Filed by North Fork Bancorporation, Inc. pursuant to Rule 425
under the Securities Act of 1933 and deemed filed pursuant to
Rule 14a-12 under the Securities Exchange Act of 1934
Subject Company: GreenPoint Financial Corp.
Subject Company's Exchange Act File No.: 001-14320
This filing contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements include, but
are not limited to, statements about the benefits of the merger between North
Fork Bancorporation, Inc. ("North Fork") and GreenPoint Financial Corp.
("GreenPoint"), including future financial and operating results, North Fork's
plans, objectives, expectations and intentions and other statements that are not
historical facts. Such statements are based upon the current beliefs and
expectations of North Fork's and GreenPoint's management and are subject to
significant risks and uncertainties. Actual results may differ from those set
forth in the forward-looking statements. The following factors, among others,
could cause actual results to differ from those set forth in the forward-looking
statements: the ability to obtain governmental approvals of the merger on the
proposed terms and schedule; the failure of North Fork and GreenPoint
stockholders to approve the merger; the risk that the businesses will not be
integrated successfully; the risk that the cost savings and any revenue
synergies from the merger may not be fully realized or may take longer to
realize than expected; disruption from the merger making it more difficult to
maintain relationships with clients, employees or suppliers; increased
competition and its effect on pricing, spending, third-party relationships and
revenues; the risk of new and changing regulation in the U.S. and
internationally. Additional factors that could cause North Fork's and
GreenPoint's results to differ materially from those described in the
forward-looking statements can be found in the 2003 Annual Reports on Forms 10-K
of North Fork and GreenPoint, and in the Quarterly Reports on Form 10-Q of North
Fork and GreenPoint filed with the Securities and Exchange Commission and
available at the Securities and Exchange Commission's internet site
(http://www.sec.gov). The forward-looking statements in this filing speak only
as of the date of the filing, and neither North Fork nor GreenPoint assumes any
obligation to update the forward-looking statements or to update the reasons why
actual results could differ from those contained in the forward-looking
statements.
STOCKHOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING
THE PROPOSED TRANSACTION WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION. Stockholders will be able to obtain a free copy of the
joint proxy statement/prospectus, as well as other filings containing
information about North Fork and GreenPoint, without charge, at the Securities
and Exchange Commission's internet site (http://www.sec.gov). Copies of the
joint proxy statement/prospectus and the filings with the Securities and
Exchange Commission that will be incorporated by reference in the joint proxy
statement/prospectus can also be obtained, without charge, by directing a
request to North Fork Bancorporation, Inc., 275 Broadhollow Road, Melville, NY
11747; Attention: Aurelie Campbell, 631-844-1252; or GreenPoint Financial Corp.,
90 Park Avenue, New York, New York 10016; Attention: Richard Humphrey,
212-834-1201.
The respective directors and executive officers of North Fork and GreenPoint and
other persons may be deemed to be participants in the solicitation of proxies in
respect of the proposed merger. INFORMATION REGARDING NORTH FORK'S DIRECTORS AND
EXECUTIVE OFFICERS IS AVAILABLE IN ITS PROXY STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION BY NORTH FORK ON MARCH 21, 2003, AND INFORMATION
REGARDING GREENPOINT'S DIRECTORS AND EXECUTIVE OFFICERS IS AVAILABLE IN ITS
PROXY STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BY GREENPOINT
ON MARCH 28, 2003. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the joint proxy
statement/prospectus and other relevant materials to be filed with the
Securities and Exchange Commission when they become available.
* * *
Page 1
The following is a transcript of a presentation given at the Sandler O'Neill
West Coast Financial Services Conference on March 10, 2004.
March 10, 2004
2:15 PM PST
Man: Would you please take your seats? We're going to get started with
our next presentation, which will be from North Fork Bancorporation.
North Fork has consistently ranked at the top of the industry in
performance metrics and profitability metrics. And with this recent
acquisition of GreenPoint Financial it will also rank at the top of
the industry in terms of size, being one of the largest banks in the
nation.
