SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1996
Commission File Number
0-9811
BFC FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Florida 59-2022148
- ------------------------------ ------------------------------
(State of Organization) (I.R.S. Employer
Identification Number)
1750 E. Sunrise Boulevard
Ft. Lauderdale, Florida 33304
- ------------------------------ ------------------------------
(Address of Principal (Zip Code)
Executive Office)
(954) 760-5200
Registrant's telephone number, including area code
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 each of the Registrant's classes of
common stock, as of the latest practicable date:
Common stock of $.01 par value, 2,305,682 shares outstanding.
Special Class A common stock of $.01 par value, 0 shares outstanding.
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Financial Condition
March 31, 1996 and December 31, 1995
(in thousands, except share data)
(Unaudited)
ASSETS
1996 1995
---- ----
Cash and cash equivalents $ 584 1,152
Securities available for sale 11,533 5,105
Investment in BankAtlantic Bancorp, Inc. ("BBC") 54,102 52,662
Mortgage notes and related receivables, net 3,759 5,168
Real estate acquired in debenture exchanges, net 10,916 11,072
Real estate investments 6,475 10,211
Escrow for redeemed debenture liability 8,799 8,982
Other assets 3,227 2,544
------- -------
Total assets $99,395 96,896
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Exchange debentures, net 3,176 3,810
Deferred interest on the exchange debentures 2,473 2,722
Redeemed debenture liability 15,721 15,964
Mortgage payables and other borrowings 26,355 27,616
Other liabilities 9,201 9,393
Deferred income taxes 3,504 1,633
------- -------
Total liabilities 60,430 61,138
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 1996 and 1995 17 17
Additional paid-in capital 20,965 19,773
Retained earnings 17,427 13,609
Less: treasury stock
(45,339 shares for 1996 and 1995) (280) (280)
------- -------
Total stockholders' equity before
BBC net unrealized appreciation on
debt securities available for sale,
net of deferred income taxes 38,129 33,119
BBC net unrealized appreciation
on debt securities available for
sale-net of deferred income taxes 836 2,639
------- -------
Total stockholders' equity 38,965 35,758
------- -------
Total liabilities and stockholders' equity $99,395 96,896
======= =======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Operations
For the three months ended March 31, 1996 and 1995
(in thousands, except per share data)
(Unaudited)
Three months ended
March 31,
---------
1996 1995
---- ----
Revenues:
Interest on mortgage notes and
related receivables $ 96 111
Interest and dividends on securities
available for sale and escrow
accounts 148 177
Earnings on real estate
operations, net 323 52
Gain on sale of
real estate, net 3,289 --
Other income, net 105 118
----- -----
Total revenues 3,961 458
----- -----
Costs and expenses:
Interest on exchange debentures 320 451
Interest on mortgages payable
and other borrowings 643 635
Loss on disposition of mortgage
notes and investment, net 232 --
Expenses related to real estate
investments 31 --
Employee compensation and benefits 241 254
Occupancy and equipment 10 13
General and administrative, net 233 308
----- -----
Total cost and expenses 1,710 1,661
----- -----
Income (loss) before equity in earnings
of BBC, income taxes and
extraordinary items 2,251 (1,203)
Equity in earnings of BBC 2,292 2,167
----- -----
Income before income taxes
and extraordinary items 4,543 964
Provision for income taxes 1,474 --
----- -----
Income before extraordinary items 3,069 964
Extraordinary items:
Gain on settlements of Exchange
litigation, net of income
taxes of $462,000 749 --
----- -----
Net income $ 3,818 964
===== =====
Income per common and
common equivalent share:
Before extraordinary items $ 1.38 0.47
Extraordinary items 0.33 --
----- -----
Net income per common and
common equivalent share $ 1.71 0.47
===== =====
Income per common and
common equivalent share
assuming full dilution:
Before extraordinary items $ 1.37 0.47
Extraordinary items 0.33 --
----- -----
Net income per common and
common equivalent share
assuming full dilution $ 1.70 0.47
===== =====
Weighted average number of common
and common equivalent shares
outstanding 2,228 2,056
===== =====
Weighted average number of common
and common equivalent shares
outstanding assuming full dilution 2,239 2,056
===== =====
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the three months ended March 31, 1996
