UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended

June 30, 2004

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

001-14320

Commission File Number

GreenPoint Financial Corp.

(Exact name of registrant as specified in its charter)

Delaware		06-1379001
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification number)

90 Park Avenue, New York, New York		10016
(Address of principal executive offices)		(Zip Code)

(212) 834-1000		Not Applicable
(Registrant’s telephone number, including area code)		(Former name, former address and former fiscal year if changed since last report)

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. ý Yes o No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). ý Yes o No

As of July 30, 2004, there were 132,454,866 shares of common stock outstanding.

GreenPoint Financial Corp.

FORM 10-Q

For the Quarterly Period Ended

June 30, 2004

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1 - Financial Statements

Consolidated Statements of Financial Condition (unaudited) as of June 30, 2004 and December 31, 2003

Consolidated Statements of Income (unaudited) for the quarter and six month periods ended June 30, 2004 and 2003

Consolidated Statements of Comprehensive Income (unaudited) for the quarter and six month periods ended June 30, 2004 and 2003

Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the six months ended June 30, 2004 and 2003

Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2004 and 2003

Notes to the Unaudited Consolidated Financial Statements

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

Item 4 - Controls and Procedures

PART II – OTHER INFORMATION

Item 1 - Legal Proceedings

Item 2 - Changes in Securities and Use of Proceeds

Item 4 - Submission of Matters to a Vote of Security Holders

Item 6 - Exhibits and Reports on Form 8-K

GreenPoint Financial Corp. and Subsidiaries

Part I – Item 1. Financial Statements

Consolidated Statements of Financial Condition

(Unaudited)

(In millions, except share amounts)	June 30, 2004			Dec. 31, 2003
ASSETS
Cash and due from banks	$	284		$	268
Money market investments:
Interest-bearing deposits in other banks	2			3
Federal funds sold and securities purchased under agreements to resell	18			64
Total cash and cash equivalents	304			335
Securities:
Securities available for sale	1,423			2,785
Securities available for sale-pledged to creditors	5,406			3,469
Retained interests in securitizations available for sale	45			49
Federal Home Loan Bank of New York stock	268			170
Securities held to maturity (fair value of $5 and $6, respectively)	5			6
Total securities	7,147			6,479
Loans receivable held for sale	5,241			4,764
Loans receivable held for investment (net of allowance for loan losses of $78)	11,666			9,885
Other interest-earning assets	142			142
Accrued interest receivable	89			81
Banking premises and equipment, net	180			183
Servicing assets	208			183
Goodwill (net of accumulated amortization and impairment of $788)	395			395
Other assets	583			538
Total assets	$	25,955		$	22,985

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
N.O.W. and checking	$	3,606		$	2,983
Savings	1,421			1,514
Variable rate savings	2,046			2,146
Money market	1,807			1,388
Total core deposits	8,880			8,031
Wholesale money market deposits	344			205
Term certificates of deposit	3,832			4,310
Total deposits	13,056			12,546
Borrowings:
Securities sold under agreements to repurchase	4,103			3,327
Other short term borrowings	635			1,062
Federal Home Loan Bank of New York advances	4,750			2,800
Senior notes	345			353
Subordinated bank notes	150			150
Other long term debt	200			200
Total borrowings	10,183			7,892
Mortgagors’ escrow	59			55
Liability under recourse exposure	181			226
Other liabilities	513			427
Total liabilities	23,992			21,146
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; 165,391,746 shares issued)	2			2
Additional paid-in capital	967			941
Unallocated Employee Stock Ownership Plan (ESOP) shares	(81		)	(84		)
Retained earnings	2,092			1,926
Accumulated other comprehensive income, net	(88		)	(30		)
Treasury stock, at cost (33,505,486 shares and 33,494,909 shares, respectively)	(929		)	(916		)
Total stockholders’ equity	1,963			1,839
Total liabilities and stockholders’ equity	$	25,955		$	22,985

(See accompanying notes to the unaudited consolidated financial statements)

Consolidated Statements of Income

(Unaudited)

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions, except per share amounts)	2004			2003			2004			2003
Interest income:
Mortgage loans held for investment	$	157.8		$	157.1		$	313.7		$	323.8
Loans held for sale	63.1			70.6			118.4			146.5
Securities	70.5			59.6			141.6			111.7
Other	3.0			4.5			6.4			8.1
Total interest income	294.4			291.8			580.1			590.1
Interest expense:
Deposits	48.9			60.4			98.4			123.1
Other borrowed funds	57.8			54.6			110.3			107.3
Long-term debt	8.9			8.9			17.9			17.0
Total interest expense	115.6			123.9			226.6			247.4
Net interest income	178.8			167.9			353.5			342.7
Provision for loan losses	(1.1		)	(0.6		)	(2.4		)	(0.9		)
Net interest income after provision for loan losses	177.7			167.3			351.1			341.8
Non-interest income:
Income from fees and commissions:
Loan servicing income	10.9			(0.4		)	5.0			5.4
Banking services fees and commissions	23.6			17.2			46.0			31.7
Fees, commissions and other income	3.0			3.1			9.9			6.5
Total income from fees and commissions	37.5			19.9			60.9			43.6
Net gain on sales of loans	123.7			145.7			244.4			270.0
Change in valuation of retained interests	(0.9		)	(0.7		)	(1.3		)	(1.4		)
Net (loss) gain on sale of securities	—			(0.6		)	0.5			0.6
Total non-interest income	160.3			164.3			304.5			312.8
Non-interest expense:
General and administrative expenses:
Salaries and benefits	70.3			66.5			134.1			128.1
Employee Stock Ownership and stock plans expense	8.4			6.7			17.3			12.8
Net expense of premises and equipment	23.0			20.9			46.5			41.8
Federal deposit insurance premiums	0.5			0.5			1.0			1.0
Other administrative expenses	37.7			31.8			75.5			63.3
Total general and administrative expenses	139.9			126.4			274.4			247.0
Other real estate owned operating income	(1.2		)	(1.7		)	(1.2		)	(1.5		)
Total non-interest expense	138.7			124.7			273.2			245.5
Income from continuing operations before income taxes	199.3			206.9			382.4			409.1
Income taxes related to earnings from continuing operations	76.3			77.1			146.9			152.4
Net income from continuing operations	123.0			129.8			235.5			256.7
Discontinued operations:
Net income from disposal of discontinued business	0.5			0.1			0.6			0.4
Net income	$	123.5		$	129.9		$	236.1		$	257.1

Basic earnings per share:
Net income from continuing operations	$	1.05		$	1.05		$	2.02		$	2.05
Net income from discontinued operations	—			—			—			—
Net income	$	1.05		$	1.05		$	2.02		$	2.05
Diluted earnings per share:
Net income from continuing operations	$	1.03		$	1.03		$	1.97		$	2.01
Net income from discontinued operations	—			—			—			—
Net income	$	1.03		$	1.03		$	1.97		$	2.01
Dividends declared per share	$	0.30		$	0.21		$	0.60		$	0.42

(See accompanying notes to the unaudited consolidated financial statements.)

Consolidated Statements of Comprehensive Income

(Unaudited)

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2004			2003			2004			2003

Net income	$	123.5		$	129.9		$	236.1		$	257.1
Other comprehensive income, before tax:
Unrealized gains (losses) on securities:
Unrealized holding losses arising during period	(154.4		)	(15.2		)	(101.5		)	(28.9		)
Less: reclassification adjustment for losses (gains) included in net income	—			0.6			(0.5		)	(0.6		)
Other comprehensive loss, before tax	(154.4		)	(14.6		)	(102.0		)	(29.5		)
Income tax benefit related to items of other comprehensive income	66.8			6.3			44.1			12.6
Other comprehensive loss, net of tax	(87.6		)	(8.3		)	(57.9		)	(16.9		)
Total comprehensive income, net of tax	$	35.9		$	121.6		$	178.2		$	240.2

(See accompanying notes to the unaudited consolidated financial statements.)