I thought it was kind of interesting as I watched the presentations
of other companies today. Probably half the presenters tried to
explain in their presentation why they were as good or better than
North Fork. So it's probably a pretty good thing when all of your
competitors are out there doing that.
We're fortunate to have with us today the company's Chairman and CEO
John Kanas as well as Dan Healy, Chief Financial Officer. John?
John Kanas: Thanks Mark. We'll talk fast to get you out into the
beautiful Carlsbad sunshine.
Page 2
We are delighted to once again be at the Sandler conference. There
is - what we have tried to do for the purposes of this presentation
is to give - is to put a little bit of three different presentations
together. That is what we were telling people we thought was going
to happen for the balance of this year before Trust Company of New
Jersey, then what happens as a result of Trust Company of New
Jersey and then what happens as a result of GreenPoint.
And I suspect that there is need for some questions so I will try to
get through this part - what do you get, 40 minutes Mark all
together? And (Unintelligible).
To review the accomplishments of the past year, many of you know if
you've been keeping up with the investments that we repurchased
almost 8 million shares last year at a cost of about $33, $33.80.
Stock has moved up from that level. We have not repurchased any
shares since about October of '03.
We repositioned the balance sheet to be consistent with current
economic conditions. This is - was an event that got a fair amount
of publicity. As you know we started to talk last March about
beginning to see some life in commercial lending, beginning to see
some life in global economic conditions, some although not vigorous
some signs to be optimistic that loan growth was going to be more
vigorous than we thought and in fact by the end of the year,
commercial loan growth was quite vigorous.
That combined with the onset of economic results sort of
macroeconomically led us to believe that it was time to get out of
the very large position of wholesale leverage that we were in. We
started to take that apart in early July after the June numbers were
announced.
Page 3
Our margin had bottomed out at the end of June at 4%. As a result of
taking that leverage off, it climbed rapidly back up to 4.24 and
then up to 4.38 by the end of the year. So we shrunk the balance
sheet and took a little bit of a hit on that year's earnings but did
quite well by it.
We refined products and services through the marriage of personal
service and technology. We have - the success we had in New York
City and particularly in Manhattan has been well publicized. And a
great deal of that success has come from us targeting in a very,
very focused way a commercial market that has specific needs for
products and services that are not being provided by other
providers.
Now others are doing well in that market attracting different kinds
of deposits, but we are very, very focused on - this is North Fork's
pre-TCNJ pre-GreenPoint, that entrepreneur, self made business man.
And we have been refining products and services for that customer
for the last seven years.
It has given us the ability to have 30 branches in Manhattan today,
having started there only in 1997 and have $3 billion in deposits
that have been growing at about 25% a year.
We also achieved preeminence as a small business and middle market
lender. And you'll see some of those numbers as we go on that we
achieved during the year.
Commercial loan growth was 25% while overall loan growth was 9%. We
have a lot of questions about loan growth in multifamily and I'll
sort of head off a question here. That's gotten to be a tough
business and you'll see later on that our - the loan growth that we
have by segment in multifamily was almost nothing in '03, which is
probably going to be the case in this year as well.
Page 4
That's gotten to be a highly competitive business. Rates have been
driven down to very skinny levels. Credit quality standards are in
some cases being, if not compromised, being adjusted downward and we
think that's a tough business to bet the ranch on right now.
Demand deposit growth was 19%. You know, we talked a lot about all
of our incentive plans. They are geared off of principally two
things -- demand deposit growth that is non-interest bearing, demand
deposit growth and fee income. And this is evident in the form of
almost now a hundred different incentive compensation plans that
are out throughout the population of the company that allows us
to show earnings per employee far greater than other institutions.