(in thousands)
(Unaudited)
Addi-
tional Trea-
Common Paid-in Retained sury
Stock Capital Earnings Stock Other Total
---- ------ ------ ---- ------ ------
Balance at
December 31, 1995 $ 17 19,773 13,609 (280) 2,639 35,758
Effect of issuance
of BBC's Class A
common stock by
BBC to shareholders
other than BFC -- 1,192 -- -- -- 1,192
Change in BBC net
unrealized
appreciation on
debt securities
available for
sale-net of
deferred income
taxes -- -- -- -- (1,803) (1,803)
Net income -- -- 3,818 -- -- 3,818
---- ------ ------ ---- ------ ------
Balance at
March 31, 1996 $ 17 20,965 17,427 (280) 836 38,965
==== ====== ====== ==== ====== ======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flow
For the three months ended March 31, 1996 and 1995
(In thousands)
March 31,
---------
1996 1995
---- ----
Operating activities:
Net income before extraordinary items $ 3,069 964
Adjustments to reconcile net income
before extraordinary items to net cash
(used) by operating activities:
Equity in earnings of BBC (2,292) (2,167)
Depreciation 196 189
Expenses related to real estate investments 31 --
Increase in deferred income taxes 1,474 --
Loss on disposition of mortgage notes
and investment, net 232 --
Accretion on exchange debentures 3 7
Amortization of discount on
loans receivable (15) (7)
Gain on sale of real estate, net (3,289) --
Increase in deferred interest on the
exchange debentures 185 345
Accrued interest income on escrow accounts (51) (87)
Interest accrued regarding redeemed
debenture liability 131 98
Decrease in other liabilities (258) (51)
Decrease in other assets 9 134
------ ------
Net cash (used) by
operating activities (575) (575)
------ ------
Investing activities:
Proceeds from the sale of real estate
investment 6,489 --
Common stock dividends received
from BBC 214 191
Purchase of securities available
for sale (6,428) (4,801)
Proceeds from redemption and maturities
of securities available for sale -- 5,020
Principal reduction on loans 1,278 34
Increase in real estate investments (245) (47)
Improvements to real estate acquired in
debenture exchanges (40) (74)
------ ------
Net cash provided by investing
activities 1,268 323
------ ------
Financing activities:
Repayments of borrowings (1,261) (77)
------ ------
Net cash (used) by
financing activities (1,261) (77)
------ ------
Decrease in cash and
cash equivalents (568) (329)
Cash and cash equivalents at
beginning of period 1,152 711
------ ------
Cash and cash equivalents at
end of period $ 584 382
====== ======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
BFC Financial Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
March 31, 1996
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 1995 Annual Report and should be read in
conjunction with the notes to the consolidated financial statements which appear
in that report.
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, 1996, the unaudited consolidated
results of operations for the three months ended March 31, 1996 and 1995 and the
unaudited consolidated cash flows for the three months ended March 31, 1996 and
1995. 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. Certain prior year balances have been
reclassified to conform with the 1996 presentation.
2. INVESTMENT IN BANKATLANTIC BANCORP, INC.
- --------------------------------------------
A reconciliation of the carrying value in BankAtlantic Bancorp, Inc. ("BBC") to
BBC stockholders' equity at March 31, 1996 and December 31, 1995 is as follows:
March 31, December 31,
1996 1995
---- ----
BBC stockholders' equity $136,819 120,561
Ownership percentage 41.52% 46.03%
------- -------
56,807 55,494
Purchase accounting adjustments (2,705) (2,832)
------- -------
Investment in BBC $ 54,102 52,662
======= =======
In February 1996 shareholders of BBC approved a proposal to create a new class
of non-voting common stock designated as Class A Common Stock. BBC's existing
common stock was redesignated Class B Common Stock. Class A Common Stock is
entitled to receive cash dividends equal to at least 110% of any cash dividends
declared and paid on the Class B Common Stock. In March 1996, BBC issued 1.15
million shares of Class A Common Stock in a public offering reducing BFC's
ownership in BBC's total outstanding Class A and B common stock to approximately
41.52%. BFC does not own any of the Class A Common Stock and BFC's ownership in
BBC's Class B Common Stock represented approximately 46% of the outstanding
Class B Common Stock at March 31, 1996.
