SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 2000
Commission File Number
000-09811
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 Executive Office) (Zip Code)
(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 for each of the Registrant's classes
of common stock, as of the latest practicable date:
Class A Common Stock of $.01 par value, 6,454,494 shares outstanding.
Class B Common Stock of $.01 par value, 2,354,907 shares outstanding.
<PAGE>
BFC Financial Corporation and Subsidiaries
Index to Consolidated Financial Statements
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Financial Condition as of March 31, 2000
and December 31, 1999 - Unaudited
Consolidated Statements of Operations for the three months ended March
31, 2000 and 1999 - Unaudited
Consolidated Statements of Stockholders' Equity and Comprehensive
Income for the three months ended March 31, 2000 and 1999 - Unaudited
Consolidated Statements of Cash Flows for the three months ended March
31, 2000 and 1999 - Unaudited
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Financial Condition
March 31, 2000 and December 31, 1999
(In thousands, except share data)
(Unaudited)
Assets
2000 1999
---- ----
Cash and cash equivalents $ 2,729 1,545
Securities available for sale 240 255
Investment in BankAtlantic Bancorp, Inc. ("BBC") 76,449 73,764
Venture capital investments 5,055 8,408
Mortgage notes and related receivables, net 1,297 1,325
Investment real estate, net 5,693 5,803
Real estate held for development and sale 1,094 1,840
Other assets 6,950 3,805
-------- --------
Total assets $ 99,507 96,745
======== ========
Liabilities and Stockholders' Equity
Mortgage payables and other borrowings 18,184 18,253
Other liabilities 5,901 5,933
Deferred income taxes 14,700 13,594
-------- --------
Total liabilities 38,785 37,780
Stockholders' equity:
Preferred stock of $.01 par value; authorized
10,000,000 shares; none issued -- --
Class A common stock of $.01 par value,
authorized 20,000,000 shares; issued and outstanding
6,454,494 in 2000 and 1999 58 58
Class B common stock, of $.01 par value; authorized
20,000,000 shares; issued and outstanding
2,354,907 in 2000 and 1999 21 21
Additional paid-in capital 25,522 25,890
Retained earnings 39,670 38,086
-------- --------
Total stockholders' equity before
accumulated other comprehensive loss 65,271 64,055
Accumulated other comprehensive loss -
net unrealized depreciation on securities
available for sale of the Company and BBC,
net of deferred income taxes (4,549) (5,090)
-------- --------
Total stockholders' equity 60,722 58,965
-------- --------
Total liabilities and stockholders' equity $ 99,507 96,745
======== ========
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, 2000 and 1999
(In thousands, except per share data)
(Unaudited)
Three months ended
March 31,
---------
2000 1999
---- ----
Revenues:
Interest on mortgage notes and
related receivables $ 610 113
Interest and dividends on securities
available for sale and escrow accounts 49 56
Earnings on real estate rental operations, net 237 322
Income related to real estate held
for development and sale, net 22 11
Sale of real estate 2,080 829
Earnings from real estate limited partnerships -- 760
Equity in earnings of BBC 2,388 2,745
Other income 117 2
------ ------
Total revenues 5,503 4,838
------ ------
Costs and expenses:
Interest on subordinated debentures -- 122
Interest on mortgages payable
and other borrowings 424 239
Cost of sale of real estate 1,796 579
Allowance for loss on mortgage notes -- 75
Employee compensation and benefits 324 299
Occupancy and equipment 8 16
General and administrative, net 369 212
------ ------
Total cost and expenses 2,921 1,542
------ ------
Income before income taxes 2,582 3,296
Provision for income taxes 998 1,376
------ ------
Net income $1,584 1,920
====== ======
Basic earnings per share $ 0.20 0.24
====== ======
Diluted earnings per share $ 0.19 0.22
====== ======
Basic weighted average shares outstanding 7,957 7,957
====== ======
Diluted weighted average shares outstanding 8,525 8,928
====== ======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity and Comprehensive Income
For the three months ended March 31, 2000 and 1999
(In thousands)
(Unaudited)
Accumulated
Other
Addi- Compre-
Compre- Class A Class B tional hensive
hensive Common Common Paid-in Retained Income
income Stock Stock Capital Earnings (Loss) Total
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1998 $ 58 21 26,095 30,660 797 57,631
Comprehensive income
Net income $ 1,920 -- -- -- 1,920 -- 1,920
Other comprehensive income, -------
net of tax:
Unrealized losses on securities
available for sale (661) -- -- -- -- -- --
Reclassification adjustment
for gains and (losses) included
in net income 114 -- -- -- -- -- --
-------
Other comprehensive loss (547) -- -- -- -- -- --
-------
Comprehensive income $ 1,373 -- -- -- -- -- --
=======
Net effect of BBC capital
transactions, net of
deferred income taxes -- -- (110) -- -- (110)
Change in net unrealized
depreciation on securities
available for sale-net of
deferred income taxes -- -- -- -- (547) (547)
------- ------- ------- ------- ------- -------
Balance at March 31, 1999 $ 58 21 25,985 32,580 250 58,894
======= ======= ======= ======= ======= =======
Balance at
December 31, 1999 58 21 25,890 38,086 (5,090) 58,965
Net income 1,584 -- -- -- 1,584 -- 1,584
-------
Other comprehensive income,
net of tax:
Unrealized gain on securities
available for sale 708 -- -- -- -- -- --
