PINX:BFCFB BFC Financial Corp Class B Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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FORM 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-Q

 

 

 

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

For the Quarter Ended March 31, 2012

OR

 

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

Commission File Number

001-09071

 

 

BFC Financial Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Florida   59-2022148

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification Number)

2100 West Cypress Creek Road

Fort Lauderdale, Florida

  33309
(Address of Principal executive office)   (Zip Code)

(954) 940-4900

(Registrant’s telephone number, including area code)

Not Applicable

(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 such 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.    YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

The number of shares outstanding of each of the registrant’s classes of common stock as of May 8, 2012 is as follows:

Class A Common Stock of $.01 par value, 70,275,222 shares outstanding.

Class B Common Stock of $.01 par value, 6,859,501 shares outstanding.

 

 

 


Table of Contents

BFC Financial Corporation

TABLE OF CONTENTS

 

                 Page  

PART I.

     FINANCIAL INFORMATION   
     Item 1.    Financial Statements:   
        Consolidated Statements of Financial Condition as of March 31, 2012 and December 31,
2011 – Unaudited
     3   
        Consolidated Statements of Operations for the Three Months Ended March 31, 2012 and
2011 – Unaudited
     4   
        Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31,
2012 and 2011 – Unaudited
     6   
        Consolidated Statement of Changes in Equity for the Three Months Ended March 31,
2012 – Unaudited
     7   
        Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and
2011 – Unaudited
     8   
        Notes to Unaudited Consolidated Financial Statements      10   
     Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations      58   
     Item 4.    Controls and Procedures      107   

PART II.

     OTHER INFORMATION   
     Item 1.    Legal Proceedings      108   
     Item 1A.    Risk Factors      108   
     Item 6.    Exhibits      108   
     SIGNATURES   

 

 

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Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

BFC Financial Corporation

Consolidated Statements of Financial Condition - Unaudited

(In thousands, except share data)

 

     March 31,     December 31,  
     2012     2011  
ASSETS     

Cash and interest bearing deposits in other banks

   $ 1,120,701        858,789   

Restricted cash ($41,810 in 2012 and $38,913 in 2011 held by variable interest entities (“VIEs”)

     67,226        62,727   

Securities available for sale at fair value

     20,747        62,803   

Tax certificates, net of allowance of $5,345 in 2012 and $7,488 in 2011

     6,120        46,488   

Federal Home Loan Bank (“FHLB”) stock, at cost which approximates fair value

     —          18,308   

Loans held for sale

     62,791        55,601   

Loans receivable, net of allowance for loan losses of $7,167 in 2012 and $129,887 in 2011

     385,817        2,442,236   

Notes receivable, including gross securitized notes of $357,473 in 2012 and $375,904 in 2011, net of allowance of $70,339 in 2012 and $73,260 in 2011

     505,605        517,836   

Accrued interest receivable

     3,845        18,432   

Inventory

     207,579        213,325   

Real estate owned

     84,805        87,174   

Investments in unconsolidated affiliates

     12,503        12,343   

Properties and equipment, net

     61,696        191,568   

Goodwill

     —          12,241   

Intangible assets, net

     64,543        72,804   

Assets held for sale

     2,252,130        35,035   

Prepaid Federal Deposit Insurance Corporation (“FDIC”) deposit insurance assessment

     —          12,715   

Other assets

     57,191        57,730   
  

 

 

   

 

 

 

Total assets

   $ 4,913,299        4,778,155   
  

 

 

   

 

 

 
LIABILITIES AND EQUITY     

Liabilities:

    

Interest bearing deposits

   $ —          2,433,216   

Non-interest bearing deposits

     —          846,636   

Deposits held for sale

     3,455,297        —     
  

 

 

   

 

 

 

Total deposits

     3,455,297        3,279,852   

Receivable-backed notes payable, (including $363,247 in 2012 and $385,140 in 2011 held by VIEs

     458,082        478,098   

Notes and mortgage notes payable and other borrowings

     70,465        108,533   

Junior subordinated debentures

     481,617        477,316   

Deferred income taxes

     32,352        24,645   

Deferred gain on settlement of investment in subsidiary

     29,875        29,875   

Liabilities related to assets held for sale

     58,539        11,156   

Other liabilities

     138,295        174,634   
  

 

 

   

 

 

 

Total liabilities

     4,724,522        4,584,109   
  

 

 

   

 

 

 

Commitments and contingencies (See Note 14)

    

Preferred stock of $.01 par value; authorized - 10,000,000 shares:

    

Redeemable 5% Cumulative Preferred Stock - $.01 par value; authorized 15,000 shares issued and outstanding 15,000 shares with redemption value of $1,000 per share

     11,029        11,029   
  

 

 

   

 

 

 

Equity:

    

Class A common stock of $.01 par value, authorized 150,000,000 shares; issued and outstanding 70,274,972 in 2012 and 70,274,972 in 2011

     703        703   

Class B common stock of $.01 par value, authorized 20,000,000 shares; issued and outstanding 6,859,751 in 2012 and 6,859,751 in 2011

     69        69   

Additional paid-in capital

     233,213        232,705   

Accumulated deficit

     (103,781     (100,873

Accumulated other comprehensive loss

     (8,738     (12,863
  

 

 

   

 

 

 

Total BFC Financial Corporation (“BFC”) shareholders’ equity

     121,466        119,741   

Noncontrolling interests

     56,282        63,276   
  

 

 

   

 

 

 

Total equity

     177,748        183,017   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 4,913,299        4,778,155   
  

 

 

   

 

 

 

See Notes to Unaudited Consolidated Financial Statements.

 

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Table of Contents

BFC Financial Corporation

Consolidated Statements of Operations - Unaudited

(In thousands, except per share data)

 

     For the Three Months
Ended March 31,
 
     2012     2011  

Revenues

    

Real Estate and Other:

    

Sales of VOIs

   $ 43,597        36,334   

Fee-based sales commission and other revenues

     12,778        11,035   

Other fee-based services revenue

     18,815        17,200   

Interest income

     21,164        22,433   
  

 

 

   

 

 

 
     96,354        87,002   
  

 

 

   

 

 

 

Financial Services:

    

Interest income

     8,335        11,838   

Gain (loss) on sale of loans

     3        (99

Other non-interest income

     84        13   
  

 

 

   

 

 

 
     8,422        11,752   
  

 

 

   

 

 

 

Total revenues

     104,776        98,754   
    

 

 

 

Costs and Expenses

    

Real Estate and Other:

    

Cost of VOIs sold

     4,362        7,225   

Cost of other resort operations

     12,986        13,081   

Interest expense

     12,712        17,704   

Selling, general and administrative expenses

     54,209        49,289   
  

 

 

   

 

 

 
     84,269        87,299   
  

 

 

   

 

 

 

Financial Services:

    

Interest expense

     4,198        3,815   

Provision for (recovery from) loan losses

     (765     6,827   

Employee compensation and benefits

     5,259        5,523   

Occupancy and equipment

     2,247        3,144   

Advertising and promotion

     153        113   

Professional fees

     6,197        2,128   

Impairments on loans held for sale

     263        628   

Impairment of real estate owned

     1,741        1,688   

Other expenses

     2,062        2,205   
  

 

 

   

 

 

 
     21,355        26,071   
  

 

 

   

 

 

 

Total costs and expenses

     105,624        113,370   
  

 

 

   

 

 

 

Gain on settlement of investment in subsidiary

     —          11,305   

Equity in earnings from unconsolidated affiliates

     158        1,777   

Other income

     586        898   
  

 

 

   

 

 

 

Loss from continuing operations before income taxes

     (104     (636

Less: Provision for income taxes

     5,201        2,145   
  

 

 

   

 

 

 

Loss from continuing operations

     (5,305     (2,781

Income (loss) from discontinued operations, net of income tax benefit of $469 in 2012 and $352 in 2011

     2,944        (9,545
  

 

 

   

 

 

 

Net loss

     (2,361     (12,326

Less: Net income (loss) attributable to noncontrolling interests

     359        (9,715
  

 

 

   

 

 

 

Net loss attributable to BFC

     (2,720     (2,611

Preferred stock dividends

     (188     (188
  

 

 

   

 

 

 

Net loss allocable to common stock

   $ (2,908     (2,799
  

 

 

   

 

 

 

See Notes to Unaudited Consolidated Financial Statements.

 

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Table of Contents

BFC Financial Corporation

Consolidated Statements of Operations - Unaudited

(In thousands, except per share data)

 

     For the Three Months Ended
March 31,
 
     2012     2011  

Basic and Diluted (Loss) Earnings Per Common Share Attributable to BFC (Note 16):

    

Basic (Loss) Earnings Per Common Share

    

(Loss) earnings per share from continuing operations

   $ (0.08     0.02   

Income (loss) per share from discontinued operations

     0.04        (0.06
  

 

 

   

 

 

 

Net loss per common share

   $ (0.04     (0.04
  

 

 

   

 

 

 

Diluted (Loss) Earnings Per Common Share

    

(Loss) earnings per share from continuing operations

   $ (0.08     0.02   

Income (loss) per share from discontinued operations

     0.04        (0.06
  

 

 

   

 

 

 

Net loss per common share

   $ (0.04     (0.04
  

 

 

   

 

 

 

Basic weighted average number of common shares outstanding

     77,135        75,381   
  

 

 

   

 

 

 

Diluted weighted average number of common and common equivalent shares outstanding

     77,489        75,381   
  

 

 

   

 

 

 

Amounts attributable to BFC common shareholders:

    

(Loss) income from continuing operations, net of tax

   $ (6,475     1,709   

Income (loss) from discontinued operations, net of tax

     3,567        (4,508
  

 

 

   

 

 

 

Net loss

   $ (2,908     (2,799
  

 

 

   

 

 

 

See Notes to Unaudited Consolidated Financial Statements.

 

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Table of Contents

BFC Financial Corporation

Consolidated Statements of Comprehensive Income (Loss) - Unaudited

(In thousands)

 

     For the Three Months Ended
March 31,
 
     2012     2011  

Net loss

   $ (2,361     (12,326
  

 

 

   

 

 

 

Other comprehensive income (loss), net of tax:

    

Unrealized gains (loss) on securities available for sale

     3,829        (864
  

 

 

   

 

 

 

Other comprehensive income (loss), net of tax

     3,829        (864
  

 

 

   

 

 

 

Comprehensive income (loss)

     1,468        (13,190

Less: Comprehensive income (loss) attributable to noncontrolling interests

     63        (10,128
  

 

 

   

 

 

 

Comprehensive income (loss) attributable to BFC

   $ 1,405        (3,062
  

 

 

   

 

 

 

See Notes to Unaudited Consolidated Financial Statements.

 

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Table of Contents

BFC Financial Corporation

Consolidated Statement of Changes in Equity - Unaudited

For the Three Months Ended March 31, 2012

(In thousands)

 

    Shares of Common     Class A     Class B     Additional     (Accumulated
Deficit)
    Accumulated
Other
Comprehensive
    Total BFC     Non-
controlling
       
    Stock Outstanding     Common     Common     Paid-in     Retained     Income     Shareholders’     Interest in     Total  
    Class A     Class B     Stock     Stock     Capital     Earnings     (Loss)     Equity     Subsidiaries     Equity  

Balance, December 31, 2011

    70,275        6,860      $ 703      $ 69      $ 232,705      $ (100,873   $ (12,863   $ 119,741      $ 63,276      $ 183,017   

Net income (loss)

    —          —          —          —          —          (2,720     —          (2,720     359        (2,361

Other comprehensive income (loss)

    —          —          —          —          —          —          4,125        4,125        (296     3,829   

Net effect of subsidiaries’ capital transactions attributable to BFC

    —          —          —          —          399        —          —          399        —          399   

Noncontrolling interest net effect of subsidiaries’ capital transactions

    —          —          —          —          —          —          —          —          (7,057     (7,057

Cash dividends on 5% Preferred Stock

    —          —          —          —          —          (188     —          (188     —          (188

Share-based compensation

    —          —          —          —          109        —          —          109        —          109   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2012

    70,275        6,860      $ 703      $ 69      $ 233,213      $ (103,781   $ (8,738   $ 121,466      $ 56,282      $ 177,748   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Unaudited Consolidated Financial Statements.

