<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1996.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BANKATLANTIC BANCORP, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
FLORIDA 6035 65-0507804
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
incorporation or
organization)
</TABLE>
1750 EAST SUNRISE BOULEVARD
FORT LAUDERDALE, FLORIDA 33304
TELEPHONE (954) 760-5000
(Address, including Zip Code, and telephone number, including
area code, of registrant's principal executive offices)
ALAN B. LEVAN
BANKATLANTIC BANCORP, INC.
1750 EAST SUNRISE BOULEVARD
FORT LAUDERDALE, FLORIDA 33304
TELEPHONE (954) 760-5000
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
PLEASE SEND COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
ALISON W. MILLER, ESQ. JOHN J. SPIDI, ESQ.
STEARNS WEAVER MILLER WEISSLER MALIZIA, SPIDI, SLOANE
ALHADEFF & SITTERSON, P.A. & FISCH, P.C.
150 WEST FLAGLER STREET 1301 K STREET, N.W.
SUITE 2200 SUITE 700 EAST
MIAMI, FLORIDA 33130 WASHINGTON, D.C. 20005
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED(2) PER DEBENTURE(3) PRICE(1)(3) FEE(3)
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<S> <C> <C> <C> <C>
% Convertible
Subordinated
Debentures Due 2006... $57,500,000 $1,000 $57,500,000 $19,827.55
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Class A Common Stock.... 3,142,076 shares N/A N/A N/A
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes up to $7,500,000 additional principal amount of % Convertible
Subordinated Debentures (the "Debentures") which may be acquired by the
Underwriters to cover overallotments, if any.
(3) The Class A Common Stock is being registered hereby solely because the
Debentures are immediately convertible into such stock. However, pursuant
to Rule 457(i) of the Securities Act of 1933, as amended, no registration
fee is required with respect to the Class A Common Stock.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
BANKATLANTIC BANCORP, INC.
Cross-Reference Sheet Pursuant to Item 501(b) of Regulation S-K showing the
location in the Prospectus of the Responses to the Items of Part I of Form S-3.
<TABLE>
<CAPTION>
FORM S-3
ITEM NO. ITEM CAPTION LOCATION IN PROSPECTUS
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<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................. Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Investment
Considerations; Selected
Consolidated Financial Data
4. Use of Proceeds.............................. Use of Proceeds
5. Determination of Offering Price.............. Not Applicable
6. Dilution..................................... Not Applicable
7. Selling Security Holders..................... Not Applicable
8. Plan of Distribution......................... Outside Front and Inside Front Cover
Pages of Prospectus; Description of
the Debentures; Underwriting
9. Description of Securities to be Registered... Outside Front Cover Page of
Prospectus; Prospectus Summary;
Description of the Debentures;
Description of Capital Stock
10. Interests of Named Experts and Counsel....... Not Applicable
11. Material Changes............................. Not Applicable
12. Incorporation of Certain Information by
Reference.................................. Incorporation of Certain Documents by
Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PROSPECTUS
$50,000,000
(LOGO) BANKATLANTIC BANCORP(R)
% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2006
The % Convertible Subordinated Debentures Due 2006 (the "Debentures") of
BankAtlantic Bancorp, Inc. (the "Company" or "BBC") will mature on , 2006
and will accrue interest at the rate of % per annum from the date of
delivery. The Debentures are convertible at any time prior to maturity, unless
previously redeemed, into shares of Class A Common Stock of the Company at a
conversion price of $ per share (equivalent to a conversion rate of
shares per $1,000 principal amount of Debentures), subject to adjustment in
certain events. On May 29, 1996, the last sale price of the Class A Common Stock
on the Nasdaq National Market (symbol: BANCA) was $14.50 per share. The Class A
Common Stock has no voting rights other than as may be required by Florida law.
See "Description of Capital Stock".
Interest on the Debentures is payable semiannually in arrears on each
and , commencing , 1996. The Debentures are redeemable at any time on or
after , 1999 at the option of the Company, in whole or in part, at fixed
redemption prices set forth herein, together with accrued interest to the
redemption date; provided that the Debentures may be redeemed at the option of
the Company, in whole or in part, at any time prior to , 1999 without any
premium if the closing sale price of the Class A Common Stock for at least 30
consecutive trading days equals or exceeds 140% of the conversion price then in
effect. The Debentures are not subject to any sinking fund.
The Debentures will be unsecured general obligations of the Company
subordinate in right of payment to all existing and future Senior Indebtedness
(as defined herein) of the Company. See "Investment
Considerations -- Subordination." The Company currently has no Senior
Indebtedness. The Debentures will rank on a par with the Company's currently
outstanding $21.0 million principal amount of 9% Subordinated Debentures Due
2005 (the "9% Debentures"). There is no restriction on the ability of the
Company or any of the Company's subsidiaries to incur additional indebtedness,
whether ranking senior to, on a par with, or junior to the Debentures. Payment
of principal and interest on the Debentures may be accelerated upon the
occurrence of certain events of default. See "Description of the Debentures."
The Debentures will be issued only in fully registered form in denominations
of $1,000 and any integral multiple thereof.
Prior to this Offering, there has been no public market for the Debentures.
The Company has filed an application to list the Debentures for quotation on the
Nasdaq SmallCap Market under the symbol "BANCG".
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY INVESTORS.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE FUND
OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Debenture............................... $1,000
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Total(3).................................... $50,000,000
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</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company, estimated to be
approximately $ .
(3) The Company has granted the Underwriters a 30-day option to purchase up to
$7,500,000 additional principal amount of Debentures at the Price to Public
less Underwriting Discount solely to cover over-allotments, if any. If this
option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $57,500,000, $ and $ ,
respectively. See "Underwriting."
The Debentures are offered by the Underwriters subject to receipt and
acceptance by them and subject to their right to reject any order in whole or in
part. It is expected that delivery of the Debentures will be made against
payment therefor at the offices of Ryan, Beck & Co., Inc. (as Representative of
the Underwriters) on or about , 1996.
Ryan, Beck & Co.
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's regional offices at Suite 1400,
500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
The Company has filed with the Commission a Registration Statement, of
which this Prospectus is a part, under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Debentures. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
portions of which have been omitted as permitted by the rules and regulations of
the Commission. In addition, certain documents filed by the Company with the
Commission have been incorporated in this Prospectus by reference. See
"Incorporation of Certain Documents by Reference." For further information with
respect to the Company and the Debentures, reference is made to the Registration
Statement, including the exhibits thereto and the documents incorporated herein
by reference. The Registration Statement may be inspected without charge at the
principal office of the Commission in Washington, D.C., and copies of all or
part of it may be obtained from the Commission upon payment of the prescribed
fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission are hereby
incorporated in this Prospectus by reference and made a part hereof:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995, filed with the Commission on February 9, 1996.
(2) The Company's Current Report on Form 8-K, dated April 9, 1996,
filed with the Commission on April 19, 1996.
(3) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, filed with the Commission on May 14, 1996.
Financial and other information included in the reports incorporated by
reference herein do not reflect stock splits or dividends declared subsequent to
the respective dates of such reports, except as indicated in such reports.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of Debentures shall be deemed to be incorporated by reference into this
Prospectus and to be a part of this Prospectus from the date of filing thereof.
Any statement contained in a document incorporated by reference herein,
shall be deemed to be modified or superseded for purposes of the Registration
Statement and this Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference, other than
certain exhibits to such documents. Written requests should be directed to
BankAtlantic Bancorp, Inc., 1750 East Sunrise Boulevard, Fort Lauderdale,
Florida 33304, Attention: Secretary, telephone: 954-760-5000.
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[INSERT MAP IDENTIFYING LOCATION OF BANKATLANTIC AND BNA RETAIL BANKING
LOCATIONS]
[TO COME]
3
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Unless otherwise indicated, the information in this Prospectus
assumes that the Underwriters' over-allotment option will not be exercised. The
Board of Directors previously declared five for four stock splits of the
Company's Class B Common Stock, par value $.01 per share (the "Class B Common
Stock"), effected as 25% stock dividends which were issued on July 19, 1995 and
February 1, 1996, respectively. Where appropriate, amounts throughout this
Prospectus have been adjusted to reflect the stock splits.
BANKATLANTIC BANCORP, INC.
BankAtlantic Bancorp, Inc. (the "Company") is a unitary savings bank
holding company organized in April 1994 under the laws of the State of Florida
for the purpose of becoming the holding company for BankAtlantic, A Federal
Savings Bank ("BankAtlantic"). The Company owns all of the outstanding capital
stock of BankAtlantic. BFC Financial Corporation ("BFC"), which is controlled by
the Chairman and Vice Chairman of the Company, acquired a controlling interest
in the Company in 1987 and currently owns 4,876,124 shares or approximately 46%
of the Company's issued and outstanding Class B Common Stock. At March 31, 1996,
the Company had consolidated total assets of approximately $1.64 billion and
total stockholders' equity of approximately $136.8 million.
BankAtlantic is a federally-chartered, federally-insured savings bank
organized in 1952, which provides traditional retail banking services and a full
range of commercial banking products and related financial services. The
principal business of BankAtlantic is attracting checking and savings deposits
from the public and general business customers and using these deposits to
originate commercial real estate and business loans, residential real estate
loans and consumer loans, and to make other permitted investments such as the
purchase of mortgage-backed securities, tax certificates and other investment
securities. BankAtlantic operates through 46 branch offices located primarily in
Dade, Broward and Palm Beach Counties in South Florida. As reported by an
independent statistical reporting service, BankAtlantic is currently the largest
independent financial institution headquartered in Broward County, Florida and
third in size among all savings institutions headquartered in the State of
Florida based on consolidated assets at December 31, 1995, the most recent date
utilized by such reporting service. Based on such published information, if the
previously announced acquisitions of financial institutions in the State of
Florida which are currently pending had been consummated at December 31, 1995,
including BankAtlantic's acquisition of Bank of North America Bancorp, Inc., the
Company would have been the second largest independent depository institution
headquartered in Florida on that date. Further, based on published information
as of June 30, 1995, the Company's market share of deposits in Broward County
would have increased from approximately 3.95% to 5.64%. The rapid pace of
consolidation among Florida's depository institutions has transformed many local
competitors into out-of-state competitors with, in many cases, remote decision
making on larger loans. Many customers feel more comfortable dealing with
community based institutions. BankAtlantic considers itself to be a community
bank, able to compete against regional and super regional institutions by
offering personalized service and fast decision making capabilities.
BankAtlantic's deposit accounts are insured by the Federal Deposit
Insurance Corporation (the "FDIC") primarily through the Savings Association
Insurance Fund (the "SAIF"), with a small portion insured through the Bank
Insurance Fund ("BIF"), both of which are administered by the FDIC. BankAtlantic
is regulated and examined by the Office of Thrift Supervision (the "OTS") and
the FDIC.
OPERATING STRATEGY
Since 1987, when BFC acquired a controlling interest in BankAtlantic, the
Company's operating strategy has been to shift from traditional thrift
activities to those more closely related to commercial banking. This strategy
entails (i) increasing the range of banking services; (ii) shifting the deposit
mix to emphasize transaction accounts, such as checking and money fund accounts;
(iii) changing the make-up of the loan
4
<PAGE> 7
portfolio to emphasize short-term and variable interest rate products, primarily
commercial real estate and business loans and consumer loans; and (iv) replacing
fixed-rate, long-term securities with floating rate or short-term securities. In
pursuing these goals, substantial expenditures were made for marketing,
equipment, updating facilities and computer systems and for adding qualified
employees, including senior management personnel.
The Company's business strategy has produced the following results:
- Profitability -- Implementation of BankAtlantic's business strategy,
complemented in later periods by improving economic conditions and lower
market interest rates, resulted in net income of $18.4 million, $16.8
million and $16.1 million for the years ended December 31, 1995, 1994 and
1993, respectively and $4.7 million for the quarter ended March 31, 1996.
Return on average assets was 1.07%, 1.17% and 1.25% for the years ended
December 31, 1995, 1994 and 1993, respectively, and an annualized 1.10%
for the quarter ended March 31, 1996.
- Improved Capital Position -- At March 31, 1996, BankAtlantic's capital
position exceeded all applicable regulatory capital requirements, with
tangible and core capital of 8.45% and risk based capital of 13.32%.
- Transaction Accounts -- Management's efforts to shift its activities to
those more closely related to commercial banking involved reducing the
dependence on high rate certificate accounts by attracting transaction
accounts, which carry a lower cost, generate service fee income and
generally represent a more stable source of funds. At March 31, 1996,
transaction accounts represented 48% of total deposits. BankAtlantic will
continue to emphasize transaction accounts by maintaining its full service
branch network and full range of accounts and services. The flow of
deposits, however, is and will continue to be significantly influenced by
economic conditions, competition and prevailing market interest rates.
- Loan Portfolio Reconfiguration -- In an effort to cause its loan
portfolio to adjust more rapidly to market conditions, BankAtlantic
shifted the focus of its portfolio from long-term, fixed-rate residential
real estate loans to shorter-term and variable interest rate commercial
business and real estate loans (including commercial construction loans),
which are generally higher yielding, have shorter terms and typically have
adjustable interest rates. Since December 31, 1991, such loans have
increased from approximately $221 million or 29% of gross loans to
approximately $573 million or 58% of gross loans at March 31, 1996.
- Asset Quality -- The Company seeks to maintain asset quality and moderate
credit risk. Although the loan portfolio has grown substantially, and the
growth has been concentrated in commercial loans and consumer loans,
primarily indirect automobile loans, which generally involve more credit
risk than residential real estate loans, BankAtlantic's non-accrual loans
and non-performing assets have decreased. Non-performing assets decreased
from $36.6 million, or 2.52% of total assets at December 31, 1991 to $19.2
million, or 1.17% of total assets at March 31, 1996. Total allowances for
losses on loans and tax certificates as a percentage of nonperforming
assets was 93.34% at March 31, 1996.