The last time we measured the numbers -- and we actually had a slide
on it once and I guess we've taken it out of the presentation -- the
average income - the average earnings per employee for US banks $10
billion and greater was about $48,000 and in North Fork it's
something on the order of $157,000 a piece. So that has been a very
successful strategy keyed off of incentive plans.
We have nine new branches including four in Manhattan and our first
branch in New Jersey, which was in Hoboken, which is probably going
to be the shortest lived branch in the history of US banking since
TCNJ is a big branch right across the street. But we did expand as
planned during the year.
And we announced the pending acquisitions of course later in the
year, of Trust Company in December and then most recently of
GreenPoint Financial.
This is a look at quarter-to-date, year-to-date numbers. I remind
you that even though we have a stated policy of being a dividend
paying shop, our policy is
Page 5
to pay between 40% and 50% of our earnings out. We paid -
quarter-to-date we paid 45%, on a year-to-date basis, 43% this year.
We had an excellent quarter. And net interest margin as you can
see climbed from as I said in June of 4, to 4.24 to 4.39 by the end
of the year, return on assets of almost 2 and return on equity of
27.4.
Core efficiency ratio, which has been the hallmark of this company
as you know for some time, up a little bit but still at 34.4. By the
way on a pro forma basis it looks like that efficiency ratio after
we close both of these acquisitions gets closer to 30%.
If you are interested in this subset of peer group, the 29 banks I
guess that are in the S&P, this is where North Fork ranks on all of
those different measurements, ROA, ROE, NIM and efficiency -- first
in ROE, second in efficiency, fourth in the other two.
We just - our weighting in the S&P will change dramatically as we
get closer and in fact close the GreenPoint deal and it will double.
So the universe - the universe of investors hopefully will change
positively and bring more people to the table that would be
interested in this company.
Balance sheet at the end of the year really showing you in the
outward right hand column, loan growth of 9%. You can see the
securities portfolio being taken down as a part of that strategy I
described earlier. Demand deposit growth, which I showed you and
then total borrowings, which really offset the securities of 36%.
And I think that slide is gone now too, but that took - the company
had 45% of the assets in securities and brought it down to about
30%. So a - and slight
Page 6
decline in stockholders' equity as a result of the buyback that I
discussed earlier.
Loans and investments, and this is something we were talking about.
Many of you are familiar with the background of North Fork Bank and
the history of having built a commercial bank on a platform of
thrift institution. So the complexion of securities and loan changed
dramatically over the last ten years, sometimes higher, sometimes
lower.
The plan over the last few years is to continue to drive down
securities especially starting with de-leveraging the balance sheet.
So we drove it down like I said earlier from 44% to 37% this year
and loans up from 56% to 63%.
The loan to deposit ratio however has declined. Deposits have been
pouring in over the last two or three years, especially as we've
been executing better and better in the NY markets. And whereas loan
to deposit ratio was as high as 98% three years ago it's down to
about 80% today. There's impact in that statement especially when
you think about the very large asset originating machine that
GreenPoint Mortgage is.
If you want to look back five years, because we have constantly kept
our eye on the idea of transforming the pure North Fork balance
sheet to look more and more like a commercial bank, five years ago
residential mortgages were about a third of the balance sheet. Today
they are about 20%. That changes now dramatically and obviously as
a result of the next acquisition. This was a result of a lot of hard
work over that five year period.
On a loan by loan basis if you will on a segment by segment, you can
see that we continued to let residential mortgages run off during
the year. So the 9% loan growth that we experienced during the year
was mostly made up of C&I
Page 7
Loan. It included a reduction, actually a reduction in the size the
last few years and the size of the residential portfolio.
Multifamily loans as I said earlier are leveling off where we were
very aggressive in that business starting in - actually starting in
- as far back as 1994 when we bought Metro Bank, Bayside Savings
Bank which brought us that line of business as we've gotten less
aggressive.
It's still a great product. But the problem is in that the
institutions that served - the institutions that serve this market
in the New York metropolitan area have gotten big themselves. They
are much larger than they used to be. Their appetite for loans has
gone up dramatically and in some cases they are monoline asset
generators, so the competition has gotten very stiff.
