<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
--------------------
For the Quarter Ended
JUNE 30, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
0-22516
Securities and Exchange Commission File Number
GREENPOINT FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1379001
-------- ----------
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
90 PARK AVENUE, NEW YORK, NEW YORK 10016
---------------------------------- -----
(Address of principal executive offices) (Zip Code)
(212) 834-1000 NOT APPLICABLE
-------------- --------------
(Registrant's telephone number, (Former name, former address and former
including area code) fiscal year if changed since last report)
Indicate 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
--- ---
As of August 4, 2000 there were 101,947,000 shares of common stock outstanding.
<PAGE>
GREENPOINT FINANCIAL CORP.
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 2000
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1 - Financial Statements
Consolidated Statements of Financial Condition (unaudited) as of June
30, 2000 and December 31, 1999 3
Consolidated Statements of Income (unaudited) for the quarters and
six month periods ended June 30, 2000 and 1999 4
Consolidated Statements of Comprehensive Income (unaudited) for the
quarters and six month periods ended June 30, 2000 and 1999 5
Consolidated Statements of Changes in Stockholders' Equity
(unaudited) for the six month periods ended June 30, 2000 and 1999 6
Consolidated Statements of Cash Flows (unaudited) for the six month
periods ended June 30, 2000 and 1999 7
Notes to the Unaudited Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations 18
Item 3 - Quantitative and Qualitative Disclosure about Market Risk 32
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 38
Item 4 - Submission of Matters to a Vote of Security Holders 39
Item 6 - Exhibits and Reports on Form 8-K 40
</TABLE>
2
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
------
Cash and due from banks $ 143,250 $ 179,462
Money market investments 749,738 1,052,840
Loans receivable held for sale 2,051,346 1,208,080
Securities available for sale 2,255,169 1,974,747
Federal Home Loan Bank of New York stock 96,284 91,791
Retained interests in securitizations 112,882 124,556
Securities held to maturity (fair value of $2,274 and
$1,985, respectively) 2,264 1,974
Loans receivable held for investment:
Mortgage loans 8,291,472 8,648,765
Other loans 623,403 659,356
Deferred loan fees and unearned discount (10,325) (14,954)
Allowance for possible loan losses (113,000) (113,000)
------------ ------------
Loans receivable held for investment, net 8,791,550 9,180,167
------------ ------------
Other interest-earning assets 122,813 123,350
Servicing assets 201,215 180,629
Accrued interest receivable, net 81,834 72,173
Banking premises and equipment, net 126,920 129,006
Deferred income taxes, net 31,902 49,705
Goodwill 901,943 941,727
Other assets 98,234 90,870
------------ ------------
Total assets $ 15,767,344 $ 15,401,077
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Deposits:
N.O.W. and checking $ 552,583 $ 540,406
Savings 1,304,961 1,369,852
Variable rate savings 1,979,135 1,981,441
Money market 431,446 459,577
Term certificates of deposit 7,103,342 7,208,850
------------ ------------
Total deposits 11,371,467 11,560,126
------------ ------------
Mortgagors' escrow 98,127 95,505
Securities sold under agreements to repurchase 396,389 260
Federal Home Loan Bank of New York advances 975,000 675,000
Notes payable 2,817 5,137
Long term debt 177,338 199,906
Guaranteed preferred beneficial interest in Company's
junior subordinated debentures 199,745 199,740
Accrued income taxes payable 23,833 27,168
Other liabilities 487,288 651,573
------------ ------------
Total liabilities 13,732,004 13,414,415
------------ ------------
Commitments and contingencies Stockholders' equity:
Preferred stock ($0.01 par value; 50,000,000 shares -- --
authorized; none issued)
Common stock ($0.01 par value; 220,000,000 shares
authorized; 110,261,164 shares issued) 1,103 1,103
Additional paid-in capital 859,257 857,824
Unallocated Employee Stock Ownership Plan (ESOP) shares (102,520) (105,097)
Unearned stock plans shares (2,546) (3,288)
Retained earnings 1,485,973 1,408,219
Accumulated other comprehensive income, net (10,009) (11,834)
Treasury stock, at cost (7,967,064 and 6,058,244
shares, respectively) (195,918) (160,265)
------------ ------------
Total stockholders' equity 2,035,340 1,986,662
------------ ------------
Total liabilities and stockholders' equity $ 15,767,344 $ 15,401,077
============ ============
</TABLE>
(SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS)
3
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Mortgage loans held for investment $ 183,365 $ 195,777 $ 370,894 $ 392,128
Securities 38,411 17,533 73,649 37,161
Loans held for sale 43,547 36,229 74,660 67,015
Money market investments 9,052 8,036 17,858 19,342
Other 25,500 7,798 51,081 16,087
--------- --------- --------- ----------
Total interest income 299,875 265,373 588,142 531,733
--------- --------- --------- ----------
INTEREST EXPENSE:
Deposits 125,807 118,506 250,060 234,431
Notes payable 13,579 708 24,306 8,106
Long-term debt 7,861 8,042 15,903 16,085
Securities sold under agreements to
repurchase 6,024 3,081 7,881 9,650
Trading liabilities 114 13 114 33
--------- --------- --------- ----------
Total interest expense 153,385 130,350 298,264 268,305
--------- --------- --------- ----------
Net interest income 146,490 135,023 289,878 263,428
Provision for possible loan losses (7,090) (1,657) (15,434) (4,454)
--------- --------- --------- ----------
Net interest income after provision
for possible loan losses 139,400 133,366 274,444 258,974
--------- --------- --------- ----------
NON-INTEREST INCOME:
Income from fees and commissions:
Loan servicing fees 36,215 23,898 68,282 49,467
Banking services fees and
commissions 9,451 7,579 18,544 14,548
Other 2,912 2,912 5,625 5,957
Net gain on sale of loans 61,685 59,492 107,674 117,488
Net gain on sale of securities 1,090 410 1,841 1,018
Change in valuation of retained
interests (15,817) -- (19,121) --
--------- --------- --------- ----------
Total non-interest income 95,536 94,291 182,845 188,478
--------- --------- --------- ----------
NON-INTEREST EXPENSE:
Salaries and benefits 52,690 52,626 103,814 106,081
Employee Stock Ownership and stock
plans expense 3,740 5,475 7,256 10,731
Net expense of premises and equipment 19,316 18,534 39,850 36,906
Advertising 1,789 2,330 2,553 4,055
Federal deposit insurance premiums 606 652 1,233 1,309
Other administrative expenses 28,804 26,955 56,959 72,718
Other real estate owned operating
income, net (809) (924) (1,155) (2,872)
Goodwill amortization 19,893 19,890 39,785 39,848
Charitable and educational foundation -- 1,875 -- 3,750
Restructuring charge and non-recurring
personnel expense -- -- -- 6,000
--------- --------- --------- ----------
Total non-interest expense 126,029 127,413 250,295 278,526
--------- --------- --------- ----------
Income before income taxes 108,907 100,244 206,994 168,926
Income taxes 43,563 40,348 83,779 74,002
--------- --------- --------- ----------
Net income $ 65,344 $ 59,896 $ 123,215 $ 94,924
========= ========= ========= ==========
Basic earnings per share $ 0.72 $ 0.63 $ 1.35 $ 1.00
========= ========= ========= ==========
Diluted earnings per share $ 0.71 $ 0.61 $ 1.34 $ 0.98
========= ========= ========= ==========
</TABLE>
(SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS)
4
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ -----------------------
2000 1999 2000 1999
---------- ---------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income $ 65,344 $ 59,896 $ 123,215 $ 94,924
--------- --------- --------- ---------
Other comprehensive income, before tax:
Unrealized gain (loss) on securities:
Unrealized holding gain (loss)
arising during period 3,146 (16,020) 4,276 (20,144)
Less: reclassification adjustment
for gains included in net income 1,090 410 1,841 1,018
--------- --------- --------- ---------
Other comprehensive income, before tax 2,056 (16,430) 2,435 (21,162)
Income tax (expense) benefit related
to items of other comprehensive
income (495) 6,962 (610) 8,965
--------- --------- --------- ---------
Other comprehensive income, net of tax 1,561 (9,468) 1,825 (12,197)
--------- --------- --------- ---------
Total comprehensive income, net of tax $ 66,905 $ 50,428 $ 125,040 $ 82,727
========= ========= ========= =========
</TABLE>
(SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS)
5
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------
2000 1999
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
COMMON STOCK
Balance at beginning of period $ 1,103 $ 1,103
----------- -----------
Balance at end of period 1,103 1,103
----------- -----------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period 857,824 1,278,795
Reissuance of treasury stock (3,999) (431,823)
Amortization of ESOP shares committed to be released 3,436 7,571
Amortization of stock plans shares 501 72
Tax benefit for vested stock plans shares 1,495 3,424
----------- -----------
Balance at end of period 859,257 858,039
----------- -----------
UNALLOCATED ESOP SHARES
Balance at beginning of period (105,097) (110,101)
Amortization of ESOP shares committed to be released 2,577 2,502
----------- -----------
Balance at end of period (102,520) (107,599)
----------- -----------
UNEARNED STOCK PLANS SHARES
Balance at beginning of period (3,288) (4,459)
Amortization of stock plans shares 742 586
----------- -----------
Balance at end of period (2,546) (3,873)
----------- -----------
RETAINED EARNINGS
Balance at beginning of period 1,408,219 1,273,264
Net income 123,215 94,924
Dividends declared (45,461) (38,952)
----------- -----------
Balance at end of period 1,485,973 1,329,236