- Controlled Growth -- As part of management's operating strategy,
BankAtlantic has added 21 drive-through facilities and 215 ATMs. There are
currently 46 full service offices, with several more scheduled to open in
1996 and 1997. In February 1995, in an effort to increase its market
presence in Dade County, Florida, BankAtlantic acquired MegaBank, a Miami
based commercial bank with 5 branches and approximately $120 million in
deposits. In April 1996, in furtherance of its policy of controlled
growth, BankAtlantic entered into an agreement to acquire the holding
company of Bank of North America, a commercial bank with $490 million in
deposits and 13 branches, 11 of which are located in Broward County,
BankAtlantic's primary market.
PENDING ACQUISITION OF BANK OF NORTH AMERICA
In an effort to enhance BankAtlantic's presence in Broward County, its
primary market, BankAtlantic entered into a stock purchase agreement (the "BNAB
Purchase Agreement") on April 9, 1996 to acquire
5
<PAGE> 8
Bank of North America Bancorp, Inc. ("BNAB"), the holding company for Bank of
North America, a Florida chartered commercial bank ("BNA"), for approximately
$54 million in cash. The purchase price is subject to upward or downward
adjustment in the event that the adjusted net worth of BNAB (as calculated
pursuant to the BNAB Purchase Agreement) as of the last day of the month
immediately preceding the date of the acquisition is greater than or is less
than $37.4 million, provided that any such adjustment will not reduce the
purchase price by more than $2 million. After any initial adjustment as
discussed in the preceding sentence, the purchase price will be reduced by an
amount equal to certain transaction costs, including severance costs and
bonuses, as specified in the BNAB Purchase Agreement, and losses on certain
assets. BNAB had assets of $560 million and stockholder's equity of
approximately $37.4 million at March 31, 1996 and had earnings in 1995 of
approximately $2.2 million. At March 31, 1996, BNAB had approximately $490
million of deposits (all of which are insured by SAIF), $395 million in loans
and 13 branches, with 11 located in Broward County and one each in Dade and Palm
Beach Counties.
The acquisition of BNAB and the subsequent merger of BNA into BankAtlantic
is expected to be completed in the fourth quarter of 1996, but is subject to
certain conditions including the receipt of all required regulatory approvals.
There is no assurance that the transaction will be consummated. Funds for the
acquisition will be obtained from one or more sources, including operations,
traditional borrowings, repayments of loans, liquidation of investments or
contributions to BankAtlantic of the proceeds of this Offering. However, the
acquisition of BNAB is not conditioned upon or dependent upon successful
completion of this Offering. See "Pending Acquisition of Bank of North America".
THE OFFERING
Securities offered......... $50,000,000 in principal amount of %
Convertible Subordinated Debentures due 2006.
Use of Proceeds............ The net proceeds will be used for general corporate
purposes. See "Use of Proceeds."
Convertibility............. Convertible into Class A Common Stock at any time
prior to maturity or redemption at $ per
share, subject to adjustment in certain
circumstances.
Interest payment dates..... and , commencing , 1996.
Maturity Date.............. , 2006.
Mandatory Redemption....... None
Optional Redemption........ The Debentures are redeemable at any time after
, 1999, in whole or in part, at the option
of the Company on not less than 30 days notice,
at fixed redemption prices as set forth herein,
together with accrued interest to the date fixed
for redemption; provided that the Debentures may
be redeemed prior to , 1999 at the option of
the Company without the payment of any premium if
the closing sale price of the Class A Common
Stock for at least 30 consecutive trading days
equals or exceeds 140% of the conversion price
then in effect. Payment of principal and interest
on the Debentures may be accelerated in the case
of certain events of default. See "Description of
the Debentures."
Subordination.............. The payment of principal and premium, if any, and
interest on the Debentures is subordinated to all
existing and future Senior Indebtedness. Senior
Indebtedness is defined as any indebtedness or
liability of the Company, whether existing on or
created or incurred after the date of issuance of
the Debentures, which is not expressly by its
terms subordinate or pari passu in right of
payment to the Debentures. The Company currently
has no Senior Indebtedness. The Debentures will
6
<PAGE> 9
rank pari passu with the Company's outstanding
$21.0 million principal amount of 9% Subordinated
Debentures Due 2005. While the Company has no
current plan to incur any indebtedness ranking
senior to, or any additional indebtedness ranking
on par with, the Debentures, the Indenture does
not limit the incurrence of indebtedness,
including Senior Indebtedness, by the Company and
its subsidiaries. See "Description of the
Debentures -- Subordination."
Certain Restrictions....... The Indenture, among its other provisions,
restricts the ability of the Company, under
certain circumstances, to pay dividends on, or
repurchase, its capital stock unless it retains
cash, cash equivalents or marketable securities
in an amount sufficient to cover the next two
consecutive semi-annual interest payments. The
Indenture also prohibits the Company from
consolidating or merging with, or transferring
substantially all its assets to, another entity
unless: (i) such other entity assumes the
Company's obligations under the Indenture, (ii)
immediately after such transaction takes effect,
the Company will not be in Default (as defined
herein) under the Indenture, and (iii) the
Company has delivered to the Indenture trustee an
appropriate opinion of counsel. The Indenture
does not prohibit or restrict the Company from
selling additional shares of capital stock or
other debt securities nor from pledging
BankAtlantic's capital stock. Further,
BankAtlantic is not restricted from issuing
additional shares of BankAtlantic's capital stock
or other debt securities. See "Description of the
Debentures -- Restrictions on Dividends and Other
Distributions."
Events of Default.......... Events of default include: (i) the failure by the
Company to pay principal of or premium, if any,
on the Debentures at maturity or upon redemption,
(ii) the failure by the Company to pay interest
on any of the Debentures and such failure
continues for a period of 30 days, (iii) the
failure by the Company to comply with any of its
other agreements or covenants in, or provisions
of, the Indenture and such default continues for
a period of 60 days after receipt of notice of
such failure and (iv) certain events of
bankruptcy, insolvency or reorganization of the
Company. See "Description of the Debentures."
Trustee.................... First Trust National Association
Nasdaq SmallCap Market
Symbol................... BANCG
Voting Rights of Class A
Common Stock............. Holders of Class A Common Stock have no voting
rights, except as may be required by Florida law.
Holders of Class B Common Stock have one vote per
share. See "Description of Capital
Stock -- Voting Rights."
Dividends on Class A
Common Stock............. Holders of Class A Common Stock are entitled to
receive cash dividends equal to at least 110% of
any cash dividends declared and paid on Class B
Common Stock. Non-cash distributions on Class A
Common Stock must be identical to those declared
and issued on Class B Common Stock, except that a
distribution to holders of Class A Common Stock
may be declared and issued in Class A Common
Stock while a distribution to holders of Class B
Common Stock may
7
<PAGE> 10
be declared and issued in either Class A Common
Stock or Class B Common Stock. See "Description
of Capital Stock -- Dividends and Other
Distributions." On April 19, 1996, the Company
paid a quarterly cash dividend of $.0506 per
share on the Class A Common Stock and $.0440 per
share on the Class B Common Stock.
INVESTMENT CONSIDERATIONS
Before making an investment decision, prospective investors should consider
all of the information contained in this Prospectus. In particular, prospective
investors should evaluate the factors discussed under "Investment
Considerations," including, but not limited to, the economic and business risks
associated with economic conditions in South Florida and the Company's
investment and loan portfolio in particular, the lack of voting rights and
voting control, the potential adverse impact on the Company's operations and
profitability of changes in interest rates and future legislation, the highly
competitive nature of the Company's business, the sources of payments to holders
of Debentures, regulatory limitations on BankAtlantic's ability to pay dividends
and the limited covenants in the Indenture.
8
<PAGE> 11
SELECTED CONSOLIDATED FINANCIAL DATA OF
BANKATLANTIC BANCORP, INC.
<TABLE>
<CAPTION>
AT OR FOR
THE THREE MONTHS
AT OR FOR THE YEARS
ENDED MARCH 31, ENDED DECEMBER 31,
----------------- --------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net interest income................................. $16,472 $14,797 $64,391 $57,118 $58,516 $60,909 $ 54,534
Provision for loan losses........................... 940 176 4,182 2,299 3,450 6,650 17,540
------- ------- ------- ------- ------- ------- --------
Net interest income after provision for loan
losses............................................ 15,532 14,621 60,209 54,819 55,066 54,259 36,994
------- ------- ------- ------- ------- ------- --------
NON-INTEREST INCOME:
Loan servicing and other loan fees.................. 838 975 3,524 3,365 2,229 2,869 4,344
Gains on sales of loans originated for
resale............................................ 164 65 395 773 1,246 976 330
Gains on sales of mortgage servicing rights......... 0 0 2,744 484 0 0 0
Unrealized and realized gains (losses) on trading
account securities................................ 0 310 589 (558) 0 0 0
Gains on sales of investment, mortgage-backed
securities and debt securities available for sale,
net............................................... 2,292 0 0 0 0 5,869 810
Other............................................... 3,540 2,631 12,136 9,699 8,163 7,337 8,622
------- ------- ------- ------- ------- ------- --------
Total non-interest income........................... 6,834 3,981 19,388 13,763 11,638 17,051 14,106
------- ------- ------- ------- ------- ------- --------
Non-interest expenses............................... 14,515 11,875 51,160 42,085 43,533 46,817 65,164
------- ------- ------- ------- ------- ------- --------
Income (loss) before income taxes and extraordinary
items............................................. 7,851 6,727 28,437 26,497 23,171 24,493 (14,064)
Provision (benefit) for income taxes................ 3,141 2,346 10,018 9,662 7,093 9,201 (4,841)
------- ------- ------- ------- ------- ------- --------
Income (loss) before extraordinary items............ 4,710 4,381 18,419 16,835 16,078 15,292 (9,223)
Extraordinary items net of taxes.................... 0 0 0 0 0 756 660
------- ------- ------- ------- ------- ------- --------
NET INCOME (LOSS)................................... 4,710 4,381 18,419 16,835 16,078 16,048 (8,563)
------- ------- ------- ------- ------- ------- --------
Dividends on non-cumulative preferred stock paid by
BFC escrow........................................ 0 0 0 0 147 880 715
Dividends on non-cumulative preferred
stock............................................. 0 220 677 880 733 0 0
Amounts classified as dividends on non-cumulative
preferred stock redemption........................ 0 0 1,353(A) 0 0 0 0
------- ------- ------- ------- ------- ------- --------
Total dividends on non-cumulative preferred stock... 0 220 2,030 880 880 880 715
------- ------- ------- ------- ------- ------- --------
NET INCOME (LOSS) AVAILABLE FOR COMMON SHARES....... $ 4,710 $ 4,161 $16,389 $15,955 $15,198 $15,168 $ (9,278)
======= ======= ======= ======= ======= ======= ========
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT
SHARE:
Net income (loss) before extraordinary
items............................................. $ 0.42 $ 0.39 $ 1.51(A) $ 1.52 $ 1.61 $ 1.97 $ (1.36)
Extraordinary items................................. 0.00 0.00 0.00 0.00 0.00 0.10 0.09
------- ------- ------- ------- ------- ------- --------
Net income (loss)................................... $ 0.42 $ 0.39 $ 1.51(A) $ 1.52 $ 1.61 $ 2.07 $ (1.27)
======= ======= ======= ======= ======= ======= ========
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
ASSUMING FULL DILUTION:
Net income before extraordinary items............... $ 0.42 $ 0.39 $ 1.50(A) $ 1.52 $ 1.60 $ 1.70 $ N/A
Extraordinary items................................. 0.00 0.00 0.00 0.00 0.00 0.09 N/A
------- ------- ------- ------- ------- ------- --------
Net income.......................................... $ 0.42 $ 0.39 $ 1.50(A) $ 1.52 $ 1.60 $ 1.79 $ N/A
======= ======= ======= ======= ======= ======= ========
BOOK VALUE PER COMMON SHARE......................... $ 11.65 $ 10.85 $ 11.38 $ 9.56 $ 8.13 $ 7.90 $ 5.82
======= ======= ======= ======= ======= ======= ========
TANGIBLE BOOK VALUE PER COMMON SHARE................ $ 10.70 $ 9.58 $ 10.29 $ 9.56 $ 8.13 $ 7.85 $ 5.73
======= ======= ======= ======= ======= ======= ========
</TABLE>
- ---------------
(A) The excess of the redemption price above the recorded amount of preferred
stock is considered a preferred stock dividend. The impact of the October
1995 preferred stock redemption for the year ended December 31, 1995 was a
reduction of $0.13 and $0.12 for primary and fully diluted earnings per
share, respectively.
9
<PAGE> 12
SELECTED CONSOLIDATED FINANCIAL DATA OF
BANKATLANTIC BANCORP, INC. -- (CONTINUED)
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS AT OR FOR THE YEARS
ENDED MARCH 31,(1) ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............. $1,642,825 $1,757,126 $1,750,689 $1,539,653 $1,359,195 $1,303,071 $1,455,822
Loans receivable-net..... 863,348 698,320 828,630 546,396 485,956 556,662 728,515
Mortgage-backed
securities held to
maturity............... 0 628,155 0 573,913 443,249 349,531 460,780
Debt securities available
for sale............... 559,775 70,285 691,803 53,969 83,116 137,963 0
Investment and trading
account securities,
net.................... 40,537 194,816 49,856 211,776 97,701 120,424 109,076
Mortgage servicing
rights................. 24,450 20,735 20,738 20,584 19,833 7,655 6,748
Cost over fair value of
net assets acquired and
other intangibles...... 11,143 12,908 11,521 0 0 0 0
Deposits................. 1,323,229 1,214,958 1,300,377 1,085,782 1,076,360 1,108,115 1,255,513
Subordinated debentures,
capital notes and note
payable................ 21,000 3,931 21,001 0 0 9,524 15,666
Advances from FHLB,
federal funds purchased
and securities sold
under agreements to
repurchase............. 107,366 375,027 269,222 311,879 149,435 87,632 94,332
Total stockholders'
equity................. 136,819 110,187 120,561 105,520 90,652 66,165 50,997
PERFORMANCE RATIOS:
Net interest spread
(during period)........ 3.84% 3.47% 3.65% 4.07% 4.67% 4.60% 3.56%
Interest rate margin
(during period)........ 4.19 3.75 4.04 4.32 4.90 4.78 3.71
Average equity to average
assets................. 6.86 6.40 6.66 6.86 5.85 4.07 3.51
Return on average
equity................. 16.10 16.13 16.03 17.07 21.32 27.09 (16.36)
Return on average
assets................. 1.10 1.03 1.07 1.17 1.25 1.10 (0.57)
Operating expenses as a
percent of net interest
income plus
non-interest income.... 62.28 63.24 61.07 59.37 62.03 60.22 94.94
ASSET QUALITY RATIOS:
Non-performing assets as
a percent of:
Total loans, tax
certificates and real
estate owned........... 2.07 2.95 2.37 3.66 3.34 3.80 4.21
Total assets............. 1.17 1.30 1.23 1.51 1.47 2.07 2.52
Allowances for loan
losses and tax
certificates as a
percent of
non-performing
assets................. 93.34 108.29 96.06 82.86 99.90 66.88 39.71
Net loan charge-offs as a
percent of average
outstanding loans...... 0.58 0.10 0.45 0.59 0.56 0.60 2.23
RATIO OF EARNINGS TO
FIXED CHARGES:
Including interest on
deposits............... 1.49 1.42 1.43 1.63 1.63 1.43 0.85
Excluding interest on
deposits............... 3.20 2.20 2.41 3.50 5.67 3.62 0.51
</TABLE>
- ---------------
(1) Annualized where appropriate.