Throw on top of that the fact that WaMu came into this market and
tried to buy some of the pricing, pricing some of these loans down
into the 3, you really have a very spoiled real estate market in
the New York area and it's difficult to be competitive.
We are very competitive in this market in sort of the bastardized
multifamily loans that are not pure. They don't fit into any
particular category. They're not syndicateable and they're not
easily saleable into markets group portfolio lenders here.
So where we continue to do business in this area is when you get a
loan that is sort of multifamily and it has a little bit of a
commercial component and may have a little bit of construction loan.
A guy brings us a $40 million building that when he gets done fixing
it up will be an $80 million building but we need to throw a little
money in with him. And so it's sort of a mix between a
Page 8
mortgage loan - or rather a multifamily loan and a commercial loan.
That's where we continue to be very active in doing loans in size in
that category.
Consumer loans is I think I don't need to remind you that there's
about a billion dollars worth of car paper. This will be expanded to
about a billion seven because TCNJ had this exact same business
and had about $600 million worth of almost identical car paper,
generated almost identically to the way we do it through a network
of dealerships, them mostly in New Jersey, although we have been
competing with them in parts of New Jersey and sort of average loan
growth in this area.
Commercial real estate a big performer this year mostly a result of
those mixed kind of loans that I just described earlier that are
partially multifamily and partially commercial. These are not spec
office buildings. These are not shopping centers. These are cash
flowing properties owned by people who own 10 or 15 or 20 other
properties that look just like them.
In many cases we have rated tenants and leases backing up the cash
flow to support these loans. And these are spread out all over the
New York metropolitan area, some on Long Island, but mostly in New
York and all of its boroughs.
Commercial and industrial loans, the big story this year a result of
principally two things -- some improvement in the atmosphere and
some actual - some optimism in the commercial and industrial. These
are cats and dogs. These are loans of every shape and size, which is
a anything from a $300,000 line of short term operating line of
credit to a window washing company to a, you know, $3 million loan
to by six more trucks in a fleet of trucks in some service industry
someplace in New York City.
Page 9
The growth here is mostly as exactly by the way as we've predicted
over the last five years would happen as we expose our self more and
more in the commercial areas in New York City and particularly by
the way the boroughs, getting a lot more opportunity to grow
commercial loans and with it commercial deposits, which we've seen.
Loan growth again somewhere in the bar graph at 9%, nearing about
what we did last year and on track - it was on track to do about the
same thing this year.
On the asset quality side, worth some mention greater reserves,
greater MPAs. When you go back in 1998 we had almost - when we had
total loans amounting to a much smaller figure about $6 billion,
where we had -- I can't see it -- $18-1/2 almost $20 million worth
of MPA. Today with $13.7 million worth of MPAs on loans of about $14
to $15 billion.
So frankly, you've heard - some of you have heard me say this
before. We were surprised at loan quality and thought interest rates
would rise faster. We thought that loan quality issues would become
a part of the discussion of bank investing. Two, three years ago it
never happened. Fortunately the recession as it were didn't affect
the banking industry as some had feared that it would.
The result is and although I think many banks probably don't have
this kind of coverages about 1000% percent, but a lot of
banks do have excess coverage of reserves, another form of excess
capital.
There is some movement afoot here. We'd had questions on this - SEC,
the accounting profession is looking at this. And I think that there
is some heat - I know there is some heat coming from them. We got it
a few years ago. The regulators talked it down but we are beginning
to see some - we are beginning some active conversation about the
build up of these reserves. And in the entire banking system not
just on our balance sheet but we'll see where that goes.
Page 10
Accomplishments in commercial banking, a very important component of
what happened to us this past year. Commercial deposit growth -
remember commercial loans grew 25%. Commercial deposits grew at 22%,
making up $5.2 billion. This is strictly as a result of us being
exposed to the New York City market and faster growth markets.