----------- -----------
ACCUMULATED OTHER COMPREHENSIVE INCOME, NET
Balance at beginning of period (11,834) 4,699
Net change in accumulated other comprehensive income,
net 1,825 (12,197)
----------- -----------
Balance at end of period (10,009) (7,498)
----------- -----------
TREASURY STOCK, AT COST
Balance at beginning of period (160,265) (520,725)
Reissuance of treasury stock 5,870 487,091
Purchase of treasury stock (41,523) --
----------- -----------
Balance at end of period (195,918) (33,634)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY $ 2,035,340 $ 2,035,774
=========== ===========
</TABLE>
(SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS)
6
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
2000 1999
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 123,215 $ 94,924
Adjustments to reconcile net income to net cash (used
in) provided by operating activities:
Provision for possible loan losses 15,434 4,454
Depreciation and amortization of premises and
equipment 16,108 15,009
Goodwill amortization 39,785 39,848
Accretion of discount on securities, net of premium
amortization (2,308) (3,410)
Net change in trading assets 11 (97)
Net change in trading liabilities 53,295 --
Net change in retained interests in securitizations 17,165 11,376
ESOP and stock plans expense 7,256 10,731
Gain on securities transactions (1,841) (1,018)
Net change in loans held for sale (843,266) (160,465)
Net gain on sales of other real estate owned (1,624) (3,398)
Capitalization of servicing assets (43,131) (47,030)
Amortization of servicing assets 22,545 25,341
Deferred income taxes 18,413 16,610
Increase in other assets (4,597) (3,604)
(Decrease) increase in other liabilities (294,674) 27,255
Other, net (14,687) (11,017)
----------- -----------
Net cash (used in) provided by operating
activities (892,901) 15,509
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal repayments, net of loan originations 368,503 71,325
Proceeds from sales of other real estate owned 7,109 11,534
Purchases of securities available for sale (907,825) (1,476,353)
Purchases of securities held to maturity (317) --
Proceeds from maturities of securities available for
sale 447,420 1,626,020
Proceeds from sales of securities available for sale 149,029 1,018
Principal repayments on securities 107,949 113,533
Purchase of Federal Home Loan Bank stock (4,493) (91,791)
Purchases of premises and equipment (14,022) (15,656)
----------- -----------
Net cash provided by investing activities 153,353 239,630
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (withdrawals) deposits from depositors' accounts (189,082) 307,798
Borrowing on notes payable -- 2,810,790
Payments on notes payable -- (3,327,413)
Net (decrease) increase on lease payable (2,320) 252
Proceeds from Federal Home Loan Bank advances 300,000 100,000
Payments for cash dividends (45,461) (38,952)
Stock offering -- 47,351
Exercise of stock options 1,871 7,917
Purchase of treasury stock (41,523) --
Retirement of long term debt (22,002) --
Securities sold under agreements to repurchase 396,129 (229,851)
Net increase (decrease) in mortgagors' escrow 2,622 (13,062)
----------- -----------
Net cash provided by (used in) financing activities 400,234 (335,170)
----------- -----------
Net decrease in cash and cash equivalents (339,314) (80,031)
Cash and cash equivalents at beginning of period 1,232,302 1,088,372
----------- -----------
Cash and cash equivalents at end of period $ 892,988 $ 1,008,341
=========== ===========
NON-CASH ACTIVITIES:
Additions to other real estate owned, net $ (8,039) $ 4,638
=========== ===========
Unsettled trades $ (130,387) $ 50,130
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 68,471 $ 76,873
=========== ===========
Interest paid $ 250,843 $ 243,918
=========== ===========
</TABLE>
(SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS)
7
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The unaudited consolidated financial statements of GreenPoint Financial Corp.
and Subsidiaries ("GreenPoint" or the "Company") are prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of the Company's interim financial
condition as of the dates indicated and the results of operations for the
periods presented have been included. Certain reclassifications have been made
to the prior period financial statements to conform to the current year
presentation. The results of operations for the interim periods shown are not
necessarily indicative of results that may be expected for the entire year.
The unaudited consolidated interim financial statements presented should be read
in conjunction with the consolidated financial statements and notes included in
the Company's Annual Report to shareholders for the year ended December 31,
1999.
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 difference 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 GreenPoint Bank (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 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.
8
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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,
interest rate spreads, and discount rates that the Company believes market
participants would use for similar assets and liabilities.
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
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 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.
2. STOCK INCENTIVE PLAN
For the six months ended June 30, 2000, the Company granted options to purchase
2,017,700 shares of the Company's common stock to certain officers, at an
average exercise price of $21.38. These awards vest over two to three years on
the anniversary dates of the awards.
9
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. LOANS RECEIVABLE HELD FOR SALE
The following table sets forth the composition of the Company's loans receivable
held for sale, at the dates indicated.
JUNE 30, DECEMBER 31,
2000 1999
-------------- --------------
(IN THOUSANDS)
LOANS RECEIVABLE HELD FOR SALE:
Residential mortgage loans $ 1,302,628 $ 766,582
Home equity lines of credit 202,297 47,551
Manufactured housing loans 360,865 265,772
Manufactured housing land/home loans 180,643 130,553
Guaranteed student loans 1,852 2,450
Deferred loan origination fees and unearned
discount 3,061 (4,828)
-------------- --------------
Loans receivable held for sale $ 2,051,346 $ 1,208,080
============== ==============
10
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. RETAINED INTERESTS IN SECURITIZATIONS AND SERVICING ASSETS
SECURITIZATIONS
During the quarters ended June 30, 2000 and 1999, GreenPoint sold $719.3 million
and $810.0 million of manufactured housing loans in one securitization
transaction each year for gains of $18.2 million and $20.6 million,
respectively. GreenPoint receives annual servicing fees approximating 1.0% 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 quarter ended June 30, 2000, GreenPoint sold $350.2 million of home
equity lines of credit and second mortgages in one securitization transaction
for a gain of $9.8 million. The draws on previously securitized home equity
lines of credit and sales of additional mortgage loans into securitization
trusts totaled $44.6 million resulting in a gain of $2.1 million during the
quarter ended June 30, 2000. GreenPoint 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.
WHOLE LOAN SALES
During the quarters ended June 30, 2000 and 1999, GreenPoint sold as whole loans
certain mortgage loans with principal balances of $1.7 billion and $2.2 billion,
respectively, for pre-tax gains of $31.6 million and $39.4 million,
respectively. GreenPoint retained servicing rights and provided limited recourse
on some of the mortgage loans sold.
At June 30, 2000, GreenPoint has provided representations and warranties on
mortgage and manufactured housing loans with remaining principal balances of
$5.2 billion and $342.5 million, respectively. GreenPoint has established a
liability related to representations and warranties for mortgage loans of $6.2
million at June 30, 2000.
RECOURSE ARRANGEMENTS
GreenPoint has established liabilities for limited recourse provided on mortgage
loans and recourse provided on manufactured housing loans that have been
securitized or sold. 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.
11
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
GreenPoint has recorded liabilities relating to the loans sold with recourse
with the following principal balances and maximum recourse exposures:
JUNE 30, 2000
-------------------------------------------
MAXIMUM
PRINCIPAL RECOURSE RECORDED
BALANCE EXPOSURE LIABILITY
-------------- ------------- -------------
(IN THOUSANDS)
Manufactured housing $ 4,484,452 $ 942,407 $ 43,872
Mortgage 1,013,938 993,659 811
-------------- ------------- -------------
$ 5,498,390 $ 1,936,066 $ 44,683
============== ============= =============
DECEMBER 31, 1999
-------------------------------------------
MAXIMUM
PRINCIPAL RECOURSE RECORDED
BALANCE EXPOSURE LIABILITY
-------------- ------------- -------------
(IN THOUSANDS)
Manufactured housing $ 3,332,273 $ 749,325 $ 32,295
Mortgage 468,184 458,820 292
-------------- ------------- -------------
$ 3,800,457 $ 1,208,145 $ 32,587
============== ============= =============
CHANGE IN VALUATION OF RETAINED INTERESTS
On a quarterly basis, GreenPoint reviews the adequacy of the value of the
recorded liability based on management's best estimate of the fair value of
future cash flows associated with the corporate guarantee. During the quarter
ended June 30, 2000, GreenPoint recorded an $11.6 million charge to adjust its
corporate guarantee liability to fair value. The charge consisted of $6.9
million relating to the effect of interest rate changes on variable rate
securitizations and $4.7 million relating to increased loss severity
assumptions.