Consolidated Statements of Changes In Stockholders’ Equity

(Unaudited)

	Six Months Ended June 30,
(In millions)	2004			2003
Common stock
Balance at beginning of period	$	2		$	1
Balance at end of period	2			1
Additional paid-in capital
Balance at beginning of period	941			907
Reissuance of treasury stock	4			(1		)
Amortization of ESOP shares committed to be released	18			13
Tax benefit for vested stock plans shares	4			7
Balance at end of period	967			926
Unallocated ESOP shares
Balance at beginning of period	(84		)	(89		)
Amortization of ESOP shares committed to be released	3			2
Balance at end of period	(81		)	(87		)
Retained earnings
Balance at beginning of period	1,926			1,563
Net income	236			257
Dividends declared	(70		)	(52		)
Balance at end of period	2,092			1,768
Accumulated other comprehensive income, net
Balance at beginning of period	(30		)	24
Net change in accumulated other comprehensive income, net	(58		)	(17		)
Balance at end of period	(88		)	7
Treasury stock, at cost
Balance at beginning of period	(916		)	(482		)
Reissuance of treasury stock	7			24
Purchase of treasury stock	(20		)	(238		)
Balance at end of period	(929		)	(696		)
Total stockholders’ equity	$	1,963		$	1,919

(See accompanying notes to the unaudited consolidated financial statements)

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
(In millions)	2004			2003
Cash flows from operating activities:
Net income	$	236		$	257
Adjustments to reconcile net income to net cash provided by operating activities:
Net premium amortization on mortgage loans	14			20
Net premium amortization on securities	15			17
Provision for loan losses	3			1
Depreciation and amortization	20			17
Gain on sales of loans	(244		)	(270		)
Gain on sale of securities	(1		)	(1		)
ESOP and stock plans expense	21			16
Capitalization of servicing assets	(88		)	(27		)
Amortization and impairment of servicing assets	35			24
(Increase) decrease in assets associated with operating activities:
Loans receivable held for sale:
Loan originations	(19,381		)	(20,675		)
Proceeds from loan sales	18,668			20,948
Other	480			222
Retained interests in securitizations	3			21
Accrued interest receivable	(8		)	9
Other assets	5			4
Increase (decrease) in liabilities associated with operating activities:
Liabilities under recourse exposure	(45		)	(21		)
Other liabilities	97			(19		)
Other, net	3			(7		)
Net cash (used in) provided by operating activities	(167		)	536
Cash flows from investing activities:
Net change in loans receivable held for investment	(1,834		)	(105		)
Purchases of premises and equipment	(17		)	(26		)
Available for sale securities:
Proceeds from maturities	150			1,626
Proceeds from sales	1,146			1,946
Purchase of securities	(3,286		)	(6,360		)
Principal repayments	1,306			1,834
Federal Home Loan Bank Stock – (purchases) redemptions	(98		)	45
Other, net	35			29
Net cash used in investing activities	(2,598		)	(1,011		)
Cash flows from financing activities:
Net change in:
Domestic deposits	510			529
Mortgagors’ escrow deposits	4			(1		)
Proceeds from securities sold under agreements to repurchase and other borrowings	117,884			29,222
Repayments of securities sold under agreements to repurchase and other borrowings	(117,535		)	(29,192		)
Proceeds from advances from Federal Home Loan Bank	116,004			125,230
Repayments of advances from Federal Home Loan Bank	(114,054		)	(125,330		)
Proceeds from issuance of senior notes	—			348
Cash dividends paid	(70		)	(52		)
Treasury stock purchased	(20		)	(238		)
Exercise of stock options	11			24
Net cash provided by financing activities	2,734			540
Net (decrease) increase in cash and cash equivalents	(31		)	65
Cash and cash equivalents – beginning of period	335			369
Cash and cash equivalents – end of period	$	304		$	434
Non-cash activities:
Additions to other real estate owned, net	$	24		$	24
Unsettled securities trades	$	—		$	(96	)
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	98		$	172
Interest paid	$	232		$	257

(See accompanying notes to the unaudited consolidated financial statements)

Notes To The Unaudited Consolidated Financial Statements

NOTE 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 period 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 Company adopted a plan to exit the manufactured housing lending business in December 2001. Current and comparative prior period consolidated statements of income present the results of continuing operations and discontinued operations separately.

These unaudited consolidated interim financial statements 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, 2003.

Use of Estimates

The preparation of the Consolidated Financial Statements under U.S. Generally Accepted Accounting Principals (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and disclosures of contingent assets and liabilities as of the date of the Consolidated Financial Statements. Actual results could differ from those estimates.

Accounting for Loan Sales

GreenPoint primarily sells loans in the whole loan market. Loans sold on a whole loan basis are sold either with GreenPoint releasing or retaining the right to service the loans. When GreenPoint 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. If the loans are sold with GreenPoint retaining the servicing rights, the gain or loss depends in part on the fair value attributed to the servicing rights.

In addition to selling through the whole loan market, GreenPoint on occasion securitizes certain mortgage loans.

The rules governing the accounting for loan securitizations are established in Statement of Financial Accounting Standards NO. 140 – “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”). This standard establishes the conditions that must be present for treating a transfer of financial assets as a sale and the conditions that must be met to treat the transferor as a Qualifying Special Purpose Entity (“QSPE”).

GreenPoint’s securitizations of mortgage loans involve the sale of a pool of loans to a QSPE and securities supported by the cash flow from the transferred loans are sold by the QSPE to third party investors. Funds received from the third-party investors are returned to GreenPoint as payment for the transferred loans. Generally, the Company may retain servicing rights and one or more retained interests. These retained interests include interest-only strips, subordinated certificates, transferor interests, demand notes and certain other credit enhancements.

For a securitization transaction to be treated as a sale under SFAS 140, the loans transferred by the Company must have been isolated from the seller (even in bankruptcy or receivership), the QSPE must meet the significant limitations on it’s activities and the transferor can not maintain effective control of the transferred assets. In order to determine if the loans have been isolated, GreenPoint obtains an opinion of legal counsel. The opinion must state that the transaction is a sale and that the assets transferred would not be consolidated with the transferor’s other assets in the event of a bankruptcy or receivership. A QSPE is exempt from being consolidated in the financial statements of a transferor or its affiliates under SFAS 140.

In calculating the gain or loss on the sale, GreenPoint allocates the cost basis of the loans sold between the assets sold, the retained interests and servicing rights based on their relative fair values at the date of sale. 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. Because market quotes are generally not available for retained interests and servicing assets, the Company generally estimates fair value using modeling techniques based on the assumptions the Company believes market participants would use for similar assets and liabilities.

Allowance for Loan Losses

The allowance for loan losses is intended to cover probable losses inherent in the loans receivable held for investment portfolio. Additions to the allowance are made by means of the provision for loan losses. Credit losses are deducted from the allowance and subsequent recoveries are added.

GreenPoint calculates its allowance for loan losses in accordance with Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies” (“SFAS 5”). This accounting standard is used to determine the allowance associated with large groups of smaller balance homogeneous loans that are collectively evaluated for impairment. GreenPoint considers all of its loans held for investment to be smaller-balance homogeneous loans. SFAS 5 requires the accrual of a loss when it is probable that an asset has been impaired and the amount of the loss can be reasonably estimated. The allowance for loan losses represents management’s estimate of probable but unconfirmed asset impairment in the loans held for investment portfolio as of the date of the financial statements.

Derivative Financial Instruments

Derivative financial instruments are recognized in the statements of financial condition in either “other assets” or “other liabilities” at fair value. The accounting for changes in the fair value of derivatives depends on whether the derivative is designated and qualifies for hedge accounting. Certain hedging relationships that have qualified for hedge accounting have been designated as either a fair value or a cash flow hedge. In order to qualify for hedge accounting, GreenPoint must identify at the inception of the hedge, the item hedged, the nature of the risk being hedged, the derivative used and how the hedging instrument’s effectiveness will be assessed.

In fair value hedge accounting, the change in fair value of the hedging instruments and the change in fair value of the hedged item attributed to the hedged risk are recognized currently in earnings. The amount of hedge ineffectiveness recognized in earnings is based on the extent to which an exact offset is not achieved. In cash flow hedge accounting, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. To the extent a cash flow hedge is ineffective, changes in fair value are recognized immediately into earnings.