And although we like to think of ourselves as enjoying the growth in
this market, most of this business as I'm sure you've heard other
people in our market say, is the migration of the off one bank
balance sheet and onto another. So we have been very successful in
pirating away business from larger institutions. And we'll talk
about that, its a story you hear a lot.
Demand deposit growth, very, very key to our profitability -- almost
20% this year and on a track to do even better. That's total demand
deposit. These are interest-free checking accounts.
And total deposit growth grew at about 15%. You can see not as fast
as in other years but we've had - we were significantly less
aggressive this year in pricing time deposits because we didn't
have the asset growth to support the need.
Into more recent issues, which I'm sure you're interested in that,
was the Trust Company. I wish we could put our hand over the left
side of this because we'd like to - when we looked at the map of
this franchise and over the last two years many have heard me say
that we've got Manhattan, which is rapidly becoming the focal point
of this franchise.
And 100 branches to the right, it would be neat to have 100 branches
to the left, particularly in markets that look an awful lot like the
markets that we're
Page 11
the most successful in and we've had literally dozens of
conversations about, and some with organizations in New Jersey.
We've always said that we've wanted to find a bank where you stand
on the West Side Highway and see most of the branches in New Jersey
and Trust Company was it.
It's about a $4 billion bank with only $2 billion in loans. Only
$120 million of those are in commercial in the form of C&I loans.
This is an extremely undermanaged franchise. Those of you that are
familiar with old Ziggy Wilzig who really built this franchise, it
was run very much like a private company for the last 25 years. The
family owned 40% of it. It was not aggressively managed. In
fact it was very conservatively managed.
The result of which, these branches are located in perfect spots to
generate commercial business, but they didn't have any - in fact
until recently didn't even have any commercial lenders out on the
marketplace. They made a move, sort of an anemic move over the last
year after Ziggy died to try to bring in some lending people but
really never got that off.
So we think that in terms of growth in C&I lending, although
GreenPoint is very interesting to talk about and of course the New
York franchise centered around New York is very interesting to talk
about, I think the thing we'll be talking about this time next year
is all the commercial loans growth that we got out of the northern
New Jersey market. These are excellent locations. It's a highly
undermanaged franchise, as I said, and I expect to see very
profitable growth coming out of this market going forward.
This thing had when we first started talking 100 branches. They have
since closed almost 30 - 29 I guess of their supermarket branches,
which we
Page 12
encouraged them to do. They're left with 20. There's probably five
or six more that need to be closely examined but basically cook
down to its least common denominator now which is 70, 65 or 70,
maybe 75 branches in that market, some consolidations although
not too many, but an excellent platform to enter the New Jersey
market.
And then GreenPoint our most recent. For those of you who can see,
the triangles that are now mixed among the blue dots on the right
hand side of New York City are sitting in the triangles
overlaying the branch system of Manhattan and North Fork branches
represent GreenPoint completely contained within the footprint of
the existing North Fork franchise -- a very simple bank
integration.
We've been around the state of California for three or four days
talking to our larger shareholders and GreenPoint's larger
shareholders to try to explain and set the record straight as to the
integration. This is a - in terms of the bank integration this will
be - this will be one bank operated under two brand names.
From the standpoint of a legal charter this will be merged into one
state chartered institution run by virtue of the software that we
have on the Fiserve system as a multibank system that will create
data and management information about the GreenPoint franchise and
management information about the North Fork franchise.
You can think of it as these are two different ways to generate
liability growth, that is deposit growth, funneling up into one bank
where the assets are merged on one balance sheet. It's about $23
billion in assets, $13 billion in deposits in 90 branches.
Page 13
It is a franchise that is absolutely unparalleled in this market,
certainly impossible to duplicate this thing. These are deposits
that go back generations in Brooklyn and it also has a niche in a
relatively uncompetitive segment of residential mortgage
origination. I'd be happy to answer questions about that and the
former GreenPoint mortgage.