On a quarterly basis, GreenPoint reviews retained interests for impairment based
on management's best estimate of the fair value of future cash flows associated
with the retained interest. During the quarter ended June 30, 2000, GreenPoint
recorded a $4.2 million charge to adjust its manufactured housing interest-only
strip to fair value. The charge was related to the effect of interest rate
changes on variable rate securitizations.
12
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
RETAINED INTERESTS IN SECURITIZATIONS
The entire portfolio of retained interests in securitizations is summarized as
follows:
JUNE 30, 2000
------------------------------------------------
MANUFACTURED
HOUSING MORTGAGE (1) TOTAL
--------------- -------------- ---------------
(IN THOUSANDS)
Subordinated certificates $ --- $ 5,187 $ 5,187
Interest-only strip 13,335 44,879 58,214
Transferor interest (2) --- 49,481 49,481
------------- ------------ -------------
$ 13,335 $ 99,547 $ 112,882
============= ============ =============
DECEMBER 31, 1999
------------------------------------------------
MANUFACTURED
HOUSING MORTGAGE (1) TOTAL
--------------- -------------- ---------------
(IN THOUSANDS)
Subordinated certificates $ 40,441 $ 5,111 $ 45,552
Interest-only strip 12,229 20,924 33,153
Transferor interest (2) --- 45,851 45,851
------------- ------------ -------------
$ 52,670 $ 71,886 $ 124,556
============= ============ =============
(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 retained
interests capitalized during the quarter ended June 30, 2000 and the assumptions
used in estimating the fair value of the entire portfolio of retained interests
at June 30, 2000 were as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
JUNE 30, 2000 JUNE 30, 2000
------------------------- -------------------------
MANUFACTURED MANUFACTURED
HOUSING MORTGAGE HOUSING MORTGAGE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average prepayment rate
(1) 11.8 % 44.6 % 13.3 % 42.8 %
Weighted average life (in years) 4.8 1.5 4.5 1.3
Weighted average default rate 3.6 % 0.5 % 4.0 % 0.9 %
Loss severity rate 58.9 % 100.0 % 58.1 % 100.0 %
Asset cash flows discounted at 14.0 % 13.4 % 14.0 % 12.8 %
Liability cash flows discounted at 7.0 % --- 6.3 % ---
</TABLE>
(1) EXCLUDES WEIGHTED AVERAGE DEFAULT RATE.
13
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 disaggregated 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 June 30,
2000 and December 31, 1999, there were no valuation allowances on any of the
servicing rights risk strata.
Servicing assets relating to the entire servicing portfolio are summarized as
follows:
JUNE 30, DECEMBER 31,
2000 1999
--------------- --------------
(IN THOUSANDS)
Manufactured housing $ 133,817 $ 126,325
Mortgage 67,398 54,304
--------------- --------------
$ 201,215 $ 180,629
=============== ==============
During the quarter ended June 30, 2000, GreenPoint capitalized servicing rights
of $13.0 million and $12.3 million for mortgage and manufactured housing loans,
respectively. The significant assumptions used in estimating the fair value of
the servicing assets capitalized during the quarter ended June 30, 2000 and the
assumptions used in estimating the fair value of the entire servicing asset
portfolio at June 30, 2000 were as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
JUNE 30, 2000 JUNE 30, 2000
------------------------- -------------------------
MANUFACTURED MANUFACTURED
HOUSING MORTGAGE HOUSING MORTGAGE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average prepayment rate (1) 11.8 % 24.7 % 12.5 % 15.6 %
Weighted average life (in years) 4.8 4.6 4.4 6.3
Weighted average default rate 3.6 % 2.4 % 3.8 % 3.6 %
Cash flows discounted at 14.0 % 10.0 % 14.0 % 9.8 %
</TABLE>
(1) EXCLUDES WEIGHTED AVERAGE DEFAULT RATE
14
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5. BUSINESS SEGMENTS
The Company consists of three domestic business segments offering unique
products and services. The Mortgage Banking segment is in the business of
originating, selling, securitizing and servicing residential mortgage loans. 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.
The accounting policies of the segments are the same as 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.
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, 2000
----------------------------------------------------------------------------------------------
MANUFACTURED SEGMENT CONSOLIDATED
MORTGAGE CONSUMER HOUSING TOTALS OTHER (1) TOTALS
--------- --------- --------- --------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net interest income $ 60,211 $ 58,743 $ 10,615 $ 129,569 $ 16,921 $ 146,490
Income from fees and
commissions (2,642) 9,604 1,796 8,758 3,605 12,363
Loan servicing fees 5,054 -- 27,501 32,555 3,660 36,215
Net gain on sales of loans 43,469 29 18,187 61,685 -- 61,685
Change in valuation
of retained interests -- -- (15,817) (15,817) -- (15,817)
Depreciation and
amortization 3,586 12,356 9,095 25,037 2,588 27,625
Segment income
(loss) before taxes 75,682 35,006 (8,579) 102,109 6,798 108,907
Other significant non-cash items:
ESOP and stock plans expense 2,512 1,028 2,573 6,113 (2,373) 3,740
Total assets $ 10,020,720 $11,850,140 $ 1,751,539 $ 23,622,399 $(7,855,055)(2) $ 15,767,344
<CAPTION>
QUARTER ENDED JUNE 30, 1999
----------------------------------------------------------------------------------
MANUFACTURED SEGMENT CONSOLIDATED
MORTGAGE CONSUMER HOUSING TOTALS OTHER (1) TOTALS
--------- --------- --------- --------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net interest income $ 65,776 $ 51,023 $ 7,423 $ 124,222 $ 10,801 $ 135,023
Income from fees and
commissions 77 7,575 1,522 9,174 1,317 10,491
Loan servicing fees 3,416 -- 20,482 23,898 -- 23,898
Net gain on sales of loans 38,916 17 20,559 59,492 -- 59,492
Change in valuation
of retained interests -- -- -- -- -- --
Depreciation and amortization 3,605 12,321 8,931 24,857 5,304 30,161
Segment income
(loss) before taxes 70,950 26,188 11,355 108,493 (8,249) 100,244
Other significant non-cash items:
ESOP and stock plans expense 1,179 1,197 2,069 4,445 1,030 5,475
Total assets $10,484,497 $12,008,189 $ 1,333,275 $23,825,961 $(8,984,955)(2) $14,841,006
</TABLE>
(1) REPRESENTS UNALLOCATED CORPORATE AMOUNTS.
(2) 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 $7.9 BILLION AND
$9.0 BILLION FOR THE QUARTERS ENDED JUNE 30, 2000 AND 1999,
RESPECTIVELY. NET INTEREST INCOME CORRESPONDING TO THE ASSUMED FUNDS
TRANSFERS IS ALLOCATED ACCORDINGLY.
15
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------------------
MANUFACTURED SEGMENT CONSOLIDATED
MORTGAGE CONSUMER HOUSING TOTALS OTHER (1) TOTALS
--------- --------- ---------- --------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net interest income $ 118,544 $ 116,092 $ 21,880 $ 256,516 $ 33,362 $ 289,878
Income from fees and
commissions (2,656) 18,924 4,278 20,546 3,623 24,169
Loan servicing fees 10,056 -- 54,566 64,622 3,660 68,282
Net gain on sales of loans 67,281 36 40,357 107,674 -- 107,674
Change in valuation
of retained interests -- -- (19,121) (19,121) -- (19,121)
Depreciation and amortization 7,642 24,784 17,971 50,397 5,496 55,893
Segment income
(loss) before taxes 137,750 68,984 4,754 211,488 (4,494) 206,994
Other significant non-cash items:
ESOP and stock
plans expense 3,486 2,020 3,515 9,021 (1,765) 7,256
Total assets $ 10,020,720 $ 11,850,140 $ 1,751,539 $ 23,622,399 $ (7,855,055)(2) $ 15,767,344
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------------------------------------------------------
MANUFACTURED SEGMENT CONSOLIDATED
MORTGAGE CONSUMER HOUSING TOTALS OTHER (1) TOTALS
--------- --------- ---------- --------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net interest income $ 134,177 $ 101,626 $ 12,838 $ 248,641 $ 14,787 $ 263,428
Income from fees and
commissions 1,605 14,541 3,685 19,831 674 20,505
Loan servicing fees 6,715 -- 42,752 49,467 -- 49,467
Net gain on sales of loans 77,581 52 39,855 117,488 -- 117,488
Change in valuation
of retained interests -- -- -- -- -- --
Depreciation and amortization 6,646 24,684 17,971 49,301 5,556 54,857
Segment income
(loss) before taxes 132,424 51,738 21,736 205,898 (36,972) 168,926
Other significant non-cash items:
ESOP and stock
plans expense 2,328 2,372 4,051 8,751 1,980 10,731
Total assets $10,484,497 $12,008,189 $ 1,333,275 $23,825,961 $(8,984,955)(2) $14,841,006
</TABLE>
(1) REPRESENTS UNALLOCATED CORPORATE AMOUNTS.
