SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
=========
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act Of 1934
For the Quarter ended Commission File Number
March 31, 1995 0-9811
-------------------- ----------------------
BFC FINANCIAL CORPORATION
=========================
Florida 59-2022148
- ------------------------------ ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1750 E. Sunrise Boulevard
Fort Lauderdale, Florida 33304
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 760-5200
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 the number of shares outstanding of the issuer's classes of common
stock as of May 10, 1995.
Class Shares Outstanding
---------- ------------------
Common stock, par value 2,305,682
$0.01 per share
Special Class A None outstanding
Common stock, par value
$0.01 par value
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Financial Condition
March 31, 1995 and December 31, 1994
(in thousands, except share data)
(Unaudited)
ASSETS
---------
1995 1994
-------- --------
Cash and cash equivalents $ 382 711
Securities available for sale 5,650 5,869
Investment in BankAtlantic Bancorp, Inc. ("BBC") 46,178 43,768
Mortgage notes and related receivables, net 4,877 4,904
Real estate acquired in debenture exchanges, net 11,062 11,169
Real estate investments 9,959 9,912
Escrow for redeemed debenture liability 10,511 12,223
Other assets 2,592 2,735
-------- --------
Total assets $ 91,211 91,291
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------------------
Exchange debentures, net 6,623 6,616
Mortgage payables and other borrowings 26,541 26,618
Deferred interest on the exchange debentures 3,839 3,494
Redeemed debenture liability 16,693 18,395
Other liabilities 9,585 9,636
-------- --------
Total liabilities 63,281 64,759
Commitments and contingencies
Stockholders' equity:
Preferred stock of $.01 par value; authorized
10,000,000 shares; none issued - -
Special class A common stock of $.01 par value;
authorized 20,000,000 shares; none issued - -
Common stock of $.01 par value; authorized
20,000,000 shares; issued 2,351,021
in 1995 and 1994 17 17
Additional paid-in capital 21,025 21,025
Retained earnings 6,641 5,677
Less: treasury stock
(45,339 shares for 1995 and 1994) (280) (280)
------ ------
Total stockholders' equity before BBC
net unrealized appreciation on mortgage-
backed securities available for
sale-net of deferred income taxes 27,403 26,439
BBC net unrealized appreciation
on mortgage-backed securities available for
sale-net of deferred income taxes 527 93
------ ------
Total stockholders' equity 27,930 26,532
------ ------
Total liabilities and stockholders' equity $ 91,211 91,291
======= =======
See accompanying notes to unaudited consolidated financial statements.
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Operations
For the three months ended March 31, 1995 and 1994
(in thousands, except per share data)
(Unaudited)
Three months ended
March 31,
------- -------
1995 1994
------- -------
REVENUES:
Interest on mortgage notes and related
receivables $ 111 182
Interest and dividends on other
investment securities 177 206
Earnings on real estate
operations, net 52 575
Other income, net 118 45
------- -------
TOTAL REVENUES 458 1,008
------- -------
COSTS AND EXPENSES:
Interest on exchange debentures 451 1,790
Interest on mortgages payable 635 689
Employee compensation and benefits 254 273
Occupancy and equipment 13 14
General and administrative, net 308 202
------- -------
TOTAL COST AND EXPENSES 1,661 2,968
------- -------
(Loss) before equity in earnings
of BBC (1,203) (1,960)
Equity in earnings of BBC 2,167 1,988
------- -------
NET INCOME $ 964 28
======= =======
INCOME PER SHARE $ 0.47 0.01
======= =======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 2,056 2,056
======= =======
See accompanying notes to unaudited consolidated financial statements
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the three months ended March 31, 1995
(in thousands)
(Unaudited)
Addi-
tional Trea-
Common Paid-in Retained sury
Stock Capital earnings Stock Other Total
------- ------- ------- ------ ------ -------
Balance at
December 31, 1994 $ 17 21,025 5,677 (280) 93 26,532
Change in BBC net
unrealized
appreciation on
mortgage-backed
securities available
for sale-net of
deferred income
taxes - - - - 434 434
Net income - - 964 - - 964
------- ------- ------- ------ ------ -------