GreenPoint designates certain fixed rate mortgage loans held for sale as hedged items in fair value hedges. The risk being hedged on these loans is the changes in fair value attributable to changes in market interest rates. GreenPoint designates forward delivery commitments as the hedging instruments used in the fair value hedges. The results of previous retrospective assessments of hedge effectiveness have established an expectation that the results of the derivative hedging instruments will substantially offset the effects of changes in the fair value of the hedged item on a prospective basis. If the retrospective assessment determines that the hedge was not highly effective, GreenPoint will discontinue hedge accounting prospectively. GreenPoint will re-establish the prospective expectation of correlation if the hedge is determined to be highly effective. The Company accounts for certain fair value hedges under the short cut method of accounting for derivatives. The short cut method assumes no ineffectiveness between an interest-bearing financial instrument and an interest rate swap. Changes in the fair value of the interest rate swap are recorded as changes in value of the swap and the hedged financial instrument.

GreenPoint designates certain commitments to purchase mortgage loans to be held for investment as the derivative used in cash flow hedges. The risk being hedged in these transactions is the variability in the cash flows of a forecasted purchase. To the extent that the hedge is effective, GreenPoint includes in other comprehensive income changes in the fair value of these derivatives.

Certain derivative financial instruments do not qualify for hedge accounting. The company records these derivatives at fair value with changes in fair value recognized through net income. For example, an interest rate lock commitment on a mortgage loan that the Company does not intend to hold for investment is a derivative. During the accumulation of these commitments with borrowers, the Company is exposed to interest rate risk. If market interest rates required by investors are higher than management’s assumptions, the prices paid by investors and resultant gain on sale of loans will be lower than previously estimated. In order to mitigate this interest rate risk, the Company uses a combination of other derivatives, such as forward delivery commitments and forward sales contracts. The amount and duration of these derivatives are selected in order to have the changes in their fair value correlate closely with the changes in fair value of the interest rate lock commitments on loans to be sold.

Representations and Warranties

In the normal course of business, GreenPoint may be required to repurchase a previously sold mortgage if certain deficiencies exist in the loan documentation. GreenPoint has established a liability for losses it estimates might be incurred (“the representation and warranty liability”). This liability is included in the Consolidated Statements of Financial Condition under other liabilities.

Additions to the representation and warranty liability are reported as a reduction to gain on sale of loans. Payments made to indemnify an investor for losses and credit losses that occur after GreenPoint has re-acquired the loan are deducted from the representation and warranty liability.

Retained Interests in Securitizations

Generally, GreenPoint retains one or more interests in loans sold in a securitization. These interests include interest-only strips, subordinated certificates, transferor interests, demand notes and the recorded liabilities for limited recourse provided on mortgage loans.

GreenPoint classifies these retained interests in securitizations as available for sale and carries these securities at fair value. To obtain fair values quoted market prices are used if available. Since market quotes are generally not available for retained interests, GreenPoint generally estimates fair value by using modeling techniques to determine the present value of future cash flows using assumptions of prepayments, defaults, loss severity rates, future interest rates and discount rates. These assumptions are based on GreenPoint’s management’s best estimates of what market participants would use for similar assets and liabilities.

Generally, if the fair value of a retained interest declines below its amortized cost basis, the change in valuation is recognized in the consolidated statement of income and is classified as a change in valuation of retained interests. If the fair value of a retained interest increases above its amortized cost basis, the unrealized gain is reported, net of applicable taxes, in accumulated other comprehensive income, as a separate component of stockholders’ equity.

Servicing Assets

Servicing assets are carried at the lower of cost or fair value and are amortized in proportion to and over the estimated net servicing revenue.

In determining fair value GreenPoint stratifies its servicing assets based on the risk characteristics of the underlying loan pools. 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, ancillary income, servicing costs and discount rates that GreenPoint believes market participants would use for similar assets.

If GreenPoint determines that the impairment for a stratum is temporary, a valuation allowance is recognized through a charge to current earnings for the amount the amortized balance exceeds the current fair value. If the fair value of the stratum were to later increase, the reduction of the valuation allowance may be recorded as an increase to servicing income. However, if GreenPoint determines that an impairment for a stratum is other-than-temporary, the value of the servicing asset and any related valuation allowance is written down.

Goodwill

Goodwill represents the excess of cost over fair value of assets of businesses acquired. The goodwill reported on the Consolidated Statements of Financial Condition arose from the 1995 acquisition of the New York Branches of Home Savings of America. In December 2001, GreenPoint formally adopted a plan to discontinue the manufactured housing lending business. As a result of this decision, management determined that the goodwill relating to the 1998 acquisition of the manufactured housing finance business of BankAmerica Housing Services (“BAHS”) was impaired and the remaining carrying value was written off.

In accordance with the adoption on January 1, 2002 of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), GreenPoint ceased the amortization of goodwill. Since that date, the Company is required to test goodwill annually for impairment. The test allocates goodwill to the Company’s reporting units and compares the fair value of a reporting unit with its carrying amount, which includes goodwill. Impairment does not exist if the fair value of a reporting unit exceeds its carrying amount.

The goodwill shown on the Consolidated Statements of Financial Condition is attributable to the retail-banking segment and is carried at its January 1, 2002 book value of $395 million. Based on GreenPoint’s testing of the retail-banking segment, no goodwill impairment was recognized in either 2003 or 2002.

Accounting for Discontinued Operations

In the fourth quarter of 2001, GreenPoint discontinued the operations of the manufactured housing lending segment. GreenPoint accounts for this discontinued operation under the provisions of Accounting Principles Board Statement No. 30 “Reporting the Results of Operation – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” (“APB 30”).

Stock-Based Compensation Plans

Deferred compensation for stock award plans are recorded as a reduction of stockholders’ equity and are calculated as the cost of the shares purchased by the Bank and contributed to the plan. Compensation expense is recognized over the vesting period of actual stock awards based upon the fair value of shares at the award date.

Compensation expense for the Employee Stock Ownership Plan and Trust (“ESOP”) is recognized for the number of shares allocated to ESOP participants, as they are committed to be released. The difference between the fair value of the shares allocated and the cost of the shares to the ESOP is charged or credited to additional paid-in capital.

The Company adopted the disclosure approach under Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), as amended by Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”. Under these standards the Company discloses in the notes to the financial statements the pro forma effects on net income and earnings per share, determined as if the fair value-based method had been applied in measuring compensation cost. The Company continues to apply Accounting Principal Board Statement No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) in accounting for its plans. Under APB 25, the Company has not recognized any costs related to its stock option plans since the options granted under these plans have an exercise price equal to the market value of the Company’s common stock on the grant date.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123, to stock-based employee compensation.

	Quarter Ended June 30,						Six Months Ended June 30,
(In millions, except per share amounts)	2004			2003			2004			2003

Net income as reported	$	123.5		$	129.9		$	236.1		$	257.1
Deduct: Total stock-based employee compensation expense determined under fair value based method net of related tax effects	(2.6		)	(2.5		)	(4.9		)	(4.8		)
Proforma net income	$	120.9		$	127.4		$	231.2		$	252.3

Earnings per share:
Basic – as reported	$	1.05		$	1.05		$	2.02		$	2.05
Basic – pro forma	$	1.03		$	1.03		$	1.98		$	2.01
Diluted – as reported	$	1.03		$	1.03		$	1.97		$	2.01
Diluted – pro forma	$	1.01		$	1.01		$	1.93		$	1.97

NOTE 2 Agreement and Plan of Merger

On February 16, 2004, an Agreement and Plan of Merger dated as of February 15, 2004 by and between North Fork Bancorporation, Inc. (“North Fork”) and GreenPoint was announced. The agreement provides that North Fork will acquire GreenPoint in an all stock transaction. Under the terms of the agreement, in a tax-free exchange of shares, GreenPoint shareholders will receive a fixed exchange ratio of 1.0514 shares of North Fork common stock for each GreenPoint share held upon consummation of the acquisition.