(2) 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 $7.9 BILLION AND
$9.0 BILLION FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999,
RESPECTIVELY. NET INTEREST INCOME CORRESPONDING TO THE ASSUMED FUNDS
TRANSFERS IS ALLOCATED ACCORDINGLY.
16
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. IMPACT OF RECENT ACCOUNTING PRONOUNCEMENT
On June 15, 1998, The Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
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.
7. STOCK REPURCHASE PROGRAM
In March 2000, the Company's Board of Directors authorized a new share
repurchase program of up to 5%, or approximately 5.2 million, of its outstanding
shares. The repurchase will be at the Company's discretion, based on ongoing
assessments of the capital needs of the business and the market valuation of its
stock.
As of June 30, 2000, the Company repurchased 2,100,500 shares under this
program, at a cost of approximately $41.5 million. The repurchased shares are
being held in treasury.
8. RESTRUCTURING RESERVE AND NON-RECURRING PERSONNEL EXPENSE
The Company recorded a $6.0 million restructuring charge in the first quarter of
1999 pertaining to the integration of Headlands Mortgage Company and GreenPoint
Mortgage Corp. The restructuring charge included accruals related to the
estimated severance expenses to be incurred. During the first quarter of 2000,
the Company reevaluated the remaining restructuring liability of $2.6 million.
Most of the actions under this plan are completed or near completion and
resulted in expenses being less than originally anticipated. As a result, the
Company recognized a restructuring credit of $1.4 million during the first
quarter of 2000.
For the quarter ended March 31, 2000 the Company recorded a new restructuring
charge of $1.4 million that will be utilized to absorb severance expenses
pertaining to further integration of GreenPoint Mortgage Funding Corp. and
GreenPoint Credit, LLC.
The Company expects to have these restructuring programs completed in 2000.
17
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
------------------------------------------------------------- ---------------------
JUNE 30, MAR. 31, DEC. 31, SEPT. 30, JUNE 30, JUNE 30, JUNE 30,
2000 2000 1999 1999 1999 2000 1999
------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS (ANNUALIZED)
Core cash earnings return on average
assets (1) 2.28% 2.14% 2.16% 2.28% 2.31% 2.21% 2.26%
Core cash earnings return on average
equity (1) 17.74 16.33 16.34 16.98 17.02 17.04 17.00
Core cash earnings return on tangible
equity (1) 31.96 30.14 30.47 32.04 33.46 31.06 34.25
Core return on average assets (1) 1.68 1.53 1.53 1.63 1.62 1.60 1.58
Core return on average equity (1) 13.03 11.63 11.57 12.12 11.95 12.33 11.88
Net interest margin 4.19 4.21 4.02 4.13 4.10 4.20 3.97
Net interest spread during period 3.77 3.80 3.63 3.75 3.75 3.79 3.63
Operating expense to average assets (2) 2.75 2.76 2.71 2.90 2.94 2.75 2.88
Efficiency ratio (3) 44.2 45.4 45.2 47.0 47.3 44.8 47.3
Average interest-earning assets to
average interest-bearing liabilities 1.10x 1.10x 1.09x 1.10x 1.09x 1.10x 1.08x
REGULATORY CAPITAL RATIOS:
Company:
Leverage capital 9.14% 9.17% 8.73% 9.36% 9.14%
Risk-based capital:
Tier I 9.61 10.29 10.62 12.44 12.26
Total 10.42 11.18 11.58 13.50 13.32
Bank:
Leverage capital 8.91 9.09 8.41 8.26 7.90
Risk-based capital:
Tier I 9.35 10.19 10.22 10.92 10.50
Total 10.16 11.08 11.17 11.97 11.55
PER SHARE DATA:
Core cash earnings (1)* $ 0.97 $ 0.88 $ 0.87 $ 0.88 $ 0.87 $ 1.85 $ 1.73
Common book value** 22.38 21.87 21.40 21.26 20.75 N/A N/A
Tangible common book value** 12.46 11.88 11.26 11.45 10.74 N/A N/A
Shares used in calculations-
(In thousands):
*Average 91,612 92,479 94,960 98,112 98,189 92,044 97,285
**Period - end 90,936 92,310 92,830 98,035 98,129 -- --
Total 102,294 103,832 104,203 109,469 109,027 -- --
ASSET QUALITY RATIOS:
Non-performing loans
to total loans held for investment 2.21% 2.16% 2.36% 2.43% 2.72%
Non-performing assets to total assets 1.32 1.39 1.47 1.55 1.76
ALLOWANCE FOR POSSIBLE
LOAN LOSSES TO:
Non-performing loans 57.28 56.40 51.47 48.13 44.65
Total loans held for investment 1.27 1.22 1.21 1.17 1.21
EARNINGS TO COMBINED
FIXED CHARGES AND
PREFERRED STOCK
DIVIDENDS (4):
Excluding interest on deposits 12.46x 11.11x 10.76x 11.33x 11.02x 11.78x 9.49x
Including interest on deposits 1.80x 1.73x 1.73x 1.78x 1.78x 1.77x 1.66x
</TABLE>
(1) EXCLUDES HEADLANDS ACQUISITION EXPENSE, RESTRUCTURING CHARGE AND
NON-RECURRING PERSONNEL EXPENSE, ONE-TIME CHARITABLE FOUNDATION EXPENSE
AND GAIN ON SALE OF A LEASE.
(2) EXCLUDES GOODWILL EXPENSE, ORE 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
GAIN ON SALE OF A LEASE.
(4) FOR PURPOSES OF COMPUTING THE RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS, EARNINGS REPRESENT
NET INCOME PLUS APPLICABLE INCOME TAXES, FIXED CHARGES AND PREFERRED
STOCK DIVIDEND REQUIREMENTS OF A CONSOLIDATED SUBSIDIARY. FIXED CHARGES
REPRESENT INTEREST EXPENSE ON LONG-TERM DEBT AND ONE-THIRD (THE PORTION
DEEMED TO BE REPRESENTATIVE OF THE INTEREST FACTOR) OF RENTS.
18
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
1. GENERAL
GreenPoint Financial Corp. (the "Company" or "GreenPoint") is a leading national
specialty housing finance company with three principal businesses. GreenPoint
Mortgage Funding, Inc. ("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 ("GPC"), headquartered in San Diego, California, is the
nation's second largest lender and servicer of manufactured housing loans.
GreenPoint Bank (the "Bank"), a New York State chartered savings bank, has $11
billion in deposits in 73 branches serving more than 400,000 households in the
Greater New York City area.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q 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, losses and prepayments on
loans made by the Company, whether such loans are held in portfolio or sold in
the secondary markets; 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.
19
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM - 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
The Company regularly explores opportunities for acquisitions of and holds
discussions with financial institutions and related businesses, and also
regularly explores opportunities for acquisitions of liabilities and assets of
financial institutions and other financial services providers. The Company
routinely analyzes its lines of business and from time to time may increase,
decrease or terminate one or more activities.