 

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Table of Contents

BFC Financial Corporation

Consolidated Statements of Cash Flows - Unaudited

(In thousands)

 

     For the Three Months Ended
March 31,
 
     2012     2011  

Net cash provided by operating activities

   $ 28,213        50,182   
  

 

 

   

 

 

 

Investing activities:

    

Proceeds from redemption of tax certificates

     10,345        20,767   

Purchase of tax certificates

     (145     (9,415

Proceeds from the maturities of interest bearing deposits

     5,655        2,480   

Proceeds from sales of securities available for sale

     —          1,194   

Proceeds from maturities of securities available for sale

     5,365        56,282   

Purchase of securities available for sale

     —          (8,149

Cash paid in settlement of liabilities held for sale

     (668     —     

Distributions from unconsolidated affiliates

     82        139   

Net repayments of loans

     120,498        135,346   

Proceeds from the sales of loans transferred to held for sale

     1,000        3,100   

Proceeds from sales of real estate owned

     14,081        3,245   

Purchases of office property and equipment, net

     (99     (874
  

 

 

   

 

 

 

Net cash provided by investing activities

     156,114        204,115   
  

 

 

   

 

 

 

Financing activities:

    

Net increase in deposits

     177,608        113,815   

Net repayments of FHLB advances

     —          (125,010

Net decrease in securities sold under agreements to repurchase

     —          (4,518

Net increase in short term borrowings and federal funds purchased

     —          127   

Repayment of notes, mortgage notes and bonds payable

     (51,513     (53,472

Proceeds from notes, mortgage notes and bonds payable

     14,973        9,238   

Payments for debt issuance costs

     (800     (742

Preferred stock dividends paid

     —          (188

Distributions to non-controlling interest

     (7,350     (3,871
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     132,918        (64,621
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     317,245        189,676   

Cash and cash equivalents at beginning of period (1)

     853,132        588,846   

Cash and cash equivalents held for sale

     (49,676     (333
  

 

 

   

 

 

 

Cash and cash equivalents at end of period (2)

   $ 1,120,701        778,189   
  

 

 

   

 

 

 

 

(CONTINUED)

 

See Notes to Unaudited Consolidated Financial Statements.

 

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Table of Contents

BFC Financial Corporation

Consolidated Statements of Cash Flows - Unaudited

(In thousands)

 

     For the Three Months Ended  
     March 31,  
     2012     2011  

Supplemental cash flow information:

    

Interest paid on borrowings and deposits

   $ 15,290        19,584   

Income taxes paid

     2,977        3,277   

Income tax refunded

     (1,104     —     

Supplementary disclosure of non-cash investing and financing activities:

    

Loans and tax certificates transferred to real estate owned

     12,467        6,679   

Loans receivable transferred to loans held-for-sale

     16,140        27,522   

Increase (decrease) in accumulated other comprehensive income (loss), net of taxes

     3,829        (864

Net increase in BFC shareholders’ equity from the effect of subsidiaries’ capital transactions, net of taxes

     399        609   

 

(1) Included in cash and interest bearing deposits in other banks on the balance sheet as of December 31, 2011 and 2010 was $5.7 million and $45.6 million, respectively, of time deposits. These time deposits had original maturities of greater than 90 days and are not considered cash equivalents.
(2) Included in cash and interest bearing deposits in other banks on the balance sheet as of March 31, 2011 was $43.1 million of time deposits. These time deposits had original maturities of greater than 90 days and are not considered cash equivalents. There were no such time deposits recorded on the balance sheet as of March 31, 2012.

See Notes to Unaudited Consolidated Financial Statements.

 

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BFC Financial Corporation

Notes to Unaudited Consolidated Financial Statements

 

1.   Presentation of Interim Financial Statements

BFC Financial Corporation (“BFC” or, unless otherwise indicated or the context otherwise requires, “we”, “us”, “our” or the “Company”) is a holding company whose principal holdings include controlling interests in BankAtlantic Bancorp, Inc. (“BankAtlantic Bancorp”) and Bluegreen Corporation and its subsidiaries (“Bluegreen”), and a non-controlling interest in Benihana, Inc. (“Benihana”). BankAtlantic Bancorp is currently the parent company of BankAtlantic, a federal savings bank. BFC also holds interests in other investments and subsidiaries, as described herein.

As a holding company with controlling positions in BankAtlantic Bancorp and Bluegreen, generally accepted accounting principles (“GAAP”) require the consolidation of the financial results of both entities. As a consequence, the assets and liabilities of both entities are presented on a consolidated basis in BFC’s financial statements. However, except as otherwise noted, the debts and obligations of BankAtlantic Bancorp and Bluegreen as well as other consolidated entities, including our wholly owned subsidiary, Woodbridge Holdings LLC, are not direct obligations of BFC and are non-recourse to BFC. Similarly, the assets of those entities are not available to BFC absent a dividend or distribution. The recognition by BFC of income from controlled entities is determined based on the total percent of economic ownership in those entities. At March 31, 2012, BFC had an approximately 53% economic ownership interest in BankAtlantic Bancorp and an approximately 54% economic ownership interest in Bluegreen.

The Company’s business activities currently consist of (i) Real Estate and Other business activities and (ii) Financial Services. We currently report the results of our business activities through five segments. Three of the segments relate to our Real Estate and Other business activities. These segments are: BFC Activities; Real Estate Operations; and Bluegreen Resorts. Our other two segments — BankAtlantic’s commercial lending reporting unit (“CLRU”) and BankAtlantic Bancorp Parent Company, (which represents the operations of BankAtlantic Bancorp at its parent company level), — relate to our Financial Services business activities. As discussed below, discontinued operations include the results of Bluegreen Communities and BankAtlantic’s community banking, investment, capital services and tax certificate reporting units. Cypress Creek Holdings (“Cypress Creek Holdings”) is also reported as a discontinued operation. See Note 3 for additional information regarding discontinued operations.

On November 11, 2011, BFC entered into a definitive merger agreement with Bluegreen. Pursuant to the terms of the merger agreement, if the merger is consummated, Bluegreen will become a wholly-owned subsidiary of BFC, and Bluegreen’s shareholders (other than BFC) will be entitled to receive eight shares of BFC’s Class A Common Stock for each share of Bluegreen’s common stock that they hold at the effective time of the merger (as adjusted in connection with the reverse stock split expected to be effected by BFC in connection with the merger). The merger agreement contains representations, warranties and covenants on the part of BFC and Bluegreen which are believed to be customary for transactions of this type. Consummation of the merger is subject to a number of closing conditions. Certain of these conditions may not be waived, including the approval of both BFC’s and Bluegreen’s shareholders, and the listing of BFC’s Class A Common Stock on a national securities exchange at the effective time of the merger. Following the announcement of our entry into the merger agreement, purported class action lawsuits seeking to enjoin the merger or, if it is completed, to recover relief as determined by the presiding court to be appropriate were filed. See Note 14 for further information regarding this litigation. The merger agreement provides for the transaction to be consummated by June 30, 2012, subject to extension to a date no later than September 30, 2012 in the event the parties are proceeding in good faith with respect to the consummation of the merger.

On May 4, 2012, Bluegreen sold substantially all of the assets that comprised its Bluegreen Communities business to Southstar Development Partners, Inc. (“Southstar”) for a purchase price of $29.0 million in cash. Southstar also agreed to pay an amount equal to 20% of the net proceeds (as calculated in accordance with the terms of the agreement) it receives upon its sale, if any, of two specified parcels of real estate to be purchased by Southstar under the agreement. Assets excluded from the sale included primarily Bluegreen’s Communities notes receivable portfolio. See Note 3 for additional information. Bluegreen Communities was previously reported as a separate segment in our Real Estate and Other business activities and has been classified as a discontinued operation in all periods presented in the accompanying consolidated financial statements.

On November 1, 2011, BankAtlantic Bancorp entered into a definitive agreement to sell BankAtlantic to BB&T Corporation (“BB&T”), which agreement was amended on March 13, 2012 (the “Agreement”). The Agreement was

 

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amended, among other things, to provide for the assumption by BB&T of BankAtlantic Bancorp’s $285 million in principal amount of outstanding trust preferred securities (“TruPs”) obligations. BankAtlantic Bancorp remains obligated to pay at the closing of the transaction all interest accrued on the TruPs through closing, and agreed to pay or escrow certain legal fees and expenses with respect to the now resolved TruPs-related litigation brought in the Delaware Chancery Court against BankAtlantic Bancorp by holders of the TruPs and certain trustees. The accrued interest on the TruPs as of March 31, 2012 was $45.5 million. BankAtlantic Bancorp expects to fund the TruPs accrued interest and the TruPs related legal obligation from transaction proceeds. The Agreement provides that BankAtlantic will form two subsidiaries, BBX Capital Management, LLC (“CAM”) and Florida Asset Resolution Group, LLC (“FAR”). BankAtlantic will contribute certain performing and non-performing loans, tax certificates, cash and real estate owned to FAR that were recorded on the Statement of Financial Condition of BankAtlantic at $402 million as of March 31, 2012, inclusive of $12 million in cash. BankAtlantic will also contribute non-performing commercial loans, commercial real estate owned and cash as well as previously written off assets to CAM that were recorded on the Statement of Financial Condition of BankAtlantic at $208 million as of March 31, 2012, inclusive of $67 million in cash. The assets contributed to FAR and CAM are referred to herein on a combined basis as “Retained Assets”. At the closing of the transaction, BankAtlantic will contribute the membership interests in FAR and CAM to BankAtlantic Bancorp, and then BankAtlantic Bancorp will sell to BB&T all of the shares of capital stock of BankAtlantic. As a result of BB&T’s assumption of the TruPs obligations, BB&T will receive from BankAtlantic Bancorp a 95% preferred membership interest in the net cash flows of FAR until such time as it has recovered $285 million in preference amount plus a priority return of LIBOR + 200 basis points per annum. At that time, BB&T’s interest in FAR will terminate, and BankAtlantic Bancorp, which will initially hold a 5% preferred membership interest in the net cash flows of FAR, will thereafter be entitled to any and all residual proceeds. FAR’s assets are expected to be monetized over a period of seven years, or longer provided BB&T’s preference amount is repaid within such seven-year period. BankAtlantic Bancorp has also agreed to provide BB&T with an incremental $35 million guarantee to further assure BB&T’s recovery within seven years of the $285 million preference amount. FAR will assume any liabilities and servicing costs related to the assets contributed to it by BankAtlantic.

Pursuant to the Agreement, BankAtlantic Bancorp will receive a purchase premium of 10.32% of non-certificate deposits at closing (provided that the purchase premium will not exceed $315.9 million) resulting in BankAtlantic Bancorp recognizing a gain from the transaction approximately equal to the purchase premium less transaction costs. The transaction, which is currently anticipated to close during the second quarter of 2012, is subject to regulatory approvals and other customary terms and conditions. At the closing of the transaction, the sum of the purchase premium and the net asset value of BankAtlantic, as calculated pursuant to the Agreement after giving effect to the distribution to BankAtlantic Bancorp of the membership interests in CAM and FAR, is to be paid in cash. If the sum is a positive number, it is to be paid by BB&T to BankAtlantic Bancorp. If the sum is a negative number, it is to be paid by BankAtlantic Bancorp to BB&T. Upon consummation of the transaction, BankAtlantic Bancorp expects to have a controlling financial interest in FAR and anticipates consolidating FAR in BankAtlantic Bancorp’s financial statements. BB&T’s 95% preferred interest in FAR is mandatorily redeemable; therefore, BankAtlantic Bancorp expects to account for BB&T’s interest in FAR as debt.

Based on the probable sale of BankAtlantic, BankAtlantic Bancorp presented the assets and liabilities anticipated to be transferred to BB&T, which consist of all of BankAtlantic’s assets and liabilities less the Retained Assets, as “Assets held for sale” and “Liabilities held for sale” in its unaudited consolidated statement of financial condition as of March 31, 2012. The majority of cash and interest bearing deposits in other banks will be transferred to BB&T upon closing of the transaction; however, except for the cash at BankAtlantic’s branches and automated teller machines, this cash and interest bearing deposits are not presented as “Assets held for sale” as of March 31, 2012. The assets and liabilities anticipated to be transferred to BB&T are measured on a combined basis as a single disposal group at the lower of cost or fair value less cost to sell. Accordingly, the assets and liabilities held for sale are presented in the accompanying unaudited consolidated statement of financial condition as of March 31, 2012 based on their carrying value as BankAtlantic Bancorp anticipates recording a substantial gain associated with the transaction.