10
<PAGE> 13
INVESTMENT CONSIDERATIONS
An investment in the Debentures offered hereby involves a high degree of
risk. In addition to the other information contained or incorporated by
reference herein, the following factors should be considered carefully in
evaluating the Company before purchasing the Debentures offered hereby.
SOURCES OF PAYMENTS TO HOLDERS OF DEBENTURES; ABILITY TO PAY DIVIDENDS; POSSIBLE
ISSUANCE
OF ADDITIONAL SECURITIES
Although the Company holds all of the outstanding capital stock of
BankAtlantic, the Company is a legal entity separate and distinct from
BankAtlantic. The ability of the Company to pay the interest on and principal of
the Debentures and to pay dividends on any Class A Common Stock issued upon
conversion of any Debentures will be significantly dependent on the ability of
BankAtlantic to pay dividends to the Company in amounts sufficient to service
the Company's obligations, including its obligation to pay interest
semi-annually on its outstanding 9% Subordinated Debentures Due 2005 (the "9%
Debentures") and to make any other payments with respect to securities issued by
the Company in the future which are pari passu or have a preference over the
Debentures or the Class A Common Stock, as applicable, with respect to the
payment of principal, interest or dividends. There is no restriction on the
ability of the Company to issue securities which are pari passu or have a
preference over the Debentures or the Class A Common Stock nor is there any
restriction on the ability of BankAtlantic to issue additional capital stock or
incur additional indebtedness.
BankAtlantic's ability to pay dividends or make other capital distributions
to the Company is governed by OTS regulations and is based on BankAtlantic's
regulatory capital levels and net income. Under these regulations, "capital
distributions" are defined as cash dividends, payments by a savings association
to repurchase or otherwise acquire its shares, payments to shareholders of
another entity in a cash-out merger, and other distributions charged against
capital. An institution that has regulatory capital that is at least equal to
its fully phased-in capital requirements (both before and after giving effect to
the distribution), and that has not been notified that it "is in need of more
than normal supervision" is a Tier 1 association. Upon prior notice to, and
non-objection by, the OTS, a Tier 1 association is permitted to make capital
distributions during a calendar year of up to the greater of (i) 100% of net
income for the current calendar year, plus 50% of its capital surplus ("surplus"
being the amount of capital in excess of its fully phased-in capital
requirements) or (ii) 75% of its net income over the most recent four quarters.
Any additional capital distributions would require prior regulatory approval. As
of March 31, 1996, BankAtlantic's capital exceeded its fully phased-in capital
requirements by approximately $60.5 million and BankAtlantic qualified as a Tier
1 association under applicable OTS regulations. Additionally, all capital
distributions of BankAtlantic are subject to the OTS' right to object to a
distribution on safety and soundness grounds. There is no assurance, however,
that BankAtlantic will remain a Tier 1 association or that it will be in a
position to make capital distributions to the Company in an amount sufficient
for the Company to service the Debentures, or to pay dividends on the Class A
Common Stock issuable upon conversion of the Debentures. See "Regulation and
Supervision -- Savings Institution Regulation -- Restrictions on Dividends and
Other Capital Distributions."
SUBORDINATION
The Debentures are subordinated to all Senior Indebtedness of the Company.
Senior Indebtedness is generally defined as any indebtedness of the Company,
whether existing on or created or incurred after the date of issuance of the
Debentures, which is not expressly by its terms subordinate or pari passu in
right of payment to the Debentures. The Debentures rank pari passu in right of
payment to the Company's outstanding 9% Debentures. Only the capital stock of
the Company is currently junior in right of payment to the Debentures. As of
March 31, 1996, the Company had no Senior Indebtedness and had outstanding $21
million in principal amount of 9% Debentures ranking on a par with the
Debentures. The Indenture does not limit the incurrence of additional
indebtedness by the Company, including Senior Indebtedness, or of additional
indebtedness by BankAtlantic or other subsidiaries.
The Debentures will be obligations of the Company only, are not obligations
of or deposits in BankAtlantic and are not insured by any government agency.
Because the Company is a holding company, its
11
<PAGE> 14
rights and the rights of its creditors, including the holders of the Debentures,
to participate in any distribution of the assets of BankAtlantic (either as a
shareholder or as a creditor), upon a liquidation, reorganization or insolvency
of BankAtlantic (and the consequent right of the holders of the Debentures to
participate in those assets) will be subject to the claims of the creditors of
BankAtlantic (including depositors in BankAtlantic). If the Company is a
creditor of BankAtlantic, the claims of the Company would be subject to any
prior security interest in the assets of BankAtlantic and any indebtedness of
BankAtlantic senior to that of the Company.
LIMITED COVENANTS
The covenants in the Indenture are limited and do not protect holders of
Debentures in the event of a material adverse change in the Company's financial
condition or results of operations. Additionally, as more fully described in
"Description of the Debentures," payment of principal of the Debentures can only
be accelerated upon a default in the payment of principal, premium, if any, or
interest, a default in the performance of any of the covenants or agreements in
the Indenture or upon certain events of bankruptcy, insolvency or reorganization
of the Company. Neither the Debentures nor the Indenture contain any provisions
which will restrict the Company from incurring, assuming or becoming liable with
respect to any indebtedness or other obligations, whether secured or unsecured.
Neither the Debentures nor the Indenture contain any financial ratios or
specified levels of liquidity to which the Company must adhere. In addition,
neither the Debentures nor the Indenture contain any provision which requires
the Company to repurchase, redeem or modify the terms of the Debentures upon a
change in control or other events involving the Company which may adversely
affect the creditworthiness of the Debentures. Therefore, neither the covenants
nor the other provisions of the Indenture should be a significant factor in
evaluating whether the Company will be able to comply or will comply with its
obligations under the Debentures. See "Description of the Debentures."
ABSENCE OF PUBLIC MARKET FOR DEBENTURES
Prior to the Offering, there has been no public market for the Debentures.
Although the Company has applied to have the Debentures approved for quotation
on the Nasdaq SmallCap Market, there is no assurance that the Debentures will be
approved for listing, that any active trading market therefor will develop, or,
if any such market develops, that it will be sustained. Accordingly, holders of
Debentures may experience difficulty in reselling them or may be unable to sell
them at all. Additionally, since the prices of securities generally fluctuate,
there can be no assurance that purchasers in this Offering will be able to sell
the Debentures at or above the purchase price.
LIMITED TRADING MARKET FOR CLASS A COMMON STOCK
The Debentures are convertible at any time prior to maturity, unless
previously redeemed, into shares of Class A Common Stock of the Company. There
is no assurance that an active trading market for the Class A Common Stock will
be developed or sustained or that a holder of Class A Common Stock will have the
ability to dispose of his shares in a liquid market. The Class A Common Stock
was first issued by the Company and commenced trading on the Nasdaq National
Market on March 11, 1996. There are currently outstanding 1,311,803 shares of
Class A Common Stock. See "Market for Common Stock and Dividends".
While the Class A Common Stock is entitled to receive at least 110% of the
cash dividends declared and paid on the Class B Common Stock, there can be no
assurance that the limited voting entitlement of the Class A Common Stock will
not have an adverse effect on its marketability or market price and no assurance
can be given that the Class A Common Stock and the Class B Common Stock will
trade at the same price or even within a narrow range of prices.
LACK OF VOTING RIGHTS OF CLASS A COMMON STOCK; VOTING CONTROL
Holders of the Class B Common Stock currently possess all voting power of
the Company. Holders of the Class A Common Stock will have no right to vote in
connection with the election of the directors of the Company or any other matter
except as provided by Florida law. BFC, which currently owns 4,876,124 shares
12
<PAGE> 15
or approximately 46% of the Company's issued and outstanding Class B Common
Stock, is in a position to significantly influence the policies and management
of the Company and effectively elect a majority of the Company's Board of
Directors. Additionally, Alan B. Levan, the Chairman of the Board and Chief
Executive Officer of the Company and BankAtlantic and John E. Abdo, a director
of the Company and the Vice-chairman of the Board and Chairman of the Executive
Committee of BankAtlantic, beneficially own approximately 46% and 17% of the
shares of BFC, respectively.
LOAN PORTFOLIO CONSIDERATIONS
Loans receivable, net at BankAtlantic increased by approximately $317
million or 58% at March 31, 1996, from December 31, 1994. While substantially
all components of lending increased in 1995 and the first quarter of 1996, much
of this loan growth occurred in commercial real estate, construction and
consumer loans and includes approximately $114 million of loans acquired in
connection with the MegaBank acquisition. As a result of this recent loan
growth, a significant portion of BankAtlantic's total loan portfolio may be
considered unseasoned and, therefore, specific payment and loss experience for
this portion of the portfolio has not yet been established. In addition, with
respect to development and construction loans, the underlying real estate
projects may be in the early stages of development. Further, these loans are
concentrated in Broward, Dade and Palm Beach Counties, Florida. As a result, a
decline in the desirability of these counties as destinations for "in migration"
or vacations, as well as the general economic conditions in these counties could
have a material adverse effect on BankAtlantic's financial condition and results
of operations. See "Business-Lending Activities."
BankAtlantic also makes various types of secured and unsecured consumer
loans and commercial business loans, including indirect automobile loans.
Included in the total amount of consumer loans at March 31, 1996 is
approximately $51.6 million of automobile loans made indirectly through two
dealers located in Dade County, Florida. A determination was made during the
first quarter of 1996 to temporarily decrease the production of indirect
automobile loans pending the integration of newly hired automobile lending
personnel. Indirect auto loans have greater credit risk than direct consumer
loans. See "Business-Lending Activities -- Consumer Loans." Consumer and
commercial business loans generally involve more credit risk than residential
mortgage loans because of the higher potential of defaults and the difficulties
involved in disposing of the collateral, if any.
RISKS ASSOCIATED WITH INTEGRATION OF PENDING ACQUISITION
BankAtlantic historically has made only one acquisition, which was the
acquisition of MegaBank in February 1995. BNA is three times the size of
MegaBank and it is currently anticipated that closing of the BNA acquisition
will occur in October 1996. As disclosed herein, BankAtlantic has entered into
an agreement with a third party for data processing services. The conversion to
the new data processing system is also anticipated to be completed in the fourth
quarter of 1996. BankAtlantic's results of operations will be impacted by how
quickly and successfully the data processing conversion is effected and BNA's
operations are integrated into BankAtlantic's ongoing business.
RISKS ASSOCIATED WITH A PARTICULAR CONSUMER LOAN PORTFOLIO
From 1987 through 1990, BankAtlantic purchased in excess of $50 million of
indirect home improvement loans from certain dealers, primarily in the Northeast
United States (the "Subject Portfolio"). Questions arose with respect to the
procedures utilized in connection with the origination and underwriting of the
Subject Portfolio which suggested that the dealers, certain home improvement
contractors and borrowers, together with certain former employees of
BankAtlantic, engaged in practices intended to defraud BankAtlantic.
BankAtlantic promptly notified appropriate regulatory and law enforcement
agencies as well as its fidelity bond carrier. In October 1992, BankAtlantic and
the fidelity bond carrier entered into a Covenant Not to Execute (the
"Covenant"). Pursuant to the Covenant, BankAtlantic continued to pursue its
litigation against the carrier but agreed to limit execution on any judgment
obtained against the carrier to $18 million and, in the event that amounts are
recovered from third party wrongdoers, BankAtlantic will receive additional
amounts recovered up to an aggregate of $22 million. Pursuant to the Covenant,
the carrier reimbursed
13
<PAGE> 16
BankAtlantic for certain losses and expenses associated with the Subject
Portfolio, up to the maximum amount of $18 million under the Covenant, on a
quarterly basis. In May 1995, the carrier made its last payment to BankAtlantic
under the Covenant. Accordingly, no funds remain available for reimbursement
from the carrier pursuant to the Covenant.