Reclassification adjustment
for losses included
in net income (167) -- -- -- -- -- --
-------
Other comprehensive income 541 -- -- -- -- -- --
-------
Comprehensive income $ 2,125 -- -- -- -- -- --
=======
Net effect of BBC capital
transactions, net of
deferred income taxes -- -- (368) -- -- (368)
Change in net unrealized
appreciation on securities
available for sale-net of
deferred income taxes -- -- -- -- 541 541
------- ------- ------- ------- ------- -------
Balance at March 31, 2000 $ 58 21 25,522 39,670 (4,549) 60,722
======= ======= ======= ======= ======= =======
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the three months ended March 31, 2000 and 1999
(In thousands)
(Unaudited)
March 31,
---------
2000 1999
---- ----
Operating activities:
Net income $ 1,584 1,920
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 135 124
Gain on sale of real estate, net (284) (250)
Earnings from real estate limited partnership -- (760)
Equity in earnings of BBC (2,388) (2,745)
Income related to real estate held
for development and sale, net (22) (11)
Provision for deferred income taxes 997 1,361
Allowance for loss on mortgage notes -- 75
Amortization on subordinated debentures -- 2
Accretion of discount on loans receivable (9) (8)
Increase in real estate development
and construction costs (68) (1,172)
Proceeds from escrow for called
debenture liability 2,455 --
Increase in deferred interest on the
subordinated debentures -- 118
Accrued interest income on escrow accounts -- (29)
Increase in other liabilities 27 90
Increase in other assets (247) (125)
------- -------
Net cash provided by
(used in) operating activities 2,180 (1,410)
------- -------
Investing activities:
Proceeds from sales of real estate -- 760
Common stock dividends received from BBC -- 303
Purchase of venture capital investments (2,062) --
Purchase of securities available for sale -- (250)
Proceeds from redemption and maturities
of securities available for sale -- 8
Principal reduction on mortgage notes and
related receivables 37 35
Decrease in real estate
held for development and sale 1,098 918
------- -------
Net cash (used in) provided
by investing activities (927) 1,774
------- -------
Financing activities:
Repayments of borrowings (69) (66)
------- -------
Net cash used in
financing activities (69) (66)
------- -------
Increase in cash
and cash equivalents 1,184 298
Cash and cash equivalents
at beginning of period 1,545 2,523
------- -------
Cash and cash equivalents at
end of period $ 2,729 2,821
======= =======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
BFC Financial Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
March 31, 2000
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 1999 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 statements of financial condition at March 31, 2000 and December
31, 1999, the unaudited consolidated statements of operations for the three
months ended March 31, 2000 and 1999, the unaudited consolidated statements of
stockholders' equity and comprehensive income for the three months ended March
31, 2000 and 1999 and the unaudited consolidated statements of cash flows for
three months ended March 31, 2000 and 1999. 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 should be read in
conjunction with the notes to consolidated financial statements appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
Certain prior year balances have been reclassified to conform with the 2000
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, 2000 and December 31, 1999 is as follows
(dollars in thousands):
March 31, December 31,
2000 1999
---- ----
BBC stockholders' equity $240,631 235,886
Ownership percentage 31.8% 31.3%
-------- --------
76,449 73,913
Purchase accounting adjustments -- (149)
-------- --------
Investment in BBC $ 76,449 73,764
======== ========
At March 31, 2000, the Company owned 8,296,891 shares of BBC Class A Common
Stock and 4,876,124 shares of BBC Class B Common Stock representing 31.8% of all
outstanding BBC Common Stock. At March 31, 2000, the Company's ownership of BBC
Class A and Class B Common Stock was approximately 26.2% and 49.6%,
respectively. The aggregate market value of the Company's investment in BBC at
March 31, 2000 was approximately $61.6 million or approximately $14.8 million
less than the carrying value in the financial statements. Management does not
believe that there is any permanent impairment in the value of the investment in
BBC.
The following are equity transactions of BBC that impact the Company's ownership
percentage of BBC:
In January 2000, the Board of Directors of BBC approved a corporate
transaction which would result in the redemption and retirement of all
outstanding shares of BBC Class B common stock, except for BBC's Class
B shares owned by the Company, at a price of $6.00 per share payable
in cash. BBC's Class B common stock represents 100% of the voting
rights of BBC. As a result of the transaction, which is structured as
a merger, the Company would be the sole holder of the BBC Class B
common stock. BBC's Class A common stock will be unaffected by the
transaction and will remain outstanding as shares of BBC's Class A
common stock as the surviving corporation. Outstanding options to
purchase BBC's Class A common stock will remain exercisable for the
same number of shares of BBC's Class A common stock for the same
exercise price and upon the same terms as in effect before the merger.
