securities on loan to securities dealers. Income earned on loaned
securities, included in other income, for the years ended December 31, 1999,
1998 and 1997 was $0.01 million, $0.3 million, and $1.1 million, respectively.
The maximum amount of securities loaned on any day during the years ended
December 31, 1999 and 1998 was $0.2 billion and $1.2 billion, respectively.
- --------------------------------------------------------------------------------
NOTE 6 Loans Receivable Held for Investment
- --------------------------------------------------------------------------------
The Company's loans receivable held for investment balances are summarized as
follows:
December 31,
- -------------------------------------------------------------------------------
(In millions) 1999 1998
================================================================================
Conventional first mortgage loans:
Residential one- to four-family $ 7,453.8 $ 8,002.2
Residential multi-family 457.6 593.3
Commercial property 626.5 573.4
Second mortgage and home equity loans 110.9 104.4
Manufactured housing loans 590.1 --
Other 69.3 127.2
- -------------------------------------------------------------------------------
Total loans receivable held
for investment 9,308.2 9,400.5
Net deferred loan origination fees
and unearned discount (15.0) (14.2)
Allowance for possible loan losses (113.0) (113.0)
- -------------------------------------------------------------------------------
Loans receivable held for
investment, net $ 9,180.2 $ 9,273.3
================================================================================
- -----------------
Non-Accrual Loans
The outstanding balances of non-accrual loans as of December 31, 1999 and 1998
are as follows:
December 31,
- -------------------------------------------------------------------------------
(In millions) 1999 1998
================================================================================
Mortgage loans secured by
Residential one- to four-family $ 173.0 $ 226.0
Residential multi-family 24.1 33.9
Commercial property 22.2 25.2
Other loans 0.2 0.1
- --------------------------------------------------------------------------------
Total $ 219.5 $ 285.2
================================================================================
The effect of non-accrual loans on interest income is as follows:
Year Ended December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998 1997
================================================================================
Interest income:
As originally contracted $ 30.3 $ 37.0 $ 45.3
As recognized (27.4) (30.7) (29.5)
- --------------------------------------------------------------------------------
Reduction of interest income $ 2.9 $ 6.3 $ 15.8
================================================================================
- ----------------------------------
Allowance for Possible Loan Losses
Activity in the allowance for possible loan losses is summarized as follows:
- --------------------------------------------------------------------------------
At or for the Year Ended December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998 1997
================================================================================
Balance at beginning of year $ 113.0 $ 109.0 $ 105.0
Provisions charged to
income 14.2 13.8 18.9
Charge-offs:
Mortgage (7.8) (9.3) (16.0)
Manufactured Housing (6.9) (1.3) --
Recoveries 0.5 0.8 1.1
- --------------------------------------------------------------------------------
Balance at end of year $ 113.0 $ 113.0 $ 109.0
================================================================================
- ------------------------
Geographic Concentration
As of December 31, 1999, 63% of the Company's mortgage loan portfolio was
secured by properties located in New York State. The properties securing the
remaining portfolio are dispersed throughout the country, with no state
representing more than 10%.
40/41
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
NOTE 7 Retained Interests in Securitizations and Servicing Assets
- --------------------------------------------------------------------------------
- ---------------
Securitizations
During the year ended December 31, 1999, GreenPoint sold $2.4 billion of
manufactured housing loans in six securitization transactions for a pre-tax gain
of $56.1 million. GreenPoint securitized $728.0 million of manufactured housing
loans in November 1998. These loans were acquired as part of the GreenPoint
Credit purchase and were recorded at their fair value in accordance with
generally accepted accounting principles. Therefore, no gain on the sale was
recognized through current income for 1998.
The Company receives annual servicing fees approximating 1.0% of the
principal balances for manufactured housing loans and rights to future cash
flows arising after the investors in the securitization trusts receive the
return for which they are contracted.
During the years ended December 31, 1999 and 1998, GreenPoint sold $675.6
million and $1.25 billion, of mortgage loans in two and four securitization
transactions for pre-tax gains of $11.4 million and $12.0 million, respectively.
The Company receives annual servicing fees approximating 0.5% of the principal
balances for these mortgage loans and rights to future cash flows arising after
the investors in the securitization trusts receive the return for which they are
contracted.
The investors and the securitization trusts have no recourse to
GreenPoint's other assets for failure of debtors to pay when due, except for the
interest-only strip related to both mortgage and manufactured housing
securitizations and the liability under the corporate guarantee related to the
manufactured housing securitizations. GreenPoint has issued corporate guarantees
with respect to securitized manufactured housing loans with principal balances
of $3.0 billion at December 31, 1999. The maximum amount of recourse exposure
under these corporate guarantees amounts to $397.9 million and $84.3 million as
of December 31, 1999 and 1998, respectively. GreenPoint has established a
liability for these corporate guarantees of $21.6 million and $5.2 million as of
December 31, 1999 and 1998, respectively.
- ----------------
Whole Loan Sales
During the years ended December 31, 1999 and 1998, GreenPoint sold as whole
loans certain mortgage loans with principal balances of $8.4 billion and $6.7
billion, respectively, for pre-tax gains of $144.8 million and $94.6 million,
respectively. GreenPoint retained servicing rights and provided limited recourse
on some of the mortgage loans sold.
During the year ended December 31, 1999, GreenPoint sold as whole loans
certain manufactured housing land/home loans with principal balances of $351.4
million for pretax gains of $16.0 million. GreenPoint retained servicing rights
on those loans and provided limited recourse in the event of default on all of
its 1999 manufactured housing whole loan sales.
At December 31, 1999, GreenPoint has established liabilities of $6.4
million and $10.7 million, respectively, related to recourse provided on
mortgage and manufactured housing loans with remaining principal balances of
$4.1 billion and $350.2 million, respectively.
- -------------------------------------
Retained Interests in Securitizations
Retained interests in securitizations are summarized as follows:
December 31, 1999
- --------------------------------------------------------------------------------
Manufactured
(In millions) Housing Mortgage(1) Total
================================================================================
Subordinated certificates $ 40.5 $ 5.1 $ 45.6
Interest-only strip 12.2 20.9 33.1
Transferor interest(2) -- 45.9 45.9
- --------------------------------------------------------------------------------
$ 52.7 $ 71.9 $ 124.6
================================================================================
December 31, 1998
- --------------------------------------------------------------------------------
Manufactured
(In millions) Housing Mortgage(1) Total
================================================================================
Subordinated certificates $ -- $ 21.0 $ 21.0
Interest-only strip 9.2 12.7 21.9
Transferor interest(2) -- 24.4 24.4
- --------------------------------------------------------------------------------
$ 9.2 $ 58.1 $ 67.3
================================================================================
(1) Retained interests are from home equity, first and second mortgage
securitizations.
(2) Includes overcollateralization accounts.
The significant assumptions used in estimating the fair value of the retained
interests in securitizations were as follows:
December 31, 1999
- --------------------------------------------------------------------------------
Manufactured
Housing Mortgage
================================================================================
Weighted average prepayment rate(1) 12.7% 43.2%
Weighted average life (in years) 4.7 1.4
Weighted average default rate 4.2% 0.9%
Loss severity rate 54.4% 100.0%
Asset cash flows discounted at 14.0% 12.3%
Liability cash flows discounted at 7.0% --
================================================================================
(1) Excludes weighted average default rate.
- ----------------
Servicing Assets
On a quarterly basis, GreenPoint reviews capitalized servicing rights for
impairment. This review is performed based on risk strata, which are determined
on a disaggregate basis given the predominant risk characteristics of the
underlying loans. For manufactured housing loans, the predominant risk
characteristics are loan type and interest rate type. For mortgage loans, the
predominant risk characteristics are loan type and interest rate. At December
31, 1999 and 1998, there were no valuation allowances on any of the servicing
rights risk strata.
<PAGE>
================================================================================
The activity in servicing assets is as follows:
At or for the Year Ended December 31,
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
Manu- Manu-
factured factured
(In millions) Housing Mortgage Housing Mortgage
================================================================================
Balance at
beginning of year $ 115.1 $ 30.8 $ -- $ 32.1
Purchases -- -- 108.3 --
Additions 44.7 49.9 15.0 41.9
Sales -- (12.0) -- (25.7)
Amortization (33.5) (14.4) (8.2) (17.5)
- --------------------------------------------------------------------------------
Balance at end of year $ 126.3 $ 54.3 $ 115.1 $ 30.8
================================================================================
The significant assumptions used in estimating the fair value of the servicing
assets were as follows:
December 31, 1999
- --------------------------------------------------------------------------------
Manufactured
Housing Mortgage
================================================================================
Weighted average prepayment rate(1) 12.6% 19.2%
Weighted average life (in years) 4.4 5.2
Weighted average default rate 3.9% 2.9%
Cash flows discounted at 14.0% 10.0%
================================================================================
(1) Excludes weighted average default rate.