The agreement has been approved unanimously by the Boards of Directors of both companies and all regulatory approvals have been obtained. The agreement is subject to approval by shareholders of both companies and other customary conditions. The agreement establishes a reciprocal termination fee of $220 million. The merger is expected to be completed on or about September 30, 2004.

NOTE 3 Loans Receivable

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

(In millions)	June 30, 2004		Dec. 31, 2003
Conventional first mortgage loans:
Residential one-to four-family	$	3,935	$	4,036
Commercial property	67		93
Second mortgage and home equity loans	1,191		589
Other	1		1
Total loans receivable held for sale	5,194		4,719
Net deferred loan origination costs	47		45
Loans receivable held for sale, net	$	5,241	$	4,764

The Company’s loans receivable held for investment balances are summarized as follows:

(In millions)	June 30, 2004			Dec. 31, 2003
Conventional first mortgage loans:
Residential one-to four-family	$	9,885		$	8,289
Residential multi-family	176			217
Commercial property	1,281			1,029
Second mortgage and home equity loans	284			301
Manufactured housing loans	47			55
Other	26			25
Total loans receivable held for investment	11,699			9,916
Net deferred loan origination costs and purchase premium	45			47
Allowance for loan losses	(78		)	(78		)
Loans receivable held for investment, net	$	11,666		$	9,885

NOTE 4 Securities Available for Sale

The amortized cost and estimated fair value of securities available for sale at June 30, 2004 and December 31, 2003 are summarized as follows:

	June 30, 2004
(In millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and Federal Agency Obligations:
U.S. Treasury notes/bills	$	100	$	—	$	(5	)	$	95
Agency notes	232		—		(8		)	224
Mortgage-backed securities	496		7		(9		)	494
Collateralized mortgage obligations	5,634		7		(114		)	5,527
Trust certificates collateralized by GNMA securities	2		—		—			2
Corporate bonds	149		2		(2		)	149
Municipal bonds	36		2		—			38
Equity securities	330		—		(30		)	300
Total securities available for sale	$	6,979	$	18	$	(168	)	$	6,829

	December 31, 2003
(In millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and Federal Agency Obligations:
U.S. Treasury notes/bills	$	101	$	—	$	(4	)	$	97
Agency notes	240		—		(5		)	235
Mortgage-backed securities	581		9		(5		)	585
Collateralized mortgage obligations	4,912		8		(44		)	4,876
Trust certificates collateralized by GNMA securities	2		—		—			2
Corporate bonds	149		1		(3		)	147
Municipal bonds	46		3		—			49
Equity securities	278		2		(17		)	263
Total securities available for sale	$	6,309	$	23	$	(78	)	$	6,254

The following is a summary of the fair value of securities with unrealized losses and identification, by security type, of those unrealized losses that have been in place for less than twelve months and for twelve months or more:

	At June 30, 2004
	Less Than 12 Months				12 Months or More				Total
(In millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government and Federal Agency Obligations:
U.S. Treasury notes/bills	$	95	$	5	$	—	$	—	$	95	$	5
Agency notes	197		8		27		—		224		8
Mortgage-backed securities	475		9		19		—		494		9
Collateralized mortgage obligations	4,953		110		574		4		5,527		114
Trust certificates collateralized by GNMA securities	—		—		2		—		2		—
Corporate bonds	110		1		39		1		149		2
Municipal bonds	38		—		—		—		38		—
Equity securities	186		21		114		9		300		30
Total	$	6,054	$	154	$	775	$	14	$	6,829	$	168

	At December 31, 2003
	Less Than 12 Months				12 Months or More				Total
(In millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government and Federal Agency Obligations:
U.S. Treasury notes/bills	$	97	$	4	$	—	$	—	$	97	$	4
Agency notes	235		5		—		—		235		5
Mortgage-backed securities	585		5		—		—		585		5
Collateralized mortgage obligations	4,792		43		84		1		4,876		44
Trust certificates collateralized by GNMA securities	2		—		—		—		2		—
Corporate bonds	74		1		73		2		147		3
Municipal bonds	—		—		49		—		49		—
Equity securities	174		10		89		7		263		17
Total	$	5,959	$	68	$	295	$	10	$	6,254	$	78

The unrealized losses in the portfolio resulted from changes in market interest rates and not from a deterioration in the creditworthiness of the issuer. At June 30, 2004 there were 275 positions in the portfolio with an unrealized loss.

NOTE 5 Mortgage Recourse Arrangements, Retained Interests in Securitizations and Servicing Assets

The following describes the balances associated with recourse arrangements, the balances and activity in the corresponding retained interests, the balances and activity in servicing assets and the economic assumptions used in valuing the retained interests and servicing assets of mortgage loans. The discussion of manufactured housing recourse and servicing assets is discussed in Note 10.

Recourse Arrangements

GreenPoint sells loans in the secondary market either through whole loan sales or by securitization. Generally the credit risk associated with those loans is transferred to the buyer. GreenPoint retains recourse on such sales. In whole loan sales the recourse is limited to documentation representations and warranties and in securitizations the recourse is limited to the amount of credit enhancement GreenPoint contributes to the particular transaction. 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 limited recourse described herein.

Typically in securitizations, GreenPoint will provide credit enhancement to the transaction to indemnify losses incurred by the investors. These credit enhancements will be in the form of over-collateralization, excess interest cash flows, subordinated interests or demand notes. GreenPoint retains those interests and, as such, those interests represent the maximum recourse that GreenPoint has on a mortgage securitization. GreenPoint also entered into a whole loan sale where the risk of loss is shared between GreenPoint and the investor.

The following table shows the principal balances of mortgage loans and amounts of maximum recourse to GreenPoint for securitizations and risk-share sales:

(In millions)	June 30, 2004		Dec. 31, 2003
Mortgage securitizations:
Principal balance	$	340	$	458
Maximum recourse (1)	44		48
Mortgage risk-share sales:
Principal balance	128		170
Maximum recourse (2)	125		166

(1) Represents the sum of all mortgage retained interests on the balance sheet.

(2) The recourse arrangements under the mortgage sale transactions represent a risk sharing arrangement in which GreenPoint has transferred the first 2% of losses to the purchaser. GreenPoint maintains a liability of $1 million to cover expected losses from this arrangement.

The following represents quantitative information about delinquencies on loans securitized and loans sold under risk-sharing arrangements:

	June 30, 2004				December 31, 2003
(In millions)	Securitized		Sold		Securitized		Sold
Principal balance of loans	$	340	$	128	$	458	$	170
Principal balance of loans 90 days or more past due	8		20		14		26

Balances and Changes in Retained Interests

The assets recognized as retained interests in mortgage securitizations include interest-only strips, transferor interests, demand notes and subordinated certificates. These retained interests represent the maximum amount of loss GreenPoint can incur in its mortgage securitizations.

The activity in retained interests in mortgage securitizations is summarized as follows:

	At and for the Quarter Ended June 30,						At and for the Six Months Ended June 30,
(In millions)	2004			2003			2004			2003
Retained Interests in Securitizations:
Balance at beginning of period	$	51		$	75		$	48		$	104
Additions from securitizations	—			8			—			8
Interest and other income	3			3			4			5
Cash advanced (received)	(7		)	(3		)	(5		)	(9		)
Cleanup call exercise	—			—			—			(23		)
Change in unrealized gain	(2		)	—			(1		)	(1		)
Change in subordinated certificates	—			—			(1		)	—
Change in valuation of retained interests	(1		)	—			(1		)	(1		)
Balance at end of period	$	44		$	83		$	44		$	83

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 interests.

Valuation Assumptions

There were no new securitizations recorded during the quarter ended June 30, 2004. The key economic assumptions used in estimating the fair value of the entire portfolio of mortgage retained interests at June 30, 2004 and December 31, 2003 were as follows:

	Estimate of Fair Value at
	June 30, 2004		Dec. 31, 2003
Weighted average life (in years)	0.6		0.7
Weighted average prepayment rate	59.3	%	59.7	%
Weighted average loss rate	3.8	%	3.2	%
Cumulative loss (1)	2.3	%	2.2	%
Asset cash flows discounted at	8.0	%	8.0	%

(1) Remaining estimated net losses divided by outstanding principal balance.