Likewise, BBC's 6-3/4% Convertible Subordinated Debentures due 2006
and 5-5/8% Convertible Subordinated Debentures due 2007 will remain
convertible into the same number of shares of BBC's Class A common
stock of BBC as the surviving corporation at the same conversion price
and upon the same terms as in effect before the merger. All
outstanding options to acquire BBC's Class B common stock will
automatically be exchanged for options to acquire BBC's Class A common
stock on a basis which preserves the intrinsic value of the option on
the effective date of BBC's corporate transaction. The options will
otherwise be on substantially the same terms and conditions as the
former options to purchase shares of BBC's Class B common stock,
including vesting and term. The proposed transaction is subject to
approval of BBC's Class A and Class B shareholders, receipt of all
required regulatory approvals, and obtaining financing for the
transaction.
On March 1, 2000, 749,533 restricted shares of Class A common stock
issued to key employees of Ryan Beck in connection with the
acquisition of Ryan Beck were retired in exchange for the
establishment of interests in the BankAtlantic Bancorp-Ryan Beck
Deferred Compensation Plan ("Plan") in the aggregate amount of $7.8
million. In January 2000, each participant in the Ryan Beck retention
pool was provided the opportunity to exchange the restricted shares
that were allocated to such participant for a cash-based deferred
compensation award in an amount equal to the aggregate value of the
restricted shares at the date of the Ryan Beck acquisition. BBC may at
its option terminate the Plan at anytime without the consent of the
participants or BBC's stockholders and distribute to the participants
the amount credited to their deferred account (in whole or in part).
Subject to the terms of the Plan, the participant's account will be
settled by BBC in cash on the vesting date (June 28, 2002) except BBC
can elect to defer payment of up to 50% of a participant's interest in
the plan for up to one year following the vesting date. If BBC elects
to exercise its rights to defer 50% of the cash payment, BBC will
issue a note bearing interest at prime plus 1%. As a result of the
exchange, BBC stockholders' equity declined by $3.2 million. BFC's
ownership percentage of BBC, as of December 31, 1999, assumed that the
shares of restricted Class A Common Stock were not outstanding.
On July 14, 1999, BBC's Board of Directors approved the repurchase on
the open market of up to 3.5 million shares of BBC's common stock.
BBC's Board authorized the repurchase of common stock on a
"time-to-time" basis, depending upon market conditions and subject to
compliance with applicable securities laws. Pursuant to the above
repurchase plan BBC paid $3.3 million to repurchase and retire 551,000
shares of Class B common stock during the three months ended March 31,
2000. Pursuant to a previously announced plan to repurchase shares of
common stock, BBC paid $8.4 million to repurchase and retire 1,149,655
shares of Class A common stock during the three months ended March 31,
1999.
During the three months ended March 31, 2000, 116,630 shares of Class
B incentive and non-qualifying stock options were exercised resulting
in a $489,000 increase in stockholders' equity. During the three
months ended March 31, 1999, 7,490 and 3,563 of Class A and Class B
incentive stock options, respectively, were exercised resulting in a
$68,000 increase in stockholders' equity.
3. VENTURE CAPITAL INVESTMENTS
Through 1999, the Company advanced funds to a wholly owned subsidiary for
investment of approximately $6.7 million in five unaffiliated technology
entities and approximately $1.7 million in three entities in the retail sector.
During 2000, the $6.7 million advanced funds in the technology entities were
contributed at cost to a specified asset limited partnership managed by the
wholly owned subsidiary. In March 2000, interests of $8.0 million were sold by
such partnership to accredited investors in a private offering. The Company
continues to indirectly hold an $800,000 general partner interest and a $500,000
limited partner interest in the partnership. In April 2000, the Company received
approximately $5.8 million from the partnership representing repayment of the
amounts advanced plus $423,000 of interest on the advances net of the Company's
investment in the partnership. The Company also received an administrative
services fee and out-of pocket expenses. Of the $8.0 million partnership
interests, the Company retained $1.3 million of interests and approximately $3.9
million was contributed by officers, directors and affiliates of the Company.
During the quarter ended March 31, 2000, the Company made additional venture
capital investments of approximately $2.1 million in entities in the technology
industry. It is anticipated that the Company may form additional partnerships in
the future to invest in the technology sector. The Company's venture investments
have been made in entities whose interests are not publicly traded and therefore
there is no liquidity in the investments and no available quoted market value
for the investments. Accordingly, the investments are carried at the Company's
cost, which is believed to approximate market value.
4. CONSOLIDATED STATEMENTS OF CASH FLOWS
Other non-cash financing and investing activities and other supplemental cash
flow items for the three months ended March 31, 2000 and 1999 were as follows
(in thousands):
March 31,
---------
2000 1999
---- ----
The change in stockholders' equity resulting from
the Company's proportionate share of BBC's net
unrealized appreciation (depreciation) on
securities available for sale, net of deferred
income taxes 551 (678)
====== ====
Net loss effect of BBC capital transactions,
net of income taxes (368) (110)
====== ====
Change in stockholders' equity resulting
from the Company's net unrealized (depreciation)
appreciation on securities available for sale,
net of deferred income taxes (10) 131
====== ====
Receivable from contribution of investments to
affiliated limited partnership (5,414) --
====== ====
Interest in affiliated limited partnership (1,300) --
====== ====
Contribution of venture capital investments to
affiliated limited partnership 6,714 --
====== ====
Transfers from escrow accounts to reflect
payments on subordinated debentures 58 84
====== ====
Allowance for loss on mortgage notes -- 75
====== ====
BBC's dividends on common stock
declared and received in subsequent period -- 303
====== ====
Interest paid on borrowings 424 239
====== ====
Income taxes paid 39 --
====== ====
5. OTHER ASSETS AND OTHER LIABILITIES
Included in other liabilities at March 31, 2000 and December 31, 1999 is
approximately $5.1 million of amounts owed to third parties pursuant to an
agreement entered into in connection with the settlement of litigation. Such
amounts owed do not bear interest. Included in other assets at December 31, 1999
was approximately $2.5 million held in escrow accounts relating to payments
associated with a portion of the settlement. In January 2000, in accordance with
the terms of the escrow agreement, approximately $2.5 million remaining in
escrow was released to the Company and any future payments to the claimants
would be paid directly by the Company. Payments are due when a claimant presents
for cancellation a subordinated debenture that was cancelled upon settlements of
the litigation. Also included in other assets at March 31, 2000 was
approximately $5.8 million due from a partnership managed by the Company. (See
note 3.)