- --------------------------------------------------------------------------------
NOTE 8 Other Real Estate Owned
- --------------------------------------------------------------------------------
The following is a summary of ORE owned by the Company:
December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998
================================================================================
Property type:
Residential one- to four-family $ 5.4 $ 8.1
Residential multi-family 1.4 1.7
Commercial 1.1 2.0
Allowance for declines in value (0.3) (0.3)
- --------------------------------------------------------------------------------
Other real estate owned, net $ 7.6 $ 11.5
================================================================================
Activity in the allowance for declines in value for ORE is summarized as
follows:
At or for the Year Ended December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998 1997
================================================================================
Balance at beginning of year $ 0.3 $ 0.9 $ 1.3
Provisions charged to income 0.1 0.1 0.8
Charge-offs (0.1) (0.7) (1.2)
- --------------------------------------------------------------------------------
Balance at end of year $ 0.3 $ 0.3 $ 0.9
================================================================================
The following is a summary of ORE operating income activity:
Year Ended December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998 1997
================================================================================
Operating expense, net of
rental and other income $ 1.9 $ 2.0 $ 4.7
Provision for decline in
value of ORE 0.1 0.1 0.8
Net gain on sales of
ORE properties (5.3) (8.1) (7.3)
- --------------------------------------------------------------------------------
Net ORE operating income $ (3.3) $ (6.0) $ (1.8)
================================================================================
During the years ended December 31, 1999, 1998 and 1997, the Company acquired
through foreclosure or deed in lieu of foreclosure, loans with book values of
$11.6 million, $16.6 million and $32.2 million, respectively. Charges to the
allowance for possible loan losses, reducing the carrying value of ORE
properties to their estimated fair values, amounted to $1.1 million, $2.0
million and $4.2 million during the years ended December 31, 1999, 1998 and
1997, respectively. Sales of ORE properties during these respective periods
totaled $14.0 million, $27.5 million and $32.6 million.
- --------------------------------------------------------------------------------
NOTE 9 Deposits
- --------------------------------------------------------------------------------
The contractual maturities of term certificates of deposit are summarized as
follows:
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------
Percentage of Percentage of
(In millions) Amount Term Deposits Amount Term Deposits
==========================================================================================
<S> <C> <C> <C> <C>
Due within six months $ 1,656.3 22.97% $ 1,899.4 28.13%
Due within six to twelve months 3,139.2 43.55 3,864.9 57.24
Due within one to two years 2,095.3 29.07 632.6 9.37
Due within two to three years 188.5 2.61 165.1 2.44
Due within three to four years 105.2 1.46 123.3 1.82
Due within four to five years 24.4 0.34 63.3 0.94
Due beyond five years -- -- 4.0 0.06
- ------------------------------------------------------------------------------------------
Total $ 7,208.9 100.00% $ 6,752.6 100.00%
==========================================================================================
</TABLE>
42/43
<PAGE>
================================================================================
Included in term certificates of deposit are certificates in denominations of
$100,000 or more at December 31, 1999 and 1998, aggregating $962.5 million and
$819.4 million, respectively.
Interest expense on deposits is summarized as follows:
Year Ended December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998 1997
================================================================================
Account type:
N.O.W $ 3.0 $ 3.8 $ 5.3
Savings 32.4 39.3 46.7
Variable rate savings 63.2 57.2 59.9
Money market 16.6 15.5 16.6
Term certificates of deposit 364.5 348.2 343.1
- --------------------------------------------------------------------------------
Total(1) $ 479.7 $ 464.0 $ 471.6
================================================================================
(1) Excludes mortgagors escrow deposits.
- --------------------------------------------------------------------------------
NOTE 10 Federal Home Loan Bank Advances
- --------------------------------------------------------------------------------
During 1999 the Company obtained advances from the Federal Home Loan Bank of New
York ("FHLB"), totaling $900 million for the year. At December 31, 1999, the
outstanding balance was $675 million. Interest expense on FHLB advances was
$15.3 million for the year ended December 31, 1999. The advances are
collateralized by the Bank's $91.8 million investment in FHLB stock, certain
first mortgage loans and certain mortgage-backed securities.
The FHLB advances at December 31, 1999 consist of the following:
(In millions) Amount
================================================================================
Variable-rate advances due between
May and August 2000; bearing
interest of 4.12% to 4.26% $225
Fixed-rate advances due 2002 to 2006;
bearing interest of 6.31% to 6.84% 450
- --------------------------------------------------------------------------------
$675
================================================================================
Future maturities of the FHLB advances are as follows:
Year Ended
(In millions) December 31, Amount
================================================================================
2000 $225
2001 --
2002 100
2003 100
2004 100
thereafter 150
- --------------------------------------------------------------------------------
Total $675
================================================================================
- --------------------------------------------------------------------------------
NOTE 11 Guaranteed Preferred Beneficial Interest in Company's Junior
Subordinated Debentures
- --------------------------------------------------------------------------------
In June 1997, GreenPoint Capital Trust I (the "Trust"), a Delaware statutory
business trust owned by the Company, issued $200 million of 9.10% Guaranteed
Preferred Beneficial Interest in the Company's Subordinated Debentures ("Capital
Securities"). The Trust exists for the sole purpose of issuing the Capital
Securities and investing the proceeds thereof in 9.10% Junior Subordinated
Debentures issued by the Company. The Junior Subordinated Debentures mature on
June 1, 2027. Payment of distributions out of monies held by the Trust, and
payments on liquidation of the Trust or the redemption of Capital Securities,
are guaranteed by the Company to the extent the Trust has funds available
therefore. The obligations of the Company under the Guarantee and the Junior
Subordinated Debentures are subordinate and junior in right of payment to all
indebtedness of the Company and will be structurally subordinated to all
liabilities and obligations of the Company's subsidiaries.
Distributions on the Capital Securities are payable semi-annually in
arrears on June 1 and December 1 of each year, commencing December 1, 1997. The
Junior Subordinated Debentures are not redeemable prior to June 1, 2007, unless
certain events have occurred.
The proceeds from the issuance of the Capital Securities were used to
repurchase $200 million of common stock for the year ended December 31, 1997.
Interest expense on Capital Securities was $18.3 million, $18.3 million
and $10.7 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
- --------------------------------------------------------------------------------
NOTE 12 Long Term Debt
- --------------------------------------------------------------------------------
In July 1997, the Company published an Offering Circular under Regulation D
authorizing it to issue, from time to time, up to $3 billion of Senior and
Subordinated Bank Notes ("Notes") with maturities ranging from 7 days to 30
years. On July 10, 1997, the Company issued $200 million of 6.70% Senior Notes
maturing July 15, 2002. Interest is paid semi-annually on January 15 and July
15.
The proceeds of the Notes are used by the Company for general corporate
and banking purposes in the ordinary course of business.
Long term debt interest expense was $13.9 million, $13.9 million and $6.4
million for the years ended December 31, 1999, 1998 and 1997, respectively.
- --------------------------------------------------------------------------------
NOTE 13 Restructuring Charge and Non-Recurring Personnel Expense
- --------------------------------------------------------------------------------
In June 1997, the Company recorded a pre-tax restructuring charge of $2.5
million pertaining to the transfer of mortgage servicing from New York to
Georgia. As of December 31, 1997, the transfer of servicing had been completed
and the full reserve was utilized for related severance payments and asset
write-downs.
In the first quarter of 1998, the Company recognized a non-recurring
charge of $8.3 million in personnel expense related to the retirement of senior
executives.
<PAGE>
================================================================================
In March 31, 1999, the Company recorded a pre-tax restructuring charge of
$6.0 million pertaining to the integration of Headlands and GreenPoint Mortgage.
At December 31, 1999 approximately $2.8 million remains of this reserve, which
will be utilized to absorb related severance expense.
- --------------------------------------------------------------------------------
NOTE 14 Pension Plan and Other Employee Benefits
- --------------------------------------------------------------------------------
The following is a summary of the Company's pension and postretirement benefits:
Pension Postretirement
Benefits Dec. 31, Benefits Dec. 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998 1999 1998
================================================================================
Change in Benefit
Obligation:
Benefit obligation at
beginning of year $ 42.1 $ 39.1 $ 10.0 $ 14.7
Service cost 3.1 1.9 0.9 0.4
Interest cost 2.4 2.5 0.7 0.6
Amendments(1) -- -- -- (3.5)
Benefit payments (5.5) (4.3) (0.8) (0.6)
Assumption change (2.8) -- -- --
Acquisition(2) -- -- 1.1 --
Actuarial (gain) loss (2.6) 2.9 (1.0) (1.6)
- --------------------------------------------------------------------------------
Benefit obligation at
end of year $ 36.7 $ 42.1 $ 10.9 $ 10.0
================================================================================
(1) A plan amendment was made at January 1, 1998. The net periodic
postretirement benefit cost was calculated after this amendment.
(2) GreenPoint Credit LLC was added to the plan January 1, 1999. Headlands
Mortgage Company was acquired March 30, 1999.
Pension Postretirement
Benefits Dec. 31, Benefits Dec. 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998 1999 1998
================================================================================
Change in Plan Assets:
Fair value of plan assets at
beginning of year $ 44.6 $ 49.1 $ -- $ --
Actual return on plan assets 3.4 (0.3) -- --
Employer contribution 1.4 0.1 0.8 0.6
Benefits paid (5.4) (4.3) (0.8) (0.6)
- --------------------------------------------------------------------------------
Fair value of plan assets
at end of year $ 44.0 $ 44.6 $ -- $ --
- --------------------------------------------------------------------------------
Reconciliation of
Funded Status:
Funded status $ 7.3 $ 2.5 $ (10.9) $ (10.0)
Unrecognized actuarial gain (5.1) (0.2) (1.8) (2.0)
Unrecognized prior
service cost (1.0) (1.1) (3.2) (3.5)
Unrecognized transition asset (0.1) (0.5) -- --
- --------------------------------------------------------------------------------
Net amount recognized at
end of year $ 1.1 $ 0.7 $ (15.9) $ (15.5)
- --------------------------------------------------------------------------------
Amounts Recognized in the
Statement of Financial
Condition Consist of:
Prepaid benefit cost $ 2.4 $ 2.9 $ -- $ --
Accrued benefit liability (0.8) (3.5) (15.9) (15.5)
Intangible asset (0.4) 0.9 -- --
Accumulated other
comprehensive income (0.1) 0.4 -- --
- --------------------------------------------------------------------------------
Net amount recognized
at end of year $ 1.1 $ 0.7 $ (15.9) $ (15.5)
================================================================================
<TABLE>
<CAPTION>
Pension Postretirement
Benefits Year Ended Benefits Year Ended
- ----------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
=========================================================================================
<S> <C> <C> <C> <C> <C> <C>
Weighted Average Assumptions:
Discount rate 7.50% 6.50% 7.00% 7.50% 6.50% 7.00%
Expected return
on plan assets 9.00% 9.00% 9.00% N/A N/A N/A
Rate of compensation
increase 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%
=========================================================================================
</TABLE>
For measurement purposes, a 7.0% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 1999.