BankAtlantic’s community banking, investment, capital services and tax certificate reporting units are reflected as “Discontinued Operations” in the accompanying unaudited consolidated statements of operations for all periods presented. BankAtlantic Bancorp will continue to service and manage and may originate commercial loans after the sale of BankAtlantic to BB&T and as a result, the results of operations for the Commercial Lending reporting unit are included in the accompanying unaudited consolidated statement of operations as continuing operations for all periods presented. The assets and liabilities anticipated to be transferred to BB&T were not reclassified to assets and liabilities held for sale in the accompanying consolidated statement of financial condition as of December 31,

 

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2011. The unaudited consolidated statement of changes in equity, unaudited consolidated statements of comprehensive income (loss) and unaudited consolidated statements of cash flows remain unchanged from prior period historical presentation for all periods presented. Additionally, pursuant to the Agreement, BankAtlantic Bancorp agreed to sell to BB&T certain assets and liabilities associated with its commercial lending reporting unit and these assets and liabilities are included in assets and liabilities held for sale in the accompanying unaudited consolidated statements of financial condition as of March 31, 2012. BankAtlantic Bancorp will retain certain assets and liabilities associated with the disposed reporting units and these assets and liabilities are included in the accompanying unaudited consolidated statement of financial condition in the respective line item as of March 31, 2012.

BankAtlantic Bancorp and BFC have each requested from the Board of Governors of the Federal Reserve System (the “Federal Reserve” or “FRB”) decertification as a savings and loan holding company in connection with the closing of the transaction with BB&T. Subject to such approval, after consummation of the transaction, BankAtlantic Bancorp and BFC expect to no longer be or operate as unitary savings bank holding companies.

The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In management’s opinion, the accompanying unaudited consolidated financial statements contain all adjustments, which include normal recurring adjustments, as are necessary for a fair statement of the Company’s consolidated financial condition at March 31, 2012; the consolidated results of operations, comprehensive income (loss) and cash flows for the three months ended March 31, 2012 and 2011; and the changes in consolidated equity for the three months ended March 31, 2012. Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. These unaudited consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in Amendment No.1 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2011. All significant inter-company balances and transactions have been eliminated in consolidation. As used throughout this document, the term “fair value” reflects the Company’s estimate of fair value as discussed herein. Certain amounts for prior periods have been reclassified to conform to the current period’s presentation.

During the quarter ended March 31, 2012, management identified an error in its cost of sales and other miscellaneous accounts and recorded an out of period adjustment related to prior quarters and years. The impact of the errors was: an understatement of cost of sales of VOIs sold of $1.3 million; an overstatement of other expenses of $300,000; an understatement of net loss from continuing operations of $1.0 million; an overstatement of net income attributable to noncontrolling interest of $608,000; an overstatement of provision for income taxes of $402,000; and an understatement of net loss attributable to BFC of $22,000. Management has determined after evaluating the quantitative and qualitative aspects of these corrections that our current and prior period financial statements were not materially misstated. Furthermore, management believes that these adjustments will not be material to its estimated results of operations for the year ended December 31, 2012.

 

2.   Liquidity and Regulatory Considerations

BFC

Regulatory Considerations

As a result of its position as the controlling shareholder of BankAtlantic Bancorp, BFC is currently a “unitary savings and loan holding company” subject to examination and regulation by the Federal Reserve. Effective July 21, 2011, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Federal Reserve succeeded to the supervisory authority previously held by the Office of Thrift Supervision (“OTS”).

BFC, on a parent company only basis, has previously committed that it will not, without the prior written non-objection of its primary regulator, (i) incur or issue any additional debt or debt securities, increase lines of credit or guarantee the debt of any other entity, (ii) make dividend payments on its preferred stock, in each case without such prior written non-objection or (iii) enter into any new agreements, contracts or arrangements or materially modify any existing agreements, contracts or arrangements with BankAtlantic not consistent with past practices. BFC has determined not to seek the Federal Reserve’s written non-objection to the dividend payments on its preferred stock for each of the quarters ended December 31, 2011 and March 31, 2012 and, therefore, has not yet made the dividend payments. Unpaid dividends on BFC’s outstanding preferred stock will cumulate, and it is anticipated that payment of unpaid cumulative dividends will be made following BFC’s deregistration as a unitary savings and loan holding company. Deregistration is expected to occur in connection with the consummation of BankAtlantic Bancorp’s currently proposed sale of BankAtlantic to BB&T. Upon deregistration, dividend payments by BFC, including with respect to its outstanding preferred stock, will no longer require the prior written non-objection of the Federal Reserve. As of March 31, 2012, unpaid dividend payments totaled $375,000, and such amount is included in other liabilities in the accompanying consolidated statement of financial condition as of March 31, 2012.

 

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As described below, BankAtlantic Bancorp and BankAtlantic each entered into Cease and Desist Orders with the OTS during February 2011. (See “BankAtlantic Bancorp and BankAtlantic – Regulatory Considerations” below for a discussion regarding the terms of the Cease and Desist Orders.) If BankAtlantic Bancorp does not complete the sale of BankAtlantic to BB&T, BFC may, based on its ownership interest in BankAtlantic Bancorp, in the future be required to enter into a Cease and Desist Order with the Federal Reserve addressing its ownership and oversight of those companies. BFC is also subject to the same regulatory restrictions as BankAtlantic Bancorp with respect to its current status as a “unitary savings and loan holding company”. If BankAtlantic Bancorp completes the sale of BankAtlantic to BB&T, these regulatory requirements may no longer be applicable to BFC.

Liquidity Considerations

Except as otherwise noted, the debts and obligations of BankAtlantic Bancorp, Bluegreen and Woodbridge are not direct obligations of BFC and generally are non-recourse to BFC. Similarly, the assets of those entities are not available to BFC, absent a dividend or distribution from those entities. BFC’s principal sources of liquidity are its available cash and short-term investments.

We expect to use our available funds to fund operations and meet our obligations. We may also use available funds to make additional investments in the companies within our consolidated group, invest in equity securities and other investments, or repurchase shares of our common stock pursuant to our share repurchase program. On September 21, 2009, our board of directors approved a share repurchase program which authorizes the repurchase of up to 20,000,000 shares of Class A Common Stock and Class B Common Stock at an aggregate cost of up to $10 million. The share repurchase program replaced our $10 million repurchase program that our board of directors approved in October 2006 which placed a limitation on the number of shares which could be repurchased under the program at 1,750,000 shares of Class A Common Stock. The current program, like the prior program, authorizes management, at its discretion, to repurchase shares from time to time subject to market conditions and other factors. No shares were repurchased during the three months ended March 31, 2012, or during the years ended December 31, 2011 or 2010.

Since March 2009, BFC has not received cash dividends from BankAtlantic Bancorp. BankAtlantic Bancorp is currently prohibited from paying dividends on its common stock without first receiving the written non-objection of the Federal Reserve. In addition, during February 2009, BankAtlantic Bancorp elected to exercise its right to defer payments of interest on its trust preferred junior subordinated debt (the TruPs”). BankAtlantic Bancorp is permitted to defer quarterly interest payments for up to 20 consecutive quarters. During the deferral period, BankAtlantic Bancorp is prohibited from paying dividends to its shareholders, including BFC. BankAtlantic Bancorp can end the deferral period at any time. Under the terms of BankAtlantic Bancorp’s stock purchase agreement with BB&T, as amended on March 13, 2012, BB&T has agreed to assume the approximately $285 million in principal amount of BankAtlantic Bancorp’s TruPs, while BankAtlantic Bancorp agreed to pay at the closing of the transaction all deferred interest on the TruPs through the closing and to pay or escrow certain other TruPs-related fees and expenses. In addition to the above restrictions, BankAtlantic Bancorp may only pay dividends if and when declared by its board of directors, a majority of whom are independent directors under the listing standards of the New York Stock Exchange (the “NYSE”).

BFC has never received cash dividends from Bluegreen. Certain of Bluegreen’s credit facilities contain terms which prohibit the payment of cash dividends, and Bluegreen may only pay dividends subject to such restrictions and declaration by its board of directors, a majority of whom are independent directors under the listing standards of the NYSE.

During March 2012, a registration statement on Form S-3 was filed by Benihana and declared effective by the SEC, under which we may sell any and all of the 1,582,577 shares of Benihana’s Common Stock that we own. The proceeds we receive from any such sale will depend on the timing of the sale and the market price of Benihana’s Common Stock.

 

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We believe that our current financial condition and credit relationships, together with anticipated cash flows from other sources of funds, including proceeds expected to be recovered from surety bond litigation and, to the extent determined to be advisable, proceeds from the disposition of properties or investments, will allow us to meet our anticipated near-term liquidity needs. With respect to long-term liquidity requirements, in addition to the foregoing, we may also, subject to the receipt of any regulatory approval or non-objection (to the extent required), seek to raise funds through the incurrence of long-term secured or unsecured indebtedness, or the issuance of equity and/or debt securities. However, these alternatives may not be available to us on attractive terms, or at all. The inability to raise funds through the sources discussed above would have a material adverse effect on the Company’s business, results of operations and financial condition.

Woodbridge

On September 21, 2009, BFC consummated its merger with Woodbridge Holdings Corporation (“WHC”). Pursuant to the merger, WHC became a wholly owned subsidiary of BFC, Woodbridge and the shareholders of WHC at the effective time of the merger (other than BFC) were entitled to receive in exchange for each share of WHC’s Class A Common Stock that they owned, 3.47 shares of BFC’s Class A Common Stock. Under Florida law, holders of WHC’s Class A Common Stock who did not vote to approve the merger and properly asserted and exercised their appraisal rights with respect to their shares (“Dissenting Holders”) are entitled to receive a cash payment in an amount equal to the fair value of their shares as determined in accordance with the provisions of Florida law in lieu of the shares of BFC’s Class A Common Stock that they would otherwise have been entitled to receive. Dissenting Holders, who collectively held approximately 4.2 million shares of WHC’s Class A Common Stock, have rejected Woodbridge’s offer of $1.10 per share and requested payment for their shares based on their respective fair value estimates of WHC’s Class A Common Stock. Woodbridge is currently a party to legal proceedings relating to the appraisal process. In December 2009, a $4.6 million liability was recorded with a corresponding reduction to additional paid-in capital, which is reflected in the Company’s consolidated statements of financial condition representing in the aggregate Woodbridge’s offer to the Dissenting Holders. However, the appraisal rights litigation is currently ongoing and its outcome is uncertain. As a result, there is no assurance as to the amount of the payment that will ultimately be required to be made to the Dissenting Holders, which amount may be greater than the $4.6 million that has been accrued.

Core Communities

In early 2010, Woodbridge made the decision to pursue an orderly liquidation of Core Communities LLC, Woodbridge’s wholly owned subsidiary (“Core” or Core Communities”) and worked cooperatively with the various lenders to achieve that objective. During November 2010, Core entered into a settlement agreement with one of its lenders, which had previously commenced actions seeking foreclosure of properties in Florida and South Carolina which served as collateral under mortgage loans totaling approximately $113.9 million. Under the terms of the agreement, Core pledged additional collateral to the lender consisting of membership interests in five of Core’s subsidiaries and granted security interests in the real property owned by such subsidiaries in Port St. Lucie, Florida, substantially all of which was undeveloped raw land. Core also agreed to an amendment of the complaint related to the Florida foreclosure action to include this additional collateral and an entry into consensual judgments of foreclosure in both the Florida and South Carolina foreclosure actions. As of November 30, 2010, Core deconsolidated the five subsidiaries, the membership interests in which were transferred to the lender upon entry into the consensual judgments of foreclosure. In turn, the lender agreed not to enforce a deficiency judgment against Core and, in February 2011, released Core from any other claims arising from or relating to the loans. In connection therewith, the deferred gain on settlement of investment in subsidiary was recognized into income during the three months ended March 31, 2011.

 

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Approximately $27.2 million of the $113.9 million of mortgage loans described above was collateralized by property in South Carolina which had an estimated carrying value of approximately $19.4 million at December 31, 2010 and was subject to separate foreclosure proceedings. The foreclosure proceedings related to this property were completed on November 3, 2011 and, in accordance with the applicable accounting guidance, the Company recorded an $11.6 million gain on extinguishment of debt during the fourth quarter of 2011.