6. SEGMENT REPORTING
The Company utilizes three reportable segments:
o Investment in BBC
o Real estate operations
o Other
Investment in BBC consists of the Company's ownership interest in the common
stock of BBC. The Company's ownership position is carried on the equity method
and the Company's ownership in BBC as of March 31, 2000 and 1999 was
approximately 31.8% and 32.2% of all of the outstanding BBC Common Stock. In
addition to its investment in BBC, the Company owns and manages real estate,
included in the Consolidated Statements of Financial Condition as investment
real estate, net and real estate held for development and sale. Investment real
estate, net includes the BMOC property and a 50% interest in the Delray
property. The real estate held for development and sale is the Center Port
property, part of which is being developed and the remainder of which is being
held for sale. Real estate operations also include mortgage notes receivable
that relate to the sale of properties previously owned by the Company. Other
includes venture capital investments, securities available for sale and other
miscellaneous activities. The Company evaluates segment performance based on its
operating profit before tax and overhead allocations.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies described in its 1999 Annual Report.
The tables below provide segment information for the three months ended March
31, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
Real
Investment Estate
in BBC Operations Other Consolidated
------ ---------- ----- ------------
Three months ended March 31, 2000
<S> <C> <C> <C> <C>
Total revenues $ 2,388 2,628 487 5,503
======== ======== ======== ========
Operating profit $ 2,388 604 487 3,479
======== ======== ========
Interest on mortgages payable
and other borrowings (196)
Employee compensation and benefits (324)
Occupancy and equipment (8)
General and administrative, net (369)
--------
Income before income taxes $ 2,582
========
Total assets at March 31, 2000 $ 76,449 9,141 13,917 99,507
======== ======== ======== ========
Three months ended March 31, 1999:
Total revenues $ 2,745 2,010 83 4,838
======== ======== ======== ========
Operating profit $ 2,745 1,125 83 3,953
======== ======== ========
Interest on subordinated debentures (122)
Interest on mortgages payable
and other borrowings (8)
Employee compensation and benefits (299)
Occupancy and equipment (16)
General and administrative, net (212)
--------
Income before income taxes $ 3,296
========
Total assets at March 31, 1999 $ 75,730 11,228 6,569 93,527
======== ======== ======== ========
</TABLE>
7. EARNINGS PER SHARE
The following table reconciles the numerators and denominators of the basic and
diluted earnings per share computations for the three months ended March 31,
2000 and 1999 (in thousands, except per share data):
Three months ended
March 31,
---------
2000 1999
---- ----
Basic Numerator:
Net income available
for common shareholders $1,584 1,920
====== ======
Basic Denominator
Weighted average shares
outstanding 7,957 7,957
====== ======
Basic earnings per share $ .20 .24
====== ======
Diluted Numerator:
Dilutive net income available
to common shareholders $1,584 1,920
====== ======
Diluted Denominator
Basic weighted average shares
outstanding 7,957 7,957
Options 568 971
------ ------
Diluted weighted average shares
outstanding 8,525 8,928
====== ======
Diluted earnings per share $ .19 .22
====== ======
The Company has two classes of common stock outstanding. The two-class method is
not presented because the Company's capital structure does not provide for
different dividend rates or other preferences, other than voting rights, between
the two classes.
<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 in the aggregate approximately 31.8% of the outstanding
BankAtlantic Bancorp, Inc. ("BBC") common stock. BBC is the holding company for
BankAtlantic, A Federal Savings Bank ("BankAtlantic") by virtue of its ownership
of 100% of the outstanding BankAtlantic common stock.
Except for historical information contained herein, the matters discussed in
this report contain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, that involve substantial risks and
uncertainties. When used in this report, the words "anticipate", "believe",
"estimate", "may", "intend", "expect" and similar expressions identify certain
of such forward-looking statements. Actual results could differ materially from
these forward-looking statements. These forward-looking statements are based
largely on the Company's expectations and are subject to a number of risks and
uncertainties, including but not limited to, economic factors (both generally
and particularly in areas where the Company or its subsidiaries operate or hold
assets), interest rates, competitive and other factors affecting the operations,
markets, products and services, and expansion strategies of the Company and its
subsidiaries including BBC and BankAtlantic, the success of its venture capital
investments and the other factors discussed elsewhere in this report and in the
documents filed by the Company with the Securities and Exchange Commission. Many
of these factors are beyond the Company's control.