The rate was assumed to decrease to 6.0% for 2000 and remain at that level
thereafter.
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
Year Ended December 31, Year Ended December 31,
- ---------------------------------------------------------------------------------------------------
(In millions) 1999 1998 1997 1999 1998 1997
===================================================================================================
Components of Net Periodic Benefit Cost:
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 3.1 $ 1.9 $ 1.7 $ 0.9 $ 0.5 $ 1.1
Interest cost 2.4 2.5 2.6 0.7 0.6 0.9
Expected return on plan assets (3.8) (4.3) (3.4) -- -- --
Amortization of prior service cost -- -- -- (0.3) (0.3) (0.1)
Amortization of transition asset (0.4) (0.4) (0.4) -- -- --
Recognized actuarial gain -- (0.3) -- (0.1) (0.1) --
- ---------------------------------------------------------------------------------------------------
Net periodic benefit cost $ 1.3 $ (0.6) $ 0.5 $ 1.2 $ 0.7 $ 1.9
===================================================================================================
</TABLE>
The aggregate projected benefit obligation and accumulated benefit obligation
for pension plans with accumulated benefit obligations in excess of plan assets
were $2.9 million and $3.3 million, respectively, as of December 31, 1999 and
$4.2 million and $3.5 million, respectively, as of December 31, 1998. There were
no plan assets for these plans as of December 31, 1999 and 1998.
Assumed health care trend rates have a significant effect on the amounts
reported for the health care benefits. A one percentage point change in assumed
health care cost trend rates would have the following effects.
44/45
<PAGE>
================================================================================
1-Percentage 1-Percentage
(In millions) Point Increase Point Decrease
================================================================================
Effect of total of service and
interest cost components -- --
Effect on postretirement
benefit obligation 0.6 (0.5)
================================================================================
- --------------------------------------
Supplemental Executive Retirement Plan
The Bank maintains a non-qualified, unfunded Supplemental Executive Retirement
Plan ("SERP") for the primary purpose of providing benefits to certain eligible
employees in excess of limitations imposed by the Internal Revenue Code of 1986,
as amended ("the Code"). For the years ended December 31, 1999, 1998 and 1997,
the SERP expense was $1.4 million, $0.9 million and $(0.2) million,
respectively.
- -------------------
401(k) Savings Plan
During 1996, the Bank amended its Incentive Savings Plan to include provisions
under Section 401(k) of the Code, (the "401(k) Savings Plan"). Substantially all
of the employees of the Company employed prior to July 1, 1996 and employees
employed after such date who have been credited with 1,000 hours of service
during a twelve month period are eligible to participate. Participants may
contribute on a pre-tax basis up to 12% of their eligible salary and may be
eligible to receive a matching contribution equal to 100% of the first 3% of
eligible salary they contribute to the 401(k) Savings Plan. Participants may
invest their pre-tax contributions in any of the investment funds made available
under the 401(k) Savings Plan, including a fund that invests primarily in the
Company's stock. The matching contribution may be funded by using some of the
shares released for allocation under the Bank's ESOP. Matching contributions
generally become vested over a five-year period. The 401(k) Savings Plan
conforms to the applicable requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the Code. 401(k) Savings Plan
expenses for matching contributions were approximately $4.3 million, $1.9
million and $1.3 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
- -------------------------------------------------
Employers' Accounting for Postemployment Benefits
The Company is accounting for postemployment benefits on a comprehensive accrual
basis. This basis requires the Company to charge to expense the expected costs
of providing these benefits to all postemployment employees, during the years
such employees are actively employed by the Company. At December 31, 1999 and
1998, the Company's postemployment benefits liability was approximately $0.4
million.
- --------------------------------------------------------------------------------
NOTE 15 Income Taxes
- --------------------------------------------------------------------------------
For the tax years prior to 1996, a special bad debt deduction was allowed for
additions to the Bank's tax bad debt reserves. As a result of federal
legislation, for tax years beginning after January 1, 1996, the Bank is only
permitted to take deductions for bad debts for federal tax purposes on the basis
of actual loan charge-off activity. This legislation also requires that the Bank
recapture into taxable income the portion of existing tax bad debt reserves
created in the years beginning after December 31, 1987 over a six year period.
The amount of such reserve subject to recapture at December 31, 1999 is
approximately $1.0 million.
At December 31, 1999, no federal income tax provision has been made
against the Bank's pre-1988 tax bad debt reserve of approximately $140 million.
However, these reserves remain subject to recapture should the Bank make certain
non-dividend distributions or cease to maintain a bank charter. Management has
no intention of taking any such actions.
For New York State and City income tax purposes, the Bank is permitted to
continue to take special reserve method bad debt deductions. For the tax year
ended December 31, 1999, the Bank maintained state and city tax bad debt
reserves in excess of the federal reserve of approximately $371 million and $380
million respectively, for which no state or city taxes have been provided. In
the event the Bank were to allow qualifying assets to fall below 60% or
otherwise fail state thrift definitional tests, the balance of the excess New
York State and City reserves would be subject to recapture into taxable income.
Furthermore, any charge to the qualifying tax bad debt reserves other than for
losses on qualifying loans may create income for state tax purposes only. The
Bank's qualifying assets at December 31, 1999 and 1998 exceeded 60%.
The Company's deferred tax asset represents the anticipated federal, state
and local tax benefits expected to be realized in future years upon the
utilization of the underlying tax attributes comprising this balance. In
management's opinion, the net deferred tax asset is fully realizable.
Accordingly, no valuation allowance has been provided.
<PAGE>
================================================================================
The components of income tax expense for the years ended December 31,
1999, 1998 and 1997, are summarized as follows:
Year Ended December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998 1997
================================================================================
Current:
Federal $ 103.8 $ 90.9 $ 85.3
State and local 36.7 27.5 17.0
- --------------------------------------------------------------------------------
Total current 140.5 118.4 102.3
- --------------------------------------------------------------------------------
Deferred:
Federal 11.0 11.3 (6.1)
State and local 3.8 4.8 (0.5)
- --------------------------------------------------------------------------------
Total deferred 14.8 16.1 (6.6)
- --------------------------------------------------------------------------------
Total $ 155.3 $ 134.5 $ 95.7
================================================================================
In addition to the income tax expense attributable to operations, deferred
income tax expense (benefit) in the amount of $(12.7) million, $6.2 million and
$16.3 million was separately allocated to stockholders' equity to recognize the
related tax effect of the change in the net unrealized gain or loss on
securities available for sale and certain employee postemployment programs for
the years ended December 31, 1999, 1998 and 1997, respectively.
The amounts reported as income tax expense vary from amounts that would be
reported by applying the statutory federal income tax rate to income before
income taxes due to the following:
<TABLE>
<CAPTION>
Year Ended December 31,
- --------------------------------------------------------------------------------------------------------------------
(In millions) 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------
Percentage Percentage Percentage
of Pre-tax of Pre-tax of Pre-tax
Amount Earnings Amount Earnings Amount Earnings
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Tax expense at federal statutory rate $129.8 35.00% $102.8 35.00% $ 84.7 30.19%
State and local taxes, net of federal
income tax benefit 24.4 6.58% 15.7 5.35% 13.0 4.63%
Fair market value over cost of
Employee Stock Ownership Plan 5.9 1.59% 5.6 1.91% 4.3 1.53%
Recognition of deferred tax liability
upon change in tax status -- -- 18.5 6.30% -- --
Other (4.8) (1.29%) (8.1) (2.76%) (6.3) (2.25%)
- --------------------------------------------------------------------------------------------------------------------
Total income taxes $155.3 41.88% $134.5 45.80% $ 95.7 34.10%
====================================================================================================================
</TABLE>
The balances of the net deferred tax asset at December 31, 1999 and 1998 were
comprised as follows:
December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998
================================================================================
Deferred Tax Assets:
Allowance for possible loan losses $ 56.0 $ 50.9
Interest income on non-accrual loans 8.7 7.8
Postretirement and post-
employment benefits 17.0 16.8
Unrealized loss on securities
available for sale 9.2 --
Loans receivable 7.6 6.3
Other 7.9 6.7
- --------------------------------------------------------------------------------
$ 106.4 $ 88.5
- --------------------------------------------------------------------------------
Deferred Tax Liabilities:
Premises and equipment $ (2.7) $ (2.9)
Servicing assets (24.7) (7.2)
Unrealized gain on securities
available for sale -- (3.5)
Deferred loan fees (30.7) (20.3)
Retained interests in securitizations (3.0) (7.2)
- --------------------------------------------------------------------------------
(61.1) (41.1)
- --------------------------------------------------------------------------------
Net deferred tax asset $ 45.3 $ 47.4
================================================================================
- --------------------------------------------------------------------------------
NOTE 16 Derivative Financial Instruments
- --------------------------------------------------------------------------------
The Bank enters into interest rate swap contracts in managing its interest rate
risk associated with its fixed-rate mortgage investment portfolio. The notional
amount of these contracts is $350 million and $1.4 billion at December 31, 1999
and 1998, respectively. As of December 31, 1999, the outstanding contracts have
an average term of approximately three years. Under the terms of the contracts
for 1999, the Bank pays an average fixed rate of 6.01% and receives an average
variable rate of 6.14%.