Why GreenPoint? We had in - over the years I've mentioned GreenPoint
many times and often said if it weren't for the fact that North Fork
was relatively small and their mortgage company was relatively big,
the most accretive deal that North Fork could ever have done is
GreenPoint Savings Bank and GreenPoint Financial.
It does provide new markets for commercial loan growth using the
North Fork business model. It provides a proven retail banking
model and a valuable brand for continued retail deposit growth.
This is a very interesting franchise. I'll break away for a moment
and talk about GreenPoint and I'll amplify that later.
GreenPoint was really several different companies in one. It was -
it got a great deal of publicity unfortunately a lot of it negative
for the manufacture - they forayed into manufactured housing a
number of years ago. It did not work very well. Management got a
black eye over it. They wrote off the business and it is now on the
balance sheet as a discontinued line of business and I think it
showed up in the company's valuation.
Also at about the same time, Headlands very well run, very highly
thought of mortgage company in - right up here - at the time it was
in Larkspur. I guess now it's in Nevado, California. And although
it's been a great mortgage company and in fact it's performance has
been relatively stellar over the last
Page 14
decade, it's too big for the size - it was always was viewed as
being too big for the size of the bank. Sixty to 63% of last year's
revenues for the whole company came off the mortgage bank, thought
of as being more volatile than bank earnings and I think that
punished the multiples as well.
There is however strong management in the retail side of the bank.
We found that the 19 - in 2001 these guys would have to get to see
my friend George Schafer and Fifth Third took a look at the
consumer banking model Fifth Third was running. It's not unlike
what Commerce Bank is doing in the New York area and in
Jersey and not unlike what, although a little bit different from
what Dego Cooper is doing at TCF and it's basically based on a very
aggressive model of free checking for consumers, low balances, high
transactions and lots of consumer fees.
Well, they did an excellent job and consequently consumer deposits
grew in GreenPoint right under everybody's nose. But nobody was
paying attention to it. That's why over 60% in 2001 are in core
deposits because they basically installed that model that was
already working very well.
They had a very nice retail bank with deposits growing at a clip
of about 17% a year, outstripping even our deposit growth. But
frankly the news about the company was always overshadowed by a
discussion of the mortgage company earnings.
It has excellent asset qualities and interest rate risk profile,
charge off rates four basis points. It has asset generation and fee
income capabilities from their mortgage banking company, which
you've seen some of the numbers.
To give you some sense of that, GreenPoint Mortgage originated $39
billion worth of product in the last year, $12 billion of that was
what they call Alt A -
Page 15
a combination of Alt A No-Doc mortgages. Eighty percent of that $12
billion were generated in the New York metropolitan area in the
northeast. And $3 billion out of the $12 billion was purchased by
the bank. The rest of it was sold into the market. So there is a
great deal of excess capacity here to generate product for a larger
balance sheet.
The economics of the transaction - I'm not sure what slide we put up
here next. But I guess this is the - yeah this is the pro forma
balance sheet showing obviously the flexible balance sheet in one of
the best markets in the world. Its capitalization will be around
$13 billion and we would hope a lot higher.
Pick a number -- 15, 16, 17, 18 or just bank in the country
depending on the stock price on a given day. And it certainly
creates a highly valuable franchise in New York's metropolitan
area and it certainly is an impossible franchise to duplicate.
It currently is - the combined institution is slightly asset
sensitive and positioned for rising rates. It's not happening right
now however we called Nevado this morning and said well the ten year
is at 372. What do volumes look like? And I can tell you that if you
take the - if you take our estimates of volumes upon which the
economic model is based, they are running very, very significantly
ahead of those estimates this year.
Immediately accretive earnings, you've seen these numbers before.
This is about - this is about $100 million worth of cost saves, $30
million of which falls - on a pre-tax basis falls out of the
collapsing of the ESOP. The balance is very, very simple to take
out.