Representations and Warranties

A majority of GreenPoint’s loan sales are done as whole loan sales. GreenPoint makes certain representations and warranties, which permit the investor to return the mortgage loan to the originator if deficiencies exist in the loan documentation. This is a common practice in the mortgage secondary markets. GreenPoint maintains a liability for such potential indemnifications and repurchases. The following table summarizes the activity in that liability and the amount of losses incurred by GreenPoint on such repurchases:

	At and for the Quarter Ended June 30,						At and for the Six Months Ended June 30,
(In millions)	2004			2003			2004			2003
Balance at beginning of period	$	66		$	35		$	61		$	32
Provision charged to income (1)	19			14			30			26
Losses	(9		)	(6		)	(15		)	(15		)
Balance at end of period	$	76		$	43		$	76		$	43

(1) The provision charged to income is reported as a reduction to gain on sale of loans.

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 mortgage loans, the predominant risk characteristics are loan type and interest rate. The asset pools underlying certain mortgage servicing assets at times do not meet agreed-upon servicing covenants. Management evaluates the impact of these covenants on the value of the servicing assets and incorporates the assessment in their quarterly impairment review. The activity in mortgage servicing assets is summarized as follows:

	At and for the Quarter Ended June 30,						At and for the Six Months Ended June 30,
(In millions)	2004			2003			2004			2003
Servicing assets
Balance at beginning of period	$	232		$	105		$	203		$	112
Additions	42			27			87			47
Sales	(26		)	—			(27		)	(20		)
Amortization	(16		)	(10		)	(31		)	(17		)
Balance at end of period	232			122			232			122
Reserve for impairment of servicing assets
Balance at beginning of period	(37		)	(26		)	(27		)	(27		)
Additional (impairment) recovery	10			(3		)	—			(2		)
Balance at end of period	(27		)	(29		)	(27		)	(29		)
Servicing assets, net	$	205		$	93		$	205		$	93

The estimated fair values of mortgage servicing assets were $215 million and $94 million at June 30, 2004 and 2003, respectively and $177 million at December 31, 2003.

Servicer advances receivable totaled $70 million and $60 million at June 30, 2004 and 2003, respectively and $79 million at December 31, 2003.

The significant assumptions used in estimating the fair value of the servicing assets at June 30, 2004 and December 31, 2003 were as follows:

	June 30, 2004		Dec. 31, 2003
Weighted average prepayment rate	21.0	%	30.5	%
Weighted average life (in years)	4.8		4.2
Cash flows discounted at	10.4	%	10.3	%

NOTE 6 Derivative Financial Instruments

The company uses various derivative financial instruments to manage certain risks and reduce the effect they may have on net income. Those derivatives, that qualify for hedge accounting, are designated as either (1) a fair value hedge of a recognized asset or liability, or of an unrecognized firm commitment or; (2) a cash flow hedge of a recognized asset or liability, or of a forecasted transaction. GreenPoint formally documents the relationship between the hedging instruments and the hedge item, as well as our risk management objective and strategy for undertaking various hedge transactions. This includes linking derivatives designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific forecasted transactions. We also assess, both at the inception of the hedge and on an ongoing basis whether the hedging relationship is highly effective in offsetting changes in the fair value or cash flows of the hedge item. If a derivative no longer qualifies for hedge accounting, we prospectively continue to carry the derivative on the balance sheet at fair value and record changes in fair value in earnings until the derivative is settled.

Fair Value Hedges

GreenPoint enters into mandatory commitments to deliver mortgage whole loans to various investors and to issue private securities and Fannie Mae and Freddie Mac securities (“forward delivery commitments”). The forward delivery commitments are used to manage the interest rate risk associated with mortgage loans and certain interest rate lock commitments made by GreenPoint to mortgage borrowers. The notional amounts of these contracts were $2.9 billion and $2.6 billion at June 30, 2004 and December 31, 2003, respectively. The forward delivery commitments designated as fair value hedges associated with mortgage loans had notional values of $2.3 billion and $2.2 billion at June 30, 2004 and December 31, 2003, respectively. The notional amounts of forward delivery commitments used to manage the interest rate risk associated with interest rate lock commitments on mortgage loans were $602 million and $494 million at June 30, 2004 and December 31, 2003, respectively. The following table shows hedge ineffectiveness on fair value hedges included in gain on sale of loans for the quarter and six months ended June 30, 2004 and 2003:

	For the Quarter Ended June 30,						For the Six Months Ended June 30,
(In millions)	2004			2003			2004			2003
Gain (loss) on hedged asset or liability	$	(32	)	$	19		$	(14	)	$	34
Gain (loss) on derivatives	32			(16		)	16			(29		)
Hedge ineffectiveness	$	—		$	3		$	2		$	5

In November 2003, the Company entered into an interest swap agreement with a notional amount of $350 million. The Company has designated this swap as a fair value hedge of the $350 million of 3.20% Senior Notes issued in June of 2003. This swap met the criteria required to qualify for short cut method accounting for derivatives. Based on this method, no ineffectiveness is assumed and fair value changes in the swap are recorded as changes in value of the swap and the long term debt.

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

The risks inherent in derivatives are the potential inability of a counterparty to meet the terms of its contract and the risk associated with changes in the fair values of the contracts due to movements in the underlying interest rates. The current credit exposure of derivatives is represented by the fair value of contracts with a positive fair value at the reporting date. At June 30, 2004 and December 31, 2003 the receivable on contracts with a positive fair value was $6 million and $3 million, respectively. To reduce credit risk, management may deem it necessary to obtain collateral.

Cash Flow Hedges

Certain commitments to purchase mortgage loans for the held for investment portfolio are designated as cash flow hedges of forecasted purchases. The fair value of each commitment changes in direct correlation to the fair value of the forecasted transaction. When the commitment is settled, the assets purchased are recorded at fair value. The gain or loss associated with the derivative will be recognized into net income, as the income for purchased asset is included into net income. At the end of the quarter ended June 30, 2004, the Company did not have any commitments outstanding and had recorded $7 million of pre-tax losses associated with these previously settled derivatives in other comprehensive income.

NOTE 7 Pension Plan and Other Employee Benefits

The Company maintains a noncontributory, qualified, defined benefit pension plan (the “Pension Plan”) covering substantially all employees who have completed one year of service. The funding of the Pension Plan is actuarially determined on an annual basis.

The Company also provides a comprehensive medical plan for certain current and future retirees and certain of their spouses until they become eligible for Medicare and a Medicare Supplemental Plan once they become eligible for Medicare. The plan was amended effective March 1, 1998 to provide different benefit and eligibility provisions to employees who retire after that date. The Company also offers life insurance to certain current and future retirees. Benefits are funded on a pay-as-you-go basis and there are no plan assets to pre-fund the liability. Currently, the company expects to make a post-retirement contribution in 2004 of less than one million.

The following tables set forth the components of net periodic benefit cost for the quarter and six months ended June 30, 2004 and 2003. An actuarial analysis of plan assets and benefit obligations is completed as of September 30^th of each year.

	Pension Benefits						Postretirement Benefits						Pension Benefits						Postretirement Benefits
	Quarter Ended June 30,												Six Months Ended June 30,
(In millions)	2004			2003			2004			2003			2004			2003			2004			2003
Components of Net Periodic Benefit Cost:
Service cost	$	1.1		$	1.0		$	0.2		$	0.2		$	2.2		$	2.0		$	0.4		$	0.4
Interest cost	0.8			0.7			0.3			0.2			1.6			1.4			0.6			0.4
Expected return on plan assets	(0.9		)	(0.7		)	—			—			(1.8		)	(1.4		)	—			—
Amortization of prior service cost	—			—			(0.1		)	(0.1		)	—			—			(0.2		)	(0.2		)
Recognized actuarial gain	—			—			—			—			—			—			—			—
Curtailment	—			—			—			—			—			—			—			—
Net periodic benefit cost	$	1.0		$	1.0		$	0.4		$	0.3		$	2.0		$	2.0		$	0.8		$	0.6

NOTE 8 Stock Incentive Plans

For the six months ended June 30, 2004, the Company granted options to purchase 1,985,250 shares of the Company’s common stock to certain officers and directors, at an exercise price range of between $37.95 and $39.00. These awards vest at various intervals over three years, on the anniversary dates of the awards.