2. OPERATING RESULTS
The second quarter's results include the following:
o Net income was $65.3 million, an increase of 9% over the second quarter
of 1999. Net income per diluted share was $0.71 for the quarter, an
increase of 16% over the second quarter of 1999.
o Total loan originations for the second quarter of 2000 were $3.3
billion, a decrease of 16% from the second quarter of 1999, and an
increase of 20% compared to the prior quarter. Mortgage originations
for the same period were $2.6 billion, a decrease of 15% from the
second quarter of 1999, and an increase of 31% from the first quarter
of 2000. Manufactured housing loan originations were $675 million, a
decrease of 8% from the first quarter of 2000 and 20% from a year ago.
o GPC recorded a gain of $18.2 million from a securitization of $719.3
million of fixed and variable rate manufactured housing loans.
o GPM sold certain whole loan mortgages of $1.7 billion, recording a gain
of $31.6 million. GPM also sold $350.2 million of home equity lines of
credit and second mortgages in one securitization transaction for a
gain of $9.8 million. Draws on previously securitized home equity lines
of credit totaling $44.6 million resulted in a gain of $2.1 million.
o Asset quality in the mortgage portfolio improved further over 1999 and
the credit performance of manufactured housing loans in the portfolio
and securitizations met expectations. Non-performing mortgage loans
decreased 10% to $197.3 million, and total non-performing assets
decreased 9% to $207.6 million at June 30, 2000.
The June 30, 1999 year to date results include the recognition of non-recurring
expenses of $27.6 million related to the acquisition of Headlands Mortgage
Company ("Headlands") and include a one-time restructuring charge related to
severance.
20
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
CORE CASH EARNINGS
Core cash earnings are net of non-recurring items and exclude certain non-cash
charges related to goodwill and the Employee Stock Ownership Plan ("ESOP"). The
non-cash expenses, unlike other expenses incurred by the Company, do not reduce
GreenPoint's tangible capital thereby enabling the Company to increase
shareholder value through the growth of earning assets, increases in cash
dividends and additional repurchases of the Company's stock.
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
--------------------------------- ---------------------
JUNE 30, MARCH 31, JUNE 30, JUNE 30, JUNE 30,
2000 2000 1999 2000 1999
---------- ---------- --------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net income $ 65,344 $ 57,871 $ 59,896 $ 123,215 $ 94,924
Non-recurring items, net
of tax (1) --- --- --- --- 22,503
---------- ---------- --------- ---------- ---------
Core net income 65,344 57,871 59,896 123,215 117,427
Add back:
Goodwill amortization 19,893 19,892 19,890 39,785 39,848
Employee Stock Ownership
and stock plans expense 3,740 3,516 5,475 7,256 10,731
---------- ---------- --------- ---------- ---------
Core cash earnings $ 88,977 $ 81,279 $ 85,261 $170,256 $168,006
========== ========== ========= ========== =========
Core cash earnings per
share (2) $ 0.97 $ 0.88 $ 0.87 $ 1.85 $ 1.73
========== ========== ========= ========== =========
</TABLE>
(1) NON-RECURRING ITEMS INCLUDE HEADLANDS ACQUISITION EXPENSE AND
RESTRUCTURING CHARGE.
(2) BASED ON THE WEIGHTED AVERAGE SHARES USED TO CALCULATE DILUTED EARNINGS
PER SHARE.
21
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
NET INTEREST INCOME
Net interest income on a tax-equivalent basis increased by $12.9 million, or 9%,
for the second quarter of 2000, and by $28.5 million, or 11%, in the first six
months of 2000, versus the comparable periods in 1999. The improvement in both
periods was due to an increase in interest earning assets, a change in the mix
of those assets and an increase in the net interest margin from 4.10% to 4.19%
in the quarterly comparison and 3.97% to 4.20% in the six months.
The increase in average interest-earning assets of $939 million in the quarter
and $643 million for the six months was attributed to growth in investment
securities (primarily mortgage-backed securities and collateralized mortgage
obligations), which was partially funded by a decline in shorter-term money
market investments. The average balance of loans held for investment (both
mortgage and manufactured housing) was essentially unchanged from the comparable
1999 periods. The yield on earning assets increased to 8.54% from 8.06% in the
second quarter and 8.50% from 8.03% in the first six months versus the
equivalent periods of 1999 due to higher market interest rates and the change in
the shift to higher-yielding, longer-term earning assets.
The cost of interest-bearing liabilities increased only 46 and 31 basis points
during these periods from 4.31% to 4.77% and 4.40% to 4.71% for the quarter and
six months ended June 30, 2000, respectively. The increase reflects the rise in
market interest rates, which was somewhat mitigated by an increase in the rates
paid on savings, money market and variable rate savings deposits.
22
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
AVERAGE BALANCE SHEETS AND INTEREST YIELD/COST
The following table sets forth certain information relating to the Company's
average statements of financial condition (unaudited) and statements of income
(unaudited) for the quarters ended June 30, 2000 and 1999, and reflects the
average yield on assets and average cost of liabilities for the periods
indicated. Such annualized yields and costs are derived by dividing income or
expense by the average balance of assets or liabilities, respectively, for the
periods shown. Average balances are derived from average daily balances. Average
balances and yields include non-accrual loans. The yields and costs include fees
that are considered adjustments to yields. Interest and yields are presented on
a taxable-equivalent yield basis.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------
JUNE 30, 2000 JUNE 30, 1999
------------------------------ -----------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
---------- --------- ------ ---------- --------- -------
(TAXABLE-EQUIVALENT INTEREST AND RATES, IN THOUSANDS) (1)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans held for
investment (2) $ 8,452,408 $ 183,365 8.68% $ 9,208,284 $ 195,777 8.50%
Other loans (2) 620,045 15,656 10.10 113,320 2,310 8.15
Loans held for sale 1,925,527 43,547 9.05 1,695,568 36,122 8.52
Money market investments (3) 569,973 9,043 6.38 666,127 8,039 4.84
Securities (4) 2,209,684 40,438 7.32 1,134,596 17,779 6.26
Other interest-earning
assets 377,160 10,093 10.76 397,642 6,190 6.24
----------- ---------- ----------- -----------
Total interest-earning
assets 14,154,797 302,142 8.54 13,215,537 266,217 8.06
---------- -----------
Non-interest earning assets (5) 1,425,516 1,538,974
----------- -----------
Total assets $15,580,313 $14,754,511
=========== ===========
Liabilities and
Stockholders' Equity:
Interest-bearing
liabilities:
Savings $ 1,330,088 6,978 2.11 $ 1,500,463 8,239 2.20
N.O.W 293,126 716 0.98 313,884 765 0.98
Money market and variable
rate savings 2,421,036 20,249 3.36 2,411,936 19,715 3.28
Term certificates of
deposit 7,108,440 97,422 5.51 7,027,910 89,384 5.10
Mortgagors' escrow 115,971 443 1.54 119,056 403 1.36
Trading liabilities 7,606 113 5.98 546 13 9.55
Notes payable and other
borrowings 873,385 14,013 6.39 111,747 708 2.54
Securities sold under
agreements to repurchase 380,127 5,590 5.82 233,295 3,081 5.30
Long term debt 189,380 3,286 6.94 199,881 3,468 6.94
Guaranteed preferred
beneficial interest in
Company's junior
subordinated debentures 199,743 4,575 9.16 199,734 4,574 9.16
----------- ---------- ----------- -----------
Total interest-bearing
liabilities 12,918,902 153,385 4.77 12,118,452 130,350 4.31
---------- -----------
Other liabilities (6) 655,696 631,830
----------- -----------
Total liabilities 13,574,598 12,750,282
Stockholders' equity 2,005,715 2,004,229
----------- -----------
Total liabilities and
stockholders' equity $15,580,313 $14,754,511
=========== ===========
Net interest
income/interest rate spread (7) $ 148,757 3.77% $ 135,867 3.75%
========= ===== =========== =====
Net interest-earning
assets/net interest margin (8) $ 1,235,895 4.19% $ 1,097,085 4.10%
=========== ===== =========== =====
Ratio of interest-earning
assets to
interest-earning liabilities 1.10x 1.09x
=========== ===========
</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.