Balance at
March 31, 1995 $ 17 21,025 6,641 (280) 527 27,930
====== ======= ======== ======= ===== =======
See accompanying notes to unaudited consolidated financial statements
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flow
For the three months ended March 31, 1995 and 1994
(In thousands)
(Unaudited)
March 31,
-------- --------
1995 1994
-------- --------
OPERATING ACTIVITIES:
Net income $ 964 28
Adjustments to reconcile net income to
net cash provided by operating
activities:
Equity in earnings of BBC (2,167) (1,988)
Depreciation 189 442
Accretion on exchange debentures
and mortgage payables 7 28
Tax effect of real estate acquired
in debenture exchange - (27)
Amortization of discount on
loans receivable (7) (18)
Increase in deferred interest on the
exchange debentures 345 1,756
Increase (decrease) in other liabilities (51) 87
Accrued interest income on escrow accounts (87) -
Interest accrued regarding redeemed
debenture liability 98 -
Decrease (increase) in other assets 134 (115)
-------- --------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $ (575) 193
-------- --------
INVESTING ACTIVITIES:
Common stock dividends received from BBC 191 187
Increase in securities available
for sale (4,801) (7,954)
Decrease in securities available
for sale 5,020 20,373
Increase in the escrow to fund redeemed
debenture liability - (12,500)
Principal reduction on loans receivable 34 65
Additions to office properties
and equipment - (12)
Increase in real estate investments (47) -
Improvements to real estate acquired in
debenture exchanges (74) (196)
-------- --------
NET CASH (USED) PROVIDED BY
INVESTING ACTIVITIES $ 323 (37)
-------- --------
FINANCING ACTIVITIES:
Repayment of borrowings $ (77) (212)
-------- --------
NET CASH (USED) BY FINANCING
ACTIVITIES (77) (212)
-------- --------
DECREASE IN CASH AND
CASH EQUIVALENTS (329) (56)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 711 349
-------- --------
CASH AND CASH EQUIVALENTS
AT END OF QUARTER $ 382 293
======== ========
See notes to unaudited consolidated financial statements.
BFC Financial Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
March 31, 1995
1. PRESENTATION OF INTERIM FINANCIAL STATEMENTS
- ------------------------------------------------
The accompanying unaudited consolidated financial statements have been prepared
by BFC Financial Corporation (the "Company" or "BFC") in accordance with the
accounting policies described in its 1994 Annual Report and should be read in
conjunction with the notes to the consolidated financial statements which appear
in that report. The Company became a savings bank holding company in 1987 by
acquiring shares of the common stock of BankAtlantic, A Federal Savings Bank
("BankAtlantic"). On July 13, 1994, BankAtlantic, consummated a reorganization
into a holding company structure and BankAtlantic Bancorp, Inc. ("BBC") acquired
all of the capital stock of BankAtlantic thereby becoming a unitary savings bank
holding company. The reorganization resulted in BankAtlantic becoming a wholly-
owned subsidiary of BBC and BFC becoming a shareholder of BBC on the same
proportionate basis as was the Company's ownership in BankAtlantic. The
consolidated financial statements reflect the activities of BFC Financial
Corporation and its wholly owned subsidiaries ("BFC"). The Company's investment
in BBC is carried on the equity method. All significant intercompany accounts
and transactions have been eliminated in consolidation.
In the opinion of management, the accompanying financial statements contain such
adjustments as are necessary to present fairly the Company's unaudited
consolidated financial condition at March 31, 1995, the unaudited consolidated
results of operations for the three months ended March 31, 1995 and 1994 the
unaudited consolidated cash flows for the three months ended March 31, 1995 and
1994. Such adjustments consisted only of normal recurring items. The unaudited
consolidated financial statements and related notes are presented as permitted
by Form 10-Q and consequently, do not include certain information and notes
necessary for a complete presentation of financial condition, results of
operations and cash flows as required by generally accepted accounting
principles for financial statements. The 1994 consolidated financial statements
have been reclassified to conform to the 1995 presentation.