NOTE 9 Discontinued Operations

In December 2001, GreenPoint formally adopted a plan to discontinue the manufactured housing lending business. GreenPoint’s consolidated statements of income have been presented to reflect the manufactured housing lending business as a discontinued operation. Accordingly, the income and expenses relating to the manufactured housing business are reported as “discontinued operations” in the consolidated statements of income. In conjunction with this plan, GreenPoint honored previously existing loan commitments to fund approved loans, but did not approve or process any new loan applications subsequent to the announcement to discontinue the business. GreenPoint continues to service a portfolio of manufactured housing loans and will proceed with the orderly liquidation of the business in conjunction with its existing servicing commitments. See Note 10 for a further description of the valuation of retained interests associated with the discontinued operations.

The assets and liabilities from discontinued operations at June 30, 2004 and December 31, 2003 were as follows:

(In millions)	June 30, 2004			Dec. 31, 2003
Assets:
Cash, cash equivalents and securities	$	36		$	37
Retained interests in securitizations	1			1
Loans receivable:
Loans receivable held for investment	47			55
Deferred loan fees and unearned discount	—			(1		)
Allowance for loan losses	(3		)	(3		)
Loans receivable held for investment, net	44			51
Servicing assets	3			7
Deferred tax assets	113			117
Intercompany receivable	10			25
Other assets	130			134
Total assets	$	337		$	372
Liabilities:
Liability under recourse exposure	$	181		$	225
Other liabilities	65			69
Allocated capital	91			78
Total liabilities and equity	$	337		$	372

The deferred tax asset represents the tax receivable associated with the write-down to the carrying value of certain assets of the discontinued business. A portion of the recorded loss (primarily goodwill) was not currently deductible for tax purposes and will be amortized on a straight-line basis through 2011.

Other assets include premises and equipment, servicer advances and other operating receivables associated with the servicing operation. Other liabilities represent balances due to investors and surety providers and accrued expenses incurred in the normal course of the discontinued operation. Allocated equity represents the balance of equity capital allocated to the discontinued business under the Company’s equity allocation formula.

The net income of $0.5 million and $0.1 million reported for the quarters ended June 30, 2004 and 2003, respectively and $0.6 million and $0.4 million reported for the six months ended June 30, 2004 and 2003, respectively, represents the difference between the projected results and the actual results of the discontinued business.

The Bank has used interest rate swaps for specific manufactured housing securitizations. These swaps are recorded at fair value. The combined notional value of these swaps was $488 million and $533 million at June 30, 2004 and December 31, 2003, respectively.

NOTE 10 Manufactured Housing Recourse Arrangements, Retained Interests in Securitizations and Servicing Assets

In December 2001, GreenPoint formally adopted a plan to discontinue the manufactured housing lending business. Although it exited the manufactured housing lending business, GreenPoint continues to service existing loans. GreenPoint is exposed to losses on or from securitizations and loan sales completed prior to the adoption of the plan of discontinuance. 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 recourse described herein. The following describes the balances associated with recourse arrangements, the balances and activity in the corresponding retained interests, the balances and activity in servicing assets and the economic assumptions used in valuing the retained interests and servicing assets.

Recourse Arrangements

The following table summarizes the principal balances of manufactured housing loans securitized and sold, the maximum recourse to GreenPoint on those loans and the liability recorded for such recourse.

(In millions)	June 30, 2004		Dec. 31, 2003
Manufactured housing securitizations:
Principal balance	$	3,365	$	3,623
Maximum recourse (1)	499		538
Recorded liability	173		217
Manufactured housing sales:
Principal balance	205		218
Maximum recourse	205		218
Recorded liability	7		8

(1) A portion of the securitization maximum exposure is a retained interest asset. As of June 30, 2004 and December 31, 2003 the manufactured housing retained interest asset was $1 million for both periods.

GreenPoint’s manufactured housing securitization exposure lies in a corporate guarantee issued with each securitization in the form of a letter of credit to indemnify a limited amount of losses to the investors. The following table summarizes those letters of credit and the amount of draws GreenPoint expects.

(In millions)	June 30, 2004			Dec. 31, 2003
Letters of credit outstanding	$	498		$	537
Projected letter of credit draws	(191		)	(239		)
Unreserved letter of credit exposure	$	307		$	298

GreenPoint’s liability under recourse exposure for manufactured housing securitizations represents the present value of the projected letter of credit draws. Of the $3.4 billion of securitized loans outstanding there are five securitizations totaling $1.4 billion, with $52 million in letters of credit remaining, in which GreenPoint’s recorded liability is equal to its remaining exposure under those letters of credit.

Under certain securitizations, GreenPoint is committed to exercise its optional termination right and retire such transactions when the underlying loans total 10% of the original loan balance. Loans to be repurchased under this commitment total $376 million and the projected financial statement impact is included in the operating results of the discontinued business.

Pursuant to GreenPoint’s letter of credit agreements associated with its manufactured housing securitizations, the announcement of a change in control, more fully described in Note 2, may require GreenPoint to fully fund its remaining obligations under its outstanding letters of credit. The funds remaining in the trusts would be returned to GreenPoint upon maturity of each securitization agreement. As of August 5, 2004, one surety provider had formally requested such funding. This funding, expected to be completed prior to the end of August of 2004, will result in a payment of approximately $380 million into certain securitization trusts. This event, along with the potential funding of the remaining letters of credit totaling $111 million at July 31, 2004, is not expected to have a material impact on the Company’s financial position.

The following presents quantitative information about delinquencies on loans sold with recourse:

	June 30, 2004				December 31, 2003
(In millions)	Securitized		Sold		Securitized		Sold
Principal balance of loans	$	3,365	$	205	$	3,623	$	218
Principal balance of loans 90 days or more past due (1)	139		1		191		2

(1) Manufactured housing past due loans include repossessed inventory.

Balances and Changes in Retained Interests

The activity in the recorded liability for manufactured housing securitizations and sales is summarized as follows:

	At and for the Quarter Ended June 30,						At and for the Six Months Ended June 30,
(In millions)	2004			2003			2004			2003
Liability for Recourse Exposure:
Balance at beginning of period	$	207		$	289		$	225		$	300
Interest expense	3			4			6			9
Letter of credit draws and other charges	(24		)	(25		)	(41		)	(42		)
Change in valuation of retained interests	(5		)	11			(9		)	12
Balance at end of period	$	181		$	279		$	181		$	279

On a quarterly basis, GreenPoint reviews the liability for recourse exposure on manufactured housing securitizations based on management’s best estimate of future cash flows associated with the corporate guarantees.

	At and for the Quarter Ended June 30,					At and for the Six Months Ended June 30,
(In millions)	2004		2003			2004		2003
Retained Interests in Securitizations:
Balance at beginning of period	$	1	$	3		$	1	$	4
Change in valuation of retained interests	—		(2		)	—		(3		)
Balance at end of period	$	1	$	1		$	1	$	1

Valuation Assumptions

The key economic assumptions used in estimating the fair value of the entire portfolio of manufactured housing retained interests, both assets and liabilities, at June 30, 2004 and December 31, 2003 were as follows:

	Estimate of Fair Value at
	June 30, 2004		Dec. 31, 2003
Weighted average life (in years)	5.3		5.4
Weighted average prepayment rate (1)	5.9	%	5.9	%
Weighted average default rate	6.1	%	6.1	%
Loss severity rate	92.4	%	90.5	%
Weighted average loss rate	5.6	%	5.5	%
Cumulative loss (2)	29.7	%	29.7	%
Asset cash flows discounted at	14.0	%	14.0	%
Liability cash flows discounted at	6.6	%	6.6	%

(1) Excludes weighted average default rate.

(2) Remaining estimated net losses divided by outstanding principal balance.