The Bank also uses interest rate swaps to hedge its fixed-rate
manufactured housing loans during accumulation prior to securitization or sale.
At December 31, 1999, the notional amount of these contracts is $175 million.
These contracts had an average term of approximately five years. The Bank pays
an average rate of 6.73% and receives an average variable rate of 6.14%.
The Company enters into mandatory commitments to deliver mortgage whole
loans to various investors, and to issue private securities and Fannie Mae and
Freddie Mac securities ("forward delivery commitments"). The forward delivery
commitments are used to manage the interest rate risk associated with mortgage
loans and interest rate
46/47
<PAGE>
================================================================================
lock commitments made by the Company to mortgage borrowers. The forward delivery
commitments at December 31, 1999 and 1998 amounted to $443.8 million and $753.8
million, respectively.
The notional amounts of derivatives do not represent amounts exchanged by
the parties and, thus, are not a measure of the Company's exposure through its
use of derivatives. The amounts exchanged are determined by reference to the
notional amounts and the other terms of the derivatives.
The risks inherent in derivatives are the potential inability of a
counterparty to meet the terms of its contract and the risk associated with
changes in the fair values of the contracts due to movements in the underlying
interest rates. The current credit exposure of derivatives is represented by the
fair value of contracts with a positive fair value at the reporting date. To
reduce credit risk, management may deem it necessary to obtain collateral.
- --------------------------------------------------------------------------------
NOTE 17 Commitments and Contingencies
- --------------------------------------------------------------------------------
In the normal course of business, there are various outstanding commitments and
contingent liabilities that have not been reflected in the consolidated
financial statements. In addition, in the normal course of business, there are
various other outstanding legal proceedings. In the opinion of management, after
consultation with legal counsel, the financial position and results of
operations of the Company will not be affected materially as a result of such
commitments and contingent liabilities or by the outcome of such legal
proceedings.
The principal commitments and contingent liabilities of the Company are
discussed in the following paragraphs.
- ------------------
Pending Litigation
The Company is not involved in any pending legal proceedings other than routine
proceedings in the ordinary course of business which, in the aggregate, involve
amounts which are believed by management to be immaterial to the consolidated
financial statements of the Company.
- ----------------
Loan Commitments
At December 31, 1999 and 1998, the Company had outstanding commitments to
originate mortgage loans of approximately, $2.1 billion and $2.8 billion,
respectively. The commitments to originate mortgage loans at December 31, 1999
included $1.8 billion to originate fixed rate mortgage loans and $317.3 million
of commitments to originate adjustable rate mortgage loans. At December 31, 1999
and 1998 the Company had outstanding commitments to originate manufactured
housing loans totaling $337.8 million and $135.5 million, respectively, based on
historical estimates of fallout.
The Company is contractually committed to fund the undrawn portion of home
equity lines of credit (HELOC's) which it has originated. The commitment extends
to HELOC's which are currently held for sale by the Company, and HELOC's sold by
the Company into Headlands Home Equity Loan Trusts. As of December 31, 1999 and
1998 this unfunded commitment was approximately $271.3 million and $185.9
million, respectively.
- --------------------
Recourse Obligations
The Company has issued corporate guarantees with respect to securitized
manufactured housing loans with principal balances of $3.0 billion at December
31, 1999. The maximum amount of recourse exposure that the Company is subject to
under these corporate guarantees is $397.9 million and $84.3 million at December
31, 1999 and 1998, respectively. The Company estimates that the total amount of
any payments made under the guarantees will be significantly less than the
maximum recourse exposure as reflected in the outstanding liability balance of
$21.6 million, and $5.2 million at December 31, 1999 and 1998, respectively.
- -----------------
Lease Commitments
The Company has entered into noncancelable operating lease agreements for
banking premises and equipment with expiration dates ranging through the year
2023. The Company's premises are used principally for branch offices and
administrative operations, and it is expected that many agreements will be
renewed at expiration in the normal course of business.
Rental expense for the Company's premises for the years ended December 31,
1999, 1998 and 1997 amounted to $26.8 million, $16.3 million and $12.8 million,
respectively.
The projected minimum rental payments under the terms of the noncancelable
leases, exclusive of taxes and escalation charges, at December 31, 1999 are
summarized as follows:
Year Ended
(In millions) December 31, Amount
================================================================================
2000 $ 26.8
2001 25.3
2002 23.0
2003 18.0
2004 12.7
thereafter 51.0
- --------------------------------------------------------------------------------
Total $156.8
================================================================================
Minimum rental income under noncancelable sublease agreements aggregates $21.5
million.
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
NOTE 18
- --------------------------------------------------------------------------------
The methods and assumptions used to estimate fair values are set forth in the
following paragraphs for each major grouping of the Company's financial
instruments.
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
- -----------------------------------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
(In millions) Values Fair Values Values Fair Values
===========================================================================================================
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 179.5 $ 179.5 $ 164.2 $ 164.2
Interest-bearing deposits in other banks 2.2 2.2 7.3 7.3
Federal funds sold and securities
purchased under agreements to resell 1,050.6 1,050.6 916.9 916.9
Securities:
Securities available for sale 1,974.7 1,974.7 1,337.6 1,337.6
Retained interests in securitizations 124.6 124.6 67.3 67.3
Securities held to maturity 2.0 2.0 3.3 3.3
Federal Home Loan Bank of New York stock 91.8 91.8 -- --
Loans receivable held for sale 1,208.0 1,221.0 1,578.1 1,601.7
Loans receivable held for investment 9,180.2 9,255.0 9,273.3 9,562.2
Other interest-earning assets 123.4 123.4 118.3 118.3
Liabilities:
Deposits:
Deposits due on demand and/or with
no specified maturities 4,351.2 4,351.2 4,420.5 4,420.5
Term certificates of deposit 7,208.9 7,300.5 6,752.6 6,827.5
Accrued Interest:
Receivable 72.2 72.2 87.0 87.0
Payable 29.0 29.0 27.8 27.8
Securities sold under agreements to repurchase 0.3 0.3 384.9 384.9
Note payable 5.1 5.1 608.0 608.0
Federal Home Loan Bank of New York advances 675.0 671.5 -- --
Long term debt 199.9 196.2 199.9 204.8
Guaranteed preferred beneficial interest in Company's
junior subordinated debentures 199.7 182.5 199.7 210.8
Off-Balance Sheet:
Commitments to originate loans -- -- -- --
Interest rate swaps -- 9.4 -- (28.2)
Mandatory forward delivery commitments -- 2.5 -- --
===========================================================================================================
</TABLE>
48/49
<PAGE>
================================================================================
The carrying values of the following balance sheet items all approximate their
fair values primarily due to their liquidity and very short-term nature:
o Cash and Due From Banks
o Interest-Bearing Deposits in Other Banks
o Federal Funds Sold and Securities Purchased Under Agreements to Resell
o Notes Payable
o Accrued Interest Receivable and Payable
o Securities Sold Under Agreements to Repurchase.
- --------------------------------------------------------------------------
Securities, Federal Home Loan Bank Stock and Other Interest-Earning Assets
The fair values of these securities are based on published market valuations or
estimated price quotations provided by securities dealers.
- -------------------------------------
Retained Interests in Securitizations
The fair value of retained interests in securitizations is determined by
calculating the present value of estimated future cash flows using assumptions
of prepayments, defaults, loss severity rates, and discount rates that the
Company believes market participants would use for similar assets and
liabilities.
- ------------------------------
Loans Receivable Held for Sale
The fair values of manufactured housing loans held for sale is estimated using a
discounted cash flow model that estimates future cash flows associated with the
securitization of these loans. The cash flow model incorporates current market
indications of securitization structure and pricing, and assumptions of interest
rates, prepayment rates and default rates that management believes market
participants would use for similar assets.
Fair value of mortgage loans held for sale is estimated using quoted
market prices for similar loans, mortgage-backed securities backed by similar
loans, and prices obtained by the Company on mandatory forward delivery
contracts.
- ------------------------------------
Loans Receivable Held for Investment
Fair value of the Company's mortgage loan portfolio is based on comprehensive
portfolio valuation analyses performed as of December 31, 1999 and 1998 by an
independent pricing firm, engaged specifically for this purpose by the Company.
The remaining categories of loans, manufactured housing loans, student
loans and home improvement loans, were deemed to have estimated fair values
approximating their respective carrying values.
- ----------------------
Derivative Instruments
Interest rate swaps and mandatory forward delivery commitments--the fair value
generally reflects the estimated amounts that the Company would receive or pay
to terminate the contracts at the reporting date.
- --------------------------------------------------------------------------------
Long Term Debt, Guaranteed Preferred Beneficial Interest in the Company's Junior
Subordinated Debentures and Federal Home Loan Bank Advances
The valuation of these securities takes into account several factors including
current market interest rates and the Company's credit rating. Estimated price
quotations were obtained from securities dealers or the fair value was estimated
using the Bank's observed credit spread to the applicable Treasury rate.
- --------
Deposits
The fair value of all deposits with no specified maturities is deemed to be
equal to the amounts payable on demand.