Three actions have been filed, two in New Jersey and one in New York,
relating to the Subject Portfolio. One of the New Jersey actions was brought on
behalf of the State of New Jersey and the others purport to be class actions on
behalf of named and unnamed plaintiffs that may have obtained loans from dealers
who subsequently sold the loans to financial institutions including
BankAtlantic. Each of the New Jersey actions seek civil remedies against certain
contractors and a named dealer and also seeks to cancel or modify certain
mortgage loans. Although BankAtlantic was not a named party in the State of New
Jersey action, it sought to protect its interest in certain loans and entered
into an Alternative Dispute Resolution Agreement (the "ADR") with the State of
New Jersey. The ADR established procedures for determining whether certain
consumers were entitled to relief under the terms of their loans. Pursuant to
the ADR, BankAtlantic offered relief to certain consumers in the form of reduced
future interest rates, or reductions or forgiveness of principal. As part of the
ADR, the State of New Jersey agreed not to seek rescission of any of the
mortgage loans held by BankAtlantic. The ADR was completed in May 1995 and
BankAtlantic obtained a release from the State of New Jersey for any claims
relating to the mortgage loans. The second New Jersey action was commenced
immediately after completion of the ADR. The New York and New Jersey actions,
which were brought against over 25 parties, including BankAtlantic, purport to
be class actions on behalf of named and unnamed plaintiffs that may have
obtained loans from dealers who subsequently sold the loans to financial
institutions including BankAtlantic. Both the remaining New Jersey action and
the New York action seek, among other things, rescission of the loan agreements
and damages. In November 1995, the court in the second New Jersey action entered
an order dismissing the complaint as against BankAtlantic and plaintiffs
appealed this ruling. In January 1996, the appellate court reversed the trial
court's dismissal of the action and remanded the case back to the trial court to
determine whether the action may be maintained as a class action. The reversal
was without prejudice to BankAtlantic's right to renew its motion after the
trial court has made a determination as to the plaintiff's ability to maintain
this case as a class action. In October 1995, the court in the New York action
preliminarily approved a settlement proposed by the parties pursuant to which
members of the class who timely file a proof of claim would be entitled to
relief in the form of reduced future interest rates and reductions of principal.
The settlement, as presently structured, will have no significant impact on the
Company's financial condition or results of operations.
The balance of the loans in the Subject Portfolio was $13.0 million at
March 31, 1996. While management believes that established reserves will be
adequate to cover any additional losses which BankAtlantic may incur from the
Subject Portfolio or the above described litigation, there is no assurance that
this will be the case. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES
BankAtlantic's profitability is dependent to a large extent on its net
interest income, which is the difference between its interest income on
interest-earning assets and its interest expense on interest-bearing
liabilities. BankAtlantic, like most financial institutions, is affected by
changes in general interest rate levels, which are currently at relatively low
levels, and by other economic factors beyond its control. Interest rate risk
arises from mismatches (i.e., the interest sensitivity gap) between the dollar
amount of repricing or maturing assets and liabilities, and is measured in terms
of the ratio of the interest rate sensitivity gap to total assets. More assets
repricing or maturing than liabilities over a given time frame is considered
asset-sensitive and is reflected as a positive gap, and more liabilities
repricing or maturing than assets over a given time frame is considered
liability-sensitive and is reflected as a negative gap. An asset-sensitive
position (i.e., a positive gap) will generally enhance earnings in a rising
interest rate environment and will negatively impact earnings in a falling
interest rate environment, while a liability-sensitive position (i.e., a
negative gap) will generally enhance earnings in a falling interest rate
environment and negatively impact earnings in a rising interest rate
environment. Fluctuations in interest rates are not predictable or controllable.
BankAtlantic has attempted to
14
<PAGE> 17
structure its asset and liability management strategies to mitigate the impact
on net interest income of changes in market interest rates. At March 31, 1996,
BankAtlantic had a one year cumulative positive gap of 1.80%. This positive one
year gap position may, as noted above, have a negative impact on earnings in a
falling interest rate environment. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition -- Interest Rate Sensitivity."
REGULATORY OVERSIGHT
BankAtlantic is subject to extensive regulation, supervision and
examination by the OTS as its chartering authority and primary federal
regulator, and by the FDIC, which insures its deposits up to applicable limits.
BankAtlantic is a member of the FHLB of Atlanta and is subject to certain
limited regulation by the Federal Reserve Board. As the holding company of
BankAtlantic, the Company is also subject to regulation and oversight by the
OTS. See "Regulation and Supervision." Such regulation and supervision governs
the activities in which an institution may engage and is intended primarily for
the protection of the FDIC insurance funds and depositors. Regulatory
authorities have been granted extensive discretion in connection with their
supervisory and enforcement activities and regulations have been implemented
which have increased capital requirements, increased insurance premiums and have
resulted in increased administrative, professional and compensation expenses.
Any change in the regulatory structure or the applicable statutes or regulations
could have a material impact on the Company and BankAtlantic and their
operations. See "Regulation and Supervision." Additional legislation and
regulations may be enacted or adopted in the future which could significantly
affect the powers, authority and operations of BankAtlantic and which could have
a material adverse effect on BankAtlantic's operations. See "Regulation and
Supervision -- Legislative Developments."
IMPACT OF DISPARITY IN DEPOSIT INSURANCE PREMIUMS; RECAPITALIZATION OF SAIF AND
ASSOCIATED
REGULATORY ISSUES
The FDIC reduced the premiums applicable to BIF deposits, effective January
1, 1996, to range from a minimum flat fee of $2,000 to a maximum assessment of
27 basis points. Under the new assessment rate schedule, approximately 92% of
BIF members will pay only the minimum fee while SAIF members retain the existing
assessment rate schedule of 23 to 31 basis points. At March 31, 1996,
BankAtlantic had approximately $135 million of deposits subject to BIF premiums
and $1.2 billion subject to SAIF premiums.
The disparity in insurance premiums between those required for financial
institutions with all or primarily SAIF insured deposits and those with all or
primarily BIF deposits generally allows BIF members to attract and retain
deposits at a lower effective cost. The resulting competitive disadvantage could
also result in BankAtlantic having to raise its deposit rates to remain
competitive or lose deposits to BIF members who may decide to pay higher rates
of interest on deposits because of the lower deposit insurance premiums.
Although BankAtlantic has other sources of funds, such sources may be more
costly than the cost of deposits. See "Regulation -- Insurance of Accounts."
Several alternatives to mitigate the effect of the BIF/SAIF premium
disparity have recently been proposed by the U.S. Congress, federal regulators,
industry lobbyists and the Clinton Administration. One plan to recapitalize the
SAIF that has gained support of several sponsors would require all SAIF member
institutions, including BankAtlantic, to pay a one-time fee of approximately 85
basis points on the amount of SAIF-insured deposits held by the member
institution at March 31, 1995. This fee would amount to approximately $6.1
million on an after tax basis to BankAtlantic and, if this proposal is enacted
into law, the effect most likely would be an immediate charge to earnings. In
addition, BNA is also subject to the proposed one-time fee since its deposits
are SAIF-insured deposits; however, management anticipates that the assessment
on BNA's deposits would be reduced by 20% based on BNA's status as a "de novo
sasser bank" as defined in the proposed legislation. Based on current proposals,
the fee associated with BNA's SAIF-insured deposits would amount to
approximately $1.8 million on an after tax basis. The Company is unable to
predict whether this proposal or any similar proposal will be enacted or whether
ongoing SAIF premiums will be reduced to a level equal to that of BIF premiums.
See "Regulation and Supervision."
15
<PAGE> 18
The Company has been considering converting BankAtlantic's charter to that
of a commercial bank. If BankAtlantic's charter were to be converted, the impact
to the Consolidated Statement of Operations under current regulations would be a
charge to income of approximately $3.2 million relating to the recapture of the
bad debt deduction for Federal income tax purposes. The Company is not presently
pursuing a conversion of BankAtlantic's charter since it is awaiting the outcome
of the legislative proposals relating to the disparity of the BIF/SAIF premiums,
which include a consideration of the treatment of the recapture of the bad debt
deduction as well as the possible consolidation of bank and thrift charters.
Even if BankAtlantic's charter was converted to that of a commercial bank, under
current regulations BankAtlantic's current SAIF deposits would remain subject to
SAIF assessments unless BankAtlantic paid significant entrance and exit fees and
assessments.
COMPETITION
The Company competes with various types of financial institutions,
including other savings institutions, commercial banks, finance companies,
mortgage banking companies, money market funds and credit unions, many of which
have substantially greater financial resources than the Company and, in some
cases, operate under fewer regulatory constraints. See
"Business -- Competition." See "Regulation and Supervision -- Legislative
Developments" for a discussion of recently enacted legislation that could result
in increased competition from bank holding companies headquartered outside of
Florida and see "Business -- Competition" and "Regulation and
Supervision -- Insurance of Accounts" for a discussion of the potential impact
of the disparity between the insurance premiums paid by BankAtlantic and those
paid by institutions whose deposits are insured by BIF.
16
<PAGE> 19
THE COMPANY
The Company is the holding company for BankAtlantic, the largest
independent financial institution, based on asset size, headquartered in Broward
County, Florida. BankAtlantic reorganized into a holding company form in 1994
based on the belief that the holding company form would provide BankAtlantic
greater financial and operating flexibility, including increased access to the
capital markets for offerings such as the offering being made herein. Capital
raised by the Company may be used to fund activities and transactions at the
Company level or may be contributed to BankAtlantic to fund acquisitions or
support growth. See "Use of Proceeds". The Company's activities to date have
consisted solely of activities incident to its ownership of BankAtlantic.
Accordingly, the business of the Company is the business of BankAtlantic and its
subsidiaries.
The principal executive offices of the Company are located at 1750 East
Sunrise Boulevard, Fort Lauderdale, Florida, 33304, and its telephone number is
(954) 760-5000.
BANKATLANTIC
BankAtlantic commenced operations in 1952 as Atlantic Federal Savings and
Loan Association of Fort Lauderdale, a federal mutual savings and loan
association. In December 1983, BankAtlantic converted from a mutual to a stock
association. From 1952 through 1986 BankAtlantic operated as a traditional
savings and loan. Upon assumption of control by BFC in 1987, BankAtlantic
adopted a federal savings bank charter and changed its name to BankAtlantic, A
Federal Savings Bank. The principal business of BankAtlantic has been attracting
checking and savings deposits from the public and general business customers and
using these deposits to originate commercial real estate and business loans,
residential real estate loans and consumer loans, and to make other permitted
investments such as the purchase of mortgage-backed securities and other
investment securities. BankAtlantic operates through 46 branch offices primarily
located in Dade, Broward and Palm Beach Counties in South Florida. As reported
by an independent statistical reporting service, BankAtlantic is currently the
largest independent financial institution headquartered in Broward County,
Florida and third in size among all savings institutions headquartered in the
State of Florida, based on consolidated assets at December 31, 1995, the most
recent date utilized by such reporting service. Based on such published
information, if the previously announced acquisitions of financial institutions
in the State of Florida which are currently pending had been consummated at
December 31, 1995, including BankAtlantic's acquisition of BNAB, the Company
would have been the second largest independent depository institution
headquartered in Florida on that date. Further, based on published information
as of June 30, 1995, the Company's market share of deposits in Broward County
would have increased from approximately 3.95% to 5.64%. The rapid pace of
consolidation among Florida's depository institutions has transformed many local
competitors into out-of-state competitors with, in many cases, remote decision
making on larger loans. Many customers feel more comfortable dealing with
community based institutions. BankAtlantic considers itself to be a community
bank, able to compete against regional and super regional institutions by
offering personalized service and fast decision making capabilities.
Prior to BFC's assumption of control, BankAtlantic had a low capital base,
high cost time deposits and borrowings, low levels of fee income, no ATMs, no
drive through operations, outdated computer systems and a loan portfolio
unresponsive to changes in market interest rates because it consisted primarily
of long term, fixed rate residential real estate loans. Based on industry wide
problems and BankAtlantic's structure, management concluded that a new direction
and focus was required in order for BankAtlantic to survive and prosper in the
changing economic and regulatory climate.
Management embarked upon a strategy to shift BankAtlantic's traditional
thrift activities to activities more closely related to commercial banking
activities. This strategy included changing the deposit mix to increase the
relative amount of transaction accounts versus time deposits and providing a
full range of banking services to its customers. Management's efforts focused on
reducing BankAtlantic's dependence on higher rate certificates of deposit by
attracting lower cost and non-interest bearing transaction accounts. At March
31, 1996, 48% of BankAtlantic's deposits constituted transaction accounts and
approximately 52% were time deposits. Fee income associated specifically with
transaction accounts increased from $4.9 million at December 31, 1991 to
approximately $7.0 million during 1995. Fee income was further increased through
17
<PAGE> 20
management's efforts to offer commercial banking services, add ATMs and expand
existing sources of non-interest income, such as servicing residential mortgage
loans for others.
BankAtlantic's strategy also included a change in the make-up of
BankAtlantic's loan portfolio emphasizing types of loans having variable rates
and terms shorter than fixed rate residential real estate mortgage loans, such
as commercial business and real estate loans (including commercial construction
loans), which are generally higher yielding, have shorter terms and typically
have adjustable interest rates. Since December 31, 1991, such loans have
increased from approximately $221 million or 29% of gross loans to approximately
$573 million or 58% of gross loans at March 31, 1996.
As part of its growth plan and in an effort to increase its market presence
in Dade County, BankAtlantic acquired MegaBank, a Miami-based commercial bank,
for approximately $21 million in cash in February 1995. MegaBank had assets of
approximately $152 million at December 31, 1994. The MegaBank acquisition added
approximately $120.2 million in deposits, $116.4 million in loans and 5 branches
to BankAtlantic's existing branch network. The acquisition of MegaBank was
accounted for as a purchase and gave rise to goodwill of approximately $12
million which is being amortized over a 10 year period. The financial
information included herein reflects the results of MegaBank since February 1,
1995. BankAtlantic has expanded by establishing additional customer service
facilities, including drive-through facilities, ATMs and branch offices. Since
1987, BankAtlantic has added 21 drive-through facilities, 215 ATMs (including 10
located on cruise ships) and has relocated and consolidated branches and opened
new full-service branches, including 6 in 1995. Seven of BankAtlantic's branches
are located in Wal-Mart Stores Super Centers. The Company and BankAtlantic
intend to continue the policy of controlled growth through additional branches,
ATMs and, when available on attractive terms, through acquisitions. As discussed
herein, BankAtlantic has entered into an agreement to acquire BNAB. BankAtlantic
also anticipates opening several additional branches and increasing the number
of ATMs in its network in 1996 and 1997.