23
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
AVERAGE BALANCE SHEETS AND INTEREST YIELD/COST
The following table sets forth certain information relating to the Company's
average statements of financial condition (unaudited) and statements of income
(unaudited) for the six months ended June 30, 2000 and 1999, and reflects the
average yield on assets and average cost of liabilities for the periods
indicated. Such annualized yields and costs are derived by dividing income or
expense by the average balance of assets or liabilities, respectively, for the
periods shown. Average balances are derived from average daily balances. Average
balances and yields include non-accrual loans. The yields and costs include fees
that are considered adjustments to yields. Interest and yields are presented on
a taxable-equivalent yield basis.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------------------------------------------------
JUNE 30, 2000 JUNE 30, 1999
----------------------------------- ---------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
---------- --------- ------ ---------- --------- -------
(TAXABLE-EQUIVALENT INTEREST AND RATES, IN THOUSANDS) (1)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans held for
investment (2) $ 8,562,104 $ 370,894 8.66% $ 9,224,103 $ 392,128 8.50%
Other loans (2) 628,149 31,803 10.13 116,241 4,688 8.07
Loans held for sale 1,672,133 74,660 8.93 1,523,971 66,833 8.77
Money market investments (3) 584,199 17,853 6.15 798,108 19,350 4.89
Securities (4) 2,144,466 76,543 7.14 1,256,597 37,708 6.01
Trading assets -- -- -- 676 18 5.32
Other interest-earning
assets 357,868 20,643 11.60 386,542 13,165 6.87
----------- ----------- ----------- -----------
Total interest-earning
assets 13,948,919 592,396 8.50 13,306,238 533,890 8.03
----------- -----------
Non-interest earning assets (5) 1,425,644 1,555,541
----------- -----------
Total assets $15,374,563 $14,861,779
=========== ===========
Liabilities and
Stockholders' Equity:
Interest-bearing liabilities:
Savings $ 1,342,922 14,261 2.14 $1,513,202 16,534 2.20
N.O.W 294,907 1,441 0.98 317,588 1,540 0.98
Money market and variable
rate savings 2,432,306 40,619 3.36 2,384,107 38,848 3.29
Term certificates of
deposit 7,120,566 192,843 5.45 6,944,324 176,749 5.13
Mortgagors' escrow 109,232 898 1.65 119,878 760 1.28
Trading liabilities 3,803 113 5.98 1,098 33 6.06
Notes payable and other
borrowings 780,963 25,046 6.39 326,274 8,106 5.01
Securities sold under
agreements to
repurchase 246,033 7,139 5.74 275,662 9,650 7.06
Long term debt 194,645 6,754 6.94 199,877 6,936 6.94
Guaranteed preferred
beneficial interest in
Company's junior
subordinated debentures 199,742 9,150 9.16 199,733 9,149 9.16
----------- ----------- ----------- -----------
Total interest-bearing
liabilities 12,725,119 298,264 4.71 12,281,743 268,305 4.40
----------- -----------
Other liabilities (6) 651,112 603,359
----------- -----------
Total liabilities 13,376,231 12,885,102
Stockholders' equity 1,998,332 1,976,677
----------- -----------
Total liabilities and
stockholders' equity $15,374,563 $14,861,779
=========== ===========
Net interest
income/interest rate spread (7) $ 294,132 3.79% $ 265,585 3.63%
========= ===== ========= =====
Net interest-earning
assets/net interest margin (8) $ 1,223,800 4.20% $ 1,024,495 3.97%
=========== ===== =========== =====
Ratio of interest-earning
assets to interest-earning
liabilities 1.10x 1.08x
=========== ===========
</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.
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
RATE/VOLUME ANALYSIS
The following table presents the effects of changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities on
the Company's interest income on a tax equivalent basis and interest expense
during the periods indicated. Information is provided in each category on
changes (i) attributable to changes in volume (changes in volume multiplied by
prior rate), (ii) changes attributable to changes in rate (changes in rate
multiplied by prior volume), and (iii) the net change. The changes attributable
to the combined impact of volume and rate have been allocated proportionately to
volume and rate.
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, 2000 SIX MONTHS ENDED JUNE 30, 2000
COMPARED TO COMPARED TO
QUARTER ENDED JUNE 30, 1999 SIX MONTHS ENDED JUNE 30, 1999
INCREASE/(DECREASE) INCREASE/(DECREASE)
---------------------------------------------------------------------
DUE TO DUE TO
-------------------- ---------------------
AVERAGE AVERAGE NET AVERAGE AVERAGE NET
VOLUME RATE CHANGE VOLUME RATE CHANGE
--------- --------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans held
for investment (1) $(16,333) $ 3,921 $(12,412) $(28,565) $ 7,331 $(21,234)
Other loans (1) 12,670 676 13,346 25,629 1,486 27,115
Loans held for sale 5,107 2,318 7,425 6,597 1,230 7,827
Money market (1,275) 2,279 1,004 (5,871) 4,374 (1,497)
investments (2)
Securities 19,248 3,411 22,659 30,624 8,211 38,835
Trading assets -- -- -- (18) -- (18)
Other
interest-earning
assets (335) 4,238 3,903 (1,042) 8,520 7,478
-------- -------- -------- -------- -------- --------
Total interest
earned on assets 19,082 16,843 35,925 27,354 31,152 58,506
-------- -------- -------- -------- -------- --------
Interest-bearing
liabilities:
Savings (906) (355) (1,261) (1,819) (454) (2,273)
N.O.W (51) 2 (49) (111) 12 (99)
Money market and
variable rate savings 74 460 534 794 977 1,771
Term certificate of
deposit 1,034 7,004 8,038 4,567 11,527 16,094
Mortgagors' escrow (10) 50 40 (72) 210 138
Trading liabilities 107 (7) 100 80 -- 80
Notes payable and
other borrowings 10,863 2,442 13,305 14,015 2,925 16,940
Securities sold under
agreements to
repurchase 2,125 384 2,509 (969) (1,542) (2,511)
Long term debt (182) -- (182) (182) -- (182)
Guaranteed preferred
beneficial interest
in Company's junior
subordinated
debentures -- 1 1 -- 1 1
-------- -------- -------- -------- -------- --------
Total interest paid
on liabilities 13,054 9,981 23,035 16,303 13,656 29,959
-------- -------- -------- -------- -------- --------
Net change in net
interest income $ 6,028 $ 6,862 $ 12,890 $ 11,051 $ 17,496 $ 28,547
======== ======== ======== ======== ======== ========
</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.
25
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for loan losses was $7.1 million for the second quarter of 2000
and $15.4 million for the first six months of 2000, up from $1.7 million and
$4.5 million, respectively, for the comparable 1999 periods. The increase is
primarily attributable to charge-offs on the $604 million of manufactured
housing loans that were retained during the third quarter of 1999. Charge-offs
for the quarter and six months ended June 30, 2000 on the residential mortgage
portfolio improved versus a year ago, which reflect continued improvement in
delinquencies and non-performing loans. The provision equaled net charge-offs
for all periods.
NON-INTEREST INCOME
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30. JUNE 30,
----------------------- ----------------------
2000 1999 2000 1999
----------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Income from fees and commissions:
Loan servicing fees $ 36,215 $ 23,898 $ 68,282 $ 49,467
Banking services fees and 9,451 7,579 18,544 14,548
commissions
Other 2,912 2,912 5,625 5,957
Net gain on sales of mortgage loans 43,498 38,933 67,317 77,633
Net gain on sales of manufactured
housing assets 18,187 20,559 40,357 39,855
Net gain on sale of securities 1,090 410 1,841 1,018
Change in valuation of retained
interests (15,817) --- (19,121) ---
--------- --------- --------- ---------
Total non-interest income $ 95,536 $ 94,291 $ 182,845 $ 188,478
========= ========= ========= =========
</TABLE>
Non-interest income was $95.5 million in the second quarter, up from $94.3
million in the comparable quarter a year ago and was $182.8 million for the six
months ended June 30, 2000, down from $188.5 million in the same period a year
ago. The results include an adjustment to the valuation of retained interests
which is described below. Without this charge, the improvement in non-interest
income for the quarter was due in part to a higher gain on the sale of mortgage
loans, $4.6 million higher than the 1999 second quarter. The gain on sale of
mortgage loans for the six month period was down $10.3 million versus a year
ago, principally due to lower origination volume as a result of rising interest
rates. Non-interest income was also favorably impacted by higher servicing fees
($36.2 million versus $23.9 million for the quarter and $68.3 million versus
$49.5 million for the six months) due to a larger servicing portfolio and the
recognition of $4.5 million of revenue, during the second quarter, earned in
prior periods but not previously recorded. Banking services fees and commissions
were $9.5 million and $18.5 million, an increase of 25% and 27% over the second
quarter and six months of 1999, respectively.
Following its regular quarterly review, the Company recorded a $15.8 million and
$19.1 million charge to the valuation of retained interests from its
manufactured housing loan securitizations for the quarter and six months ended
June 30, 2000. The valuation represents management's best estimate of the
current value of future cash flows associated with the retained interests. Of
the total second quarter adjustment, $11.1 million was related to the effect of
interest rate changes on variable rate securitizations and $4.7 million was the
result of changes in loss severity assumptions.
26
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
The current interest rate environment impacts the valuation of retained
interests in variable rate loan securitizations because market rates affect both
the rates received and the rates paid on variable rate securitizations. The
interest received on adjustable rate loans is determined by margins added to
either the one-year Treasury rate or the one-year Libor rate. The interest paid
to bondholders is affected by changes in the one-month Libor rate. Since the
previous quarterly review, one-month Libor increased 69 basis points while the
one-year Treasury rate actually fell by 7 basis points reflecting increases in
federal budget surpluses and a resultant decline in Treasury borrowing
requirements. One-year Libor rose over the quarter, but only by 45 basis points.