3. SECURITIES AVAILABLE FOR SALE
- ---------------------------------
Included in securities available for sale at March 31, 1996 and December 31,
1995 was approximately $11.5 million and $5.1 million of U.S. Treasury Bills and
other investments, respectively. Market value at March 31, 1996 and December 31,
1995 approximates book value. At March 31, 1996 and December 31, 1995
approximately $4.8 million was 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, 1996 and 1995 were as follows (in thousands):
March 31,
---------
1996 1995
---- ----
The reclassification of redeemable
common stock to additional paid-in
capital due to the cancellation
of a shareholder agreement $ - 5,776
===== =====
Change in stockholders' equity resulting
from the Company's proportionate share of BBC's
net unrealized appreciation on
debt securities available for sale,
less related deferred income taxes (1,803) 434
======= =====
Transfers from escrow accounts to reflect
payments on the redeemed debenture liability 275 1,842
===== =====
Effect of issuance of BBC's Class A common stock
by BBC to shareholders other than BFC 1,192 -
====== =====
The net gain associated with the settlements
of the Exchange litigation, net of income taxes 749 -
====== =====
Loss on disposition of mortgage
notes and investment, net 232 -
====== =====
BBC's dividends on common stock
declared and not received 241 191
===== =====
Interest paid on borrowings 643 632
===== =====
5. REAL ESTATE INVESTMENTS
- --------------------------
In 1994, the Company agreed to participate in certain real estate opportunities
with John E. Abdo, Vice Chairman of the Board, and certain of his affiliates
(the "Abdo Group"). Under the arrangement, the Company and the Abdo Group will
share equally in profits after any profit participation due to any other
partners in the ventures and after a priority return in favor of the Company.
The Company bears the risk of loss, if any, under the arrangement. On such
basis, the Company has acquired interests in three properties. In June 1994, an
entity controlled by the Company acquired from an independent third party 23.7
acres of unimproved land know as "Cypress Creek" property located in Fort
Lauderdale, Florida. In March 1996, the Cypress Creek property was sold to an
unaffiliated third party for approximately $9.7 million and the company
recognized a gain of approximately $3.3 million. In December 1994, an entity
controlled by the Company acquired from an unaffiliated seller 60.1 acres of
unimproved land known as the "Centerport" property in Pompano Beach, Florida. In
May 1995, an entity controlled by the Company contracted to acquire the Regency
Golf Beach Club at Palm-Aire in Pompano Beach, Florida (the "Regency"). The
Regency is an existing rental apartment complex having 288 apartment suites. The
acquisition is expected to close during September 1996 and it is currently
anticipated that the Company will seek other partners in connection with the
acquisition of the property.
In March 1996, the Company recorded a loss on the disposition of mortgage notes
and investment, net of approximately $232,000 due to the disposition of three
mortgage notes and an investment due from affiliated limited partnerships.
During 1996, the limited partnerships were liquidated after the sale of their
respective properties. In addition, a subsidiary of the Company acquired
unimproved land from one of the limited partnerships for a value of $115,000.
6. OTHER MATTERS
- ----------------
The Company has knowledge that an unaffiliated tenant contaminated certain
property formerly owned by BFC. The tenant while contractually responsible for
the cleanup of the contamination refused to do so. BFC, therefore, conducted the
cleanup and sought to collect the cleanup costs from the tenant. When the tenant
refused to pay, BFC filed a lawsuit against the tenant to seek recovery. Through
March 31, 1996, BFC had incurred an aggregate of approximately $856,000 of costs
and attorneys' fees relating to this matter. In mediation held in May 1996, the
parties agreed to settle the matter for approximately $1.1 million. Upon receipt
of the settlement payment which is expected prior to June 30, 1996, BFC will
recognize a gain of approximately $250,000.