In December 2010, Core and one of its subsidiaries entered into agreements, including, without limitation, a Deed in Lieu of Foreclosure Agreement, with one of their lenders which resolved the foreclosure proceedings commenced by the lender related to property which served as collateral for a $25 million loan. Pursuant to the agreements, Core’s subsidiary transferred to the lender all of its right, title and interest in and to the property as well as certain additional real and personal property. In consideration therefor, the lender released Core and its subsidiary from any claims arising from or relating to the loan. In accordance with applicable accounting guidance, this transaction was accounted for as a troubled debt restructuring and a $13.0 million gain on debt extinguishment was recognized during the year ended December 31, 2010.

Carolina Oak

In 2007, WHC acquired from Levitt and Sons, LLC (“Levitt and Sons”), WHC’s wholly-owned subsidiary at the time, all of the outstanding membership interests in Carolina Oak, LLC (“Carolina Oak”), which engaged in homebuilding activities in South Carolina prior to the suspension of the activities in the fourth quarter of 2008. In the fourth quarter of 2009, the inventory of real estate at Carolina Oak was reviewed for impairment and a $16.7 million impairment charge was recorded to adjust the carrying amount of Carolina Oak’s inventory to its fair value of $10.8 million.

Woodbridge was the obligor under a $37.2 million loan collateralized by the Carolina Oak property. During 2009, the lender declared the loan to be in default and filed an action for foreclosure. On April 26, 2011, a settlement agreement was entered into to resolve the disputes and ligation relating to the loan. Under the terms of the settlement agreement, (i) Woodbridge paid $2.5 million to the note holder, (ii) Carolina Oak conveyed to the note holder the real property securing the loan and (iii) the note holder agreed not to pursue certain remedies, including a deficiency judgment, and after the expiration of an agreed-upon time period, to fully release Woodbridge and Carolina Oak, in each case subject to certain conditions. In accordance with applicable accounting guidance, a deferred gain on debt settlement of $29.9 million was recorded in the Company’s consolidated statement of financial condition as of December 31, 2011 and will be recognized as income in the second quarter of 2012.

Cypress Creek Holdings

Cypress Creek Holdings owned an 80,000 square foot office building in Fort Lauderdale, Florida. As of December 31, 2011, the building, which had an estimated carrying value of approximately $6.4 million, served as collateral for an approximately $11.2 million mortgage loan.

The building was previously 50% occupied by an unaffiliated third party pursuant to a lease which expired in March 2010. The tenant opted not to renew the lease and vacated the space as of March 31, 2010. After efforts to lease the space proved unsuccessful, the lender with respect to the loan secured by the office building agreed to permit Cypress Creek Holdings to pursue a short sale of the building. Cypress Creek Holdings results of operations are reported as a discontinued operation in the Company’s consolidated financial statements and its assets were classified as assets held for sale as of December 31, 2011. During January 2012, the building was sold for approximately $10.8 million. The proceeds of the sale plus a $668,000 payment made by Cypress Creek Holdings were paid to the lender in full satisfaction of the loan. During the first quarter of 2012, the Company recognized a gain of approximately $4.4 million in connection with the sale.

BankAtlantic Bancorp and BankAtlantic

Regulatory Considerations

On February 23, 2011, BankAtlantic Bancorp and BankAtlantic each entered into a Stipulation and Consent to Issuance of Order to Cease and Desist with the OTS, BankAtlantic Bancorp’s and BankAtlantic’s primary regulator on that date. Since July 21, 2011, the regulatory oversight of BankAtlantic Bancorp is under the Federal Reserve and the regulatory oversight of BankAtlantic is under the Office of the Comptroller of the Currency (“OCC”) as a result

 

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of the passage of the Dodd-Frank Act. The Order to Cease and Desist to which BankAtlantic Bancorp is subject is referred to as the “Company Order,” the Order to Cease and Desist to which BankAtlantic is subject is referred to as the “Bank Order” and the Company Order and Bank Order are referred to collectively as the “Orders.” The OTS issued the Orders due to BankAtlantic Bancorp’s losses over the prior three years, high levels of classified assets and inadequate levels of capital based on BankAtlantic’s risk profile as determined by the OTS following its examination. BankAtlantic Bancorp submitted written plans to the OTS that address, among other things, BankAtlantic’s capital and set forth BankAtlantic Bancorp’s business plan. In addition, under the terms of the Company Order, BankAtlantic Bancorp is prohibited from taking certain actions without receiving the prior written non-objection of the FRB, including, without limitation, declaring or paying any dividends or other capital distributions and incurring certain indebtedness. BankAtlantic Bancorp is also required to ensure BankAtlantic’s compliance with the terms of the Bank Order as well as all applicable laws, rules, regulations and agency guidance.

Pursuant to the terms of the Bank Order, BankAtlantic is required to maintain a tier 1 (core) capital ratio equal to or greater than 8% and a total risk-based capital ratio equal to or greater than 14%. At March 31, 2012, BankAtlantic had a tier 1 (core) capital ratio of 7.72% and a total risk-based capital ratio of 15.77%. BankAtlantic’s tier 1 capital ratio fell below the regulatory requirements due to growth in assets during the three months ended March 31, 2012. The increase in assets reflects $179.6 million in deposit growth with the proceeds invested in cash at the Federal Reserve Bank. If the BB&T transaction is not completed, BankAtlantic would take steps to improve its tier 1 capital ratio through the reduction of cash at the Federal Reserve Bank with a corresponding reduction in deposits. Since BankAtlantic’s tier 1 capital ratio fell below the minimum required tier 1 capital ratio in the Bank Order, BankAtlantic may upon any written request from the OCC, be required to submit a contingency plan, which must detail actions which BankAtlantic would take to either merge with or be acquired by another banking institution. BankAtlantic would not be required to implement such contingency plan until such time as it receives written notification from the OCC to do so. BankAtlantic believes that any contingency plan requirement would be met by the Agreement with BB&T. In addition, the Bank Order requires BankAtlantic to limit its asset growth and restricts BankAtlantic from originating or purchasing new commercial real estate loans or entering into certain material agreements, in each case without receiving the prior written non-objection of the OCC. As a result of the deposit growth noted above, BankAtlantic’s assets grew during the first quarter of 2012 by $172.6 million, all of which was maintained in cash balances. Separately, the OTS confirmed that it has no objection to BankAtlantic originating loans to facilitate the sale of certain assets or the renewal, extension or modification of existing commercial real estate loans, subject in each case to compliance with applicable regulations and bank policies. Under the terms of the Bank Order, BankAtlantic has revised certain of its plans, programs and policies and submitted to the OCC certain written plans, including a capital plan, a business plan and a plan to reduce BankAtlantic’s delinquent loans and non-performing assets. The Bank Order prohibits the payment of dividends and other distributions without the prior written non-objection of the OCC. The Orders also include certain restrictions on compensation paid to directors and named executive officers of BankAtlantic Bancorp and BankAtlantic, and restrictions on agreements with affiliates.

In the event the BB&T transaction is not consummated, BankAtlantic Bancorp may seek to issue its Class A Common Stock in public or private offerings, and BankAtlantic would seek to adopt operating strategies to increase revenues and to reduce asset balances, non-interest expenses, and non-performing loans in order to meet the heightened regulatory capital levels and asset growth restrictions under the Bank Order. There can be no assurance that BankAtlantic Bancorp or BankAtlantic will be able to execute these or other strategies in order for BankAtlantic to comply with the requirements in subsequent periods.

Each Order became effective on February 23, 2011 and will remain in effect until terminated, modified or suspended by the OCC, as it relates to the Bank Order, or the FRB, as it relates to the Company Order. No fines or penalties were imposed in connection with either Order. If there is any material failure by BankAtlantic Bancorp or BankAtlantic to comply with the terms of the Orders, or if unanticipated market factors emerge, and/or if BankAtlantic Bancorp is unable to successfully execute its plans, or comply with other regulatory requirements, then the regulators could take further action, which could include the imposition of fines and/or additional enforcement actions. Enforcement actions broadly available to regulators include the issuance of a capital directive, removal of officers and/or directors, institution of proceedings for receivership or conservatorship, and termination of deposit insurance. Any such action would have a material adverse effect on BankAtlantic Bancorp’s business, results of operations and financial position.

Liquidity Considerations

Both BankAtlantic Bancorp and BankAtlantic actively manage liquidity and cash flow needs. BankAtlantic’s liquidity is primarily dependent on its ability to maintain or increase deposit levels and secondarily dependent on the

 

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availability of its lines of credit borrowings with the Federal Home Loan Bank (“FHLB”) as well as the Treasury and Federal Reserve lending programs. As of March 31, 2012, BankAtlantic had $1.1 billion of cash and approximately $578 million of available unused borrowings, consisting of $543 million of unused FHLB line of credit capacity, $7 million of unpledged securities, and $28 million of available borrowing capacity at the Federal Reserve. BankAtlantic has $601 million of loans pledged against the FHLB unused borrowings and $30 million of securities available for sale pledged against unused Federal Reserve borrowings. However, such available borrowings are subject to regular reviews and may be terminated, suspended or reduced at any time at the discretion of the issuing institution or based on the availability of qualifying collateral. Additionally, interest rate changes, additional collateral requirements, disruptions in the capital markets, adverse litigation or regulatory actions, or deterioration in BankAtlantic’s financial condition may reduce the amounts it is able to borrow, make borrowings unavailable or make terms of the borrowings and deposits less favorable. As a result, BankAtlantic’s cost of funds could increase and the availability of funding sources could decrease.

BankAtlantic Bancorp had cash of $4.8 million and current liabilities of $6.9 million as of March 31, 2012. BankAtlantic Bancorp does not have debt maturing until March 2032 and has the ability to defer interest payments on its junior subordinated debentures until December 2013; however, based on current interest rates, accrued and unpaid interest of approximately $76 million would be owed as of December 2013 if interest is deferred until that date. BankAtlantic Bancorp’s operating expenses for the three months ended March 31, 2012 were $5.7 million with the majority of these expenses associated with the now resolved TruPs litigation in the Delaware Chancery Court. The majority of the current liabilities were associated with the TruPs litigation and are anticipated to be paid upon consummation of the transaction with BB&T. BankAtlantic Bancorp’s liquidity is dependent on the consummation of the Agreement, repayments of loans, sales of loans and real estate, and obtaining funds from external sources. Based on the current and expected liquidity needs and sources, BankAtlantic Bancorp expects to be able to meet its liquidity needs over the next 12 months. In the event that the BB&T transaction is not consummated, BankAtlantic Bancorp may seek to increase liquidity to meet its obligations through the sale of assets or the issuance of its Class A Common Stock.

 

3.   Assets and Liabilities Held for Sale

Bluegreen Communities

On October 12, 2011, Bluegreen entered into a Purchase and Sale Agreement with Southstar, which, provided for the sale to Southstar of substantially all of the assets that comprised Bluegreen Communities. On May 4, 2012, the sale was consummated in accordance with the terms of the agreement, as amended, and Southstar paid $29.0 million in cash for the assets. Southstar has also agreed to pay an amount equal to 20% of the net proceeds (as calculated in accordance with the terms of the agreement) it receives upon its sale, if any, of two specified parcels of real estate to be purchased by Southstar under the agreement. Assets excluded from the sale primarily included Bluegreen Communities’ notes receivable portfolio and Bluegreen or Bluegreen Communities subsidiaries will generally remain responsible for commitments and liabilities relating to previously completed developments and assets not sold to Southstar. In addition, liabilities not assumed by Southstar under the agreement, including liabilities related to Bluegreen Communities’ operations prior to the closing of the transaction, are retained by Bluegreen.

Bluegreen Communities is reported as a discontinued operation and the majority of Bluegreen Communities assets are classified as “assets held for sale” for all periods presented. The assets held for sale primarily consist of Bluegreen Communities’ real estate assets valued on our books at $27.8 million and $28.6 million as of March 31, 2012 and December 31, 2011, respectively, which in each case was derived from the sales price under the Purchase and Sale Agreement, as amended, (Level 3) discussed above, less estimated costs to sell.

Also included in results of discontinued operations in each of the periods presented is interest expense primarily on the H4BG Communities Facility ($20.5 million as of March 31, 2012) as certain of the assets classified as held for sale served as collateral under this facility. Under the terms of the facility, the entire amount of the debt outstanding under the facility which was approximately $20.5 million in principal amount as of March 31, 2012 and $20.2 million in principal amount as of May 4, 2012, accelerated and became immediately due, and was repaid by Bluegreen together with accrued interest and accrued $2.0 million deferred fee, upon the sale of the respective assets on May 4, 2012.