This spread compression reduced projected cash flows.
At the time of the quarterly review, variable rate loans indexed to the one year
Treasury totaled approximately $547 million, all of which were originated prior
to September, 1999. To mitigate risk associated with changes in the relationship
between Treasury and Libor rates, beginning in September, the Company's
adjustable rate loans are all indexed to one year Libor. Outstanding balances on
these loans total $660 million.
The remaining $4.7 million of the second quarter charge reflects revised
assumptions about future loss severity rates for manufactured housing loans.
These assumptions are based on projections that the excess inventory created by
overbuilding on the part of the manufacturers will continue for several more
quarters, and will continue to exert pricing pressure on repossessed units.
27
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30. JUNE 30,
----------------------- ----------------------
2000 1999 2000 1999
----------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Salaries and benefits $ 52,690 $ 52,626 $ 103,814 $ 104,144
Employee Stock Ownership and stock
plans expense 3,740 5,475 7,256 10,731
Net expense of premises and
equipment 19,316 18,534 39,850 36,906
Advertising 1,789 2,330 2,553 4,055
Federal deposit insurance premiums 606 652 1,233 1,309
Other administrative expenses 28,804 26,955 56,959 53,050
Other real estate owned operating
income, net (809) (924) (1,155) (2,872)
Goodwill amortization 19,893 19,890 39,785 39,848
Charitable and educational
foundation --- 1,875 --- 3,750
----------- ---------- ---------- ----------
Total non-interest expense
before non-recurring expenses 126,029 127,413 250,295 250,921
Headlands acquisition expense --- --- --- 21,605
Restructuring charge and
non-recurring personnel expense --- --- --- 6,000
----------- ---------- ---------- ----------
Total non-interest expense $ 126,029 $ 127,413 $ 250,295 $ 278,526
=========== ========== ========== ==========
</TABLE>
Total non-interest expense was $126.0 million and $250.3 million for the quarter
and six months ended June 30, 2000, a decrease of 1% and 10%, respectively, over
the comparable 1999 periods. The decrease for the six month period is primarily
attributable to non-recurring expenses of $27.6 million incurred by the Company
relating to its acquisition of Headlands on March 30, 1999. Excluding the
non-recurring acquisition expense, total non-interest expense was essentially
unchanged reflecting the Company's continued emphasis on tight expense controls.
The non-recurring acquisition expenses incurred in the first quarter of 1999
included $10.2 million in transaction fees, $1.9 million in stock option
acceleration expense, a $2.5 million increase in the recourse reserve for sold
loans, and a $5.0 million contingent liability reserve. The charges also
included $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.
28
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
INCOME TAX EXPENSE
Total income tax expense increased $3.2 million, or 8%, to $43.6 million for the
second quarter of 2000 and by $9.8 million, or 13%, to $83.8 million in the
first six months of 2000, from $40.4 million and $74.0 million for the
comparable periods of 1999. The rise in the current quarter compared to 1999 was
due to a $8.7 million increase in income before income taxes partially offset by
a decline in the effective tax rate from 40.25% in the 1999 quarter to 40% in
the 2000 quarter. The rise for the six months ended June 30, 2000 as compared to
1999 was due to a $38.1 million increase in income before income taxes partially
offset by a decline in the effective tax rate from 43.8% to 40.5%. The
relatively high effective tax rate reported in the first six months of 1999 was
due to non-recurring charges, which included expenses of approximately $14.1
million for which no tax benefit was recognized.
NON-PERFORMING ASSETS
The Company's asset quality improved during the six months ended June 30, 2000,
as non-performing assets decreased by 9%. The ratio of non-performing loans to
mortgage loans held for investment fell to 2.21% at June 30, 2000 from 2.36% at
December 31, 1999 while the ratio of non-performing assets to total assets fell
to 1.32% at June 30, 2000 from 1.47% at December 31, 1999.
Non-performing assets, net of related specific reserves, were as follows:
JUNE 30, DECEMBER 31,
2000 1999
----------------- -----------------
(IN THOUSANDS)
Mortgage loans secured by:
Residential one-to
four-family $ 165,516 $ 172,975
Residential multi-family 16,643 24,144
Commercial property 13,699 22,240
Other loans 1,414 171
----------------- -----------------
Total non-performing loans (1) 197,272 219,530
Total other real estate
owned, net 10,324 7,544
----------------- -----------------
Total non-performing assets $ 207,596 $ 227,074
================= =================
(1) INCLUDES $5.0 MILLION AND $5.9 MILLION OF NON-ACCRUAL MORTGAGE LOANS
UNDER 90 DAYS PAST DUE AT JUNE 30, 2000 AND DECEMBER 31, 1999,
RESPECTIVELY.
29
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The following is a summary of the provision and allowance for possible loan
losses:
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
2000 1999 2000 1999
------------- ------------ ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at beginning of
period $ 113,000 $ 113,000 $ 113,000 $ 113,000
Provision charged to income 7,090 1,657 15,434 4,454
Charge-offs:
Residential mortgage (1,101) (1,871) (3,063) (3,970)
Manufactured housing (9,224) (124) (17,988) (936)
------------- ------------ ------------- ------------
Total Charge-offs (10,325) (1,995) (21,051) (4,906)
------------- ------------ ------------- ------------
Recoveries:
Residential mortgage 46 338 87 452
Manufactured housing 3,189 --- 5,530 ---
------------- ------------ ------------- ------------
Total Recoveries 3,235 338 5,617 452
------------- ------------ ------------- ------------
Balance at end of period $ 113,000 $ 113,000 $ 113,000 $ 113,000
============= ============ ============= ============
</TABLE>
CAPITAL RATIOS
The Company's ratio of period-end stockholders' equity to ending total assets at
June 30, 2000 was 12.91% compared to 12.90% at December 31, 1999.
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 June 30, 2000, that the Company and the
Bank met all capital adequacy requirements to which they are subject.
30
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
As of June 30, 2000, the most recent notification from the FDIC categorized the
Bank as well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Bank must maintain minimum
Tier 1 capital, total capital and leverage ratios of 6%, 10% and 5%,
respectively. There have been no conditions or events since that notification
that management believes have changed the Company's or Bank's category.
<TABLE>
<CAPTION>
REQUIRED FOR CAPITAL
ACTUAL ADEQUACY PURPOSES
----------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO
----------- ---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
AS OF JUNE 30, 2000
Total Capital (to Risk Weighted
Assets):
Company $ 1,456.2 10.42 % $ 1,117.8 8.00 %
Bank 1,420.6 10.16 1,119.1 8.00
Tier 1 Capital (to Risk Weighted
Assets):
Company $ 1,343.2 9.61 % $ 558.9 4.00 %
Bank 1,307.6 9.35 559.5 4.00
Tier 1 Capital (to Average Assets):
Company $ 1,343.2 9.14 % $ 587.5 4.00 %
Bank 1,307.6 8.91 587.3 4.00
<CAPTION>
REQUIRED FOR CAPITAL
ACTUAL ADEQUACY PURPOSES
----------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO
----------- ---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
AS OF DECEMBER 31, 1999
Total Capital (to Risk Weighted
Assets):
Company $ 1,366.2 11.58 % $ 943.8 8.00 %
Bank 1,319.8 11.17 945.1 8.00
Tier 1 Capital (to Risk Weighted
Assets):
Company $ 1,253.2 10.62 % $ 471.9 4.00 %
Bank 1,206.8 10.22 472.5 4.00
Tier 1 Capital (to Average Assets):
Company $ 1,253.2 8.73 % $ 574.2 4.00 %
Bank 1,206.8 8.41 573.9 4.00
</TABLE>
31
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK
MARKET RISK MANAGEMENT
The Company's primary 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.
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
counter-parties 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.
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 schedule reflect management's judgment
of the most likely repricing table; 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.
32
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK - (CONTINUED)
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 earned on
earlier investments and loan originations.
33
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK - (CONTINUED)
INTEREST RATE SENSITIVITY GAP ANALYSIS
The table below depicts the Company's interest rate sensitivity as of June 30,
2000. Allocations of assets and liabilities, including non-interest-bearing
sources of funds to specific periods, are based upon management's assessment of
contractual or anticipated repricing characteristics, adjusted periodically to
reflect actual experience. Those gaps are then adjusted for the net effect of
off-balance sheet financial instruments such as interest rate swaps.