<PAGE>
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 which owns approximately 41.52% of the outstanding common stock 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").
Results of Operations
- ---------------------
For the quarter ended March 31, 1996 the Company reported net income of
approximately $3.8 million or $1.71 primary and $1.70 fully diluted income per
common and common equivalent share as compared to net income of approximately
$964,000 or $.47 primary and fully diluted income per common and common
equivalent share for the comparable period in 1995. Operations for the quarter
ended March 31, 1996 included an extraordinary gain of approximately $749,000 or
$.33 primary and fully diluted income per common and common equivalent share,
relating to a revision of the estimate of the amount of the settlement liability
on the 1989 Exchange transaction.
The increase in revenues of approximately $3.5 million for the three months
ended March 31, 1996, as compared to the comparable period in 1995 was primarily
due to an increase in earnings on real estate operations of approximately
$271,000 and the net gain on the sale of real estate of approximately $3.3
million. Such increase in revenues was partially offset by a decrease in
interest on mortgage notes and related receivables of approximately $15,000 and
interest and dividends on securities available for sale and escrow accounts of
approximately $29,000.
In June 1994, an entity controlled by the Company acquired from an independent
third party 23.7 acres of unimproved land know as "Cypress Creek" property
located in Fort Lauderdale, Florida. In March 1996, the Cypress Creek property
was sold to an unaffiliated third party for approximately $9.7 million and the
company recognized a net gain of approximately $3.3 million.
Earnings on real estate operations, net increased for the three months ended
March 31, 1996 as compared to the same period in 1995 primarily as a result of
an increase in occupancy at a property acquired in the 1989 Exchange.
Interest on mortgage notes and related receivables decreased for the three
months ended March 31, 1996 as compared to the same period in 1995 primarily due
to a reduction in the amount of mortgage note receivables from affiliated
limited partnerships.
Interest and dividends on other securities available for sale and escrow
accounts decreased for the three months ended March 31, 1996 as compared with
the 1995 comparable period primarily due to decreases in yields in securities
available for sale and decreases in the escrow accounts yield and average
balance related with the settlement of litigation.
The increase in cost and expenses of approximately $49,000 for the three months
ended March 31, 1996 as compared to the same period in 1995 was primarily due a
loss on disposition of mortgage notes and investment, net of approximately
$232,000 and expenses related to real estate investments of approximately
$31,000. This increase was offset by decreases in interest on exchange
debentures of approximately $131,000 and general and administrative expense, net
of approximately $75,000.
Interest on exchange debentures decreased for the three months ended March 31,
1996 as compared to the same period in 1995 as a result of the 1991 and 1989
Exchange settlements during 1994 and adjustments in 1995 and 1996 relating to
changes in the settlement liability. This decrease was offset in part by the
accrual of interest on the 1989 Exchange settlement liability.
The 1996 expenses related to real estate investments represents the Company's
prorata share of expenses, primarily real estate taxes, related to the ownership
of property acquired in 1994 by an entity controlled by the Company.
In March 1996, the Company recorded a loss on the disposition of mortgage notes
and investment, net of approximately $232,000 due to the disposition of three
mortgage notes and an investment due from affiliated limited partnerships.
During 1996, the limited partnerships were liquidated, subsequent to the sale of
their respective properties.
The decrease in general and administrative, net for the three months ended March
31, 1996 as compared to the same period in 1995 was primarily attributable to
decreases in legal expenses, leasing fees and professional and consulting fees.
BBC's net income applicable to common shareholders for the three months ended
March 31, 1996 and 1995 was $4.7 million and $4.2 million, respectively. The
Company's equity in BBC's net income for the three months ended March 31, 1996
and 1995 was $2.3 million and $2.2 million, respectively.