 

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Cypress Creek Holdings

As described in Note 2, during January 2012, Cypress Creek Holdings sold the office building it owned for approximately $10.8 million. The building served as collateral for an approximately $11.2 million mortgage loan, accordingly the proceeds of the sale plus $668,000 payment made by Cypress Creek Holdings were paid to the lender in full satisfaction of the loan and the Company recognized a gain of approximately $4.4 million during the first quarter of 2012. Cypress Creek Holdings’ results of operations are reported as a discontinued operation in the accompanying consolidated financial statements and its assets were classified as assets held for sale as of December 31, 2011.

The following table summarizes the assets held for sale and liabilities related to the assets held for sale for Bluegreen Communities and Cypress Creek Holdings as of March 31, 2012 and December 31, 2011 (in thousands):

 

     March 31, 2012  
     Bluegreen
Communities
     Cypress
Creek
Holdings
     Total  

Real estate inventory

   $ 22,389         —           22,389   

Property and equipment, net

     5,361         —           5,361   
  

 

 

    

 

 

    

 

 

 

Assets held for sale

   $ 27,750         —           27,750   
  

 

 

    

 

 

    

 

 

 

 

     December 31, 2011  
     Bluegreen
Communities
     Cypress
Creek
Holdings
     Total  

Real estate inventory

   $ 23,264         —           23,264   

Property and equipment, net

     5,361         6,410         11,771   
  

 

 

    

 

 

    

 

 

 

Assets held for sale

   $ 28,625         6,410         35,035   
  

 

 

    

 

 

    

 

 

 

Notes and mortgage payable

   $ —           11,156         11,156   
  

 

 

    

 

 

    

 

 

 

Liabilities related to assets held for sale

   $ —           11,156         11,156   
  

 

 

    

 

 

    

 

 

 

The following table summarizes the results of discontinued operations for Bluegreen Communities and Cypress Creek Holdings for the three months ended March 31, 2012 and 2011 (in thousands):

 

     For the Three Months Ended March 31, 2012  
     Bluegreen
Communities
    Cypress  Creek
Holdings
     Total  

Revenues

   $ 2,798        3         2,801   

Gain on sale of asset

     —          4,446         4,446   
  

 

 

   

 

 

    

 

 

 
     2,798        4,449         7,247   
  

 

 

   

 

 

    

 

 

 

Cost and Expenses:

       

Other costs and expenses

     2,664        52         2,716   

Loss on assets held for sale

     264        —           264   

Interest expense

     642        —           642   
  

 

 

   

 

 

    

 

 

 
     3,570        52         3,622   
  

 

 

   

 

 

    

 

 

 

(Loss) income from discontinued operations before taxes

     (772     4,397         3,625   

Benefit for income taxes

     469        —           469   
  

 

 

   

 

 

    

 

 

 

(Loss) income from discontinued operations

   $ (303     4,397         4,094   
  

 

 

   

 

 

    

 

 

 

 

18


Table of Contents
     For the Three Months Ended March 31, 2011  
     Bluegreen
Communities
    Cypress  Creek
Holdings
    Total  

Revenues

   $ 5,723        —          5.723   
  

 

 

   

 

 

   

 

 

 
     5,723        —          5,723   
  

 

 

   

 

 

   

 

 

 

Cost and Expenses:

      

Other costs and expenses

     5,898        271        6,169   

Interest expense

     760        161        921   
  

 

 

   

 

 

   

 

 

 
     6,658        432        7,090   
  

 

 

   

 

 

   

 

 

 

Loss from discontinued operations before taxes

     (935     (432     (1,367

Benefit for income taxes

     352        —          352   
  

 

 

   

 

 

   

 

 

 

Loss from discontinued operations

   $ (583     (432     (1,015
  

 

 

   

 

 

   

 

 

 

BankAtlantic Bancorp

The following table summarizes the assets and liabilities held for sale related to the BankAtlantic Bancorp transaction (as discussed in Note 1) as of March 31, 2012 (in thousands):

 

     March 31, 2012  

Cash and due from banks

   $ 49,676   

Securities available for sale, at fair value

     40,527   

Tax certificates

     29,881   

Federal Home Loan Bank stock

     18,308   

Loans receivable

     1,906,897   

Accrued interest receivable

     12,813   

Office properties and equipment

     126,975   

Goodwill

     12,241   

Other assets

     27,062   
  

 

 

 

Total assets held for sale (1)

   $ 2,224,380   
  

 

 

 

Deposits

  

Interest free checking

   $ 917,780   

Insured money fund savings

     626,444   

Now accounts

     1,155,314   

Savings accounts

     435,266   
  

 

 

 

Total non-certificate accounts

     3,134,804   

Certificate accounts

     320,493   
  

 

 

 

Total deposits held for sale (2)

   $ 3,455,297   
  

 

 

 

Subordinated debentures

   $ 22,000   

Other liabilities

     36,539   
  

 

 

 

Total other liabilities held for sale (2)

   $ 58,539   
  

 

 

 

Total liabilities held for sale

   $ 3,513,836   
  

 

 

 

 

(1) Loans receivable, office properties and equipment and goodwill amounts includes decreases of approximately $5.7 million, $6.2 million and $0.8 million, respectively, and other assets includes an increase of approximately $7.3 million related to BFC’s purchase accounting. These purchase accounting amounts were in connection with BFC’s share acquisitions of BankAtlantic Bancorp in 2008, which were accounted for as step acquisitions under the purchase method of accounting then in effect.
(2) Total deposits held for sale includes the elimination of $2.2 million of cash held at BankAtlantic by BFC. Total other liabilities held for sale includes the elimination of $0.2 million of shared service accruals between BankAtlantic and BFC.

The majority of the cash and interest bearing deposits in other banks on BankAtlantic Bancorp’s consolidated statement of financial condition will also be transferred to BB&T in connection with the assumption of liabilities by BB&T.

 

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Table of Contents

BankAtlantic’s five reporting units each reflect a component of the BankAtlantic entity and each is the lowest level for which cash flows can be clearly distinguished, operationally and for financial reporting purposes. These five components are Community Banking, Commercial Lending, Tax Certificates, Investments, and Capital Services. BankAtlantic Bancorp determined that its Community Banking, Investments, Capital Services and Tax Certificates reporting units should be treated as discontinued operations. The Agreement commits BankAtlantic Bancorp to a plan to sell all operations and the majority of the assets and liabilities of these discontinued reporting units. Management of BankAtlantic Bancorp does not intend to continue in any material respect any activities of or have any continuing involvement with these reporting units. BankAtlantic Bancorp intends to continue Commercial Lending reporting unit activities after the closing of the transaction. Therefore, although certain assets of this reporting unit will be sold to BB&T and are presented as assets and liabilities held for sale in the consolidated statement of financial condition as of March 31, 2012, the Commercial Lending reporting unit was not reported as discontinued operations.

Pursuant to the Agreement, FAR will include certain assets and liabilities that were associated with BankAtlantic Bancorp’s disposed reporting units (Community Banking, Tax Certificates, Investments, and Capital Services reporting units). BankAtlantic Bancorp determined that the ongoing cash flows of the disposed reporting units were not significant relative to the historical cash flows of each reporting unit; therefore the income and expenses associated with the disposed reporting units are reported in discontinued operations for each period presented. The carrying value of the disposed reporting units’ net assets anticipated to be included in FAR’s total assets discussed above was $134 million as of March 31, 2012. BankAtlantic Bancorp and BB&T intend to hire asset managers to manage and ultimately liquidate these FAR assets in orderly transactions over a seven year period. Ninety-five percent of the cash flows from these assets net of operating expenses and the preferred return will be applied toward the payment of BB&T’s preferred interest in FAR.

The loss from Community Banking, Investments, Capital Services and Tax Certificates reporting units included in discontinued operations in the accompanying consolidated statement of operations was as follows (in thousands):

 

     For the Three
Months Ended
March 31,
 
     2012     2011  

Revenues:

    

Interest income

   $ 21,016        28,226   

Service charges on deposits

     7,851        12,032   

Other service charges and fees

     5,938        7,191   

Securities activities, net

     —          (24

Other non-interest income

     3,735        3,294   
  

 

 

   

 

 

 
     38,540        50,719   
  

 

 

   

 

 

 

Costs and Expenses:

    

Total interest expense

     3,254        4,712   

Provision for loan losses

     9,217        20,985   

Employee compensation and benefits (1)

     11,690        13,767   

Occupancy and equipment (1)

     7,272        9,122   

Advertising and promotion (1)

     1,016        1,583   

Professional fees (1)

     1,823        1,232   

Other expenses (1)

     5,418        7,848   
  

 

 

   

 

 

 
     39,690        59,249   
  

 

 

   

 

 

 

Net loss from discontinued operations

   $ (1,150     (8,530
  

 

 

   

 

 

 

 

(1) All general corporate overhead was allocated to continuing operations.

 

20


Table of Contents
4.   Fair Value Measurement

The following tables present major categories of the Company’s assets measured at fair value on a recurring basis as of March 31, 2012 and December 31, 2011 (in thousands):

 

            Fair Value Measurements Using  

Description

   March 31,
2012
     Quoted prices in
Active Markets
for Identical
Assets (Level 1)
     Significant
Other
Observable
Inputs

(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

Benihana’s Common Stock

   $ 20,526         20,526         —           —     

Other equity securities

     221         221         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 20,747         20,747         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
            Fair Value Measurements Using  

Description

   December 31,
2011
     Quoted prices in
Active Markets
for Identical
Assets (Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

Mortgage-backed securities

   $ 13,418         —           13,418         —     

REMICS

     31,690         —           31,690         —     

Benihana’s Common Stock

     16,190         16,190         —           —     

Other equity securities

     1,505         1,005         500         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 62,803         17,195         45,608         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Real estate mortgage investment conduits (“REMICs”) are pass-through entities that hold residential loans, and investors are issued ownership interests in the entities in the form of a bond. The securities were issued by government agencies.

There were no liabilities measured at fair value on a recurring basis in the Company’s financial statements as of March 31, 2012 or December 31, 2011.

The following table presents major categories of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2011 (in thousands):

 

     Benihana
Convertible
Preferred
Stock (1)
 

Beginning Balance at January 1, 2011

   $ 21,106   

Total gains and losses (realized/unrealized) Included in earnings (or changes in net assets)

     —     

Cumulative effect of change in accounting principle

     —     

Included in other comprehensive loss

     (155

Purchases, issuances, and settlements

     —     

Transfers in and/or out of Level 3

     —     
  

 

 

 

Balance at March 31, 2011

   $ 20,951   
  

 

 

 

 

(1) 

During May and July 2011, BFC converted an aggregate of 300,000 shares of Convertible Preferred Stock of Benihana into shares of Benihana’s Common Stock. In connection with the May 2011 conversion, effective for the quarter ended June 30, 2011, we began to assess the value of our investment in Benihana’s Convertible Preferred Stock, as if converted, by using the market approach with Level 2 measurements instead of the income approach with Level 3 measurements which we historically used. During October 2011, BFC converted its remaining 500,000 shares of Convertible Preferred Stock of Benihana into shares of Benihana’s Common Stock.

The valuation techniques and the inputs used in our financial statements to measure the fair value of our recurring financial instruments are described below.

The fair values of mortgage-backed securities and REMICs are estimated using independent pricing sources and matrix pricing. Matrix pricing uses a market approach valuation technique and Level 2 valuation inputs as quoted market

 

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Table of Contents

prices are not available for the specific securities that BankAtlantic Bancorp owns. The independent pricing sources value these securities using observable market inputs including: benchmark yields, reported trades, broker/dealer quotes, issuer spreads and other reference data in the secondary institutional market which is the principal market for these types of assets. To validate fair values obtained from the pricing sources, BankAtlantic Bancorp reviews fair value estimates obtained from brokers, investment advisors and others to determine the reasonableness of the fair values obtained from independent pricing sources. BankAtlantic Bancorp reviews any price that it determines may not be reasonable and requires the pricing sources to explain the differences in fair value or re-evaluate its estimated fair value.

Equity securities are generally fair valued using the market approach and quoted market prices (Level 1) or matrix pricing (Level 2) with inputs obtained from independent pricing sources, if available. At March 31, 2012 and December 31, 2011, the estimated fair value of Benihana’s Common Stock was obtained by using the quoted market price using Level 1 inputs. We also obtain non-binding broker quotes to validate fair values obtained from matrix pricing. BankAtlantic Bancorp also invests in private limited partnerships that do not have readily determinable fair values. BankAtlantic Bancorp uses the net asset value per share as provided by the partnership to estimate the fair value of these investments. The net asset value of the partnership is a Level 2 input since BankAtlantic Bancorp has the ability to require the redemption of its investment at its net asset value.