The fair value of the Company's term certificates of deposit was estimated by
discounting cash flows based on contractual maturities at current interest rates
for raising funds of similar remaining maturities.
- ---------------------------------------------------
Commitments to Originate Manufactured Housing Loans
Loan commitments issued and outstanding as of December 31, 1999 and 1998 contain
rates and terms similar to the rates and terms of commitments issued by the
Company at December 31, 1999 and 1998. Accordingly, the fair value of these
commitments approximates the carrying amount.
- ---------------------------------------
Commitments to Originate Mortgage Loans
The fair value of commitments to originate mortgage loans are estimated using
quoted market prices for similar loans or mortgage-backed securities, and prices
obtained by the Company on forward delivery commitments.
- -----------
Limitations
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instruments being
estimated. These estimates do not reflect any premium or discount that could
result from offering for sale at one time the Company's entire holdings of a
particular financial instrument. In those instances for which no market exists
for portions of the Company's financial instruments, fair value estimates were
based on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of the affected financial instruments, and
other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore, should not be
considered to represent any specific market values. Changes in the assumptions
could significantly affect the fair valuation estimates.
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
NOTE 19 Regulatory Matters
- --------------------------------------------------------------------------------
The Company and the Bank are subject to various regulatory capital requirements
administered by the federal and state banking agencies. The Board of Governors
of the Federal Reserve System establishes minimum capital requirements for the
consolidated bank holding company as well as for the Bank.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that involve
quantitative measures of its assets, liabilities, and certain off balance sheet
items as calculated under regulatory accounting practices. These guidelines
require minimum ratios of risk-based capital to risk adjusted assets of 4% for
Tier 1 capital and 8% for total capital. The Federal Reserve Board also has
guidelines for a leverage ratio that is designed to complement the risk-based
capital ratios in determining the overall capital adequacy of banks and bank
holding companies. A minimum leverage ratio of Tier 1 capital to average total
assets of 3% is required for banks and bank holding companies, with an
additional 100 to 200 basis points required for all but the highest rated
institutions. Management believes, as of December 31, 1999, that the Company and
the Bank meet all capital adequacy requirements to which it is subject.
FDICIA, among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires federal bank regulatory agencies to implement
systems for "prompt corrective action" for insured depository institutions that
do not meet minimum capital requirements based on these categories. As of
December 31, 1999, the Bank was well capitalized based on the prompt corrective
action guidelines.
<TABLE>
<CAPTION>
Minimum
For Capital
Actual Adequacy Purposes
- --------------------------------------------------------------------------------------
(In millions) Amount Ratio Amount Ratio
======================================================================================
<S> <C> <C> <C> <C>
As of December 31, 1999:
Total Capital (to Risk
Weighted Assets):
Company $ 1,351.4 11.75% $ 920.0 8.00%
Bank 1,305.1 11.35 919.6 8.00
Tier 1 Capital (to Risk
Weighted Assets):
Company $ 1,238.4 10.77% $ 460.0 4.00%
Bank 1,192.1 10.37 459.8 4.00
Tier 1 Capital (to
Average Assets):
Company $ 1,238.4 8.64% $ 573.6 4.00%
Bank 1,192.1 8.32 573.3 4.00
======================================================================================
<CAPTION>
Minimum
For Capital
Actual Adequacy Purposes
- --------------------------------------------------------------------------------------
(In millions) Amount Ratio Amount Ratio
======================================================================================
<S> <C> <C> <C> <C>
As of December 31, 1998:
Total Capital (to Risk
Weighted Assets):
Company $ 1,196.4 13.90% $ 688.6 8.00%
Bank 1,029.7 11.99 687.2 8.00
Tier 1 Capital (to Risk
Weighted Assets):
Company $ 1,088.7 12.65% $ 344.3 4.00%
Bank 922.3 10.74 343.6 4.00
Tier 1 Capital (to
Average Assets):
Company $ 1,088.7 7.90% $ 551.0 4.00%
Bank 922.3 6.75 546.8 4.00
======================================================================================
</TABLE>
- -------------------
Dividend Limitation
The Company's principal source of funds for distributions of dividends to
shareholders, stock repurchase activities and any acquisitions to be made at the
holding company level, are dividends from the Bank. Applicable federal and state
laws impose limitations on the payment of dividends. Under such limitations,
dividend payments by the Bank are limited to the lesser of (i) the amount of
undivided profits and (ii) an amount not in excess of net income for the current
year plus retained net income for the preceding two years. Dividends paid by the
bank during 1999 were within these limitations.
In accordance with the requirements of the New York State Banking Law, the
Bank established a liquidation account in the amount equal to its capital as of
the date of the latest consolidated statement of condition appearing in the
final IPO prospectus. The liquidation account is maintained for the benefit of
eligible pre-conversion depositors who continue to maintain their accounts at
the Bank after the Transaction. The liquidation account is reduced annually to
the extent that such depositors have reduced their qualifying deposits as of
each subsequent audited balance sheet date. Subsequent increases in their
balances will not restore such depositors' interest in the liquidation account.
In the event of a liquidation of the Bank (a circumstance not envisioned or
expected by management) such depositors would be entitled, under New York State
law, to receive a distribution from the liquidation account in an amount
proportionate to their then current adjusted qualifying account balances for all
such depositors then holding qualifying deposits in the Bank. The balance of the
liquidation account at December 31, 1999 was $48.6 million.
50/51
<PAGE>
================================================================================
In addition to the restrictions described above, the Bank may not declare
or pay cash dividends on or repurchase any of its shares of common stock if the
effect thereof would cause stockholders' equity to be reduced below then
applicable capital maintenance requirements or if such declaration and payment
would otherwise violate either regulatory requirements and/or applicable banking
laws, or would reduce the Bank's capital level below the then aggregate balance
required for the liquidation account.
- --------------------------------------------------------------------------------
NOTE 20 Stock Benefit Plans
- --------------------------------------------------------------------------------
- -----------------------------
Employee Stock Ownership Plan
The Bank's ESOP covers substantially all employees of the Company who have been
credited with 1,000 hours of service during a twelve month period. Participants
receive allocations on the basis of their eligible salary and generally become
vested over a five-year period. Participants fully vest in their benefit upon
retirement, death or disability while in active employment, or in the event of a
change in control of the Company or the Bank. Participants who terminate
employment before becoming 100% vested forfeit the unvested portion of their
accounts. Forfeitures are reallocated among the remaining participants. The ESOP
conforms to the applicable requirements of ERISA and the Code.
During 1994, the ESOP purchased 16,467,604 shares of the Company's common
stock, at a weighted average price of $8.33 per share. The purchases were funded
with a loan of $137.1 million from the Company, which is collateralized by the
unallocated Company shares owned by the ESOP. The loan will be repaid primarily
from contributions by the Bank and dividends paid by the Company on unallocated
shares over the applicable loan amortization period. The outstanding principal
balance of the loan as of December 31, 1999 and 1998 was $123.9 million and
$126.4 million, respectively, and the interest rate was 6.00% at both dates.
The shares owned by the ESOP are held by a third party trustee and
released for allocation to participants as repayments of the loan are made. The
number of shares released for allocation in any year is based upon the ratio of
current year principal and interest payments to the total of current year and
all projected future years' principal and interest payments. As of December 31,
1999, 3,847,118 shares have been allocated to participants' accounts. There are
12,620,486 unallocated shares with a value of $300.5 million, based upon the
December 31, 1999 closing price of $23.81 per share.
The Company recognized $14.2 million, $19.0 million and $15.8 million of
compensation expense relating to the ESOP for the years ended December 31, 1999,
1998 and 1997, respectively.
Restricted Stock Plan
The Bank's Recognition and Retention Plan ("RRP") authorizes the granting of up
to 2,484,036 shares of the Company's common stock to officers, employees and
directors emeriti of the Company.
In 1994, the Bank purchased 2,484,036 shares of the Company's common stock
on behalf of the RRP, at the initial public offering price of $7.50 per share.
Through December 31, 1999, 2,430,088 shares have been awarded to participants.
These awards vest ratably over a three to five year period on the anniversary
dates of the awards. Participants' awards fully vest upon retirement, death or
disability while in active employment, or in the event of the participants'
termination of employment due to a change in control of the Company or the Bank.
For the years ended December 31, 1999, 1998 and 1997, the Company
recognized $0.4 million, $0.4 million and $1.7 million, respectively, of
compensation expense relating to the RRP.
- --------------------
Stock Incentive Plan
Under the Company's Amended and Restated 1994 Stock Incentive Plan (the "Stock
Incentive Plan"), grants may be made in the form of incentive stock options
("ISOs"), non-statutory stock options ("NSOs"), limited rights and restricted
stock to officers and other key employees. The Stock Incentive Plan provides
that the total number of shares available for grant shall be 11,000,000 shares
of the Company's common stock.
The ISOs and NSOs granted under the Stock Incentive Plan vest and become
exercisable over a three to five year period and expire on the tenth anniversary
of the grants. In the event of the employee's retirement (for grants made prior
to 1997), death or disability while in active employment, or in the event of an
employee's termination of service due to a change in control of the Company or
the Bank, all ISOs and NSOs held by such participant vest and generally become
exercisable in full for a period of one year. The term during which any future
ISOs and NSOs granted vest and become exercisable is at the discretion of the
Compensation Committee. The exercise price for all ISOs and NSOs is at least
100% of the fair market value of the stock on the grant date.
As of December 31, 1999, 330,000 shares of restricted stock at a weighted
average fair value of $13.72, had been granted under the Stock Incentive Plan.