Financial Condition
- -------------------
BFC's total assets at March 31, 1996 and at December 31, 1995 were $99.4 million
and $96.9 million, respectively. The majority of the difference at March 31,
1996 as compared to December 31, 1995 was due to decreases in mortgage notes and
related receivables, net of approximately $1.4 million, and real estate
investments of approximately $3.7 million. These decreases were offset by
increases in securities available for sale of approximately $6.4 million and
investment in BBC of approximately $1.4 million.
Mortgage notes and related receivables, net decreased due to principal
reductions on loans and the disposition of three mortgage notes due from
affiliated limited partnerships resulting from the liquidation of the
partnerships.
Mortgages payable and other borrowing decreased due to the satisfaction of loans
upon the sale of affiliated limited partnership properties.
The decrease in real estate investments was due to the sale of the Cypress Creek
property to an unaffiliated third party for approximately $9.7 million.
Securities available for sale increased due to the investment of proceeds
received in connection with the sale of the Cypress Creek property in March
1996.
Investment in BBC increased by $1.4 million due to the equity in earnings of
BBC, the $1.2 million effect of issuance of BBC Class A common stock by BBC to
BBC shareholders other than BFC, reduced by the common stock dividends declared
in 1996 and the change in BBC's net unrealized appreciation on debt securities
available for sale, net of deferred income taxes of approximately $1.8 million.
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 1995
Annual Report.
In connection with the above settlements, the Company deposited $20.3 million
into settlement escrow accounts, with another deposit of approximately $4.7
million and $5.1 million required in December 1996 and March 1997, respectively.
Based upon claims made and paid during March 1996 in the Meador litigation, a
net gain of approximately $749,000 was recognized in the first quarter of 1996
related to Class Members No Longer Owning Debentures that did not make a claim
within a specified time period. Payments are not being made under the Purcell
Litigation pending resolution of the ABC litigation.(See Item 3 Legal
Proceedings in the Company's 1995 Annual Report.)
At March 31, 1996, the redeemed debenture liability for the 1989 and 1991
Exchange litigation was approximately $13.8 million and $2.2 million,
respectively. Additionally, at March 31, 1996 the escrow for redeemed debenture
liability for the 1989 and 1991 Exchange litigation was approximately $5.8
million and $3.0 million, respectively. The 1991 Exchange settlement agreements
provide for a release from the escrow of any balances remaining at the end of
June 1996. The Meador 1989 Exchange settlement agreement provides for a release
from the escrow of any balances remaining at January 18, 1998. No release dates
are currently available relating to the Purcell 1989 Exchange settlement due to
the ABC litigation.
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 1995 Annual Report), on February 25, 1994, the
lower court on remand awarded plaintiff a judgment totaling approximately $4.5
million, including interest. The Company appealed the trial court's order and
posted an appeal bond which is currently collateralized by approximately $4.8
million of marketable securities. In prior years, the Company had accrued a $4.5
million provision for this litigation and paid a cash bond of approximately
$445,000, which is included in other liabilities in the Company's Consolidated
Statements of Financial Condition. In July 1995, the Indiana Court of Appeals
affirmed conditionally or remanded in part and reversed in part the decision of
the trial court on remand. The effect of the Court of Appeals opinion was to
reduce the damage award to $1,285,000 from $2,570,000; disallow prejudgment
interest, set the date for computation of postjudgment interest and fix the rate
at 8% and require the use of a discount to compute the present value of the
damage award. The reduction of the damage award will be remanded to the trial
court for verification that the trial court used the same method of damage
computation as the Court of Appeals and for the trial court to determine the
present value and enter a new final judgment. Short filed for a hearing before
the Indiana Supreme Court but his petition was denied. Based upon the ruling,
preliminary computations by the Company indicate that the total loss to the
Company could be approximately $500,000 not the $4.5 million dollars previously
established as a provision in connection with this litigation.
A substantial portion of the funds currently required 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.