The following tables present major categories of assets measured at fair value on a non-recurring basis as of March 31, 2012 and 2011 (in thousands):

 

     Fair Value Measurements Using  

Description

   As of
March 31,
2012
     Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
     Total
Impairments (1)
For the Three
Months Ended
March 31, 2012
 

Impaired real estate owned

   $ 15,223         —           —           15,223         1,741   

Impaired loans held for sale

     7,914         —           —           7,914         263   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 23,137         —           —           23,137         2,004   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Total impairments represent the amount recognized during the applicable period on assets that were measured at fair value on the last day of the period.

Quantitative information about significant unobservable inputs within Level 3 non-recurring major categories of assets is as follows:

 

As of March 31, 2012 Description

   Fair Value
(in  thousands)
    

Valuation

Technique

  

Unobservable
Inputs

   Range (Average) (1)

Impaired real estate owned

   $ 15,223       Fair Value of Property    Appraisal    $0.4 - 3.5 million (2.5 million)

Impaired loans held for sale

     7,914       Fair Value of Collateral    Appraisal    $0.9 - 3.6 million (2.6 million)
  

 

 

          

Total

   $ 23,137            
  

 

 

          

 

(1) Range and average appraised value includes cost to sell.

 

     Fair Value Measurements Using  

Description

   As of
March 31,
2011
     Quoted prices in
Active Markets
for Identical
Assets (Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
     Total
Impairments (1)
For the Three
Months Ended
March 31, 2011
 

Loans measured for impairment using the fair value of the underlying collateral

   $ 238,540         —           —           238,540         14,497   

Impaired loans held for sale

     33,664         —           —           33,664         4,479   

Impaired real estate owned

     19,728         —           —           19,728         2,323   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 291,932         —           —           291,932         21,299   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

Total impairments represent the amount recognized during the applicable period on assets that were measured at fair value on the last day of the period.

There were no liabilities measured at fair value on a non-recurring basis in the Company’s financial statements as of March 31, 2012 or December 31, 2011.

 

22


Table of Contents

Loans Receivable Measured For Impairment

Impaired loans are generally valued based on the fair value of the underlying collateral less cost to sell. BankAtlantic Bancorp primarily uses third party appraisals to assist in measuring non-homogenous impaired loans. These appraisals generally use the market or income approach valuation technique and use market observable data to formulate an opinion of the fair value of the loan’s collateral. However, the appraiser uses professional judgment in determining the fair value of the collateral or properties, and BankAtlantic Bancorp may also adjust these values for changes in market conditions subsequent to the appraisal date. When current appraisals are not available for certain loans, BankAtlantic Bancorp uses its judgment on market conditions to adjust the most current appraisal. The sales prices may reflect prices of sales contracts not closed, and the amount of time required to sell out the real estate project may be derived from current appraisals of similar projects. As a consequence, the calculation of the fair value of the collateral are considered Level 3 inputs. BankAtlantic Bancorp generally recognizes impairment losses when impaired homogenous loans become 120 days delinquent based on third party broker price opinions or an automated valuation service to obtain the fair value of the collateral less cost to sell. . These third party valuations from real estate professionals also use Level 3 inputs in determining fair values. The observable market inputs used to fair value loans are comparable property sales, rent rolls, market capitalization rates on income producing properties, risk adjusted discounts rates and foreclosure period and exposure periods. The fair value of BankAtlantic Bancorp loans may significantly increase or decrease based on property values as its loans are primarily real estate loans.

Loans Held for Sale

Loans held for sale are valued using an income approach with Level 3 inputs as market quotes or sale transactions of similar loans are generally not available. The fair value is estimated by discounting forecasted cash flows, using a discount rate that reflects the risks inherent in the loans held for sale portfolio. For non-performing loans held for sale, the forecasted cash flows are based on the estimated fair value of the collateral less cost to sell adjusted for foreclosure expenses and other operating expenses of the underlying collateral until foreclosure or sale.

Impaired Real Estate Owned

Real estate is generally valued using third party appraisals or broker price opinions. These appraisals generally use the market approach valuation technique and use market observable data to formulate an opinion of the fair value of the properties. The market observable data was generally comparable property sales, rent rolls, market capitalization rates on income producing properties and risk adjusted discount rates. However, the appraisers or brokers use professional judgments in determining the fair value of the properties and we may also adjust these values for changes in market conditions subsequent to the valuation date. As a consequence of using appraisals, broker price opinions and adjustments to appraisals, the fair values of the properties are considered Level 3 inputs.

Financial Disclosures about Fair Value of Financial Instruments

The following tables present information for financial instruments at March 31, 2012 and December 31, 2011 (in thousands):

 

            Fair Value Measurements Using  
     Carrying
Amount As
of March 31,
2012
     As of
March 31,
2012
     Quoted prices in
Active Markets
for Identical
Assets (Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

Financial assets:

              

Cash and interest bearing deposits in other banks

   $ 1,120,701         1,120,701         1,120,701         —           —     

Restricted cash

     67,226         67,226         67,226         —           —     

Securities available for sale

     20,747         20,747         20,747         —           —     

Tax certificates

     6,120         5,982         —           —           5,982   

Loans receivable including loans held for sale, net

     448,608         433,477         —           —           433,477   

Notes receivable

     505,605         542,000         —           —           542,000   

Financial liabilities:

              

Receivable-backed notes payable

   $ 458,082         443,000         —           —           443,000   

Notes and mortgage notes payable and other borrowings

     70,465         70,000         —           —           70,000   

Junior subordinated debentures

     481,617         424,974         —           302,974         122,000   

 

23


Table of Contents
     December 31, 2011  
     Carrying
Amount
     Fair Value  

Financial assets:

     

Cash and interest bearing deposits in other banks

   $ 858,789         858,789   

Restricted cash

     62,727         62,727   

Securities available for sale

     62,803         62,803   

Tax certificates

     46,488         45,562   

Federal Home Loan Bank stock (“FHLB”)

     18,308         18,308   

Loans receivable including loans held for sale, net

     2,497,837         2,311,177   

Notes receivable

     517,836         558,000   

Financial liabilities:

     

Deposits

   $ 3,279,852         3,279,331   

Receivable-backed notes payable

     478,098         468,000   

Notes and mortgage notes payable and other borrowings

     108,533         107,989   

Junior subordinated debentures

     477,316         336,221   

Management has made estimates of fair value that it believes to be reasonable. However, because there is no active market for many of these financial instruments and management has derived the fair value of certain of these financial instruments using the income approach technique with Level 3 unobservable inputs, it is possible that the Company or its subsidiaries may not receive the estimated value upon sale or disposition of the asset or pay the estimated value upon disposition of the liability in advance of its scheduled maturity. Management estimates used in its net present value financial models rely on assumptions and judgments regarding issues where the outcome is unknown and actual results or values may differ significantly from these estimates. These fair value estimates do not consider the tax effect that would be associated with the disposition of the assets or liabilities at their fair value estimates.

The fair value of tax certificates is calculated using the income approach with Level 3 inputs. The fair value is based on discounted expected cash flows using discount rates that take into account the risk of the cash flows of tax certificates relative to alternative investments.

The fair value of FHLB stock is its carrying amount as the FHLB redeems its stock at par.

Fair values are estimated for BankAtlantic Bancorp’s loan portfolios with similar financial characteristics. Loans are segregated by category, and each loan category is further segmented into fixed and adjustable rate interest terms and by performing and non-performing categories.

The fair value of BankAtlantic Bancorp’s performing loans is calculated by using an income approach with Level 3 inputs. The fair value of performing loans is estimated by discounting forecasted cash flows through the estimated maturity using estimated market discount rates that reflect the interest rate risk inherent in the loan portfolio. The estimate of average maturity is based on historical experience with prepayments for each loan classification, modified as required, by an estimate of the effect of current economic and lending conditions. Management of BankAtlantic Bancorp assigns a credit risk premium and an illiquidity adjustment to these loans based on risk grades and delinquency status. The fair value of non-performing loans utilizes the fair value of the collateral adjusted for operating and selling expenses and discounted over the estimated holding period based on the market risk inherent in the property.

The estimated fair value of Bluegreen’s notes receivable is estimated using Level 3 inputs and is based on estimated future cash flows considering contractual payments and estimates of prepayments and defaults, discounted at a market rate.

As permitted by applicable accounting guidance, the fair value of deposits with no stated maturity, such as non-interest bearing demand deposits, savings and NOW accounts, and money market and checking accounts, is shown in the above tables at book value. The fair value of certificates of deposit is based on an income approach with Level 3 inputs. The fair value is calculated by the discounted value of contractual cash flows with the discount rate estimated using current rates offered by BankAtlantic for similar remaining maturities.

The estimated fair values of notes and mortgage notes payable and other borrowings, including receivable-backed notes payable, were determined by discounting the net cash flows to be used to repay the debt (Level 3 inputs).

 

24


Table of Contents

In determining the fair value of BankAtlantic Bancorp’s junior subordinated debentures, BankAtlantic Bancorp used NASDAQ price quotes available with respect to its $75.0 million of publicly traded TruPs related to its junior subordinated debentures (“public debentures”). However, $266.1 million of BankAtlantic Bancorp’s outstanding TruPS related to its junior subordinated debentures are not traded, but are privately held in pools (“private debentures”) and with no liquidity or readily determinable source for valuation. BankAtlantic Bancorp has deferred the payment of interest with respect to all of its junior subordinated debentures as permitted by the terms of these securities. Based on the deferral status and the lack of liquidity and ability of a holder to actively sell the private debentures, the fair value of the private debentures may be subject to a greater discount to par and have a lower fair value than indicated by the public debenture price quotes. However, due to their private nature and the lack of a trading market, fair value of the private debentures was not readily determinable at March 31, 2012 or December 31, 2011, and as a practical alternative, BankAtlantic Bancorp used the NASDAQ price quotes of the public debentures to value its remaining outstanding junior subordinated debentures whether privately held or publicly traded. As such, the private debentures were valued using Level 2 inputs.

The estimated fair value of Woodbridge’s and Bluegreen’s junior subordinated debentures are estimated using Level 3 inputs based on the contractual cash flows discounted at a market rate or based on market price quotes from the over-the-counter bond market.

 

5.   Securities Available for Sale

The following tables summarize securities available for sale as of March 31, 2012 and December 31, 2011 (in thousands):

 

     As of March 31, 2012  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair
Value
 

Benihana’s Common Stock

   $ 16,477         4,049         —           20,526   

Other equity securities

     76         145         —           221   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities

   $ 16,553         4,194         —           20,747   
  

 

 

    

 

 

    

 

 

    

 

 

 
     As of December 31, 2011  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair
Value
 

Government agency securities:

           

Mortgage-backed securities

   $ 12,533         885         —           13,418   

Real estate mortgage conduits (1)

     30,561         1,129         —           31,690   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     43,094         2,014         —           45,108   
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment securities:

           

Benihana’s Common Stock

     16,477         —           287         16,190   

Other equity securities

     1,326         179         —           1,505   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities

     17,803         179         287         17,695   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 60,897         2,193         287         62,803   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table shows the gross unrealized loss and fair value of the Company’s securities available for sale, all of which were in a continuous unrealized loss position for less than 12 months (in thousands):

 

     As of December 31, 2011  
     Less Than 12 Months  
     Fair
Value
     Unrealized
Losses
 

Benihana Common Stock

   $ 16,190         (287
  

 

 

    

 

 

 

As of March 31, 2012, there were no unrealized losses associated with the Company’s securities available for sale.

BFC currently owns an aggregate of 1,582,577 shares of Benihana’s Common Stock, representing an approximately 9% ownership and voting interest in Benihana. At March 31, 2012 and December 31, 2011, the estimated fair value

 

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of our investment in Benihana’s Common Stock was approximately $20.5 million and $16.2 million, respectively, based on the closing price of Benihana’s Common Stock on the NASDAQ on March 31, 2012 and December 31, 2011 of $12.97 per share and $10.23 per share, respectively.