<TABLE>
<CAPTION>
REPRICING PERIODS
---------------------------------------------------------------
MORE THAN MORE THAN
THREE SIX MORE THAN
THREE MONTHS MONTHS ONE YEAR MORE THAN
MONTHS TO SIX TO ONE TO THREE THREE
OR LESS MONTHS YEAR YEARS YEARS TOTAL
---------- ---------- ---------- ---------- ---------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Total loans, net $ 2,898 $ 629 $ 1,055 $ 2,175 $ 4,086 $ 10,843
Money market
investments (1) 750 --- --- --- --- 750
Securities held to
maturity --- --- 1 --- 98 99
Securities available
for sale 401 71 188 648 1,060 2,368
Other interest earning
assets 123 --- --- --- --- 123
---------- ---------- ---------- ---------- ---------- --------
Total interest
earning assets 4,172 700 1,244 2,823 5,244 14,183
---------- ---------- ---------- ---------- ---------- --------
Cash and due from banks 143 --- --- --- --- 143
Servicing assets 5 5 10 37 144 201
Goodwill 20 20 40 160 661 901
Other non-interest
earning assets 339 --- --- --- --- 339
---------- ---------- ---------- ---------- ---------- --------
Total assets $ 4,679 $ 725 $ 1,294 $ 3,020 $ 6,049 $ 15,767
========== ========== ========== ========== ========== ========
Term certificates of
deposit $ 1,180 $ 1,680 $ 2,947 $ 1,140 $ 156 $ 7,103
Core deposits 327 291 572 1,955 1,123 4,268
---------- ---------- ---------- ---------- ---------- --------
Total deposits 1,507 1,971 3,519 3,095 1,279 11,371
---------- ---------- ---------- ---------- ---------- --------
Mortgagors' escrow 6 6 11 44 32 99
Securities sold under
agreements to
repurchase 96 200 100 --- --- 396
Federal Home Loan Bank
of New York advances 125 50 250 200 350 975
Long term debt --- --- --- 177 --- 177
Guaranteed preferred
beneficial interest
in Company's junior
subordinated
debentures --- --- --- --- 200 200
Notes payable 3 --- --- --- --- 3
Other liabilities 511 --- --- --- --- 511
Stockholders' equity --- --- --- --- 2,035 2,035
---------- ---------- ---------- ---------- ---------- --------
Total liabilities
and stockholders'
equity $ 2,248 $ 2,227 $ 3,880 $ 3,516 $ 3,896 $ 15,767
========== ========== ========== ========== ========== ========
Off balance sheet
financial instruments $ 350 $ --- $ --- $ (350) $ --- $ ---
========== ========== ========== ========== ========== ========
Interest rate
sensitivity gap $ 2,781 $(1,502) $ (2,586) $ (846) $ 2,153
Cumulative gap $ 2,781 $ 1,279 $(1,307) $(2,153)
Interest rate
sensitivity gap as a
percentage of total
assets 17.64% (9.53)% (16.40)% (5.37)% 13.66%
Cumulative gap as a
percentage of total
assets 17.64% 8.11% (8.29)% (13.66)%
</TABLE>
(1) CONSISTS OF INTEREST-BEARING DEPOSITS IN OTHER BANKS, FEDERAL FUNDS
SOLD AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL.
As of June 30, 2000, the cumulative volume of liabilities maturing or repricing
within one year exceeded assets by $1,307 million, or 8.29% of assets.
34
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK - (CONTINUED)
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 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 June 30, 2000, 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 2.2% of projected 2000 net income. Conversely, a
gradual 200 basis point increase in interest rates over the next twelve months
on instruments held for other than trading purposes would result in net income
increasing by 0.3%. GreenPoint does not have significant exposure to such 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 earning at risk.
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 an interest rate 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.
35
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK - (CONTINUED)
The Company mitigates the risk associated with accumulating manufactured housing
loans 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 relationships 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 of
securitization.
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 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.
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. 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.
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.
36
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK - (CONTINUED)
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.
RETAINED INTEREST RISK MANAGEMENT
GreenPoint's retained interest consists of two pieces--an asset which is valued
based on expected positive cash flows over the life of the underlying loans, and
a liability reflecting expected negative cash flows--or draws on the Bank's
letter of credit over the same life. In the absence of market-determined values
for these balance sheet items, the Company estimates the values using discounted
future cash flows.
The estimated cash flows are affected by changes to underlying assumptions,
which in turn are a function of changes in current credit loss experience on the
underlying loans, and for variable rate loan securitizations, changes in current
market interest rates.
The Risk Management Division monitors closely the performance of all loans on
which the Company retains credit risk. On securitization or sale, the
independent Risk Management Division sets expectations on the default, recovery
and voluntary prepayment rates. Each pool of loans is reviewed 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 GPC and GPM.
The interest rate environment impacts the valuation of retained interests on
variable rate loan securitizations because market rates affect both the rates
received and the rates paid on variable rate securitizations. The interest
received on adjustable rate loans is determined by margins added to either the
one-year Treasury rate, or the one-year Libor rate. The interest paid to
bondholders is affected by changes in the one-month Libor rate.
To measure and monitor effectively the value of the retained interests in
conjunction with changes in credit performance and market interest rates,
management completes a rigorous quarterly review of the value of the retained
interests. The review assesses current and historical credit performance and the
interest rate environment. Based on this review, management derives its best
estimate of the interest rate and credit loss assumptions utilized to calculate
projected cash flows.
The frequency of this review enables management to assess the value of the
retained interest and to reflect that valuation regularly in its quarterly
financial statements. Changes in the value of the retained interest are reported
in accordance with established accounting rules, with changes in the value of
the liability reflected currently in the Statement of Income and changes in the
value of the asset reported as a component of "other comprehensive income". If
changes to the asset value are deemed to reflect other than temporary
impairment, this change is also recorded in current period income.
37
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
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, involve amounts that are believed by management to be immaterial to
the consolidated financial statements of the Company.
38
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual meeting of shareholders held on May 5, 2000, the
following matters were voted upon with the results of the voting on such matters
indicated:
1. Election of the following five directors of the Company to three-year
terms:
FOR WITHHELD
------------ ------------
William M. Jackson 96,658,460 913,450
Charles B. McQuade 96,669,240 902,670
Peter T. Paul 96,409,309 1,167,601
Alvin N. Puryear 96,665,444 906,466
Robert P. Quinn 96,657,306 914,604
The following sets forth the names of Directors continuing in office after
the annual meeting:
Bharat B. Bhatt Robert M. McLane
Dan F. Huebner Edward C. Schmults
Thomas S. Johnson Robert F. Vizza
Susan J. Kropf Jules Zimmerman
2. Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for the year ending December 31, 2000.
For: 96,895,349
Against: 505,903
Abstain: 170,658
39
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT NUMBER:
11.1 Statement Regarding Computation of Per Share Earnings
12.1 Ratios of Earnings to Combined Fixed Charges and Preferred
Stock Dividends
27.1 Financial Data Schedule
40
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6 -EXHIBITS AND REPORTS ON FORM 8-K - (CONTINUED)
(B) REPORTS ON FORM 8-K
On May 16, 2000, 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 2000-3 (the "Publicly Offered Certificates"), which
contains Orrick's consent to use of its name in the Prospectus Supplement
("Prospectus Supplement") dated May 12, 2000 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 May 25, 2000, 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, 2000, 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 May 25, 2000, 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, 2000, 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 May 25, 2000, 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 13, 2000, 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 May 25, 2000, 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 13, 2000, 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 May 26, 2000, 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 May 1, 2000
between GreenPoint, as Contract Seller and as Servicer and Bank One, National
Association as the Trustee in connection with the sale of approximately
$719,166,228 of GreenPoint Credit Manufactured Housing Contract Trust
Pass-Through Certificates, Series 2000-3, on May 18, 2000.
41
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K - (CONTINUED)
On June 16, 2000, 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 issuance of GreenPoint Home Equity
Loan Trust 2000-1, Home Equity Loan Asset-Backed Certificates dated
June 1, 2000.
On June 22, 2000, 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 issuance of GreenPoint Home Equity
Loan Trust 2000-1, Home Equity Loan Asset-Backed Certificates dated
June 1, 2000.
On June 27, 2000, 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 issuance of GreenPoint Home Equity
Loan Trust 2000-1, Home Equity Loan Asset-Backed Securities dated June
1, 2000.
On June 27, 2000, 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 13, 2000, 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 June 27, 2000, 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, 2000, 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.
42
<PAGE>
GREENPOINT FINANCIAL CORP. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements 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
By: /s/ Jeffrey R. Leeds
-------------------------------
Jeffrey R. Leeds
Executive Vice President and
Chief Financial Officer
By: /s/ Joseph D. Perillo
-------------------------------
Joseph D. Perillo
Senior Vice President and
Controller
Dated August 14, 2000
43