Results of Operations
The Company's basic and diluted earnings per share were $0.20 and $0.19 for the
quarter ended March 31, 2000, compared to basic and diluted earnings per share
of $0.24 and $0.22 for the comparable period in 1999.
For the three months ended March 31, 2000, the Company reported net income of
approximately $1.6 million as compared to net income of approximately $1.9
million for the comparable period in 1999.
Increases (decreases) in revenues for the three months ended March 31, 2000, as
compared to the comparable period in 1999 were as follows (in thousands):
Three months ended
March 31,
--------- Increases
2000 1999 (decreases)
---- ---- -----------
Interest on mortgage notes and
related receivables $ 610 113 497
Interest and dividends on securities
available for sale and escrow accounts 49 56 (7)
Earnings on real estate rental operations, net 237 322 (85)
Income related to real estate held for
development and sale, net 22 11 11
Sale of real estate 2,080 829 1,251
Earnings from real estate limited partnership -- 760 (760)
Equity in earnings of BBC 2,388 2,745 (357)
Other income, net 117 2 115
------ ------ ------
$5,503 4,838 665
====== ====== ======
Interest on mortgage notes and related receivables increased for the three
months ended March 31, 2000 as compared to the same period in 1999 primarily due
to interest of approximately $159,000 received relating to real estate held for
development and sale and approximately $303,000 of interest received from an
affiliate in connection with amounts advanced for venture capital investments
from the date they were made until transferred to the affiliated limited
partnership in March 2000.
Earnings on real estate rental operations, net decreased for the three months
ended March 31, 2000 as compared to the same period in 1999 primarily due to a
decrease in rental income primarily due to a 1999 payment received for the
cancellation of a lease and an increase in 2000 of repair and maintenance
expenses at the Company's Burlington Manufacturers Outlet Center.
During the three months ended March 31, 2000, the Company sold two buildings
that it had constructed on approximately 2 acres at the Center Port property to
unaffiliated third parties for approximately $2.08 million. The Company
recognized a net gain from the sale of real estate of approximately $284,000.
During the three months ended March 31, 1999, the Company sold approximately 4
acres of the Center Port property to an unaffiliated third party for
approximately $829,000. The Company recognized a net gain from the sale of the
real estate of approximately $250,000.
During the three months ended March 31, 1999, the Company received a
distribution of approximately $501,000 from a real estate limited partnership in
which the Company holds an interest. The limited partnership sold 30 of 34
convenience stores that it owned. The limited Partnership sold another store in
the second quarter of 1999. The Company has a 49.5% interest in this partnership
and had written off its investment of approximately $441,000 in 1990 due to the
bankruptcy of the entity leasing the real estate. The $501,000 has been included
in earnings from real estate limited partnerships. In March 1996, as part of the
sale of the Company's "Cypress Creek" property in Fort Lauderdale, Florida, the
Company received a 4.5% limited partnership interest in the partnership that
acquired the property. In January 1999, the Company received a distribution of
approximately $259,000 from the liquidation of this partnership. The $259,000
has also been included in earnings from real estate limited partnerships.
Other income increased for the three months ended March 31, 2000 as compared to
the same period in 1999 as a result of an administrative services fee of
approximately $80,000 from an affiliated limited partnership for organizational
services provided to the limited partnership and management fees from Levitt
Corporation (formerly BankAtlantic Development Corporation) for accounting and
other administrative services.
BBC's net income available for common shareholders and the Company's equity in
earnings of BBC for the three months ended March 31, 2000 and 1999 are
summarized below (in thousands):
For the
Three Months Ended
March 31,
---------
2000 1999
---- ----
Income before extraordinary item $3,681 8,171
Extraordinary item, net of taxes 3,466 --
------ ------
Net income $7,147 8,171
====== ======
The Company's equity in earnings of BBC for the three months ended March 31,
2000 and 1999 were approximately $2.4 million and $2.7 million, respectively.
The decrease in equity in earnings of BBC for the three months ended March 31,
2000 as compared to the same period in 1999 was primarily due to a decrease in
BBC's net income.
BBC's net income before extraordinary item declined by 55% during the three
months ended March 31, 2000 compared to the same period during 1999. The primary
reasons for BBC's decline were:
1) an increase in the provision for loan losses based on BBC's historical
loss experiences in its small business and consumer loan portfolios,
2) higher compensation expense associated with expanded investment
banking operations, the acquisition of Levitt and Sons and new banking
products,
3) a significant increase in other real estate expenses resulting from
Levitt and Sons and selling, general and administrative expenses
during 2000 which were not included during 1999,
4) increased occupancy expenses associated with repairs and maintenance
on bank branches and maintenance contracts associated with ATM
operations, and
5) lower gains on sales of securities available for sale net of
writedowns were due to a reduction in securities sales caused by a
rising rate environment and
6) lower gains on sales of loans held for sale were due to a decline in
loans originated for sale and, an increase in the valuation allowance.