 

6.   Loans Receivable

The loan portfolio below as of March 31, 2012 excludes loans to be transferred to BB&T under the terms of the Agreement as these loans are included in assets held for sale (in thousands):

 

     March 31,     December 31,  
     2012     2011  

Commercial non-real estate

   $ 29,805        118,145   

Commercial real estate:

    

Residential

     66,708        104,593   

Land

     3,496        24,202   

Owner occupied

     9,026        86,809   

Other

     174,292        464,902   

Small Business:

    

Real estate

     23,152        184,919   

Non-real estate

     11,999        99,835   

Consumer:

    

Consumer - home equity

     21,043        545,908   

Consumer other

     31        10,704   

Deposit overdrafts

     —          1,971   

Residential:

    

Residential-interest only

     19,468        369,531   

Residential-amortizing

     34,048        558,026   
  

 

 

   

 

 

 

Total gross loans

     393,068        2,569,545   
  

 

 

   

 

 

 

Adjustments:

    

Premiums, discounts and net deferred fees

     (84     2,578   

Allowance for loan losses

     (7,167     (129,887
  

 

 

   

 

 

 

Loans receivable - net

   $ 385,817        2,442,236   
  

 

 

   

 

 

 

Loans held for sale

   $ 62,791        55,601   
  

 

 

   

 

 

 

Loans held for sale - Loans held for sale as of March 31, 2012 consisted of $46.2 million of commercial real estate loans and $16.6 million of residential loans. Included in the commercial real estate loans held for sale was $16.1 million of loans transferred from loans held-to-maturity during the three months ended March 31, 2012. Loans held for sale as of December 31, 2011 consisted of $35.8 million of commercial real estate loans and $19.8 million of residential loans. BankAtlantic Bancorp transfers loans to held-for-sale when, based on the current economic environment and related market conditions, it does not have the intent to hold those loans for the foreseeable future.

The recorded investment (unpaid principal balance less charge-offs and deferred fees) of non-accrual loans receivable and loans held for sale as of March 31, 2012 and December 31, 2011 was as follows (in thousands):

 

     March 31,      December 31,  

Loan Class

   2012      2011  

Commercial non-real estate

   $ 4,460         19,172   

Commercial real estate:

     

Residential

     63,118         71,719   

Land

     12,888         14,839   

Owner occupied

     4,064         4,168   

Other

     86,022         123,396   

Small business:

     

Real estate

     7,093         10,265   

Non-real estate

     1,368         1,751   

Consumer

     9,398         14,134   

Residential:

     

Interest only

     23,539         33,202   

Amortizing

     38,438         52,653   
  

 

 

    

 

 

 

Total nonaccrual loans

   $ 250,388         345,299   
  

 

 

    

 

 

 

 

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An age analysis of the past due recorded investment in loans receivable and loans held for sale as of March 31, 2012 and December 31, 2011 was as follows (in thousands):

 

March 31, 2012

   31-59
Days
Past Due
     60-89
Days
Past
Due
     90 Days or
More
     Total
Past Due
     Current      Total Loans
Receivable
 

Commercial non-real estate

   $ 1,096         —           1,381         2,477         27,328         29,805   

Commercial real estate:

                 

Residential

     —           —           47,141         47,141         23,740         70,881   

Land

     —           —           12,888         12,888         —           12,888   

Owner occupied

     —           —           3,926         3,926         6,428         10,354   

Other

     7,708         —           52,720         60,428         145,009         205,437   

Small business:

                 

Real estate

     551         172         5,983         6,706         16,408         23,114   

Non-real estate

     135         —           30         165         11,834         11,999   

Consumer

     357         616         9,398         10,371         10,807         21,178   

Residential:

                 

Residential-interest only

     397         —           23,051         23,448         1,477         24,925   

Residential-amortizing

     1,170         1,061         34,182         36,413         8,781         45,194   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 11,414         1,849         190,700         203,963         251,812         455,775   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2011

   31-59
Days
Past Due
     60-89
Days
Past
Due
     90 Days
or More (1)
     Total
Past Due
     Current      Total Loans
Receivable(2)
 

Commercial non-real estate

   $ —           2,248         13,292         15,540         102,605         118,145   

Commercial real estate:

                 

Residential

     —           —           44,633         44,633         64,134         108,767   

Land

     681         —           14,839         15,520         18,070         33,590   

Owner occupied

     2,008         —           4,031         6,039         82,102         88,141   

Other

     —           5,467         47,841         53,308         431,399         484,707   

Small business:

                 

Real estate

     2,089         372         9,449         11,910         173,009         184,919   

Non-real estate

     —           462         76         538         99,187         99,725   

Consumer

     5,339         3,996         14,134         23,469         538,569         562,038   

Residential:

                 

Residential-interest only

     2,656         3,488         32,317         38,461         343,958         382,419   

Residential-amortizing

     3,968         4,513         48,189         56,670         514,570         571,240   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 16,741         20,546         228,801         266,088         2,367,603         2,633,691   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

Includes an $80,000 commercial loan that was past due greater than 90 days and still accruing.

(2)

At December 31, 2011, total loans receivable excluded purchase accounting of $6.0 million in connection with BFC’s share acquisitions of BankAtlantic Bancorp in 2008. The 2008 share acquisitions were accounted for as step acquisitions under the purchase method of accounting then in effect.

 

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The activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2012 was as follows (in thousands):

 

     Commercial
Non-Real
Estate
    Commercial
Real Estate
    Small
Business
    Consumer     Residential     Total  

Allowance for Loan Losses:

            

Beginning balance

   $ 16,407        67,054        7,168        22,554        16,704        129,887   

Charge-off :

     (14,615     (51,503     (1,624     (6,564     (10,209     (84,515

Recoveries :

     54        —          142        795        996        1,987   

Provision :

     1,410        (2,175     —          —          —          (765

Discontinued operations Provision:

     —          —          (212     4,220        5,210        9,218   

Transfer to assets held for sale:

     (1,897     (9,164     (4,454     (20,639     (12,491     (48,645
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 1,359        4,212        1,020        366        210        7,167   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance individually evaluated for impairment

   $ 243        222        702        —          —          1,167   

Ending balance collectively evaluated for impairment

     1,116        3,990        318        366        210        6,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 1,359        4,212        1,020        366        210        7,167   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans receivable:

            

Ending balance individually evaluated for impairment

   $ 7,403        197,551        959        9,048        44,617        259,578   

Ending balance collectively evaluated for impairment

   $ 22,402        55,971        34,192        12,026        8,899        133,490   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 29,805        253,522        35,151        21,074        53,516        393,068   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Purchases of loans

   $ —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Proceeds from loan sales

   $ —          1,000        —          —          —          1,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transfer to loans held for sale

   $ —          16,140        —          —          —          16,140   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2011 was as follows (in thousands):

 

     Commercial
Non-Real
Estate
    Commercial
Real Estate
    Small
Business
    Consumer     Residential     Total  

Allowance for Loan Losses:

            

Beginning balance

   $ 10,786        83,859        11,514        32,043        23,937        162,139   

Charge-offs:

     (464     (12,667     (2,611     (7,814     (13,702     (37,258

Recoveries :

     791        718        310        408        131        2,358   

Provision :

     (405     7,232        —          —          —          6,827   

Discontinued operations Provision:

     —          —          912        2,874        17,199        20,985   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 10,708        79,142        10,125        27,511        27,565        155,051   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance individually evaluated for impairment

   $ 9,024        59,274        1,565        1,453        7,369        78,685   

Ending balance collectively evaluated for impairment

     1,684        19,868        8,560        26,058        20,196        76,366   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 10,708        79,142        10,125        27,511        27,565        155,051   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans receivable:

            

Ending balance individually evaluated for impairment

   $ 16,495        343,809        10,562        24,033        84,667        479,566   

Ending balance collectively evaluated for impairment

   $ 115,961        520,029        285,654        586,088        1,038,637        2,546,369   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total (1)

   $ 132,456        863,838        296,216        610,121        1,123,304        3,025,935   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Purchases of loans

   $ —          —          —          —          3,864        3,864   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Proceeds from loan sales

   $ —          3,100        —          —          7,618        10,718   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transfer to loans held for sale

   $ —          2,450        —          —          25,072        27,522   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

As of March 31, 2011, total loans receivable excluded purchase accounting of $7.9 million in connection with BFC’s share acquisitions of BankAtlantic Bancorp in 2008. The 2008 share acquisitions were accounted for as step acquisitions under the purchase method of accounting then in effect.

 

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Table of Contents

As part of the transition of the regulation of OTS savings associations to the OCC, the OCC provided guidance to thrifts related to their transition to OCC regulatory reporting, which was to be implemented no later than March 31, 2012, including guidance surrounding specific valuation allowances on collateral dependent loans. Under OCC guidance where the appraised value of collateral on a collateral dependent loan is less than the recorded investment of the loan, a charge-off of the amount of the deficiency rather than a specific valuation allowance is now generally required. Management considered the appraisals on its impaired collateral dependent loans, including appraised values and appraisal dates and during the first quarter of 2012, BankAtlantic Bancorp charged down the recorded investment of loans by $66.5 million to the fair value of the collateral less cost to sell. This charge down consisted entirely of the charging off of existing specific valuation allowances. As a specific valuation allowance was previously established for these loans, the charge-offs did not impact the provision for loan losses or the net loss during the three months ended March 31, 2012, but did reduce BankAtlantic Bancorp’s allowance for loan losses and recorded investment in the loans.

Impaired Loans - Loans are considered impaired when, based on current information and events, BankAtlantic Bancorp believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement. For a loan that has been restructured, the contractual terms of the loan agreement refer to the contractual terms specified by the original loan agreement, not the contractual terms specified by the restructured agreement. Impairment is evaluated based on past due status for consumer and residential loans. Impairment is evaluated as part of BankAtlantic Bancorp’s on-going credit monitoring process for commercial and small business loans which results in the evaluation for impairment of all criticized loans. Factors considered in determining if a loan is impaired are past payment history, strength of the borrower or guarantors, and cash flow associated with the collateral or business. BankAtlantic Bancorp generally measures loans for impairment using the fair value of collateral less cost to sell method. If a loan is impaired, a specific valuation allowance is allocated, if necessary, based on the present value of estimated future cash flows using the loan’s existing interest rate or based on the fair value of the loan. Collateral dependent impaired loans are charged down to the fair value of collateral less cost to sell. Interest payments on impaired loans for all loan classes are recognized on a cash basis, unless collectability of the principal and interest amount is probable, in which case interest is recognized on an accrual basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible. Impaired loans held for sale are measured for impairment based on the estimated fair value of the collateral less cost to sell adjusted for foreclosure expenses and other operating expenses of the underlying collateral until foreclosure and sale.

 

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Table of Contents

Impaired loans as of March 31, 2012 and December 31, 2011 were as follows (in thousands):

 

     As of March 31, 2012      As of December 31, 2011  
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
 

With a related allowance recorded:

                 

Commercial non-real estate

   $ 1,189         1,189         243         17,792         17,792         15,408   

Commercial real estate:

                 

Residential

     —           —           —           64,841         70,780         20,986   

Land

     —           —           —           5,451         5,451         1,765   

Owner occupied

     —           —           —           1,715         1,715         100   

Other

     20,000         20,000         222         130,771         149,742         29,731   

Small business:

                 

Real estate

     —           —           —           6,499         6,499         85   

Non-real estate

     959         959         702         1,339         1,339         776   

Consumer

     —           —           —           15,951         17,502         1,454   

Residential:

                 

Residential-interest only

     —           —           —           15,441         20,667         2,982   

Residential-amortizing

     —           —           —           20,554         24,545         3,960   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total with allowance recorded

   $ 22,148         22,148         1,167         280,354         316,032         77,247   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With no related allowance recorded:

                 

Commercial non-real estate

   $ 6,960         19,451         —           5,922         5,922         —     

Commercial real estate:

                 

Residential

     69,789         141,483         —           26,735         71,759         —     

Land

     12,888         35,768         —           9,388         30,314         —     

Owner occupied

     5,483         6,573         —           3,882         4,872         —     

Other

     136,014         193,704         —           63,024         86,052         —     

Small business:

                 

Real estate

     13,112         14,640         —           10,265         12,007         —     

Non-real estate

     744         902         —           792         1,107         —     

Consumer

     20,220         25,571         —           9,719         13,246         —     

Residential:

                 

Residential-interest only

     23,539         39,741         —           17,761         28,042         —     

Residential-amortizing

     40,713         57,931         —           34,494         45,680         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total with no allowance recorded