Management continues to pursue an operating strategy of (i) emphasizing
commercial real estate, business and consumer loans; (ii) focusing on
non-interest income; (iii) promoting transaction accounts and (iv) enhancing
market penetration through de novo branching and acquisitions. While pursuing
this strategy, management remains committed to maintaining asset quality,
managing interest rate risk and enhancing profitability.
PENDING ACQUISITION OF BANK OF NORTH AMERICA
GENERAL
In an effort to enhance BankAtlantic's presence in Broward County, its
primary market, BankAtlantic has entered into an agreement with the sole
shareholder of BNAB to purchase BNAB, the holding company for BNA, a Florida
chartered bank, for a purchase price of $54 million, subject to adjustment as
described below. Management believes that the acquisition will substantially
increase BankAtlantic's market share in Broward County, will allow the Company
to recognize the economies associated with an in-market acquisition and will
enable BankAtlantic to compete more effectively with larger financial
institutions located in this area.
BNA
BNA began operations on June 15, 1990 through an agreement with the FDIC
for the acquisition of certain assets and the assumption of deposits and
liabilities of Bank M, an insolvent financial institution in Miami, Florida.
Subsequent to the initial acquisition, BNA entered into additional transactions
with the FDIC and the Resolution Trust Corporation (the "RTC") which resulted in
the assumption of deposits from four additional insolvent financial
institutions.
At March 31, 1996, BNAB had total assets of approximately $560 million,
approximately $490 million of deposits (all of which are insured by SAIF), $395
million in loans and 13 branches (with 11 located in Broward County, one in Dade
County and one in Palm Beach County). For the year ended December 31, 1995,
BNAB's net income was approximately $2.2 million.
18
<PAGE> 21
REASONS FOR THE ACQUISITION
BankAtlantic believes that this "in market" acquisition offers considerable
consolidation opportunities as well as benefits resulting from an increase of
its customer base in a manner which BankAtlantic believes is less expensive than
de novo branching. All BNA branches are in close proximity to BankAtlantic
branches. It is currently anticipated that a significant number of these
locations will be consolidated, although it has not yet been determined which
locations will remain open.
BNA's loan operations resemble BankAtlantic's current loan operations. BNA
currently offers the following types of loans: residential, residential
construction, commercial real estate and business, and consumer (direct and
indirect). BankAtlantic also currently offers these types of loans although
BankAtlantic has placed greater emphasis on the origination of commercial real
estate loans. BankAtlantic currently anticipates that it will continue offering
all of BNA's loan products. An integral part of BankAtlantic's business strategy
after the acquisition will be to expand the commercial business and real estate
loan areas by combining BNA's existing strong customer base with BankAtlantic's
real estate expertise and greater lending capacity.
BankAtlantic's deposit products are also similar to those offered by BNA,
and at March 31, 1996 BankAtlantic's deposit mix (transaction accounts 48%,
certificate accounts 52%) closely resembled BNA's deposit mix (transaction
accounts 43%, certificate accounts 57%). Since both entities have used similar
liability pricing strategies, significant deposit runoff is not anticipated.
Further, BankAtlantic intends to continue operations within the communities
where BNA's existing 13 branches are located and, accordingly, this should
promote customer retention. BankAtlantic believes that its extensive branch
network and wide range of banking products will not only preserve relationships
with BNA's existing customers but will also enhance those relationships and
provide opportunities to cross sell additional services.
THE PURCHASE AGREEMENT
The acquisition will be made pursuant to the terms and conditions of the
BNAB Purchase Agreement for a purchase price of approximately $54 million in
cash. The purchase price to be paid by BankAtlantic for BNA has been initially
set at $54 million, but is subject to adjustment based upon the deviation of the
adjusted net worth of BNAB from $37.4 million (the "Target Amount"), which
amount is approximately equal to BNAB's unaudited GAAP net worth at March 31,
1996. The purchase price will, except as noted below, initially be adjusted on a
dollar for dollar basis to reflect the variance of the adjusted net worth of
BNAB (as defined in the BNAB Purchase Agreement), as of the last day of the
month immediately preceding the date of the acquisition, from the Target Amount.
If the Target Amount exceeds the adjusted net worth of BNAB by more than $2
million, the initial reduction in purchase price will nonetheless be limited to
$2 million. In such event, BankAtlantic has the option either (i) to proceed
with the acquisition, thereby accepting the $2 million initial reduction to the
purchase price or (ii) to terminate the transaction. The adjusted net worth of
BNAB includes upward adjustments for, among other things, (i) any special SAIF
or similar one-time assessment paid or accrued by BNAB, (ii) any amounts
required to be recorded by BNAB as an allowance for loan losses in accordance
with the BNAB Purchase Agreement, (iii) certain transaction costs as specified
in the BNAB Purchase Agreement and (iv) certain losses and write-offs. After any
initial adjustment to the purchase price based upon adjusted net worth as
described above, the purchase price will be reduced by (i) certain transaction
costs, including severance costs and bonuses, as specified in the BNAB Purchase
Agreement and (ii) losses on certain assets, and such adjustments are not
subject to the $2 million limitation. For purposes of determining BNAB's
adjusted net worth and the other adjustments discussed above, appropriate income
tax adjustments will be made.
The acquisition of BNAB and BNA is expected to be completed in the fourth
quarter of 1996, but is subject to certain conditions, including the receipt of
all required regulatory approvals and that the adjusted net worth of BNAB exceed
$35.4 million. BNAB has agreed to cause BNA to comply with certain operational
limitations and requirements pending the closing of the acquisition, including
that the Bank operate its business in the ordinary course in substantially the
same manner as BNA conducted its business up to the date
19
<PAGE> 22
of the BNAB Purchase Agreement and in a manner consistent with market conditions
and past practice. Further, the BNAB Purchase Agreement may be terminated and
the acquisition abandoned if, among other events, either BankAtlantic or BNAB or
BNA experiences a material adverse change in its business, financial condition,
results of operations (subject to certain exceptions specified in the BNAB
Purchase Agreement), assets or liabilities or the acquisition is not consummated
by February 15, 1997. Accordingly, there is no assurance that the transaction
will be consummated. See "Pro Forma Combined Financial Data".
Funds for the acquisition will be obtained from one or more sources,
including operations, traditional borrowings, repayments of loans, liquidation
of investments or contributions to BankAtlantic of the proceeds of this
offering. However, the acquisition of BNAB is not conditioned upon or dependent
upon successful completion of this Offering.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Debentures offered
hereby are estimated to be approximately $47.7 million ($54.85 million if the
Underwriter's over-allotment option is exercised in full) after deduction of the
underwriting discount and estimated expenses.
The Company intends to contribute the majority of the net proceeds of this
Offering to the capital of BankAtlantic where it will be used for general
corporate purposes including working capital and for financing possible future
acquisitions. Such proceeds may be used in financing the acquisition of BNAB
discussed herein, however, such acquisition is not dependent upon nor
conditioned upon the consummation of the Offering. See "Pending Acquisition of
Bank of North America". Any net proceeds retained by the Company will be used
for general corporate purposes.
MARKET FOR COMMON STOCK AND DIVIDENDS
The Company's Class B Common Stock is quoted on the Nasdaq National Market
under the symbol "BANC" and the Company's Class A Common Stock is quoted on the
Nasdaq National Market under the symbol "BANCA". On May 29, 1996 there were
approximately 105 record holders of the Class A Common Stock and 1,311,803
shares issued and outstanding and 590 record holders of the Class B Common Stock
and 10,625,266 shares issues and outstanding.
The following table sets forth, for the periods indicated, the high and low
closing sale prices of the Class A Common Stock and the Class B Common Stock as
reported by the Nasdaq National Market, as adjusted to reflect the 25% stock
dividends issued on July 19, 1995 and February 1, 1996 to holders of the Class B
Common Stock.
<TABLE>
<CAPTION>
CLASS B COMMON CLASS A COMMON
STOCK PRICE STOCK PRICE
-------------- --------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
Fiscal year ending December 31, 1996......................
First Quarter........................................... $15 3/8 $12 5/8 $15 1/2 $15
Second Quarter through May 29, 1996..................... 16 14 1/8 15 1/2 14 1/2
Fiscal year ended December 31, 1995....................... 16 9 5/8 N/A N/A
First Quarter........................................... 10 1/2 9 5/8 N/A N/A
Second Quarter.......................................... 11 11/16 9 1/4 N/A N/A
Third Quarter........................................... 15 5/8 11 3/16 N/A N/A
Fourth Quarter.......................................... 16 14 3/16 N/A N/A
Fiscal year ended December 31, 1994....................... 10 13/16 7 11/16 N/A N/A
First Quarter........................................... 9 3/8 7 11/16 N/A N/A
Second Quarter.......................................... 10 11/16 8 3/16 N/A N/A
Third Quarter........................................... 10 11/16 8 5/8 N/A N/A
Fourth Quarter.......................................... 10 13/16 8 13/16 N/A N/A
</TABLE>
20
<PAGE> 23
On May 29, 1996, the last sale price of the Class A Common Stock and Class
B Common Stock as reported by the Nasdaq National Market was $14.50 and $14.375
per share, respectively.
The Company has paid regular quarterly cash dividends on the Class B Common
Stock since its formation in 1994 and paid a quarterly cash dividend on the
Class A Common Stock since its initial issuance in March 1996. Prior to 1994,
BankAtlantic had paid regular quarterly cash dividends on its common stock since
August 1993. Prior to August 1993, BankAtlantic had not paid any regular
dividend on its common stock. The per share amount of cash dividends declared
and paid by the Company for each quarter for the fiscal years ended December 31,
1994 and 1995 and the first quarter of 1996 are as follows:
<TABLE>
<CAPTION>
CASH DIVIDENDS PER CASH DIVIDENDS PER
SHARE SHARE
OF CLASS B COMMON STOCK OF CLASS A COMMON STOCK
----------------------- -----------------------
<S> <C> <C>
Fiscal Year Ended December 31, 1996
First Quarter............................ $0.0440 $0.0506
Fiscal Year Ended December 31, 1995
First Quarter............................ 0.0392 N/A
Second Quarter........................... 0.0392
Third Quarter............................ 0.0440
Fourth Quarter........................... 0.0440
Fiscal Year Ended December 31, 1994
First Quarter............................ 0.0384 N/A
Second Quarter........................... 0.0384
Third Quarter............................ 0.0392
Fourth Quarter........................... 0.0392
</TABLE>
The Company intends to continue to declare regular quarterly cash dividends
on the Class A Common Stock and the Class B Common Stock. The 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. The declaration and
payment of dividends will depend upon, among other things, the results of
operations, financial condition and cash requirements of the Company and on the
ability of BankAtlantic to pay dividends or otherwise advance funds to the
Company, which in turn is subject to OTS regulations and is based upon
BankAtlantic's regulatory capital levels and net income.
21
<PAGE> 24
CAPITALIZATION
The following table sets forth the consolidated historical capitalization,
including deposits, of the Company at March 31, 1996 and as adjusted (i) to
reflect the sale of the Debentures in this Offering and the estimated net
proceeds therefrom, (ii) on a pro forma basis after giving effect to the
acquisition of BNAB and (iii) on a pro forma basis to reflect both the sale of
Debentures in this Offering and the estimated net proceeds therefrom and the
acquisition of BNAB. The information set forth below should be read in
conjunction with the Consolidated Financial Statements of BankAtlantic included
elsewhere in this Prospectus, including the pro forma information below, which
should be read in conjunction with Pro Forma Combined Financial Data.
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------------------------------
AS PRO PRO
ACTUAL ADJUSTED(3) FORMA(4) FORMA(3)(4)
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Deposits and borrowings:
Deposits...................................... $1,323,229 $1,323,229 $1,815,361 $1,815,361
Advances from FHLB............................ 63,485 63,366 83,612 83,612
Securities sold under agreements to
repurchase................................. 43,881 0 44,870 870
Subordinated debentures....................... 21,000 71,000 21,000 71,000
---------- ---------- ---------- ----------
Total deposits and borrowings......... $1,451,595 $1,457,595 $1,964,843 $1,970,843
========= ========= ========= =========
Stockholders' equity:
Common Stock, $0.01 par value, 45,000,000
shares authorized all series:
Class A Common Stock, 30,000,000 shares
authorized, 1,150,000 shares issued and
outstanding(2)........................... $ 11 $ 11 $ 11 $ 11
Class B Common Stock, 15,000,000 shares
authorized, 10,592,999 shares and
10,592,999 shares issued and
outstanding(1)........................... 106 106 106 106
Additional paid in capital...................... 64,685 64,685 64,685 64,685
Retained earnings............................... 70,003 70,003 70,003 70,003
Net unrealized appreciation on debt securities
available for sale -- net of deferred income
taxes......................................... 2,014 2,014 2,014 2,014
---------- ---------- ---------- ----------
Total stockholders' equity............ $ 136,819 $ 136,819 $ 136,819 $ 136,819
========= ========= ========= =========
</TABLE>
- ---------------
(1) Does not include 1,251,921 shares of Class B Common Stock issuable upon
exercise of stock options outstanding at March 31, 1996, of which 399,457
are currently exercisable.
(2) Does not include 161,803 shares of Class A Common Stock issued pursuant to
the exercise of an overallotment option subsequent to March 31, 1996.
(3) After giving effect to the anticipated net proceeds of this Offering
totaling approximately $47.7 million and assuming for purposes of the
presentation that $44 million will be contributed by the Company to
BankAtlantic where it will be used to reduce short-term borrowings and FHLB
advances.
(4) After giving effect to the acquisition of BNAB. See "Pro Forma Combined
Financial Data".