2. INVESTMENT IN BANKATLANTIC BANCORP, INC.
- --------------------------------------------
A reconciliation of the carrying value in BBC to BBC stockholders' equity at
March 31, 1995 and December 31, 1994 is as follows:
March 31, December 31,
1995 1994
-------- ----------
BBC stockholders' equity $ 110,187 105,520
Preferred stock of BBC (7,030) (7,030)
------- -------
BBC common stockholders' equity 103,157 98,490
Ownership percentage 48.00% 48.00%
------- -------
49,515 47,275
Purchase accounting adjustments (3,337) (3,507)
------- -------
Investment in BBC $ 46,178 43,768
======= =======
BFC also owns 5,600 shares of BBC 12.25% Series A Preferred Stock, 529 shares of
BBC 10.00% Series B Preferred Stock and 7,245 shares of BBC 8.00% Preferred
Stock. The aggregate purchase price relating to the acquisition of these shares
was approximately $143,000 and is included in securities available for sale, net
in the accompanying statements of financial condition.
3. SECURITIES AVAILABLE FOR SALE
- ---------------------------------
Included in securities available for sale at March 31, 1995 was approximately
$5,416,000 and $234,000 of U.S. Treasury Bills and other investments,
respectively. Included in securities available for sale at December 31, 1994
was approximately $5,639,000 and $230,000 of U.S. Treasury Bills and other
investments, respectively. Market value at March 31, 1995 and December 31, 1994
approximates book value. Approximately $4.8 million is pledged as collateral to
secure a Letter of Credit issued in connection with the Short vs. Eden United,
Inc. litigation.
4. CONSOLIDATED STATEMENTS OF CASH FLOWS
- -----------------------------------------
Other non-cash financing and investing activities for the three months ended
March 31, 1995 and 1994 are as follows (in thousands):
March 31,
----------
1995 1994
------- -----
The reclassification of redeemable
common stock to additional paid-in
capital due to the cancellation
of a shareholder agreement $ - 5,776
The increase in stockholders' equity resulting
from the Company's proportionate share of BBC's
net unrealized appreciation on
mortgage-backed securities available for sale,
less related deferred income taxes 434 -
Transfers from escrow accounts to reflect
payments on the redeemed debenture liability 1,848 -
Interest paid on borrowings 632 680
===== =====
BFC Financial Corporation and Subsidiaries
Management's Discussion and Analysis of Results
of Operations and Financial Condition
General
- -------
BFC Financial Corporation (the "Company" or "BFC") is a savings bank holding
company owning approximately 48% of BankAtlantic Bancorp, Inc. ("BBC"). BBC was
formed in April 1994 under the laws of the state of Florida and is the holding
company for BankAtlantic, A Federal Savings Bank ("BankAtlantic"). On July 13,
1994, BankAtlantic consummated a reorganization into a holding company structure
and became a unitary savings bank holding company. The reorganization resulted
in BFC becoming a shareholder of BBC on the same proportionate basis as it was
in BankAtlantic before the reorganization.
Results of Operations
- ---------------------
For the quarter ended March 31, 1995 the Company reported net income of
approximately $964,000 or $.47 per share as compared to net income of
approximately $28,000 or $.01 per share for the comparable period in 1994.
The Company reported revenues of approximately $458,000 and $1.0 million for the
three months ended March 31, 1995 and 1994, respectively. The decrease in
revenues for the 1995 period as compared to the 1994 period was primarily due to
decreases in interest on mortgage notes and related receivables, interest and
dividends on other investment securities and earnings on real estate operations.
Such decrease in revenues was partially offset by an increase in other income,
net.
Interest on mortgage notes and related receivables decreased for the three
months ended March 31, 1995 as compared to the same period in 1994 due to the
elimination of five wrap mortgage note receivables from affiliated limited
partnerships during the quarter ended December 31, 1994.
Interest and dividends on other investment securities decreased for the three
months ended March 31, 1995 as compared to the comparable period in 1994
primarily due to a decrease in investable funds.
Earnings on real estate operations, net decreased for the three months ended
March 31, 1995 as compared to the same period in 1994 primarily due to the sale
and disposition of properties in 1994 and the accrual of real estate taxes for
real estate investments acquired during 1994.