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 in part dependent on the earnings
and regulatory capital position of BBC. 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. Items considered in the decision to defer the
interest payment would include, among other items, the upcoming payments due on
the Purcell and Meador Litigation, the possible outcome of the Hess Litigation,
the ability to identify which debentures are held by Holders in Due Course and
current operating expenses. Since December 31, 1991, the Company has deferred
interest payments on its subordinated debentures. The Company believes it has
sufficient current liquidity to meet its normal operating expenses, but it is
not anticipated that it will make current payments of interest on the Exchange
debentures until such time as the identity of holders due interest has been
determined with reasonable finality.
As previously indicated, the Company holds approximately 41% of BBC's
outstanding common stock. At the present time, BBC has no significant operations
other than those related to its ownership of BankAtlantic and does not require
funds other than to pay certain operating expenses and interest expense on $21.0
million of BBC's outstanding debentures. It is anticipated that funds for
payment of these expenses will be obtained from BankAtlantic. Additionally, the
ultimate repayment by BBC of its outstanding debt will be dependent upon
dividends from BankAtlantic, refinancing of the debt or raising additional
equity capital by BBC. While BBC has stated its intention to pay regular
quarterly cash dividends on its common stock, funds for dividend and interest
payments by BBC will be dependent upon BankAtlantic's ability to pay dividends
to BBC.
Current regulations applicable to the payment of cash dividends by savings
institutions impose limits on capital distributions based on an institution's
regulatory capital levels and net income. An institution that meets all of its
fully phased-in capital requirements (both before and after giving effect to the
distribution) and is not in need of more than normal supervision would be a
"Tier 1 association". Upon prior notice to, and non-objection by, the OTS, a
Tier 1 association may make capital distributions during a calendar year up to
the greater of (1) 100% of net income for the current calendar year plus 50% of
its capital surplus or (ii) 75% of its net income over the most recent four
quarters. Any additional capital distributions would require prior regulatory
approval.
An institution that meets its minimum regulatory capital requirements but does
not meet its fully phased-in capital requirements would be a "Tier 2
association," which may make capital distributions of between 25% and 75% of its
net income over the most recent four-quarter period, depending on the
institution's risk-based capital level. A "Tier 3 association" is defined as an
institution that does not meet all of its minimum regulatory capital
requirements and therefore may not make any capital distributions without the
prior approval of the OTS. Savings institutions must provide the OTS with at
least 30 days written notice before making any capital distribution. All capital
distributions are subject to the OTS' right to object to a distribution on
safety and soundness grounds.
BankAtlantic is required to meet all capital standards promulgated pursuant to
FIRREA and FDICIA. To be considered "well capitalized" under FDICIA, a savings
institution must generally have a core capital ratio of at least 5%, a Tier 1
risk-based capital ratio of at least 6%, and a total risk-based capital ratio of
at least 10%. At March 31, 1996, BankAtlantic met all regulatory capital
requirements and met the definition of "well capitalized."
In 1994, the Company agreed to participate in certain real estate opportunities
with John E. Abdo, Vice Chairman of the Board, and certain of his affiliates
(the "Abdo Group"). Under the arrangement, the Company and the Abdo Group will
share equally in profits after any profit participation due to any other
partners in the ventures and after a priority return in favor of the Company.
The Company bears the risk of loss, if any, under the arrangement. On such
basis, the Company has acquired interests in three properties. In June 1994, an
entity controlled by the Company acquired from an independent third party 23.7
acres of unimproved land know as "Cypress Creek" property located in Fort
Lauderdale, Florida. In March 1996, the Cypress Creek property was sold to an
unaffiliated third party for approximately $9.7 million and the company
recognized a gain of approximately $3.3 million. In December 1994, an entity
controlled by the Company acquired from an unaffiliated seller 60.1 acres of
unimproved land known as the "Centerport" property in Pompano Beach, Florida. In
May 1995, an entity controlled by the Company contracted to acquire the Regency
Golf Beach Club at Palm-Aire in Pompano Beach, Florida (the "Regency"). The
Regency is an existing rental apartment complex having 288 apartment suites. The
acquisition is expected to close during September 1996 and is currently
anticipated that the Company will seek other partners in connection with the
acquisition of the property.