22
<PAGE> 25
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's historical and as adjusted
ratio of earnings to fixed charges for the three months ended March 31, 1996 and
for the year ended December 31, 1995. The as adjusted ratio of earnings to fixed
charges is presented as if the consummation of the offering of the Debentures
had occurred on January 1, 1995 or January 1, 1996. Earnings used in computing
the ratios shown consist of earnings from continuing operations before taxes,
interest expense and non-cumulative preferred stock dividends. Fixed charges
represent all interest expense (ratios are presented both excluding and
including interest on deposits) and the portion of rental expense considered to
be representative of interest. Interest expense (other than on deposits)
includes interest on long-term obligations, FHLB borrowings, securities sold
under agreements to repurchase and other funds borrowed. For each 1/2 of 1%
change in the interest rate on the Debentures being offered hereby, interest
expense would change by $250,000 on an annualized basis and as adjusted ratio of
earnings to fixed charges would change by a maximum of 0.03.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
-------------------------- --------------------------
HISTORICAL AS ADJUSTED HISTORICAL AS ADJUSTED
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Excluding interest on deposits................... 3.20 2.97 2.41 2.34
Including interest on deposits................... 1.49 1.46 1.43 1.41
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA OF
BANKATLANTIC BANCORP, INC.
The Selected Consolidated Financial Data presented below has been derived
from the unaudited and audited Consolidated Financial Statements of the Company
and are qualified in their entirety by reference to the more detailed
Consolidated Financial Statements and Independent Auditors Report included
elsewhere within. Where appropriate, amounts and percentages have been adjusted
for the January 1996 and July 1995 five for four common stock splits effected in
the form of 25% stock dividends, issued February 1, 1996 and July 19, 1995,
respectively.
<TABLE>
<CAPTION>
AT MARCH AT DECEMBER 31,
31, --------------------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF FINANCIAL CONDITION:
Total assets........................ $1,642,825 $1,750,689 $1,539,653 $1,359,195 $1,303,071 $1,455,822
Loans receivable -- net............. 863,348 828,630 546,396 485,956 556,662 728,515
Mortgage-backed securities held to
maturity.......................... 0 0 573,913 443,249 349,531 460,780
Debt securities available for
sale.............................. 559,775 691,803 53,969 83,116 137,963 0
Investment and trading account
securities, net(1)................ 40,537 49,856 211,776 97,701 120,424 109,076
Mortgage servicing rights........... 24,450 20,738 20,584 19,833 7,655 6,748
Cost over fair value of net assets
acquired and other intangibles.... 11,143 11,521 0 0 0 0
Deposits............................ 1,323,229 1,300,377 1,085,782 1,076,360 1,108,115 1,255,513
Subordinated debentures, capital
notes and note payable............ 21,000 21,001 0 0 9,524 15,666
Advances from FHLB, federal funds
purchased and securities sold
under agreements to repurchase.... 107,366 269,222 311,879 149,435 87,632 94,332
Total stockholders' equity.......... 136,819 120,561 105,520 90,652 66,165 50,997
</TABLE>
- ---------------
(1) Excludes FHLB stock. Includes interest-bearing deposits in other banks, and
securities purchased under agreement to resell. Excludes $109.9 million of
banker's acceptances in 1993, and includes trading account securities of
$9.1 million in 1994.
23
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA OF
BANKATLANTIC BANCORP, INC. -- (CONTINUED)
<TABLE>
<CAPTION>
AT OR FOR THE
THREE
MONTHS ENDED MARCH
31, AT OR FOR THE YEARS ENDED DECEMBER 31,
------------------ ---------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- -------- ------- ------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Total interest income................ $32,092 $30,452 $130,077 $98,549 $94,503 $116,476 $145,532
Total interest expense............... 15,620 15,655 65,686 41,431 35,987 55,567 90,998
------- ------- -------- ------- ------- -------- --------
Net interest income.................. 16,472 14,797 64,391 57,118 58,516 60,909 54,534
Provision for loan losses............ 940 176 4,182 2,299 3,450 6,650 17,540
------- ------- -------- ------- ------- -------- --------
Net interest income after provision
for loan losses.................... 15,532 14,621 60,209 54,819 55,066 54,259 36,994
------- ------- -------- ------- ------- -------- --------
NON-INTEREST INCOME:
Loan servicing and other loan fees... 838 975 3,524 3,365 2,229 2,869 4,344
Gains on sales of loans originated
for resale......................... 164 65 395 773 1,246 976 330
Gains on sales of mortgage servicing
rights............................. 0 0 2,744 484 0 0 0
Gains on sales of investment and
mortgage-backed securities, net.... 2,292 0 0 0 0 5,869 810
Unrealized and realized gains
(losses) on trading account
securities......................... 0 310 589 (558) 0 0 0
Other................................ 3,540 2,631 12,136 9,699 8,163 7,337 8,622
------- ------- -------- ------- ------- -------- --------
Total non-interest income............ 6,834 3,981 19,388 13,763 11,638 17,051 14,106
------- ------- -------- ------- ------- -------- --------
NON-INTEREST EXPENSE:
Employee compensation and benefits... 7,368 6,544 25,403 22,382 19,617 19,202 24,062
Occupancy and equipment.............. 2,785 2,594 10,831 8,061 8,417 8,864 10,626
Federal insurance premium............ 591 687 2,750 2,673 2,750 2,772 3,281
Advertising and promotion............ 507 612 2,144 1,495 960 480 1,143
(Income) loss from joint venture
investments........................ 0 (3) (7) 30 25 245 (2,335)
Foreclosed asset activity -- net..... (162) (1,163) (3,178) (2,290) 1,243 4,323 8,922
Amortization of cost over fair value
of net assets acquired............. 306 204 1,122 0 0 0 0
Other................................ 3,120 2,400 12,095 9,734 10,521 10,931 19,465
------- ------- -------- ------- ------- -------- --------
Total non-interest expense........... 14,515 11,875 51,160 42,085 43,533 46,817 65,164
------- ------- -------- ------- ------- -------- --------
Income (loss) before income taxes and
extraordinary items................ 7,851 6,727 28,437 26,497 23,171 24,493 (14,064)
Provision (benefit) for income
taxes.............................. 3,141 2,346 10,018 9,662 7,093 9,201 (4,841)
------- ------- -------- ------- ------- -------- --------
Income (loss) before extraordinary
items.............................. 4,710 4,381 18,419 16,835 16,078 15,292 (9,223)
Extraordinary items net of taxes..... 0 0 0 0 0 756(2) 660(1)
------- ------- -------- ------- ------- -------- --------
NET INCOME (LOSS).................... 4,710 4,381 18,419 16,835 16,078 16,048 (8,563)
Dividend on non-cumulative preferred
stock paid by BFC escrow........... 0 0 0 0 147 880 715
Dividends on non-cumulative preferred
stock.............................. 0 220 677 880 733 0 0
Amounts classified as dividends on
non-cumulative preferred stock
redemption......................... 0 0 1,353(A) 0 0 0 0
------- ------- -------- ------- ------- -------- --------
Total dividends on non-cumulative
preferred stock.................... 0 220 2,030 880 880 880 715
------- ------- -------- ------- ------- -------- --------
NET INCOME (LOSS) AVAILABLE FOR
COMMON SHARES...................... $ 4,710 $ 4,161 $ 16,389 $15,955 $15,198 $ 15,168 $ (9,278)
======= ======= ======== ======= ======= ======== ========
</TABLE>
24
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL DATA OF
BANKATLANTIC BANCORP, INC. -- (CONTINUED)
<TABLE>
<CAPTION>
AT OR FOR THE
THREE
MONTHS ENDED MARCH
31, AT OR FOR THE YEARS ENDED DECEMBER 31,
--------------------- ---------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- -------- ------- ------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE:
Net income (loss) before
extraordinary items................ $ 0.42 $ 0.39 $ 1.151(A) $ 1.52 $ 1.61 $ 1.97 $ (1.36)
Extraordinary items.................. 0.00 0.00 0.00 0.00 0.00 0.10 0.09
------- ------- -------- ------- ------- -------- --------
Net income (loss).................... $ 0.42 $ 0.39 $ 1.51(A) $ 1.52 $ 1.61 $ 2.07 $ (1.27)
======= ======= ======== ======= ======= ======== ========
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE ASSUMING FULL
DILUTION:
Net income before extraordinary
items.............................. $ 0.42 $ 0.39 $ 1.50(A) $ 1.52 $ 1.60 $ 1.70 $ N/A
Extraordinary items.................. 0.00 0.00 0.00 0.00 0.00 0.09 N/A
------- ------- -------- ------- ------- -------- --------
Net income........................... $ 0.42 $ 0.39 $ 1.50(A) $ 1.52 $ 1.60 $ 1.79 $ N/A
======= ======= ======== ======= ======= ======== ========
Book value per common share.......... $ 11.65 $ 10.85 $ 11.38 $ 9.56 $ 8.13 $ 7.90 $ 5.82
======= ======= ======== ======= ======= ======== ========
Tangible book value per share........ $ 10.70 $ 9.58 $ 10.29 $ 9.56 $ 8.13 $ 7.85 $ 5.73
======= ======= ======== ======= ======= ======== ========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING........................ 11,292,320 10,571,570 10,830,603 10,490,033 9,460,004 7,334,530 7,313,186
========== ========== ========== ========== ========== ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES ASSUMING
FULL DILUTION...................... 11,327,570 10,571,570 10,934,120 10,520,489 9,518,438 8,501,248 N/A
========== ========== ========== ========== ========== ========= =========
ACTUAL COMMON SHARES OUTSTANDING AT
PERIOD END......................... 11,742,999 10,157,592 10,592,999 10,157,593 10,122,820 7,315,044 7,315,044
========== ========== ========== ========== ========== ========= =========
<CAPTION>
WEIGHTED AVERAGE NUMBER OF COMMON AND
OUTSTANDING........................
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES ASSUMING
FULL DILUTION......................
ACTUAL COMMON SHARES OUTSTANDING AT
PERIOD END.........................
<CAPTION>
COMMON EQUIVALENT SHARES
</TABLE>
- ---------------
(A) The excess of the redemption price above the recorded amount of preferred
stock is considered a preferred stock dividend. The impact of the October
1995 preferred stock redemption for the year ended December 31, 1995 was a
reduction of $0.13 and $0.12 for primary and fully diluted earnings per
share, respectively.
25
<PAGE> 28
SELECTED CONSOLIDATED FINANCIAL DATA OF
BANKATLANTIC BANCORP, INC. -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,(6) FOR THE YEARS ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL AND STATISTICAL DATA
PERFORMANCE RATIOS:
Return on average assets(3)............ 1.10% 1.03% 1.07% 1.17% 1.25% 1.10% (0.57)%
Return on average equity(3)............ 16.10 16.13 16.03 17.07 21.32 27.09 (16.36)
Cash dividend payout ratio(4).......... 11.13 9.57 10.62 9.87 4.86 0.00 0.00
Average equity to average assets....... 6.86 6.40 6.66 6.86 5.85 4.07 3.51
Average yield on loans, mortgage-backed
securities, tax certificates and
investment securities................ 8.18 7.83 8.16 7.45 7.95 9.14 9.89
Average cost of deposits and
borrowings........................... 4.34 4.36 4.51 3.38 3.28 4.54 6.33
Net interest spread -- during
period(5)............................ 3.84 3.47 3.65 4.07 4.67 4.60 3.56
Interest rate margin -- during
period(5)............................ 4.19 3.75 4.04 4.32 4.90 4.78 3.71
Operating expenses as a percent of net
interest income plus non-interest
income............................... 62.28 63.24 61.07 59.37 62.03 60.22 94.94
OTHER FINANCIAL DATA:
Cash dividends per common share:
Class A.............................. .0506 0 0 0 0 0 0
Class B.............................. $ 0.044 $ 0.039 $ 0.166 $ 0.155 $ 0.077 $ 0.000 $ 0.000
ASSET QUALITY RATIOS:
Non-performing assets as a percent of
total loans, tax certificates and
real estate owned.................... 2.07% 2.95% 2.37% 3.66% 3.34% 3.80% 4.21%
Net charge-offs as a percent of average
loans................................ 0.58 0.10 0.45 0.59 0.56 0.60 2.23
Loan loss allowance as a percent of
total loans.......................... 2.12 2.54 2.24 2.89 3.38 2.88 1.85
Loan loss allowance as a percent of
non-performing loans................. 182.12 142.69 149.49 134.87 173.01 142.93 95.26
Non-performing loans as a percent of
total loans.......................... 1.16 1.78 1.50 2.14 1.95 2.01 1.83
Non-performing assets as a percent of
total assets......................... 1.17 1.30 1.23 1.51 1.47 2.07 2.52
RATIO OF EARNINGS TO FIXED CHARGES:
Including interest on deposits......... 1.49 1.42 1.43 1.63 1.63 1.43 0.85
Excluding interest on deposits......... 3.20 2.20 2.41 3.50 5.67 3.62 0.51
NUMBER OF:
Offices (all full-service)............. 43 32 43 32 31 31 34
Deposit accounts....................... 120,400 123,863 120,067 110,002 113,459 120,558 144,942
Loans.................................. 23,192 21,941 23,172 15,319 19,163 27,761 36,936
</TABLE>
- ---------------
(1) Gain on early retirement of Capital Notes, net of applicable income taxes of
$340,000.
(2) Utilization of state net operating loss carry-forwards.
(3) Based on income (loss) before extraordinary items. The return on average
assets and average equity based on net income (loss) was 1.16% and 28.43%
for the year ended December 31, 1992, respectively; (.53)% and (15.19)% for
the year ended December 31, 1991, respectively.
(4) Cash dividends declared on common shares divided by net income available for
common shares. The cash dividend payout ratio for the year ended December
31, 1995 excluding the October 1995 preferred stock redemption was 9.81%.
(5) Interest rate spread is equal to total interest earned on interest earning
assets divided by the total of interest earning assets, less the total of
interest expense divided by total interest-bearing liabilities. Interest
rate spread and margin during periods is based upon daily average balances
of interest-bearing assets and liabilities. Interest rate margin is equal
to total interest earned on interest earning assets divided by the total of
interest earning assets less the total of interest expense divided by total
interest earning assets.
(6) Annualized where appropriate.
26
<PAGE> 29
SELECTED CONSOLIDATED FINANCIAL DATA
OF BANK OF NORTH AMERICA BANCORP, INC.
The Selected Consolidated Financial Data presented below has been derived
from the unaudited and audited Consolidated Financial Statements of BNAB and are
qualified in their entirety by reference to the more detailed Consolidated
Financial Statements and Independent Auditors' Report included elsewhere within.