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. The asset pools underlying certain manufactured housing servicing assets at times do not meet agreed-upon servicing covenants. Management evaluates the impact of these covenants on the value of the servicing assets and incorporates the assessment in their quarterly impairment review.

The activity in manufactured housing servicing assets is summarized as follows:

	At and for the Quarter Ended June 30,						At and for the Six Months Ended June 30,
(In millions)	2004			2003			2004			2003
Servicing assets
Balance at beginning of period	$	36		$	99		$	35		$	101
Amortization	2			(2		)	3			(4		)
Balance at end of period	38			97			38			97
Reserve for impairment of servicing assets
Balance at beginning of period	(29		)	(69		)	(28		)	(69		)
Additions	(6		)	(1		)	(7		)	(1		)
Balance at end of period	(35		)	(70		)	(35		)	(70		)
Servicing assets, net	$	3		$	27		$	3		$	27

The estimated fair values of manufactured housing servicing assets were $14 million and $37 million at June 30, 2004 and 2003, respectively and $16 million at December 31, 2003.

Manufactured housing servicer advances receivable totaled $37 million and $36 million at June 30, 2004 and 2003, respectively, and $39 million at December 31, 2003.

The significant assumptions used in estimating the fair value of manufactured housing servicing assets at June 30, 2004 and December 31, 2003 were as follows:

	June 30, 2004		Dec. 31, 2003
Weighted average prepayment rate (1)	6.0	%	6.6	%
Weighted average life (in years)	5.4		5.3
Weighted average default rate	5.1	%	5.1	%
Cash flows discounted at	14.0	%	14.0	%

(1) Excludes weighted average default rate.

NOTE 11 Loan Commitments and Contingencies

In the normal course of business, there are various outstanding loan commitments and contingent liabilities that have not been reflected in the consolidated financial statements. In addition, in the normal course of business, there are various other outstanding legal and administrative proceedings. In the opinion of management, after consultation with legal counsel, the financial position and results of operations of the Company will not be affected materially as a result of such loan commitments and contingent liabilities or by the outcome of such legal or administrative proceedings.

The principal commitments and contingent liabilities of the Company are discussed in the following paragraphs.

Pending Litigation

In the ordinary course of business, the Corporation and its subsidiaries are defendants in or parties to a number of pending and threatened legal actions and proceedings, and are also involved from time to time in investigations and administrative proceedings by governmental agencies. Certain of such actions and proceedings involve alleged violations of consumer protection laws, including claims relating to the Corporation’s loan origination and collection efforts, and other federal and state banking laws. Certain of such actions and proceedings include claims for breach of contract, restitution, compensatory damages, punitive damages and other forms of relief. Due to the difficulty of predicting the outcome of such matters, the Corporation can give no assurance that it will prevail on all claims made against it; however, management believes, based on current knowledge and after consultation with counsel, that these legal matters and administrative proceedings and the losses, if any, resulting from the final outcome thereof, will not have a material adverse effect on the Corporation and its subsidiaries’ financial position, results of operations or liquidity, but can give no assurance that they will not have such an effect.

Loan Commitments

At June 30, 2004 and December 31, 2003, the Company had an outstanding pipeline of mortgage loans of approximately, $8.6 billion and $7.0 billion, respectively. This pipeline represents applications received, but not yet funded and is therefore the maximum amount of the Company’s origination commitments. Of this amount, at June 30, 2004, approved applications totaled approximately $5.2 billion.

The Company is contractually committed to fund the undrawn portion of home equity lines of credit (HELOC’s), which it has originated. The commitment extends to HELOC’s, which are currently held by the Company, and HELOC’s securitized by the Company. As of June 30, 2004, the company is primarily responsible to fund undrawn HELOC’s of approximately $420 million.

Guarantees

Under agreements with a third party, the Company has guaranteed a portion of the third party’s secured lending arrangements. As of June 30, 2004, the total potential commitment under this guarantee totaled approximately $40 million. This guarantee would require payment by the company only if the third party’s were to default on payment of this borrowing. Management believes the likelihood a material payment will be required under this guarantee is remote.

NOTE 12 Business Segments

The Company has identified three domestic business segments. The predominant factor by which each segment is organized is the unique products and services they offer. The accounting policies of the segments are the same as those described in Note 1 “Summary of Significant Accounting Policies”. The Mortgage Banking segment originates, sells and services mortgage loans with a specialization in Alt A and NoDoc mortgage loan products. The Retail Banking segment consists of 93 full service banking offices offering a variety of financial services to the Greater New York area. The Balance Sheet Management segment includes earnings from the held for investment mortgage portfolios and other corporate investment activities.

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. Credit losses are charged to the Balance Sheet Management segment in an amount equal to net charge-offs. The expenses relating to administrative units of the Company such as executive, finance and audit are not allocated to individual operating segments and are identified in the “other” column. The “other” column also includes intercompany eliminations. The management of the Company evaluates the performance of each business segment based on income before income taxes.

The following table sets forth information by business segment:

	Quarter Ended June 30, 2004
(In millions)	Balance Sheet Management (1)			Retail Banking			Sub-total Banking					Mortgage Banking (5)				Segment Totals				Other (4)				Consolidated Continuing Operations
Net interest income	$	83.2		$	54.7		$	137.9				$		40.9		$		178.8		$		—		$	178.8
Provision for loan losses	(1.1		)	—			(1.1				)	—				(1.1			)	—				(1.1			)
Net interest income after provision for loan losses	82.1			54.7			136.8					40.9				177.7				—				177.7
Non-interest income:
Loan servicing fees	—			—			—					17.8				17.8				(6.9			)	10.9
Banking fees and commissions	—			23.6			23.6					—				23.6				—				23.6
Other income	2.4			0.5			2.9					0.1				3.0				—				3.0
Net gain on sale of loans	—			—			—					161.9				161.9				(38.2			)	123.7
Change in valuation of retained interests	—			—			—					(0.9			)	(0.9			)	—				(0.9			)
Net gain on sale of securities	—			—			—					—				—				—				—
Total non-interest income	2.4			24.1			26.5					178.9				205.4				(45.1			)	160.3
Non-interest expense:
Depreciation	—			2.6			2.6					4.7				7.3				1.6				8.9
ESOP and stock plans expense	0.1			1.6			1.7					5.2				6.9				1.5				8.4
Other expenses	0.4			36.6			37.0					61.2				98.2				23.2				121.4
Total non-interest expense	0.5			40.8			41.3					71.1				112.4				26.3				138.7
Segment income (loss) before taxes	$	84.0		$	38.0		$		122.0			$		148.7		$		270.7		$		(71.4	)	$	199.3
Total Assets	$	18,548		$	524	(2)	$			19,072		$	5,685			$	24,757			$	1,198		(3)	$		25,955

	Quarter Ended June 30, 2003
(In millions)	Balance Sheet Management (1)			Retail Banking			Sub-total Banking			Mortgage Banking (5)			Segment Totals			Other (4)			Consolidated Continuing Operations
Net interest income	$	61.2		$	60.1		$	121.3		$	46.6		$	167.9		$	—		$	167.9
Provision for loan losses	(0.6		)	—			(0.6		)	—			(0.6		)	—			(0.6		)
Net interest income after provision for loan losses	60.6			60.1			120.7			46.6			167.3			—			167.3
Non-interest income:
Loan servicing fees	—			—			—			(0.7		)	(0.7		)	0.3			(0.4		)
Banking fees and commissions	—			17.2			17.2			—			17.2			—			17.2
Other income	5.1			—			5.1			(2.0		)	3.1			—			3.1
Net gain on sale of loans	—			—			—			162.6			162.6			(16.9		)	145.7
Change in valuation of retained interests	—			—			—			(0.7		)	(0.7		)	—			(0.7		)
Net gain on sale of securities	(0.6		)	—			(0.6		)	—			(0.6		)	—			(0.6		)
Total non-interest income	4.5			17.2			21.7			159.2			180.9			(16.6		)	164.3
Non-interest expense:
Depreciation	—			2.2			2.2			3.9			6.1			1.4			7.5
ESOP and stock plans expense	0.1			1.5			1.6			4.2			5.8			0.9			6.7
Other expenses	0.5			30.9			31.4			59.8			91.2			19.3			110.5
Total non-interest expense	0.6			34.6			35.2			67.9			103.1			21.6			124.7
Segment income (loss) before taxes	$	64.5		$	42.7		$	107.2		$	137.9		$	245.1		$	(38.2	)	$	206.9
Total Assets	$	15,827		$	490	(2)	$	16,317		$	5,987		$	22,304		$	372	(3)	$	22,676

(1) Balance Sheet Management segment largely consists of the mortgage portfolio, MBS and investment securities.