Other income, net increased for the three months ended March 31, 1995 as
compared to the same period in 1994 primarily due to the receipt of proceeds
from litigation regarding an investment that the Company wrote off in 1991.
The decrease in cost and expenses of approximately $1.3 million for the three
months ended March 31, 1995 as compared to the same period in 1994 was primarily
due to decreases in interest on exchange debentures and interest on mortgage
payables. This decrease was offset in part by an increase in general and
administrative, net.
Interest on exchange debentures decreased for the three months ended March 31,
1995 as compared to the same period in 1994 as a result of the cancellation of
debentures in connection with the 1994 settlements of litigation pertaining to
the 1991 and 1989 Exchange transactions.
The decrease in interest on mortgage payables for the three months ended March
31, 1995 as compared to the comparable period in 1994 was due to the elimination
of mortgage debt principally related to the sale and foreclosure of properties
acquired in the 1989 Exchange and 1991 Exchange. This decrease was offset in
part by an increase in interest expense on additional borrowings in 1994.
The increase in general and administrative, net for the three months ended March
31, 1995 as compared to the same period in 1994 was primarily due to legal
expenses and leasing expenses related to a property owned by the Company.
BBC's net income applicable to common shareholders for the three months ended
March 31, 1995 and 1994 was $4.4 million and $4.3 million, respectively. The
Company's equity in BBC's net income for the three months ended March 31, 1995
and 1994 was $2.2 million and $2.0 million, respectively.
Financial Condition
- -------------------
BFC's total assets at March 31, 1995 and at December 31, 1994 were $91.2 and
$91.3 million, respectively. The majority of the difference at March 31, 1995 as
compared to December 31, 1994 was due to decreases in securities available for
sale of approximately $219,000 and an escrow for redeemed debenture liability of
approximately $1.7 million. These decreases were offset by an increase in
investment in BBC of approximately $2.4 million.
Investment in BBC increased by $2.4 million due to the equity in earnings of BBC
for the three months ended March 31, 1995, reduced by the common stock dividends
declared in 1995.
At March 31, 1995 redeemed debenture liability and the related escrow decreased
by approximately $1.7 million due to payments made in accordance with the
Exchange litigation settlements.
Liquidity and Capital Resources
- -------------------------------
Numerous lawsuits were filed against the Company in connection with both the
1989 and 1991 Exchange offers. Settlement of these lawsuits occurred during
1994. A description of these settlements is contained in the Company's 1994
Annual Report.
As a result of the exchange litigation settlements, the Company's obligation to
pay interest on debentures is limited to only those debentures held by persons
that acquired debentures in an arms length transaction prior to the date on
which settlements were reached ("Holders in Due Course"), or debentures held by
persons that opted out of the litigation. The Company's ability to meet its
obligations and to pay interest on the debentures issued in the 1989 Exchange
and the 1991 Exchange as discussed above is substantially dependent on the
earnings and regulatory capital position of BBC. However, pursuant to the terms
of the debentures issued in the 1989 Exchange and the 1991 Exchange, the Company
may elect to defer interest payments on its subordinated debentures if
management of the Company determines in its discretion that the payment of
interest would impair the operations of the Company. Additionally, until the
Company can ascertain which debentures are held by Holders in Due Course,
interest will continue to be deferred.
In connection with certain litigation related to the purchase and sale of an
apartment complex in Indiana (See item 3. "Litigation ", Short vs. Eden United,
Inc., et.al. in the Company's 1994 Annual Report), on February 25, 1994, the
court on remand awarded plaintiff a judgment totaling approximately $4.5
million, including interest. The Company is appealing the trial court's order
and has posted an appeal bond. The bond is collateralized by approximately $4.8
million of securities available for sale. In prior years, the Company had
accrued a $4.5 million provision for this litigation.
In addition to the litigation discussed above, an appellate court entered an
order reversing a lower court decision in favor of the Company and its
affiliates which related to the sale of units in two partnerships which
participated in the 1991 Exchange. (See Item 3. "Litigation", Martha Hess,
et.al. vs. Gordon, Boula, et.al. in the Company's 1994 Annual Report.) The
company has accrued $4.0 million with respect to this matter. There is no
requirement for a bond in connection with the appeal.