Page 16
This is - represents about 19% of GreenPoint's total expenses. North
Fork has averaged 55% across theirs and every one of its deals it's
done since 1987 and we think that the accretion here, accretion of
39 cents is easily achievable.
Revenue diversification is one of the byproducts of this. North Fork
only had 15% of its earnings coming from a nonspread source. Up
until now as a result of combining with great consumer fees coming
off the GreenPoint deposit base and the mortgage banking fees, that
will go up to 32%, I think a better mix of revenue.
And I know we are running slow - we're low on time. So I'll move
quickly here. GreenPoint Mortgage is one of the top five wholesale
lenders and one of the top ten originators in the country. It's
known for the product Alt-A. It happens to be right now a very, very
attractive product, very interesting to lots of people in the market
and has produced a lot of high quality assets that can be used in
this market.
Dominant market share, North Fork has had the fourth largest - third
or fourth largest depending on how you measure it - bank in the New
York metropolitan area and actually you could throw in New Jersey
with more branches than Citigroup in that area. So second only to JP
Morgan Chase with a little bit less than 6% market share.
Number one in Nassau, number one in Suffolk, number two in Queens in
terms of deposit share and on so on down the line. And the most
interesting is New York where we are number five, but number five is
only about 4% on a combined basis of the total market share in that
very wealthy market.
We've already talked about this in our investor presentations. There
are a number of opportunities to modify some of the locations. Some
of the North
Page 17
Fork Locations will become GreenPoint because they are in consumer
areas. Some of the GreenPoint locations will become North Fork
because the communities change and these areas are much more
suitable for a commercial bank franchise today.
And then in some cases we are going to put North Fork bank branches
inside the buildings that have the GreenPoint Savings Bank branches
particularly in Brooklyn where we could throw up 10 or 15 new
branches of North Fork immediately and very ostensibly in locations
that we wouldn't have been able to go out and buy on our own. And
there is 15 or so consolidation opportunities here. There are two
branches next to each other that cry out for consolidation.
A look at GreenPoint's core deposit growth, as I said 27% last year,
34% the year before. And average deposits per branch very high, $140
million.
Tentative timing, close Trust Company New Jersey around May 14, get
shareholder approval for the GreenPoint deal at the end of June and
close on the GreenPoint deal sometime late September, giving you a
clean quarter to take a look at for the fourth quarter this year
with both, three cylinders.
Our plans -- and I'm not sure what we put on this slide -- momentum
in C&I lending and deposit growth on the North Fork side obviously
as the economy improves and if interest rates do start to climb,
commercial deposits are believed to be at cyclical lows.
If rates improve and if we're right about this, the bank part of
this franchise would do very, very well. The bank - both these banks
tend to make more money in a rising rate environment. Obviously the
mortgage company would do better if rates stay low.
Page 18
Investments in market expansion and technology over the past three
years have positioned us well. We've sunk the cost - there are 30
branches in Manhattan alone that represent $3 billion worth of
deposits today. We only have three or four more to build and the
growth in those branches is running at almost 30% a year. So we
think that the best is yet to come out of the Manhattan franchise.
Strong operating controls and oversight, great regulatory
relationships. We were put on negative watch by S&P as a result of
the deal because of its size and GreenPoint was put on a positive
watch. Dan met with the credit agency the other day.
We don't know what they are going to do. But the body language and
I would be - the body language indicates and I would be surprised
if they don't take that negative watch off. They were concerned
about integration, didn't understand how it was going to work,
didn't understand how simple it was. That we're not integrating
the mortgage company. I think most of those issues are behind us at
S&P. Moody's never changed us.
Industry leading earnings, high dividend yields and lots of money to
reinvest in growth for the future and cultivate our newly created
regional bank.
And I want to get to your questions as soon as I can so shoot
away. Yes, Jim. Is that you Jim? Hi.
Man: (Unintelligible).