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS AT OR FOR THE YEARS
ENDED MARCH 31,(5) ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Interest income....................... $ 10,313 $ 9,723 $ 40,552 $ 35,643 $ 32,709 $ 38,713 $ 35,851
Interest expense...................... 5,631 5,399 23,016 19,092 17,072 22,361 23,903
-------- -------- -------- -------- -------- -------- --------
Net interest income................... 4,682 4,324 17,536 16,551 15,637 16,352 11,948
Provision for loan losses............. 180 75 1,150 1,105 2,050 600 1,455
Non-interest income (expense)......... 1,181 1,556 5,204 2,776 (1,700) 3,688 9,386
Non-interest expense.................. 4,802 4,507 18,299 16,372 16,392 15,317 11,186
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income tax....... 881 1,298 3,291 1,850 (4,505) 4,123 8,693
Provision (benefit) for income
taxes............................... 326 426 1,113 493 (1,697) 1,586 3,364
-------- -------- -------- -------- -------- -------- --------
Net income before extraordinary
item................................ 555 872 2,178 1,357 (2,808) 2,537 5,329
Extraordinary item.................... 0 0 0 0 0 0 174(4)
-------- -------- -------- -------- -------- -------- --------
Net income (loss)..................... $ 555 $ 872 $ 2,178 $ 1,357 $ (2,808) $ 2,537 $ 5,503
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets.......................... $559,656 $536,344 $554,502 $544,872 $489,598 $505,489 $523,176
Loans receivable-net(1)............... 399,380 346,565 379,492 352,497 347,926 341,065 306,015
Allowance for loan losses............. 5,468 5,068 5,501 5,846 8,434 6,214 5,316
Investment securites(2)............... 108,554 145,653 100,787 147,223 103,866 42,153 172,980
Deposits and escrows.................. 499,619 452,101 493,712 438,685 421,023 466,249 474,692
Advances from FHLB and securities sold
under agreements to repurchase...... 20,989 46,125 20,820 69,873 30,000 0 0
Total stockholder's equity(3)......... 37,362 36,222 37,941 34,715 34,931 37,673 35,136
PERFORMANCE RATIOS:
Net interest spread (during period)... 2.96% 2.72% 2.71% 2.70% 2.83% 2.51% 2.49%
Net interest margin (during period)... 3.58 3.35 3.33 3.18 3.35 3.22 2.97
Return on average assets.............. 0.40 0.65 0.40 0.25 (0.57) 0.49 1.34
Return on average equity.............. 5.75 9.55 5.83 3.84 (7.60) 6.88 21.33
Average equity to average assets...... 6.99 6.80 6.81 6.51 7.44 7.05 6.27
Operating expenses as a percent of net
interest income plus non-interest
income.............................. 81.90 76.65 80.47 84.72 117.62 76.43 52.43
ASSET QUALITY RATIOS:
Non-performing assets as a percent of:
Total loans and real estate owned..... 1.49 1.41 1.41 1.38 1.56 1.97 1.69
Total assets.......................... 1.08 0.93 0.93 0.91 1.14 1.38 1.04
Allowance for loan losses as a
percentage of non-performing
assets.............................. 90.55 101.45 100.96 117.38 151.56 89.29 97.79
CAPITAL RATIOS:
Leverage capital ratio................ 6.91 6.81 6.90 6.48 6.96 7.10 6.41
Risk-based capital ratio.............. 12.28 13.42 12.70 12.59 13.41 13.38 14.79
</TABLE>
- ---------------
(1) Includes loans held for sale and dealer reserve.
(2) Including mortgage-backed and related securities held to maturity and
available for sale.
(3) Includes unrealized depreciation on securities available for sale of $1.6
million, $872,000, $459,000 and $1.5 million at March 31, 1996 and 1995 and
December 31, 1995 and 1994, respectively.
(4) Represents the realization of the net operating loss carryover.
(5) Annualized where appropriate.
27
<PAGE> 30
PRO FORMA COMBINED FINANCIAL DATA
The following tables present certain selected historical financial
information for the Company and BNAB and selected unaudited pro forma combined
financial data. The information presented is based on and should be read in
conjunction with, and is qualified in its entirety by reference to, the separate
historical financial statements of the Company and BNAB appearing elsewhere in
this Prospectus. The pro forma amounts included in the tables assume completion
of the acquisition and the issuance of $50.0 million principal amount of
Debentures. The acquisition will be accounted for by the purchase method of
accounting. Under this method of accounting, assets and liabilities of BNAB are
recorded at their estimated fair value and any unallocated portion of the
purchase price remaining after fair value adjustments is recorded as goodwill.
Goodwill is amortized on a straight line basis over 10 years. Applicable income
tax effects for the difference in the income tax basis and the financial
statement basis of BNAB's accounts result in deferred tax assets and liabilities
and correspondingly adjust the amount recorded as goodwill. The unaudited pro
forma combined balance sheets assume the acquisition had been effective on March
31, 1996 and December 31, 1995, respectively. The unaudited pro forma combined
statements of operations assume the acquisition had been effective as of January
1, 1996 and 1995, respectively. For purposes of the pro forma financial
information estimated fair values of BNAB's assets and liabilities are, except
for debt securities available for sale, based on December 31, 1995 information.
Debt securities available for sale are based on March 31, 1996 information. The
unaudited pro forma combined financial data do not give effect to the
disposition of certain yet to be identified assets and liabilities, or
restructuring charges. Restructuring charges, when incurred, will adversely
impact the Company's results of operations. However, no benefit from anticipated
expense reductions is reflected in the pro forma combined financial data.
The resolution of the pending matters pertaining to the assets and
liabilities of BNAB described above, as well as the operations of BNAB
subsequent to March 31, 1996, will affect the allocation of the purchase price.
In addition, changes to the adjustments already included in the unaudited pro
forma combined financial statements, and possibly other adjustments, are
expected because valuations of assets and liabilities are determined as of the
actual date the acquisition is completed. An increase in the unallocated portion
of the purchase price remaining after fair value adjustments will result in a
greater final allocation to goodwill which will have a corresponding impact on
amortization expense and will reduce tangible common equity and net income. A
decrease in the unallocated portion of the purchase price remaining after fair
value adjustments will have the opposite effects. Additionally, under certain
circumstances, the purchase price may be adjusted. Accordingly, the final
combined amounts may differ from those set forth in the unaudited pro forma
combined financial statements. See "Pending Acquisition of Bank of North
America."
28
<PAGE> 31
PRO FORMA COMBINED FINANCIAL DATA -- (CONTINUED)
The historical information relating to BNAB contained throughout this
Prospectus was provided to the Company by BNAB. The Company makes no
representations regarding the accuracy or completeness of the information
regarding BNAB; however, the Company has no reason to believe that such
information is materially incomplete or inaccurate.
The pro forma information shown below is presented for comparative purposes
only and is not necessarily indicative of the combined financial position or
results of operations in the future. The pro forma information is also not
necessarily indicative of the combined financial position or results of
operations which would have been realized had the acquisition been consummated
during the periods or as of the dates for which the pro forma financial
information is presented. Certain balances on BNAB's financial statements were
reclassified to conform with the Company's financial statement presentations.
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------------------------------
HISTORICAL
----------------------- COMBINED
BBC BNAB ADJUSTMENTS PRO FORMA
---------- -------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Cash............................................................ $ 61,133 $ 22,701 $ $ 83,834
Investment securities, net...................................... 40,537 5,814 3,700(A) 50,051
Loans receivable, net........................................... 863,348 394,966 6,755(1) 1,265,069
Debt securities available for sale.............................. 559,775 108,554 (54,000)(2) 614,329
Real estate owned............................................... 6,737 1,119 7,856
Office properties and equipment................................. 42,602 8,500 51,102
Federal Home Loan Bank stock.................................... 8,840 2,775 11,615
Mortgage servicing rights....................................... 24,450 2,180 2,823(1) 29,453
Deferred tax asset.............................................. 1,828 2,187 (2,860)(6) 1,155
Cost over fair value of net assets acquired..................... 10,517 179 13,084(3) 23,780
Other assets.................................................... 23,058 10,681 2,300(A) 36,039
---------- -------- ----------- ----------
TOTAL ASSETS.................................................... $1,642,825 $559,656 $ (28,198) $2,174,283
========= ======== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits........................................................ $1,323,229 $490,095 $ 2,037(1) $1,815,361
FHLB advances................................................... 63,485 20,000 127(1) 83,612
Subordinated debentures......................................... 21,000 0 50,000(A) 71,000
Other borrowings................................................ 43,881 989 (44,000)(A) 870
Advances by borrowers for taxes and insurance................... 28,918 9,524 38,442
Other liabilities............................................... 25,493 1,686 1,000(4) 28,179
---------- -------- ----------- ----------
TOTAL LIABILITIES............................................... 1,506,006 522,294 9,164 2,037,464
---------- -------- ----------- ----------
STOCKHOLDERS' EQUITY
Class A Common Stock............................................ 11 0 0 11
Class B Common Stock............................................ 106 100 (100) 106
Additional paid-in capital...................................... 64,685 30,000 (30,000) 64,685
Net unrealized appreciation (depreciation)...................... 2,014 (1,594) 1,594 2,014
Retained earnings............................................... 70,003 8,856 (8,856) 70,003
---------- -------- ----------- ----------
TOTAL STOCKHOLDERS' EQUITY...................................... 136,819 37,362 (37,362) 136,819
---------- -------- ----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................... $1,642,825 $559,656 $ (28,198) $2,174,283
========= ======== =========== ==========
BOOK VALUE PER COMMON SHARE..................................... $ 11.65 $ 11.65
========= ==========
TANGIBLE BOOK VALUE PER COMMON SHARE............................ $ 10.70 $ 9.57
========= ==========
</TABLE>
29
<PAGE> 32
PRO FORMA COMBINED FINANCIAL DATA -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------------------------------
HISTORICAL
----------------------- COMBINED
BBC BNAB ADJUSTMENTS PRO FORMA
---------- -------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Cash............................................................ $ 69,867 $ 51,029 $ $ 120,896
Investment securities, net...................................... 49,856 431 3,700(A) 53,987
Loans receivable, net........................................... 828,630 375,745 6,755(1) 1,211,130
Debt securities available for sale.............................. 691,803 100,787 (54,000)(2) 738,590
Real estate owned............................................... 6,279 1,026 7,305
Office properties and equipment................................. 40,954 8,211 49,165
Federal Home Loan Bank stock.................................... 10,089 2,775 12,864
Mortgage servicing rights....................................... 20,738 2,277 2,823(1) 25,838
Deferred tax asset.............................................. 0 1,503 (1,503)(6) 0
Cost over fair value of net assets acquired..................... 10,823 204 12,505(3) 23,532
Other assets.................................................... 21,650 10,514 2,300(A) 34,464
---------- -------- ----------- ----------
TOTAL ASSETS.................................................... $1,750,689 $554,502 $ (27,420) $2,277,771
========= ======== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits........................................................ $1,300,377 $488,912 $ 2,037(1) $1,791,326
FHLB advances................................................... 201,785 20,000 127(1) 221,912
Subordinated debentures......................................... 21,000 0 50,000(A) 71,000
Other borrowings................................................ 67,438 820 (44,000)(A) 24,258
Advances by borrowers for taxes and insurance................... 15,684 4,800 20,484
Deferred tax liabilities, net................................... 744 0 1,357(6) 2,101
Other liabilities............................................... 23,100 2,029 1,000(4) 26,129
---------- -------- ----------- ----------
TOTAL LIABILITIES............................................... 1,630,128 516,561 10,521 2,157,210
---------- -------- ----------- ----------
STOCKHOLDERS' EQUITY
Class A Common Stock............................................ 0 0 0 0
Class B Common Stock............................................ 106 100 (100) 106
Additional paid-in capital...................................... 48,905 30,000 (30,000) 48,905
Net unrealized appreciation (depreciation)...................... 5,733 (459) 459 5,733
Retained earnings............................................... 65,817 8,300 (8,300) 65,817
---------- -------- ----------- ----------
TOTAL STOCKHOLDERS' EQUITY...................................... 120,561 37,941 (37,941) 120,561
---------- -------- ----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................... $1,750,689 $554,502 $ (27,420) $2,277,771
========= ======== =========== ==========
BOOK VALUE PER COMMON SHARE..................................... $ 11.38 $ 11.38
========= ==========
TANGIBLE BOOK VALUE PER COMMON SHARE............................ $ 10.29 $ 9.09
========= ==========
</TABLE>
30
<PAGE> 33
PRO FORMA COMBINED FINANCIAL DATA -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
------------------------------------------------- ---------------------------------------------------
HISTORICAL HISTORICAL
--------------------- COMBINED ----------------------- COMBINED
BBC BNAB ADJUSTMENTS PRO FORMA BBC BNAB ADJUSTMENTS PRO FORMA
----------- ------- ----------- ----------- ----------- ------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest
income(1)(2)(A)..... $ 32,092 $10,313 $(1,290) $ 41,115 $ 130,077 $40,552 $(5,175) $ 165,454
Interest
expense(1)(B)....... 15,620 5,631 52 21,303 65,686 23,016 (417) 88,285
Provision for loan
losses 940 180 0 1,120 4,182 1,150 0 5,332
Noninterest
income(1)........... 6,834 1,181 (208) 7,807 19,388 5,204 (745) 23,847
Noninterest expense(3) 14,515 4,802 332 19,649 51,160 18,299 1,271 70,730
Provision for income
taxes............... 3,141 326 (598)(6) 2,869 10,018 1,113 (2,122)(6) 9,009
----------- ------- ----------- ----------- ----------- ------- ----------- -----------
Net Income............ $ 4,710 $ 555 $(1,284) $ 3,981 $ 18,419 $ 2,178 $(4,652) $ 15,945
========== ======= =========== ========== ========== ======= =========== ==========
Per common share
Primary............... $ 0.42 $ 0.35 $ 1.51(7) $ 1.28(7)
========== ========== ========== ==========
Fully diluted......... $ 0.42 $ 0.35 $ 1.50(7) $ 1.27(7)
========== ========== ========== ==========
Average shares
outstanding
Primary............... 11,292,320 11,292,320 10,830,603 10,830,603
========== ========== ========== ==========
Fully diluted......... 11,327,570 11,327,570 10,934,120 10,934,120
========== ========== ========== ==========
</TABLE>
- ---------------
(1) Adjustments to fair value of BNAB's loans receivable, mortgage servicing
rights, deposits, and FHLB advances at December 31, 1995 are $6.8 million,
$2.8 million, $2.0 million, and $127,000, respectively. Adjustments to fair
values are amortized as follows:
<TABLE>
<S> <C>
- Loans receivable 3 years straight line method.