For the years ended December 31, 1999, 1998 and 1997, the Company
recognized $0.9 million, $1.0 million and $0.9 million of compensation expense
relating to the Stock Incentive Plan.
<PAGE>
================================================================================
The following table presents a summary of the aggregate stock option
transactions for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Stock Exercise of Stock Exercise of Stock Exercise
Options Price Options Price Options Price
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Stock options outstanding,
beginning of year 6,590,002 $ 19.34 5,832,696 $ 14.22 5,364,786 $ 10.49
Granted 1,609,500 32.32 2,009,890 29.03 1,610,160 23.06
Exercised (1,058,416) 11.49 (1,137,555) 10.37 (1,032,198) 8.96
Canceled (204,334) 32.52 (115,029) 17.56 (110,052) 10.76
- ------------------------------------------------------------------------------------------------------------------------
Stock options outstanding, end of year 6,936,752 23.16 6,590,002 $ 19.34 5,832,696 $ 14.22
========================================================================================================================
Options exercisable at year-end 2,774,701 2,018,374 1,394,400
Weighted-average fair value of
options granted during the year $ 9.45 $ 6.98 $ 4.24
========================================================================================================================
</TABLE>
The range of exercise prices on options outstanding for the years ended December
31, 1999, 1998, and 1997 were $7.50 to $34.97, $7.50 to $34.97 and $7.50 to
$34.35, respectively. The weighted average remaining contractual life for
options outstanding at December 31, 1999 is 6.51 years.
- ----------------------------
Directors' Stock Option Plan
Under the Company's Directors' Stock Option Plan, the Company may grant up to
1,450,000 NSOs to directors who are not officers or employees of the Company
("Non-Employee Directors").
The exercise price is equal to 100% of the fair market value of the stock
on the grant date. The term of each NSO is ten years from the grant date. All
options become exercisable immediately upon a change of control, or death,
disability or retirement on or after January 28, 2000. In the event of death,
disability or retirement prior to January 28, 2000, one-half of all
unexercisable options shall become immediately exercisable, with all remaining
options becoming exercisable pro rata over the remaining option term.
The following table presents a summary of the aggregate NSO transactions
for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Stock Exercise of Stock Exercise of Stock Exercise
NSOs Price NSOs Price NSOs Price
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
NSOs outstanding, beginning of year 1,173,184 $ 13.03 1,178,192 $ 11.81 1,254,000 $ 11.01
Granted 40,000 34.75 72,800 30.59 52,000 28.88
Exercised (33,000) 10.94 (72,808) 11.01 (127,808) 10.94
- ------------------------------------------------------------------------------------------------------------------------
NSOs outstanding, end of year 1,180,184 $ 13.82 1,173,184 $ 13.03 1,178,192 $ 11.81
========================================================================================================================
Options exercisable at year-end 737,506 509,469 300,172
Weighted-average fair value of options
granted during the year $ 9.45 $ 9.89 $ 7.49
========================================================================================================================
</TABLE>
52/53
<PAGE>
================================================================================
The range of exercise prices on options outstanding for the years ended December
31, 1999, 1998 and 1997 were $10.94 to $40.19, $10.94 to $40.19 and $10.94 to
$28.75, respectively. The weighted average remaining contractual life for
options outstanding at December 31, 1999 is 6.32 years.
Because stock options under the Stock Incentive Plan and the Directors'
Stock Option Plan have characteristics significantly different from those of
traded options and because changes in the subjective assumptions can materially
affect the fair value estimate, the Company used a Black Scholes option-pricing
model with the following weighted-average assumptions used for grants in 1999,
1998 and 1997:
Year Ended December 31,
- --------------------------------------------------------------------------------
1999 1998 1997
================================================================================
Dividend yield 2.73% 1.90% 1.80%
Expected volatility 28.93% 25.43% 24.05%
Risk-free interest rate 4.83% 5.14% 6.34%
Expected option lives 4.54 years 4.82 years 5.65 years
================================================================================
Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards made under
those plans, consistent with the method of SFAS 123, the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below:
Year Ended December 31,
- --------------------------------------------------------------------------------
(In millions, except per share data) 1999 1998 1997
================================================================================
Net income As reported $215.5 $159.1 $184.9
Pro forma $206.7 $152.5 $181.1
Diluted earnings
per share As reported $ 2.23 $ 1.77 $ 2.10
Pro forma $ 2.14 $ 1.70 $ 2.06
================================================================================
of applying SFAS 123 for providing pro forma disclosures are not indicative of
the effects on reported net income for future years because SFAS 123 has not
been applied to all outstanding, non-vested awards (does not apply to awards
prior to January 1, 1995). Additional awards in future years are anticipated.
- --------------------------------------------------------------------------------
NOTE 21 Earnings Per Share
- --------------------------------------------------------------------------------
The Company's reconciliation of the income and shares used in the basic and
diluted EPS computations is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(In millions, except share and
per share amounts) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Per Per Per
Income Shares Share Income Shares Share Income Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to
common stockholders $215.5 94,783,000 $2.27 $159.1 87,109,000 $1.83 $184.9 84,013,000 $2.20
Effect of dilutive
securities:
Stock options -- 1,678,000 -- 2,775,000 -- 4,005,000
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted EPS
Income available to
common stockholders
plus assumed
conversions $215.5 96,461,000 $2.23 $159.1 89,884,000 $1.77 $184.9 88,018,000 $2.10
====================================================================================================================================
</TABLE>
- -------------------------------------------------------------------------------
NOTE 22 Educational and Charitable Foundation
- --------------------------------------------------------------------------------
The Bank has committed to endow a $50 million Educational and Charitable
Foundation (the "Foundation"). The purpose of the Foundation is to fund grants
for civic, cultural, affordable housing and educational programs within the
communities served by the Bank. During 1999, the Bank contributed $25.1 million
to complete its funding commitment to the Foundation.
- --------------------------------------------------------------------------------
NOTE 23 Business Segments
- --------------------------------------------------------------------------------
The Company consists of three domestic business segments offering unique
products and services. The Mortgage Banking segment specializes in Alt A and
NoDoc mortgage loan products which are primarily obtained from the Company's
network of registered mortgage brokers. The Company has historically funded its
mortgage portfolio with consumer deposits raised through its Consumer Banking
operations. The Consumer Banking segment consists of 73 full service banking
offices offering a variety of financial services to the Greater New York City
area. The Manufactured Housing segment primarily originates, securitizes and
services manufactured housing loans.
<PAGE>
================================================================================
The accounting policies of the segments are the same as those described in
Note 1 "Summary of Significant Accounting Policies." The Company evaluates the
performance of its business segments based on income before income taxes.
Expenses under the direct control of each business segment and the expense of
premises and equipment incurred to support business operations are allocated
accordingly, by segment. The expenses relating to the executive, strategic
planning, information systems personnel, finance, audit and human resources
functions of the Company are not allocated to individual operating segments. The
Company purchased the Manufactured Housing business segment on September 30,
1998, therefore, 1998 financial information pertaining to this segment
represents results from fourth quarter operations only.
The following table sets forth information by business segment:
<TABLE>
<CAPTION>
Manufactured Segment Consolidated
(in millions) Mortgage Consumer Housing Totals Other(1) Total
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1999
Net interest income $ 269.1 $ 207.4 $ 29.6 $ 506.1 $ 33.8 $ 539.9
Income from fees and commissions 4.6 31.1 -- 35.7 -- 35.7
Loan servicing fees 17.1 -- 83.1 100.2 -- 100.2
Net gain on sale of loans 156.1 0.1 72.1 228.3 -- 228.3
Depreciation and amortization 15.0 49.5 35.8 100.3 11.1 111.4
Segment income (loss) before taxes 300.0 108.7 14.0 422.7 (51.9) 370.8
Other significant non cash items:
ESOP and stock plans expense 4.3 4.8 7.4 16.5 3.3 19.8
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $ 9,600.2 $12,074.8 $ 1,691.5 $23,366.5 $(7,965.4)(3) $15,401.1
=================================================================================================================================
Year ended December 31, 1998
Net interest income $ 261.4 $ 216.4 $ 4.5 $ 482.3 $ 27.2 $ 509.5
Income from fees and commissions 17.6 25.6 -- 43.2 1.5 44.7
Loan servicing fees 1.8 -- 21.7 23.5 -- 23.5
net gain on sale of loans(2) 106.5 0.1 -- 106.6 -- 106.6
Depreciation and amortization 8.9 52.0 8.6 69.5 6.3 75.8
Segment income (loss) before taxes 255.3 111.8 (11.3) 355.8 (62.2) 293.6
Other significant non cash items:
ESOP and stock plans expense 7.2 7.9 -- 15.1 7.2 22.3
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $10,326.1 $11,648.1 $ 1,437.3 $23,411.5 $(8,395.6)(3) $15,015.9
=================================================================================================================================
Year ended December 31, 1997
Net interest income $ 212.3 $ 207.8 $ -- $ 420.1 $ 67.4 $ 487.5
Income from fees and commissions 8.4 21.9 -- 30.3 7.3 37.6
Loan servicing fees 11.1 -- -- 11.1 0.1 11.2
Net gain on sale of loans 58.7 -- -- 58.7 -- 58.7
Depreciation and amortization 7.1 54.2 -- 61.3 4.5 65.8
Segment income before taxes 194.9 100.1 -- 295.0 (14.4) 280.6
Other significant non cash items
ESOP and stock plans expense 6.7 7.4 -- 14.1 5.6 19.7
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $ 9,789.5 $11,698.9 $ -- $21,488.4 $(7,668.8)(3) $13,819.6
=================================================================================================================================
</TABLE>
(1) Represents unallocated corporate amounts.