John Kanas: There is two discussions. One is GreenPoint Mortgage and one
is the bank. The bank is the simplest bank we've ever seen in terms
of managing. In fact
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the other day we began to lay out the product matrixes to see
whether we were going to use the core platform of GreenPoint's or
the core platform of North Fork's. And the first thing we did was
take a look at, you know, the measure for how complicated the
business is and how many products there are.
Well in North Fork's case we have 149 deposits products. GreenPoint
has eight. It is so simple to manage the bank part of GreenPoint
it's probably one of the simplest we've ever done. Trust Company
has 40 to give you an idea of the complexity of that relative to
GreenPoint.
So the managing of the bank piece given the product matrix that they
have, they have management who knows how to do it. Those management
people are important but not essential because they just do the same
thing everybody else does.
They basically - they have a free checking product. They've
targeted a component of the consumer market that tends to have a
lot of activity like what Cooper has and like (unintelligible) does
and it generates a great deal of fee income. That model is very
easy to run and yes, there's management in place on that existing
in GreenPoint and everybody at North Fork is very conversant
in running that piece.
On the mortgage side, S.A. Ibrahim runs the mortgage company about
seven years. He's a guy we've known from all the way back to
Chemical Bank. We've been in communication with GreenPoint for many,
many years looking at this company, watching the management team
operate when frankly they had a lot of things to prove to us that I
didn't think that they could.
We have a very high level of confidence in that mortgage banking
group. They really know their stuff. It's a buttoned up company. I
was up there for a
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day the other day. I have never - it's a stretch to say they're as
good as Countrywide because I think Countrywide is the best in the
business that you could find but they are a close second. They are
probably as good as Wells or some of the other good providers.
So the controls are excellent. The management incentives are in the
right places. The people have the right experience and I think as
part of a larger company now these people will excel.
If rates move up mortgage company volumes will come down and 20% of
the total. We said that if you slapped together these things would
take up of course, the revenue is about a billion six pre-tax next
year, $300 million or so comes off mortgage banking. Obviously that
will change if rates rise. That will also change if rates stay
where they are or go down from here. The 300 will come more and the
banks won't make as much.
But both these banks, 80% of our company will do better in higher
rate environments. Twenty percent of our company would do better in
a lower rate environment. So it's a nice kind of cyclical hedge run
by excellent people.
It can't be that easy. Go ahead.
Man: Let me ask you a question if I may. As organizations get larger
there is a tendency to sort of revert to the mean. What kinds of
things are you doing to prevent North Fork from becoming a mediocre
bank?
John Kanas: We've spent a lot of time talking about this. If you read our
annual report and particularly my message this year, I gave a lot of
- companies - it's always been our view that companies move towards
mediocrity not because of size
Page 21
but because they hire mediocre people who have low thresholds and
low target thresholds for performance.
We have had great success, in fact the performance of North Fork has
gone up as it's gotten bigger, because we've been able to continue
to attract people who understand their job who are highly focused on
the bottom line and who manage their own businesses within
businesses.
I believe that - I wouldn't say that no matter how large you get
you can continue to do that, but being careful about the kind of
people that you hire and making them understand what the mission of
the company is, is very important. I would argue that a lot of the
smaller regional banks do well not because they are small, but
because they have people with vested interests in the company who
are focused on their business like nothing else.
The larger institutions tend to become managed by managers and not
the people who created the institutions. They are second or third
generation people who have come along, make big salaries and ride
around in airplanes and play at Augusta every year, but they really
don't have an investment in the legacy company, the building of the
company. Their investment is in perpetuating quite frankly an
organizational chart that gets bigger all the time.
We will avoid that. We have continued to avoid that. Our - the
complexion of our compensation structure reflects it. Everybody owns
stock here. Nobody makes any money unless the company makes any
money. And that gets easier and easier to tell as the company gets
larger and more successful.
That's too easy.
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Man: Any other questions? Well John will be available after the session
and Dan if you have additional questions. Thanks very much.
John Kanas: Thank you very much.