(2) Retail Banking segment excludes intercompany funds transfers. Intersegment assets and liabilities eliminated for consolidation purposes were $13.0 billion and $12.3 billion for the quarter ended June 30, 2004 and 2003, respectively.

(3) Includes the assets of the discontinued business segment.

(4) Other includes intercompany eliminations and unallocated administrative expenses.

(5) Intersegment revenues, in the Mortgage Banking segment, for the quarter ended June 30, 2004 and 2003 were $45 million and $17 million.

	Six Months Ended June 30, 2004
(In millions)	Balance Sheet Management (1)			Retail Banking			Sub-total Banking			Mortgage Banking (5)			Segment Totals			Other (4)			Consolidated Continuing Operations
Net interest income	$	166.8		$	110.0		$	276.8		$	76.7		$	353.5		$	—		$	353.5
Provision for loan losses	(2.4		)	—			(2.4		)	—			(2.4		)	—			(2.4		)
Net interest income after provision for loan losses	164.4			110.0			274.4			76.7			351.1			—			351.1
Non-interest income:
Loan servicing fees	—			—			—			6.2			6.2			(1.2		)	5.0
Banking fees and commissions	—			46.0			46.0			—			46.0			—			46.0
Other income	6.6			0.8			7.4			2.5			9.9			—			9.9
Net gain on sale of loans	—			—			—			294.8			294.8			(50.4		)	244.4
Change in valuation of retained interests	—			—			—			(1.3		)	(1.3		)	—			(1.3		)
Net gain on sale of securities	0.5			—			0.5			—			0.5			—			0.5
Total non-interest income	7.1			46.8			53.9			302.2			356.1			(51.6		)	304.5
Non-interest expense:
Depreciation	—			5.7			5.7			9.6			15.3			3.2			18.5
ESOP and stock plans expense	0.1			3.3			3.4			10.6			14.0			3.3			17.3
Other expenses	0.9			71.4			72.3			117.2			189.5			47.9			237.4
Total non-interest expense	1.0			80.4			81.4			137.4			218.8			54.4			273.2
Segment income (loss) before taxes	$	170.5		$	76.4		$	246.9		$	241.5		$	488.4		$	(106.0	)	$	382.4
Total Assets	$	18,548		$	524	(2)	$	19,072		$	5,685		$	24,757		$	1,198	(3)	$	25,955

	Six Months Ended June 30, 2003
(In millions)	Balance Sheet Management (1)			Retail Banking			Sub-total Banking			Mortgage Banking (5)			Segment Totals			Other (4)			Consolidated Continuing Operations
Net interest income	$	128.0		$	118.9		$	246.9		$	95.8		$	342.7		$	—		$	342.7
Provision for loan losses	(0.9		)	—			(0.9		)	—			(0.9		)	—			(0.9		)
Net interest income after provision for loan losses	127.1			118.9			246.0			95.8			341.8			—			341.8
Non-interest income:
Loan servicing fees	—			—			—			0.8			0.8			4.6			5.4
Banking fees and commissions	—			31.7			31.7			—			31.7			—			31.7
Other income	9.2			—			9.2			(2.7		)	6.5			—			6.5
Net gain on sale of loans	—			—			—			301.6			301.6			(31.6		)	270.0
Change in valuation of retained interests	—			—			—			(1.4		)	(1.4		)	—			(1.4		)
Net gain on sale of securities	0.6			—			0.6			—			0.6			—			0.6
Total non-interest income	9.8			31.7			41.5			298.3			339.8			(27.0		)	312.8
Non-interest expense:
Depreciation	—			4.5			4.5			7.7			12.2			2.8			15.0
ESOP and stock plans expense	0.1			3.0			3.1			7.8			10.9			1.9			12.8
Other expenses	0.8			60.9			61.7			117.7			179.4			38.3			217.7
Total non-interest expense	0.9			68.4			69.3			133.2			202.5			43.0			245.5
Segment income (loss) before taxes	$	136.0		$	82.2		$	218.2		$	260.9		$	479.1		$	(70.0	)	$	409.1
Total Assets	$	15,827		$	490	(2)	$	16,317		$	5,987		$	22,304		$	372	(3)	$	22,676

(1) Balance Sheet Management segment largely consists of the mortgage portfolio, MBS and investment securities.

(2) Retail Banking segment excludes intercompany funds transfers. Intersegment assets and liabilities eliminated for consolidation purposes were $13.0 billion and $12.3 billion for the six months ended June 30, 2004 and 2003, respectively.

(3) Includes the assets of the discontinued business segment.

(4) Other includes intercompany eliminations and unallocated administrative expenses.

(5) Intersegment revenues, in the Mortgage Banking segment, for the six months ended June 30, 2004 and 2003 were $52 million and $27 million.

NOTE 13 Earnings Per Share

The Company’s reconciliation of the income and shares used in the basic and diluted EPS computations is summarized as follows:

	Quarter Ended June 30,				Six Months Ended June 30,
(In millions, except per share amounts)	2004		2003		2004		2003

Net income from continuing operations	$	123.0	$	129.8	$	235.5	$	256.7
Net income from discontinued operations	0.5		0.1		0.6		0.4
Net income	$	123.5	$	129.9	$	236.1	$	257.1

Weighted average number of common shares outstanding during each period – basic	117,085,000		123,439,000		116,892,000		125,222,000
Effect of dilutive securities – stock options	2,863,000		2,596,000		3,023,000		2,498,000
Weighted average number of common shares and common stock equivalents outstanding during each period – diluted	119,948,000		126,035,000		119,915,000		127,720,000

Basic earnings per share:
Net income from continuing operations	$	1.05	$	1.05	$	2.02	$	2.05
Net income from discontinued operations	—		—		—		—
Net income	$	1.05	$	1.05	$	2.02	$	2.05

Diluted earnings per share:
Net income from continuing operations	$	1.03	$	1.03	$	1.97	$	2.01
Net income from discontinued operations	—		—		—		—
Net income	$	1.03	$	1.03	$	1.97	$	2.01

(1) All options to purchase shares of common stock were included in the computation of diluted earnings per share because the options’ exercise prices were less than the average market price of the common shares for the quarter and six months ended June 30, 2004.

(2) Options to purchase 63,750 shares of common stock at prices between $32.97 and $34.26 per share were outstanding at June 30, 2003, but were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares for the quarter ended June 30, 2003. For the six months ended June 30, 2004, options to purchase 142,500 shares of common stock at prices between $31.42 and $34.26 where not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of common shares.

	Quarter Ended										Six Months Ended
(Dollars in millions, except per share data)	June 30, 2004		March 31, 2004		Dec. 31, 2003		Sept. 30, 2003		June 30, 2003		June 30,
											2004		2003
Performance Ratios – Continuing Operations (Annualized):
Return on average assets	1.98	%	1.98	%	2.00	%	1.76	%	2.34	%	1.98	%	2.37	%
Return on average equity	25.43		23.95		25.07		21.86		27.46		24.71		26.99
Net interest margin	3.10		3.30		3.19		2.84		3.23		3.20		3.37
Net interest spread	3.01		3.21		3.09		2.73		3.11		3.10		3.25
General and administrative expense to average assets	2.25		2.36		2.08		2.26		2.24		2.30		2.28
Total non-interest expense to operating revenue	30.5		31.3		28.2		31.4		27.3		30.9		27.2
Efficiency ratio (1)	41.3		42.2		39.2		44.3		37.5		41.7		37.7
Average interest-earning assets to average interest-bearing liabilities	1.05	x	1.05	x	1.05	x

GREENPOINT FINANCIAL CORP 10-Q