(2) The Company did not recognize an $18.5 million gain on the sale of $728
million of manufactured housing loans securitized and sold in November
1998. These loans were acquired by the Company as part of the GreenPoint
Credit purchase and recorded at their fair value.
(3) For the purpose of internal management reporting, the Company records
intersegment funds transfers and eliminates these transfers on a
consolidated basis for GAAP reporting. Intersegment assets and liabilities
eliminated for consolidation purposes were $11.4 billion, $11.0 billion
and $11.0 billion for the years ended 1999, 1998 and 1997, respectively.
Net interest income corresponding to the assumed funds transfers is
allocated accordingly.
- --------------------------------------------------------------------------------
NOTE 24 Condensed Parent Company Financial Statements
- --------------------------------------------------------------------------------
The following condensed statements of financial condition at December 31, 1999
and 1998 and condensed statements of income and cash flows for the years ended
December 31, 1999, 1998 and 1997 for GreenPoint Financial Corp. (parent company
only) reflect the Company's investment in its wholly-owned subsidiaries using
the equity method of accounting.
54/55
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Parent Company Only-
Condensed Statements of Financial Condition
December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998
================================================================================
Assets:
Cash and due from banks $ 0.8 $ 4.7
Money market investments -- 82.5
Due from subsidiaries 41.5 73.0
Other assets 3.2 3.5
Investment in subsidiaries 2,152.4 1,967.6
- --------------------------------------------------------------------------------
Total assets $ 2,197.9 $ 2,131.3
================================================================================
Liabilities and Stockholders' Equity:
Liabilities:
Due to subsidiaries $ 6.2 $ 6.2
Guaranteed preferred beneficial
interest in Company's junior
subordinated debentures 199.8 199.7
Accrued income taxes payable -- 1.1
Accrued interest payable 1.5 1.5
Other liabilities 3.7 0.2
- --------------------------------------------------------------------------------
Total liabilities 211.2 208.7
- --------------------------------------------------------------------------------
Stockholders' equity 1,986.7 1,922.6
- --------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 2,197.9 $ 2,131.3
================================================================================
- --------------------------------------------------------------------------------
Parent Company Only-
Condensed Statements of Income
Year Ended December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998 1997
================================================================================
Dividends from
GreenPoint Bank $ 50.0 $ 140.8 $ 185.2
- --------------------------------------------------------------------------------
Interest Income:
Line of credit-subsidiary 5.7 4.7 0.4
Money market investments 1.7 2.6 1.3
Securities -- -- 0.8
- --------------------------------------------------------------------------------
Total interest income 7.4 7.3 2.5
================================================================================
Interest Expense:
Guaranteed preferred beneficial
interest in Company's junior
subordinated debentures 18.2 18.2 10.7
- --------------------------------------------------------------------------------
Total interest expense 18.2 18.2 10.7
- --------------------------------------------------------------------------------
Net interest income (10.8) (10.9) (8.2)
- --------------------------------------------------------------------------------
Administrative expenses 0.7 0.5 0.4
- --------------------------------------------------------------------------------
Income before income taxes and
equity in undistributed earnings
of subsidiaries 38.5 129.4 176.6
Income taxes (4.9) (4.8) (3.6)
- --------------------------------------------------------------------------------
Income before equity in
undistributed earnings
of subsidiaries 43.4 134.2 180.2
- --------------------------------------------------------------------------------
Equity in undistributed earnings
of subsidiaries 172.1 24.9 4.7
- --------------------------------------------------------------------------------
Net income $ 215.5 $ 159.1 $ 184.9
================================================================================
- --------------------------------------------------------------------------------
Parent Company Only-
Condensed Statements of Cash Flows
Year Ended December 31,
- --------------------------------------------------------------------------------
(In millions) 1999 1998 1997
================================================================================
Operating Activities:
Net income $ 215.5 $ 159.1 $ 184.9
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Equity in undistributed
(earnings) of
subsidiaries (172.1) (24.9) (4.7)
Net change in other liabilities 2.4 1.2 1.5
Net change in other assets 0.3 5.1 (8.1)
Other, net -- -- (0.7)
- --------------------------------------------------------------------------------
Net cash provided by
operating activities 46.1 140.5 172.9
================================================================================
Investing Activities:
Purchases of securities -- -- (432.5)
Maturities of securities -- -- 433.3
Payments for investments
in and advances to
subsidiaries (244.4) (1,065.8) (278.7)
Repayment of investments
in and advances to
subsidiaries 275.4 682.8 278.7
Other, net -- -- --
- --------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 31.0 (383.0) 0.8
================================================================================
Financing Activities:
Guaranteed preferred
beneficial interest in
Company's junior
subordinated debentures -- -- 199.7
Proceeds from issuance
of common stock 58.5 593.7 8.8
Purchase of treasury stock (141.4) (219.6) (355.5)
Dividends paid (80.6) (46.5) (37.7)
- --------------------------------------------------------------------------------
Net cash (used in) provided
by financing activities (163.5) 327.6 (184.7)
- --------------------------------------------------------------------------------
Net (decrease) increase in
cash and cash equivalents (86.4) 85.1 (11.0)
Cash and cash equivalents
at beginning of period 87.2 2.1 13.1
- --------------------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 0.8 $ 87.2 $ 2.1
================================================================================
In connection with the BAHS acquisition in September 1998, the Company made a
$310 million capital contribution to the Bank consisting of cash.
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
- --------------------------------------------------------------------------------------------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st
(In millions, except per share data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 282.2 $ 276.9 $ 265.4 $ 266.3 $ 272.0 $ 268.4 $ 259.3 $ 261.7
Interest expense 145.0 137.6 130.4 137.9 142.5 137.6 134.3 137.5
- --------------------------------------------------------------------------------------------------------------------
Net interest income 137.2 139.3 135.0 128.4 129.5 130.8 125.0 124.2
Provision for possible
loan losses (8.3) (1.5) (1.7) (2.7) (3.9) (2.7) (3.2) (4.0)
- --------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for possible
loan losses 128.9 137.8 133.3 125.7 125.6 128.1 121.8 120.2
- --------------------------------------------------------------------------------------------------------------------
Non-interest income 108.3 94.9 94.3 94.2 54.6 41.4 35.6 43.2
Non-interest expense 138.6 129.4 127.4 151.2 121.1 83.0 81.4 91.4
- --------------------------------------------------------------------------------------------------------------------
Income before taxes 98.6 103.3 100.2 68.7 59.1 86.5 76.0 72.0
Income taxes related
to earnings 39.7 41.6 40.3 33.7 22.8 33.7 29.5 30.0
Income taxes related
to S corporation conversion -- -- -- -- -- -- -- 18.5
- --------------------------------------------------------------------------------------------------------------------
Net income $ 58.9 $ 61.7 $ 59.9 $ 35.0 $ 36.3 $ 52.8 $ 46.5 $ 23.5
====================================================================================================================
Basic earnings per share $ 0.63 $ 0.64 $ 0.63 $ 0.37 $ 0.39 $ 0.58 $ 0.56 $ 0.29
====================================================================================================================
Diluted earnings per share $ 0.62 $ 0.63 $ 0.61 $ 0.36 $ 0.38 $ 0.57 $ 0.54 $ 0.28
====================================================================================================================
Stock price per common share
High $ 30.13 $ 34.63 $ 35.75 $ 36.69 $ 39.25 $ 42.63 $ 42.06 $ 37.31
Low $ 23.38 $ 25.19 $ 32.56 $ 30.38 $ 25.38 $ 25.19 $ 36.19 $ 32.69
Closing $ 23.81 $ 26.56 $ 32.88 $ 34.75 $ 35.13 $ 31.88 $ 37.63 $ 35.94
====================================================================================================================
</TABLE>
56/57
<PAGE>
================================================================================
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholders of GreenPoint Financial Corp. and
Subsidiaries
In our opinion, the accompanying consolidated statements of financial condition
and the related consolidated statements of income, comprehensive income, changes
in stockholders' equity, and cash flows present fairly, in all material
respects, the financial position of GreenPoint Financial Corp. and its
subsidiaries at December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
New York, New York
January 20, 2000
<PAGE>
- --------------------------------------------------------------------------------
Directors and Officers
- --------------------------------------------------------------------------------
Board of Directors
Bharat B. Bhatt
President and
Chief Operating Officer
Dan F. Huebner
Retired Vice Chairman
and Director of
Grumman Corporation
William M. Jackson
Partner with the law firm of Satterlee,
Stephens, Burke & Burke, L.L.P.
Thomas S. Johnson
Chairman and
Chief Executive Officer
Susan J. Kropf
Chief Operating Officer,
North America and Global
Business Operations and
Director of Avon Products, Inc.
Robert M. McLane
Retired Senior Vice President
of Marsh & McLennan, Inc.
Charles B. McQuade
President and
Chief Executive Officer
of the Securities Industry
Automation Corporation
Peter T. Paul
Vice Chairman, and
President and
Chief Executive Officer
of GreenPoint Credit
Alvin N. Puryear
Lawrence N. Field Professor
of Entrepreneurship at
Bernard M. Baruch College of the
City University of New York
Robert P. Quinn
Retired General Partner and
Managing Director of
Salomon Brothers Inc.