The above BBC reductions in income before extraordinary item were partially
offset by:
1) an improvement in net interest income resulting from an increase in
interest earning assets reflecting higher loan receivables and
securities available for sale average balances, partially offset by a
decline in the net margin,
2) the sale of one parcel of land for a $182,000 gain,
3) trading securities profits during 2000 compared to losses during 1999,
and
4) a gain on the sale of a utility expansion receivable from real estate
operations.
BBC's extraordinary item resulted from the early extinguishment of debt. On
February 29, 2000, BBC repurchased $25 million aggregate principal amount of its
5 5/8% convertible subordinated debentures for $18.75 million. Included in BBC's
extraordinary item was $250,000 of offering costs and a $673,000 write-off of
original unamortized issuance costs.
The Company's ownership in BBC at March 31, 2000 and 1999 was approximately
31.8% and 32.2%, respectively, of all outstanding BBC Common Stock. The
following table provides information regarding the Company's ownership interest
in BBC at the dates indicated:
BBC BBC
Class A Class B
Common Common Total
Stock Stock Outstanding
----- ----- -----------
March 31, 1999 26.1% 47.1% 32.2%
March 31, 2000 26.2% 49.6% 31.8%
Increases (decreases) in the Company's expenses for the three months ended March
31, 2000, as compared to the comparable periods in 1999 were as follows (in
thousands):
Three months ended
March 31,
--------- Increases
2000 1999 (decreases)
---- ---- -----------
Interest on subordinated debentures $ -- 122 (122)
Interest on mortgages payable
and other borrowings 424 239 185
Cost of sale of real estate 1,796 579 1,217
Allowance for loss on mortgage notes -- 75 (75)
Employee compensation and benefits 324 299 25
Occupancy and equipment 8 16 (8)
General and administrative, net 369 212 157
------ ------ ------
$2,921 1,542 1,379
====== ====== ======
No interest was paid on subordinated debentures in 2000 due the redemption in
November 1999 of the Company's outstanding Subordinated Debentures at a price
equal to 100% of the principal amount plus accrued interest.
Interest on mortgage payables and other borrowings increased for the three
months ended March 31, 2000 as compared to the same period in 1999 primarily due
to an increase in average borrowings outstanding.
In March 1999, the Company recorded an allowance for loss on mortgage notes due
from affiliated limited partnerships of approximately $75,000. This allowance
for mortgage notes was based upon management's determination regarding the net
carrying value of the loans and the estimated fair value of the underlying loan
collateral.
Employee compensation and benefits increased for the three months ended March
31, 2000 as compared to the same period in 1999 primarily due to an increase in
levels of compensation.
General and administrative, net increased for the three months ended March 31,
2000 as compared to the same period in 1999 primarily due to an increase in
legal fees associated with litigation.
Financial Condition
The Company's total assets at March 31, 2000 and December 31, 1999 were $99.5
million and $96.7 million, respectively. The majority of the difference at March
31, 2000 as compared to December 31, 1999 was due to increases in the investment
in BBC and other assets. This increase was offset in part by decreases in
venture capital investments and real estate held for development and sale.
Investment in BBC increased by $2.7 million due to equity in earnings of BBC of
approximately $2.4 million and a decrease in net unrealized depreciation on
securities available for sale of approximately $896,000. This increase was
offset in part by the net effect of BBC capital transactions of approximately
$599,000.
The increase in other assets of approximately $3.1 million was primarily
attributable to funds due from an affiliated limited partnership of
approximately $5.8 million, associated with the contribution of the venture
capital investments in March 2000. This increase was offset by a decrease in the
escrow relating to the Subordinated Debentures. In January 2000, in accordance
with the terms of the escrow agreement, approximately $2.5 million remaining in
escrow was released to the Company.
Through 1999, the Company advanced funds to a wholly owned subsidiary for
investment of approximately $6.7 million in five unaffiliated technology
entities and approximately $1.7 million in three entities in the retail sector,
included in the Company's Consolidated Statements of Financial Condition as
Venture capital investments. During 2000, the $6.7 million advanced funds in the
technology entities were contributed at cost to a specified asset limited
partnership managed by the wholly owned subsidiary. In March 2000, interests of
$8.0 million were sold by such partnership to accredited investors in a private
offering. The Company continues to indirectly hold an $800,000 general partner
interest and a $500,000 limited partner interest in the partnership. In April
2000, the Company received approximately $5.8 million from the partnership
representing repayment of the amounts advanced plus $423,000 of interest on the
advances net of the Company's investment in the partnership. The Company also
received an administrative services fee and out-of pocket expenses. During the
quarter ended March 31, 2000, the Company made additional venture investments of
approximately $2.1 million to entities in the technology industry.
Real estate held for development and sale decreased due to the sale of
approximately 2 acres of the Company's Center Port property.
Market Risk
Market risk is defined as the risk of loss arising from adverse changes in
market valuation which arise from interest rate risk, foreign currency exchange
rate risk, commodity price risk and equity price risk. The Company's primary
market risk is equity risk through its investment in BBC. The Company also bears
a market risk in its venture capital investments.