Much of the funds required currently for the litigation described above have
already been provided. Other funds required, in addition to those currently
available, may come from operations, borrowings against BBC stock, BBC
dividends, return of excess funds placed in escrow for litigation settlements,
return of the bond delivered in connection with the Short lawsuit, or sale
and/or refinancing of real estate and mortgages owned.
An OTS regulation, effective August 1, 1990, limits all capital distributions
made by savings institutions, including cash dividends, by permitting only
institutions that meet specified capital levels to make capital distributions
without prior OTS approval. The regulation established a three-tiered system,
with the greatest flexibility afforded to well-capitalized institutions. An
institution that meets all of its fully phased-in capital requirements and is
not in need of more than normal supervision would be a "Tier 1 Institution". An
institution that meets its minimum regulatory capital requirements but does not
meet its fully phased-in capital requirements would be a "Tier 2 Institution".
An institution that does not meet all of its minimum regulatory capital
requirements would be "Tier 3 Institution". A Tier 1 Institution may, after
prior notice but without the approval of the OTS, make capital distributions
during a calendar year up to 100% of net income earned to date during the
current calendar year plus 50% of its capital surplus ("surplus" being the
amount of capital over its fully phased-in capital requirement). Any additional
capital distributions would require prior regulatory approval. A Tier 2
Institution may, after prior notice but without the approval of the OTS, make
capital distributions of between 50% and 75% of its net income over the most
recent four-quarter period (less any dividends previously paid during such
four-quarter period) depending on how close the institution is to its fully
phased-in risk-based capital requirement. A Tier 3 Institution would not be
authorized to make any capital distributions without the prior approval of the
OTS. Notwithstanding the provision described above, the OTS also reserves the
right to object to the payment of a dividend on safety and soundness grounds.
Prior to 1993, BankAtlantic had not paid any regular dividend on its common
stock. In August 1993, BankAtlantic declared and paid a quarterly cash dividend
to its common stockholders and has paid a regular quarterly dividend since that
time. Subject to the results BankAtlantic's operations and regulatory capital
requirements, BBC has indicated that it will seek to declare regular quarterly
cash dividends of $0.06125 per share on its common stock. A 15% common stock
dividend was declared in May 1993. Currently, the source of funds for payment of
dividends by BBC is the dividends by BankAtlantic. In February 1995, BBC
borrowed $4 million from an unaffiliated lender and in the future BBC may incur
additional debt which may have an impact on its ability to pay dividends to the
Company.
Cash Flows
- ----------
A summary of the Company's consolidated cash flows is as follows (in
thousands):
Three months ended
March 31,
------------------
Net cash provided (used) by: 1995 1994
------- -------
Operating activities $ (575) 193
Investing activities 323 (37)
Financing activities (77) (212)
------- -------
Decrease in cash $ (329) (56)
======= =======
The changes in cash flow used or provided in operating activities are affected
by the changes in operations, which are discussed elsewhere herein, and by
certain other adjustments. These adjustments include additions to operating
cash flows for non-operating charges such as depreciation. Cash flow from
operating activities is also adjusted to reflect the use or the providing of
cash for increases and decreases, respectively, in operating assets, decreases
or increases, respectively of operating liabilities, and increases in exchange
debentures deferred interest. Accordingly, the changes in cash flow from
operating activities in the periods indicated above has been impacted not only
by the changes in operations during the periods but also by these other
adjustments.
The primary sources of funds to the Company, for the three months ended March
31, 1995 were revenues from property operations, collections on mortgage
receivables, sale of securities available for sale and dividends from BBC.
These funds were primarily utilized for operating expenses at the properties,
capital improvements at the properties, mortgage payables on the properties and
general and administrative expenses.
PART II - OTHER INFORMATION
Item 1 through 5.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 27 - Financial Data Schedule
b) No report on Form 8-K was filed during the quarter ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BFC Financial Corporation
Date: May 10, 1995 By: /s/ Glen R. Gilbert
--------------------------
Glen R. Gilbert, Senior Vice President
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFRENCE TO SUCH FINANCIAL STATEMENTS.
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<NAME> BFC FINANCIAL CORPORATION
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