   $ 329,462         535,764         —           181,982         299,001         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Commercial non-real estate

   $ 8,149         20,640         243         23,714         23,714         15,408   

Commercial real estate

     244,174         397,528         222         305,807         420,685         52,582   

Small business

     14,815         16,501         702         18,895         20,952         861   

Consumer

     20,220         25,571         —           25,670         30,748         1,454   

Residential

     64,252         97,672         —           88,250         118,934         6,942   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 351,610         557,912         1,167         462,336         615,033         77,247   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Average recorded investment and interest income recognized on impaired loans as of March 31, 2012 and 2011 were (in thousands):

 

     For the Three Months
Ended March 31, 2012
     For the Three Months
Ended March 31, 2011
 
     Average
Recorded
Investment
     Interest
Income
Recognized
     Average
Recorded
Investment
     Interest
Income
Recognized
 

With an allowance recorded:

           

Commercial non-real estate

   $ 1,174         11         15,958         16   

Commercial real estate:

           

Residential

     —           —           87,825         435   

Land

     —           —           10,319         42   

Owner occupied

     —           —           2,930         —     

Other

     20,000         169         105,215         404   

Small business:

           

Real estate

     —           —           5,292         14   

Non-real estate

     960         —           1,864         17   

Consumer

     —           —           10,489         —     

Residential:

           

Residential-interest only

     —           —           24,632         —     

Residential-amortizing

     —           —           20,211         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total with allowance recorded

   $ 22,134         180         284,735         928   
  

 

 

    

 

 

    

 

 

    

 

 

 

With no related allowance recorded:

           

Commercial non-real estate

   $ 13,218         142         2,211         7   

Commercial real estate:

           

Residential

     80,683         283         34,626         91   

Land

     13,864         —           15,378         —     

Owner occupied

     5,540         14         3,919         36   

Other

     154,904         699         80,269         614   

Small business:

           

Real estate

     14,401         116         12,594         148   

Non-real estate

     792         13         489         14   

Consumer

     21,078         86         16,178         111   

Residential:

           

Residential-interest only

     26,932         —           13,883         4   

Residential-amortizing

     45,192         33         28,544         34   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total with no allowance recorded

   $ 376,604         1,386         208,091         1,059   
  

 

 

    

 

 

    

 

 

    

 

 

 

Commercial non-real estate

   $ 14,392         153         18,169         23   

Commercial real estate

     274,991         1,165         340,481         1,622   

Small business

     16,153         129         20,239         193   

Consumer

     21,078         86         26,667         111   

Residential

     72,124         33         87,270         38   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 398,738         1,566         492,826         1,987   
  

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans without specific valuation allowances represent loans that were written-down to the fair value of the collateral less cost to sell, loans in which the collateral value less cost to sell was greater than the carrying value of the loan, loans in which the present value of the cash flows discounted at the loans’ effective interest rate were equal to or greater than the carrying value of the loans, or large groups of smaller-balance homogeneous loans that were collectively measured for impairment.

BankAtlantic Bancorp monitors collateral dependent loans and performs an impairment analysis on these loans quarterly. Generally, a full appraisal is obtained when a real estate loan is initially evaluated for impairment and an updated full appraisal is obtained within one year from the prior appraisal date, or earlier if management deems it appropriate based on significant changes in market conditions. In instances where a property is in the process of foreclosure, an updated appraisal may be postponed beyond one year, as an appraisal is required on the date of foreclosure; however, such loans are subject to quarterly impairment analyses. Included in total impaired loans as of March 31, 2012 was $191.7 million of collateral dependent loans, of which $96.8 million were measured for impairment using current appraisals and $94.9 million were measured by adjusting appraisals greater than six months old, as appropriate, to reflect changes in market conditions subsequent to the last appraisal date. Appraised values with respect to ten loans which did not have current appraisals were adjusted down by an aggregate amount of $2.7 million to reflect the change in market conditions since the appraisal date.

BankAtlantic Bancorp had commitments to lend $2.6 million of additional funds on impaired loans as of March 31, 2012.

 

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Credit Quality Information

Management of BankAtlantic Bancorp monitors delinquency trends, net charge-off levels of classified loans, impaired loans and general economic conditions nationwide and in Florida in an effort to assess loan credit quality. BankAtlantic Bancorp uses a risk grading matrix to monitor credit quality for commercial and small business loans. Risk grades are assigned to each commercial and small business loan upon origination. The loan officers monitor the risk grades and these risk grades are reviewed periodically by a third party consultant. BankAtlantic Bancorp assigns risk grades on a scale of 1 to 13. A general description of the risk grades is as follows:

Grades 1 to 7 – The loans in these risk grades are generally well protected by the current net worth and paying capacity of the borrower or guarantors or by the fair value, less cost to sell, of the underlying collateral.

Grades 8 to 9 – Not used.

Grade 10 – These loans are considered to have potential weaknesses that deserve management’s close attention. While these loans do not expose BankAtlantic Bancorp to immediate risk of loss, if left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan.

Grade 11 – These loans are considered to be inadequately protected by the current sound net worth and paying capacity of the borrower or guarantors or by the collateral pledged, if any. Loans in this grade have well-defined weaknesses that jeopardize the liquidation of the loan and there is a distinct possibility that BankAtlantic Bancorp may sustain some credit loss if the weaknesses are not corrected.

Grade 12 – These loans are considered to have all the weaknesses of a Grade 11 with the added characteristic that the weaknesses make collection of BankAtlantic Bancorp’s investment in the loan highly questionable and improbable on the basis of currently known facts, conditions and fair values of the collateral.

Grade 13 – These loans, or portions thereof, are considered uncollectible and of such little value that continuance on BankAtlantic Bancorp’s books as an asset is not warranted. Such loans are generally charged down or completely charged off.

The following table presents risk grades for commercial and small business loans including loans held for sale as of March 31, 2012 (in thousands):

 

March 31, 2012

   Commercial
Non Real
Estate
     Commercial
Residential
     Commercial
Land
     Owner
Occupied
Commercial
Real Estate
     Other
Commercial
Real Estate
     Small
Real
Business
Estate
     Small
Business
Non-Real
Estate
 

Grade:

                    

Grades 1 to 7

   $ 267         —           —           4,608         22,959         —           645   

Grade 10

     5,718         1,460         —           —           49,235         2,591         4,161   

Grade 11

     23,820         69,421         12,888         5,746         133,243         20,523         7,193   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total (1)

   $ 29,805         70,881         12,888         10,354         205,437         23,114         11,999   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents risk grades for commercial and small business loans including loans held for sale as of December 31, 2011 (in thousands):

 

Risk Grade:

   Commercial
Non Real
Estate
     Commercial
Residential
     Commercial
Land
     Owner
Occupied
Commercial
Real Estate
     Other
Commercial
Real Estate
     Small
Business
Real
Estate
     Small
Business
Non-Real
Estate
 

Grades 1 to 7

   $ 71,798         16,085         18,752         82,251         250,238         157,237         85,942   

Grade 10

     6,021         1,375         —           —           50,208         2,837         4,306   

Grade 11

     40,326         91,307         14,838         5,890         184,261         24,845         9,477   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total (1)

   $ 118,145         108,767         33,590         88,141         484,707         184,919         99,725   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

There were no loans risk graded 12 or 13 as of March 31, 2012 or December 31, 2011

 

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BankAtlantic Bancorp monitors the credit quality of residential loans through loan-to-value ratios of the underlying collateral. Elevated loan-to-value ratios indicate the likelihood of increased credit losses upon default which results in higher loan portfolio credit risk.

The loan-to-value ratios of BankAtlantic Bancorp’s residential loans were as follows (in thousands):

 

     As of March 31, 2012 (1)      As of December 31, 2011 (1)  

Loan-to-value ratios

   Residential
Interest
Only
     Residential
Amortizing
     Residential
Interest
Only
     Residential
Amortizing
 

Ratios not available (2)

   $ 5,072         21,357         124,868         304,372   

=<60%

     413         3,544         20,314         68,817   

60.1% - 70%

     548         1,154         10,316         30,033   

70.1% - 80%

     254         1,852         24,784         32,271   

80.1% - 90%

     988         2,045         27,622         27,523   

>90.1%

     17,650         15,242         174,515         108,224   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 24,925         45,194         382,419         571,240   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

Current loan-to-value ratios (“LTV”) for the majority of the portfolio were obtained as of the second quarter of 2011 based on automated valuation models.

(2)

Ratios not available consisted of property addresses not in the automated valuation database, and $10.7 million and $78.8 million as of March 31, 2012 and December 31, 2011, respectively, of loans originated under the community reinvestment act program that are not monitored based on loan-to-value.

BankAtlantic Bancorp monitors the credit quality of its portfolio of consumer loans secured by real estate utilizing loan–to-value ratios at origination. BankAtlantic Bancorp’s experience indicates that default rates are significantly lower with loans that have lower loan-to-value ratios at origination.

The loan-to-value ratios at loan origination of BankAtlantic Bancorp’s consumer loans secured by real estate were as follows (in thousands):

 

     Consumer Home Equity  
     March 31,      December 31,  

Loan-to-value ratios

   2012      2011  

<70%

   $ 17,878         334,050   

70.1% - 80%

     2,104         97,516   

80.1% - 90%

     1,061         62,674   

90.1% -100%

     —           40,327   

>100%

     —           11,341   
  

 

 

    

 

 

 

Total

   $ 21,043         545,908   
  

 

 

    

 

 

 

BankAtlantic Bancorp monitors the credit quality of its consumer non-real estate loans based on loan delinquencies.

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules, extending loan maturities, deferring loan payments until the loan maturity date and other actions intended to minimize potential losses. The majority of concessions for consumer loans were changing monthly payments from interest and principal payments to interest only payments as well as deferring monthly loan payments until the loan maturity date. Commercial real estate and non-real estate loan concessions were primarily below market interest rates based on the risk profile of the loan and extensions of maturity dates. Residential and small business loan concessions were mainly reductions of monthly payments by extending the amortization period and/or deferring monthly payments.

 

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Table of Contents

There was no financial statement effect of consumer and residential troubled debt restructured loans as the affected loans were generally on non-accrual status and measured for impairment before the restructuring. The financial statement effects of commercial and small business troubled debt restructured loans was the establishment of specific valuation allowances, if any, in place of the general allowance for those loans that had not already been placed on nonaccrual status. There was an impact to the allowance for loan losses as a result of the concessions made, which generally results from the expectation of slower future cash flows.

Troubled debt restructurings during the three months ended March 31, 2012 and 2011 were as follows (dollars in thousands):

 

     For the Three Months Ended  
     March 31, 2012      March 31, 2011  
     Number      Recorded Investment      Number      Recorded Investment  

Troubled Debt Restructurings

           

Commercial non-real estate

     —         $ —           —         $ —     

Commercial real estate:

           

Residential

     —           —           —           —     

Land

     —           —           —           —     

Owner occupied

     —           —           —           —     

Other

     —           —           3         11,118   

Small business:

           

Real estate

     2         342         —           —     

Non-real estate

     —           —           —           —     

Consumer

     —           —           1         50   

Residential:

           

Residential-interest only

     —           —           1         547   

Residential-amortizing

     1         62         8         1,401   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Troubled Debt Restructured

     3       $ 404         13       $ 13,116   
  

 

 

    

 

 

    

 

 

    

 

 

 

There were no loans that were modified in troubled debt restructurings since January 1, 2011 which defaulted during the three months ended March 31, 2012.

The following table represents the recorded investment of loans that were modified in troubled debt restructurings beginning January 1, 2010 and experienced a payment default during the three months ended March 31, 2011 (dollars in thousands).

 

     For the Three Months Ended  
     March 31, 2011  
     Number      Recorded Investment  

Troubled Debt Restructurings which
have subsequently defaulted:

     

Commercial non-real estate

     —         $ —     

Commercial real estate:

     

Residential

     —           —     

Land

     1         3,458   

Owner occupied

     1         860   

Other

     —           —     

Small business:

     

Real estate

     —           —     

Non-real estate

     —           —     

Consumer

     1         20   

Residential:

     

Residential-interest only

     —           —     

Residential-amortizing

     —           —     
  

 

 

    

 

 

 

Total Troubled Debt Restructured

     3       $ 4,338   
  

 

 

    

 

 

 

 

7.   Notes Receivable

The table below sets forth information relating to Bluegreen’s notes receivable (in thousands):

 

     March 31,     December 31,  
     2012     2011