Equity Price Risk
The Company's primary equity investment is its investment in BBC. This
investment was entered into for purposes other than trading purposes. Since this
investment is carried using the equity method of accounting, changes in the
market price of BBC stock would not have a direct impact on the Company's
financial statements, however, a change in the market price could likely have an
impact on the investment community's view of the Company. The following table
shows changes in the market value of the Company's investment in BBC at March
31, 2000 based on percentage changes in market price. Actual future price
changes may be different from the changes identified in the table below (in
thousands):
Percent
Change In Market
Market Price Value
------------ -----
20.00% $ 73,953
10.00% 67,790
0.00% 61,628
(10.00)% 55,465
(20.00)% 49,302
The Company has made venture capital investments in various entities and has
invested in an affiliated partnership which holds investments in various
entities with the anticipation that it will be able to achieve a return on its
investment when these entities are either acquired by other companies or sell
their stock in public offerings. It is possible that the products being
developed by these entities will not gain market acceptance or that the public
markets will not support a pricing of these entities that would provide the
Company with a return on or recoupment of its investments in these entities.
Management does not believe that market risk on other equity instruments would
have a significant impact on the financial condition of the Company.
BBC maintains a portfolio of trading and available for sale securities which
subjects BBC to equity pricing risks. The change in fair values of equity
securities represents instantaneous changes in all equity prices segregated by
trading securities, securities sold not yet purchased and available for sale
securities. The following are hypothetical changes in the fair value of BBC's
securities sold not yet purchased, trading and available for sale securities at
March 31, 2000 based on percentage changes in fair value. Actual future price
appreciation or depreciation may be different from the changes identified in the
table below.
Available Securities Total
Percent Trading for Sale Sold Not Dollar
Change in Securities Securities Yet Change from
Fair Value Fair Value Fair Value Purchased 0%
---------- ---------- ---------- --------- -------
20% $ 9,812 26,719 (900) 5,938
10% 8,995 24,493 (825) 2,970
-% 8,177 22,266 (750) -
(10%) 7,359 20,039 (675) (2,970)
(20%) 6,542 17,813 (600) (5,938)
Ryan Beck is a market maker in equity securities which could from time to time
require them to hold securities during declining markets. BBC attempts to manage
its equity price risk by maintaining a relatively small portfolio of securities
and evaluating equity securities as part of BBC's overall asset and liability
management process.
Interest Rate Risk
The majority of BBC's assets and liabilities are monetary in nature subjecting
BBC to significant interest rate risk. During 1998, BBC began trading government
securities which are generally bought and sold on the same day. During the
second quarter of 1999 BBC's trading activities were expanded beyond trading in
government securities to trading in options and futures on Eurodollar time
deposits which expire in three months or less. Eurodollar time deposits are
indexed to the LIBOR.
BBC has developed a model using vendor software to quantify its interest rate
risk. A sensitivity analysis was performed measuring BBC's potential gains and
losses in net portfolio fair values of interest rate sensitive instruments at
March 31, 2000 resulting from a change in interest rates. Interest rate
sensitive instruments included in the model were BBC's:
o Loan portfolio,
o Debt securities available for sale,
o Investment securities,
o FHLB stock,
o Federal Funds sold,
o Government securities,
o Eurodollar time deposit options and futures,
o Deposits, including brokered deposits and public funds,
o Advances from FHLB,
o Securities sold under agreements to repurchase,
o Federal Funds purchased,
o Notes and Bonds payable,
o Subordinated Debentures,
o Trust Preferred Securities,
o Interest rate swaps, and
o Off-balance sheet loan commitments.
BBC had fixed rate loan commitments aggregating $6.4 million at March 31, 2000.
The model calculates the net potential gains and losses in net portfolio fair
value by:
(i) discounting anticipated cash flows from existing assets,
liabilities and off-balance sheet contracts at market rates to
determine fair values at March 31, 2000,
(ii) discounting the above expected cash flows based on instantaneous
and parallel shifts in the yield curve to determine fair values,
and
(iii) calculating the difference between the fair values of (i) and (ii)
to determine the potential gain or loss in net portfolio fair
values.
BBC's management has made estimates of fair value discount rates that it
believes to be reasonable. However, because there is no quoted market for many
of these financial instruments, BBC's management has no basis to determine
whether the fair value presented would be indicative of the value negotiated in
an actual sale. BankAtlantic's 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.
Net Portfolio
Changes Value Dollar
in Rate Amount Change
------- ------ -------
(Dollars in thousands)
+200 bp $ 258,485 (86,554)
+100 bp 307,559 (37,480)
0 bp 345,039 --
(100) bp 368,358 23,319
(200) bp 347,867 2,828
In preparing the above BBC table, BBC makes various assumptions to determine the
net portfolio value at the assumed changes in interest rate. These assumptions
include:
o loan prepayment rates,
o deposit decay rates,
o market values of certain assets under the representative interest
rate scenarios, and
o repricing of certain deposits and borrowings
It was also assumed that delinquency rates would not change as a result of
changes in interest rates although there can be no assurance that this would be
the case. Even if interest rates change in the designated increments, there can
be no assurance that BBC's assets and liabilities would be impacted as indicated
in the table above. In addition, a change in U.S. Treasury rates in the
designated amounts, accompanied by a change in the shape of the yield curve
could cause significantly different changes to the fair values than indicated
above. Furthermore, the result of the calculations in the preceding table are
subject to significant deviations based upon actual future events, including
anticipatory and reactive measures which BBC may take in the future.