Edward C. Schmults
Retired Senior Vice President
and General Counsel of
GTE Corporation
Robert F. Vizza
Retired President and
Chief Executive Officer
of St. Francis Hospital
Jules Zimmerman
Retired President and
Chief Executive Officer
of Hickok Associates, Incorporated
Senior Management
Thomas S. Johnson
Chairman and
Chief Executive Officer
Bharat B. Bhatt
President and
Chief Operating Officer
Peter T. Paul
Vice Chairman, and
President and
Chief Executive Officer
of GreenPoint Credit
Jean C. Bingham
Executive Vice President,
Risk Management
S.A. Ibrahim
President and
Chief Executive Officer
of GreenPoint Mortgage
Jeffrey R. Leeds
Executive Vice President and
Chief Financial Officer
Ramesh N. Shah
Executive Vice President,
Consumer Banking
Howard C. Bluver
Senior Vice President and
General Counsel
Mary M. Massimo
Senior Vice President and
Human Resources Director
- --------------------------------------------------------------------------------
GreenPoint Foundation
- --------------------------------------------------------------------------------
Board of Directors
The Reverend Dr. Calvin O. Butts III
The Abyssinian Baptist Church
Regina Peruggi, Ph.D.
President
Marymount Manhattan College
The Most Reverend Joseph M. Sullivan
Brooklyn Catholic Charities
58/59
<PAGE>
- --------------------------------------------------------------------------------
Corporate Information
- --------------------------------------------------------------------------------
Executive Offices
90 Park Avenue
New York, NY 10016-1303
Common Stock
GreenPoint Financial Corp.'s common stock is listed on the New York Stock
Exchange (NYSE) under the symbol GPT.
Sources of Information
For more information relating to share positions, transfer requirements, lost
certificates and related matters, call our transfer agent at: 1.888.224.2741.
For information regarding Annual and Quarterly Reports and related matters, call
our Stockholder Relations Department at 212.834.1202.
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Transfer Agent
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
Subsidiary Activities
The Company has formed four subsidiaries:
GreenPoint Bank. The Bank was organized in 1868 as a New York State
chartered mutual savings bank. On January 28, 1994, the Bank converted from the
mutual to the stock form of ownership, and the Company acquired 100% of its
outstanding shares. The Bank is the principal subsidiary of the Company.
GreenPoint Community Development Corp. This for-profit community
development subsidiary was incorporated in 1993. The subsidiary offers lending
programs, development opportunities and assistance, consulting and other
activities which promote the objective of greater access to affordable housing
for low-and moderate-income persons residing in the New York metropolitan area.
GreenPoint Community Development Corp. is a subsidiary of the Company.
GreenPoint Capital Trust I. This subsidiary was incorporated on June 3,
1997. The subsidiary issued $200 million of Capital Securities, the proceeds of
which were used for general corporate purposes, including the repurchase of
stock and financing growth.
TrueWeb, Inc. TWeeb, Inc., subsequently renamed TrueWeb, Inc. ("TrueWeb"),
was incorporated in December 1999. TrueWeb is a wholly owned subsidiary of the
Company and was formed to pursue internet businesses strategic to GreenPoint.
As of December 31, 1999 the Bank has formed twenty subsidiaries:
Headlands Mortgage Company. Headlands was acquired in a pooling of
interests transaction on March 30, 1999. Headlands is located in Larkspur,
California. On September 30, 1999, Headlands transferred all of its assets and
the liabilities related to loan origination and servicing operations to its
wholly-owned subsidiary GPM.
GreenPoint Mortgage Funding, Inc. GPM was acquired on April 8, 1999. On
September 30, 1999, the Bank transferred all of the issued and outstanding
shares of GPM to Headlands. Also, on September 30, 1999, GreenPoint Mortgage
Corp. (a wholly-owned subsidiary of Headlands) merged into GPM, with GPM as the
surviving entity. GPM is headquartered in Larkspur, California and its
activities consist of the origination, sale and servicing of mortgage loans.
GreenPoint Credit LLC. On September 30, 1999, the Bank transferred all
issued and outstanding shares of GreenPoint Credit Corp. to Headlands, which
then transferred these shares to GPM. GreenPoint Credit Corp. then merged into
GreenPoint Credit with GreenPoint Credit the surviving entity. GreenPoint
Credit's activities consist of the origination, sale and servicing of
manufactured housing loans. In Mississippi, GreenPoint Credit conducts
activities through its wholly owned subsidiary, GreenPoint Credit of
Mississippi, LLC. On September 30, 1999, GreenPoint Credit Corp. of Mississippi
was merged into GreenPoint Credit of Mississippi, LLC.
GreenPoint Mortgage Securities Inc. With the transfer of the mortgage
assets and liabilities, Headlands transferred ownership of its securitization
subsidiary, Headland Mortgage Securities, Inc., and its related subsidiaries
Marin Conveyancing Corp. and Headlands Insurance Agency to GreenPoint Mortgage
Funding, Inc. Headlands Securities, Inc. changed its name to GreenPoint Mortgage
Securities Inc.
<PAGE>
GreenPoint Agency, Inc. This subsidiary was incorporated on June 30, 1998
as an insurance agency. GreenPoint Agency acts as an agent in connection with
the sale of forced placed property insurance and standard property and casualty
insurance. In Alabama, GreenPoint Agency conducts its activities through its
wholly owned subsidiary, GreenPoint Agency of Alabama, Inc.
GreenPoint Insurance Corp. This subsidiary was incorporated on September
10, 1998 as an insurance underwriting and reinsurance subsidiary. GreenPoint
Insurance's activities include the reinsurance of life and disability insurance
risks.
GreenPoint Purchasing Corp. This subsidiary was incorporated on July 19,
1996, with an agreement between the Company and the Nassau County Industrial
Development Agency. This agreement enables the Company, on a sales tax exempt
basis, to (1) purchase and/or lease machinery and equipment for the Lake Success
facility and (2) renovate and improve the facility.
3090 Ocean Avenue Realty Corp. This subsidiary was incorporated on June 6,
1996, as a real estate investment subsidiary.
GreenPoint Corporate Owned Life Insurance. This subsidiary was
incorporated on July 25, 1996, as an insurance trust established for the purpose
of purchasing corporate life insurance policies for the officers of the Company.
e4close Inc. This subsidiary was in incorporated on October 21, 1999.
e4close Inc. lists foreclosed properties on the internet.
GreenPoint Securities LLC. This subsidiary was incorporated on August 25,
1999 for the purpose of establishing an entity to sell mutual funds. There was
no activity in 1999.
Other Real Estate Subsidiaries. The Bank has formed five wholly-owned
subsidiary corporations, all of which are incorporated under the laws of the
State of New York, for the purpose of holding and maintaining certain properties
acquired by the Bank as a result of foreclosure proceedings or deeds in lieu
thereof. As of December 31, 1999, four of these subsidiaries were active. The
Bank attempts to limit the carrying value of property held by any one subsidiary
to approximately $5 million. Accordingly, in the event the Bank acquires
additional properties through foreclosure or deeds in lieu thereof, the Bank may
form additional subsidiaries for the purpose of holding and maintaining such
properties. The properties selected by the Bank to be held in its subsidiaries
generally consist of multi-family properties with five units or more, commercial
properties and one- to four-family properties which have been identified by the
Bank as having attributes which may subject the Bank to liabilities beyond those
normally associated with its other real estate such as properties which are not
in compliance with building codes or properties with potential environmental
problems. Descriptions of the Bank's subsidiaries are set forth below:
Neerg Corp. This subsidiary was formed in January 1990 and currently holds
3 properties having an aggregate carrying value of $0.5 million and an aggregate
appraised value of $1.1 million, as of December 31, 1999, based on the Company's
most recent appraisals.
298 15th Street Realty Corp. This subsidiary was formed in January 1993
and currently holds 2 properties having an aggregate carrying value of $0.2
million and an aggregate appraised value of $0.3 million as of December 31,
1999, based on the Company's most recent appraisals.
Neerg Second Corp. This subsidiary was formed in June 1993 and currently
holds 4 properties having an aggregate carrying value of $0.6 million and an
aggregate appraised value of $0.6 million, as of December 31, 1999, based on the
Company's most recent appraisals.
Alpha REO Corporation. This subsidiary was formed in March 1994 and
currently holds 2 properties having an aggregate carrying value of $0.2 million
and an aggregate appraised value of $0.2 million, as of December 31, 1999, based
on the Company's most recent appraisals.
Beta REO Corp. This subsidiary was formed in June 1994 and currently holds
no properties.
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
statements on Form S-8 (Nos. 33-74556,33-87758, 33-87760, 333-06673 and
333-45917) of Green Point Financial Corp. of our reports dated January 20, 2000
relating to the financial statements, which appears in the Annual Report to
Shareholders, which is incorporated in this Annual Report on Form 10-K.
/s/ PricewatherhouseCoopers, LLP
New York, New York
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 179
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<FED-FUNDS-SOLD> 1,051
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<ALLOWANCE> (113)
<TOTAL-ASSETS> 15,401
<DEPOSITS> 11,560
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<LONG-TERM> 400
0
0
<COMMON> 1
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<INTEREST-LOAN> 943
<INTEREST-INVEST> 125
<INTEREST-OTHER> 23
<INTEREST-TOTAL> 1,091
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<INTEREST-EXPENSE> 551
<INTEREST-INCOME-NET> 540
<LOAN-LOSSES> (14)
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<INCOME-PRETAX> 371
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<CHANGES> 0
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<EPS-BASIC> 2.27
<EPS-DILUTED> 2.23
<YIELD-ACTUAL> 4.02
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<ALLOWANCE-OPEN> (113)
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<ALLOWANCE-CLOSE> (113)
<ALLOWANCE-DOMESTIC> (113)
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</TABLE>