Cash Flows
- ----------
A summary of the Company's consolidated cash flows is as follows (in thousands):
Three months ended
March 31,
----------
1996 1995
---- ----
Net cash provided (used) by:
Operating activities $ (575) (575)
Investing activities 1,268 323
Financing activities (1,261) (77)
------- -------
(Decrease) in cash $ (568) (329)
====== =======
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 and loss on disposition of
mortgage notes and investment, net. 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, 1996 were proceeds from the sale of real estate investments, principal
reduction on loans revenues from property operations and dividends from BBC.
These funds were primarily utilized for reduction on mortgage payables and other
borrowings, operating expenses at the properties, capital improvements at the
properties and general and administrative expenses.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
- --------------------------
Short vs. Eden United, Inc., et al. in the Marion County Superior Court, State
of Indiana. Civil Division Case No. S382 0011. In January, 1982, an individual
filed suit against a subsidiary of the Company, Eden United, Inc. ("Eden"),
seeking return of an earnest money deposit held by an escrow agent and
liquidated damages in the amount of $85,000 as a result of the failure to close
the purchase and sale of an apartment complex in Indianapolis, Indiana. Eden was
to have purchased the apartment complex from a third party and then immediately
resell it to plaintiff. The third party was named as a co-defendant and such
third party also filed a cross claim against Eden, seeking to recover the
earnest money deposit. In September 1983, Plaintiff filed an amended complaint,
naming additional subsidiaries of the Company and certain officers of the
Company as additional defendants. The amended complaint sought unspecified
damages based upon alleged fraud and interference with contract. The case went
to trial during October 1988. On April 26, 1989, the Court entered a judgment
against Eden, the Company and certain additional subsidiaries of the Company
jointly and severally in the sum of $85,000 for liquidated damages with interest
accruing at 8% per annum from September 1, 1981, normal compensatory damages of
$1.00, and punitive damages in the sum of $100,000. The judgment also awarded
the Plaintiff the return of his $85,000 escrow deposit, and awards the third
party $85,000 in damages plus interest accruing from September 14, 1981 against
Eden. The Company has charged an expense for the above amounts. Both Short and
the Company appealed the judgment and in June 1991, the appellate court reversed
the trial court's decision on the issue of compensatory damages, determined that
Short might be entitled to an award of compensatory damages and remanded the
case to the trial court to determine the amount of compensatory damages to be
awarded. A hearing on remand was held on February 3, 1993. On February 25, 1994,
the court on remand awarded plaintiff a judgment in the amount of $85,000 for
liquidated damages for breach of contract jointly and severally from the
subsidiary, the Registrant and certain named affiliates, plus prejudgment
interest of $52,108 through May 1, 1989, plus post-judgment interest of 10% per
annum thereafter until paid. Additionally, plaintiff was awarded a judgment
against the defendants in the amount of $2,570,000 for tortious interference,
plus prejudgment interest of $469,400 through May 1, 1989, plus post-judgment
interest of 10% per annum thereafter until paid. The Company posted a $4.8
million appeal bond and appealed the February 25, 1994 judgment. Such bond was
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 July 1995, the Indiana Court of Appeals affirmed conditionally or
remanded in part and reversed in part the decision of the trial court on remand.
The effect of the Court of Appeals opinion was to reduce the damage award to
$1,285,000 from $2,570,000; disallow prejudgment interest, set the date for
computation of postjudgment interest and fix the rate at 8% and require the use
of a discount to compute the present value of the damage award. The reduction of
the damage award will be remanded to the trial court for verification that the
trial court used the same method of damage computation as the Court of Appeals
and for the trial court to determine the present value and enter a new final
judgment. Short has filed for a hearing before the Indiana Supreme Court and in
March 1996 such hearing was denied. Based upon the ruling, preliminary
computations by the Company indicate that the total loss to the Company could be
approximately $500,000 not the $4.5 million dollars previously established as a
provision in connection with this litigation.
Item 2 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, 1996.
<PAGE>
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 14, 1996 By: /s/ Glen R. Gilbert
----------------------
Glen R. Gilbert, Senior Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
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0
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