Liquidity and Capital Resources
The primary sources of funds to the Company for the three months ended March 31,
2000 were return of amounts previously held in escrow for called Subordinated
Debentures, interest received on advances to an affiliate in connection with
real estate held for development and sale, revenues from property operations,
principal reduction on loan receivables and dividends from BBC. These funds were
primarily utilized to invest in venture capital technology entities, reduce
mortgage payable and other borrowings and to fund operating expenses and general
and administrative expenses.
In January 2000, in accordance with the terms of the escrow agreement,
approximately $2.5 million remaining in escrow to fund future payments
associated with the called Subordinated Debenture was released to the Company.
Any future payments associated with these settlements will be paid from the
Company's working capital. Payments are made only when a claimant presents for
cancellation the subordinated debenture that was cancelled upon settlements of
litigation. At March 31, 2000, there was approximately $5.1 million remaining
that could be presented for payment. The Company is not obligated to pay
interest on this amount.
Through 1999, the Company advanced funds to a wholly owned subsidiary for
investment of approximately $6.7 million in five unaffiliated technology
entities and approximately $1.7 million in three entities in the retail sector.
During 2000, the $6.7 million advanced funds in the technology entities were
contributed at cost to a specified asset limited partnership managed by the
wholly owned subsidiary. In March 2000, interests of $8.0 million were sold by
such partnership to accredited investors in a private offering. The Company
continues to indirectly hold an $800,000 general partner interest and a $500,000
limited partner interest in the partnership. In April 2000, the Company received
approximately $5.8 million from the partnership representing repayment of the
amounts advanced plus $423,000 of interest on the advances net of the Company's
investment in the partnership. The Company also received an administrative
services fee and out-of pocket expenses. During the quarter ended March 31,
2000, the Company made additional venture capital investments of approximately
$2.1 million to entities in the technology industry. It is anticipated that the
Company may form additional partnerships in the future to invest in the
technology sector.
In December 1994, an entity controlled by the Company acquired from an
unaffiliated seller approximately 70 acres of unimproved land known as the
"Center Port" property in Pompano Beach, Florida. Through March 31, 2000,
approximately 52 acres of the Center Port property had been sold to unaffiliated
third parties for approximately $15.7 million and the Company recognized net
gains from the sales of real estate of approximately $3.7 million. The remainder
of the Center Port property is currently being marketed for sale. The unsold
property is unencumbered.
As previously indicated the Company holds approximately 31.8% of all outstanding
BBC Common Stock. The payment of dividends by BBC is subject to declaration by
BBC's Board of Directors and will depend upon, among other things, the results
of operations, financial condition and cash requirements of BBC and the ability
of BankAtlantic to pay dividends or otherwise advance funds to BBC, which in
turn is subject to OTS regulation and is based upon BankAtlantic's regulatory
capital levels and net income. Currently, BBC pays a quarterly dividend of $.025
and $.023 per share for Class A and Class B Common Stock, respectively.
At March 31, 2000, BankAtlantic's core, Tier 1 risk-based and total risk-based
capital ratios were 7.71%, 11.74% and 12.99%, respectively. Based on these
capital ratios, BankAtlantic meets the definition of a "well-capitalized"
institution.
Cash Flows
A summary of the Company's consolidated cash flows is as follows (in thousands):
Three months ended
March 31,
---------
Net cash provided by (used in) : 2000 1999
---- ----
Operating activities $ 2,180 (1,410)
Investing activities (927) 1,774
Financing activities (69) (66)
------- -------
Increase in cash and cash equivalents $ 1,184 298
======= =======
Impact of Inflation - The financial statements and related financial data and
notes presented herein have been prepared in accordance with GAAP, which require
the measurement of financial position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of money over time due to inflation. BFC does not believe that inflation has had
any material impact on the Company. Inflation could also have an effect on the
market value of the Company's ownership in its BBC Common Stock. Virtually all
of the assets and liabilities of BBC are monetary in nature. As a result,
interest rates have a more significant impact on BBC's performance than the
effects of general price levels. Although interest rates generally move in the
same direction as inflation, the magnitude of such changes varies.
<PAGE>
PART II - OTHER INFORMATION
Item 1 through 5. - Not applicable.
Item 6. - Exhibits and Reports on Form 8-K
a) Index to Exhibits:
27. Financial data schedule for the three months ended March
31, 2000.
b) No report on Form 8-K was filed during the three months ended
March 31,2000.
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, 2000 By: /s/ Alan B. Levan
----------------------
Alan B. Levan, President
Date: May 10, 2000 By: /s/ Glen R. Gilbert
------------------------
Glen R. Gilbert, Executive Vice President
Chief Accounting Officer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 2000 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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,729
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
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<INVESTMENTS-HELD-FOR-SALE> 5,295
<INVESTMENTS-CARRYING> 5,155
<INVESTMENTS-MARKET> 5,295
<LOANS> 2,369
<ALLOWANCE> 1,072
<TOTAL-ASSETS> 99,507
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<SHORT-TERM> 8,080
<LIABILITIES-OTHER> 821
<LONG-TERM> 10,104
0
0
<COMMON> 79
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<TOTAL-LIABILITIES-AND-EQUITY> 99,507
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