- Mortgage servicing rights Based on projected portfolio cash flows of 26.4% for year
ended December 31, 1995 and 7.4% for the three months ended
March 31, 1996.
- Deposits Based on estimated time deposit maturities of 65% in year
one and 16% for the three months ended March 31, 1996.
- FHLB Advances 1 year straight line.
</TABLE>
(2) The purchase price of $54.0 million is assumed to be funded through the sale
of debt securities available for sale. The weighted average interest rate
earned on BNAB's debt securities available for sale were 5.76% and 5.81% at
March 31, 1996 and December 31, 1995, respectively.
(3) Straight line amortization of cost over fair value of net assets acquired
(goodwill) is based on a ten year useful life. Amortization is not
deductible for tax purposes.
(4) The total purchase price will include other direct acquisition costs, such
as legal, accounting and other professional fees and expenses. For purposes
of the pro forma financial information such other acquisition costs are
estimated at $1.0 million.
(5) The pro forma does not include the effect of any potential expense
reductions, revenue increases or restructuring charges.
(6) The effective income tax rate is assumed to be 38%.
(7) Includes a reduction of $0.13 and $0.12 for primary and fully diluted
earnings per share, respectively, related to the October 1995 Preferred
Stock redemption.
DEBENTURE OFFERING ADJUSTMENTS
(A) $44 million of assumed net proceeds of the Offering will be contributed by
the Company to BankAtlantic where it was used to paydown securities sold
under agreements to repurchase. The remaining net proceeds of the Offering
(approximately $3.7 million assuming the underwriters over allotment option
is not exercised) is assumed to be invested by the Company in short term
investments in order to comply with the terms of the Indenture. The assumed
interest earned on the short term investments is 5.36% and 5.80% for the
three months ended March 31, 1996 and the year ended December 31, 1995,
respectively.
(B) Interest expense on the Debentures assumes amortization of offering costs
over 10 years on a straight-line basis. The average rate on securities sold
under agreements to repurchase assumed to be paid down for the three months
ended March 31, 1996 and the year ended December 31, 1995 was 4.39% and
5.81%, respectively.
31
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
GENERAL
The Company's primary asset is the capital stock of BankAtlantic, and its
principal activities relate to the operations of BankAtlantic. At the present
time the Company has no significant operations and does not require funds other
than to pay certain operating expenses, interest on the 9% Debentures and
dividend payments to its common shareholders. It is anticipated that funds for
payment of its operating and interest expenses will continue to be obtained from
BankAtlantic. Additionally, the Company anticipates it will pay regular
quarterly cash dividends on its common stock. Dividend and interest payments are
in part dependent upon BankAtlantic's ability to pay dividends or otherwise
distribute funds to the Company.
RESULTS OF OPERATIONS
Net interest income after provision for loan losses was $15.5 million for
the quarter ended March 31, 1996 compared to $14.6 million for the quarter ended
March 31, 1995. During the 1996 quarter, interest income increased by $1.6
million primarily due to higher interest earned on loans, partially offset by
lower interest income on securities and investments. This increase in loan
interest income reflects higher average balances due to the acquisition of
MegaBank as well as loan originations and purchases. The decline in interest
income on securities and investments resulted from lower average balances
primarily due to principal repayments and the sale of $73.1 million of
mortgage-backed securities available for sale. During the three months ended
March 31, 1996 total interest expense was $15.6 million compared to $15.7
million during the comparable 1995 period. Higher interest expenses on deposits
and the 9% Debentures were offset by lower interest expense on short term
borrowings (primarily securities sold under agreements to repurchase). The
increase in deposit interest expense resulted from higher time deposit average
balances and rates. The decline in short term borrowings interest expense
primarily resulted from lower average balances and secondarily from lower rates
during the first quarter of 1996 compared to 1995. The provision for loan losses
was $940,000 for the three months ended March 31, 1996 compared to $176,000
during the comparable 1995 period. The increased 1996 provision resulted from an
increase of $845,000 in consumer loan charge-offs net of recoveries.
Non-interest income was $6.8 million for the three months ended March 31, 1996
compared to $4.0 million for the comparable 1995 period. The $2.8 million
increase primarily related to $2.3 million of gains on sales of mortgage-backed
securities available for sale and higher transaction account and ATM fee income.
Non-interest expense for the quarter ended March 31, 1996 was $14.5 million
compared to $11.9 million for the same period in 1995. The net increase of $2.6
million reflects decreased gains on the sale of foreclosed assets and higher
employee compensation costs, occupancy and equipment expenses, other expenses,
and amortization of cost over fair value of net assets acquired. These expense
increases primarily related to the acquisition of MegaBank and the opening of
six additional branches during 1995. The 1995 provision for income taxes was
reduced by $319,000 due to a reduction in the deferred tax asset valuation
allowance.
Net income of $18.4 million, $16.8 million and $16.1 million was realized
for the three years ended December 31, 1995, 1994 and 1993, respectively. Net
interest income for 1995 reflects the acquisition of MegaBank which increased
loans, debt securities available for sale and deposits by $116.4 million, $18.1
million, and $120.2 million, respectively. Furthermore, loans originated for
portfolio during 1995 were $597.3 million compared to $328.8 million during
1994. Net interest income during 1994 reflects $768,000 realized from the
repayment of a loan purchased at a discount and a $1.4 million reversal of
accrued tax certificate interest to previously established allowance accounts.
The $1.4 million interest reversal was offset by a $1.4 million reduction in
provision for tax certificate losses included in non-interest expense, both of
which resulted from a change in methodology for classifying tax certificates and
calculating the allowance for tax certificate losses. Non-interest income during
1995 includes $2.7 million of gains on the sales of mortgage servicing rights,
$589,000 of realized gains on trading account securities, $395,000 of gains on
the sales of loans originated for resale and $9.0 million of transaction account
and ATM fee income. Non-interest income during 1994 includes $484,000 of gains
on the sale of mortgage servicing rights, $558,000 of unrealized losses on
investment trading securities, $773,000 of gains on sales of loans originated
for resale, and $6.4 million of
32
<PAGE> 35
transaction account and ATM fee income. In addition, 1994 non-interest income
included $332,000 of dormant account fee income relating to a settlement with
the Florida Comptroller's Office, and a $291,000 gain on the sale of a building
utilized for administrative operations. Non-interest expenses during 1995
included income from foreclosed asset activity, net of $3.2 million compared to
$2.3 million during 1994. The acquisition of MegaBank and the opening of three
Florida west coast Wal-Mart branches and three South Florida branches were the
primary causes of the increase in non-interest expenses in 1995. The MegaBank
acquisition added 70 employees and five branches in Dade County. Operations for
1995 also included $1.0 million of loan charge-offs and $1.2 million of legal
expenses, all related to the Subject Portfolio discussed in Note 15 of the
Consolidated Financial Statements. The Covenant was operative for all of 1993
and 1994, but only provided $120,000 of reimbursement in 1995. The financial
effect of the Covenant for 1994 and 1993 was to reduce expenses by $1.1 million
and $942,000, increase interest income by $210,000 and $757,000 and recognize
loan loss recoveries of $1.2 million and $972,000, respectively. Operations for
1993 include a settlement of a claim with the Internal Revenue Service ("IRS")
relating primarily to net operating loss carrybacks, resulting in an increase in
other interest income of $587,000 and a reduction in the provision for income
taxes of $1.4 million. Provision for loan losses increased during 1995 to $4.2
million compared to $2.3 million and $3.5 million for the years ended December
31, 1994 and 1993, respectively. The increase during 1995 reflects lower
recoveries from the Subject Portfolio and higher non-mortgage loan charge-offs.
The lower provision for loan losses during 1994 and 1993 resulted primarily from
the improved economic environment as well as recoveries during 1994 through 1993
related to the Subject Portfolio. The 1995 and 1994 tax provisions were reduced
by $972,000 and $492,000 due to a reduction in the deferred tax asset valuation
allowance.
As discussed above, net income increased in 1995 by $1.6 million compared
to 1994 and 1994 net income increased by $700,000 compared to 1993. However, as
indicated below, comparative income per share amounts decreased. The decrease in
1995 was due to the October 1995 redemption of the Company's non-cumulative
preferred stock at the stated redemption price of $25 per share. This amount
resulted in a payment of $1.4 million above the recorded amount of the Preferred
Stock. In accordance with Generally Accepted Accounting Principles ("GAAP") the
$1.4 million is not reflected in operations and has no effect on net income but
does impact income per share by being treated as a Preferred Stock dividend
which reduced primary and fully diluted earnings per share by $0.13 and $0.12,
respectively. The primary reason for the redemption of the preferred stock was
that the dividend requirements, based upon the redemption price, represented an
after-tax equivalent effective interest rate of 10.5% compared to an after-tax
equivalent effective interest rate of approximately 5.5% on the funds used for
the redemption. During the second quarter of 1993 the Company issued 1.76
million shares of common stock in connection with the exercise of warrants by
BFC Financial Corporation ("BFC") and 1.05 million shares of common stock were
issued in a November 1993 public offering. A portion of the decline in 1994
income per share as compared to 1993 resulted from those shares being
outstanding for all of 1994 as compared to only a portion of 1993. Income per
share comparisons for the quarterly periods of 1996 to 1995 and the annual
periods of 1995 to 1994 and 1994 to 1993 were also diluted by the increasing
market price of the Company's common stock and the accounting effect this had in
calculating common equivalent shares. The average for the quarter, for the year
and the period end stock prices used in the calculation was $14.55 and $15.25
for the quarter ended March 31, 1996 quarter compared to $10.25 and $9.92 for
the quarter ended March 31, 1995, $13.05 and $15.00 for 1995, compared to $9.45
and $9.92 in 1994 and $8.24 and $8.80 in 1993. Resulting income per common and
common equivalent share (primary earnings per share) and income assuming full
dilution (fully diluted income per share) were $0.42 and $0.42 for the 1996
quarter, $0.39 and 0.39 for the 1995 quarter, $1.51 and $1.50 for 1995, $1.52
and $1.52 for 1994 and $1.61 and $1.60 for 1993.
Operations during the three months ended March 31, 1996 compared to 1995
were favorably impacted by the change in the mix of interest earning assets from
lower yielding mortgage-backed securities and investments to higher yielding
loans resulting in the net interest margin increasing from 3.75% during the
three months ended March 31, 1995 to 4.19% during the comparable 1996 period.
Operations during the two year period ended December 31, 1994 were favorably
impacted by the declining interest rate environment and BankAtlantic's interest
rate sensitivity gap position during these periods. During 1995 the interest
margin decreased compared to 1994 as interest rates increased. A negative
interest rate sensitivity gap provides the
33
<PAGE> 36
potential for widening interest margins and increased earnings during times of
declining rates, the environment that generally existed during the 1994 and 1993
periods. However, a negative gap will correspondingly negatively impact earnings
when rates increase, the environment that generally existed during the first
half of 1995. At December 31, 1995, 1994 and 1993 the cumulative one-year
interest rate sensitivity gap was a negative 2.49% and 13.74% and a positive
3.79%, respectively. At March 31, 1996 the cumulative one-year interest
sensitivity gap was a positive 1.80% (See "Interest Rate Sensitivity"). The 1996
change in the one-year cumulative gap resulted from lower short term borrowings
at period end due to the sale of $73.1 million of mortgage-backed securities.
The 1994 decline in the one year cumulative negative interest rate gap resulted
from higher short term borrowings during the fourth quarter of 1994 compared to
the same 1993 period. In addition, during 1994, and most of 1995, a period when
interest rates were rising, liabilities repriced at a faster pace than
BankAtlantic's assets, causing the net interest margin to decline from 4.90%
during the year ended December 31, 1993 to 4.32% during the comparable 1994
period and to 4.04% during 1995.
NET INTEREST INCOME
A financial summary of net interest income follows:
<TABLE>
<CAPTION>
FOR THE THREE 1996 1995 1994
MONTHS ENDED MARCH TO FOR THE YEARS ENDED DECEMBER TO TO
31, 1995 31, 1994 1993
------------------- -------- ------------------------------ -------- -------
1996 1995 CHANGE 1995 1994 1993 CHANGE CHANGE
-------- -------- -------- -------- -------- -------- -------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest and fees on loans............. $ 20,333 $ 15,743 $ 4,590 $ 72,841 $ 49,426 $ 47,335 $ 23,415 $ 2,091
Interest on banker's acceptances....... 0 0 0 0 406 314 (406) 92
Interest on mortgage-backed securities
held to maturity..................... 0 10,067 (10,067) 37,855 30,550 24,891 7,305 5,659
Interest on debt securities available
for sale............................. 10,500 1,400 9,100 7,207 5,542 9,412 1,665 (3,870)
Interest and dividends on investment
securities........................... 1,259 3,242 (1,983) 12,174 12,625 11,964 (451) 661
Other interest income.................. 0 0 0 0 0 587 0 (587)
Interest on deposits................... (12,379) (10,333) (2,046) (46,646) (31,646) (31,798) (15,000) 152
Interest on advances from FHLB......... (2,027) (1,606) (421) (7,449) (4,976) (2,359) (2,473) (2,617)
Interest on securities sold under
agreements to repurchase............. (718) (3,714) 2,996 (10,815) (4,809) (1,082) (6,006) (3,727)
Interest on capital notes, subordinated
debentures and note payable.......... (496) (2) (494) (776) 0 (748) (776) 748
-------- -------- -------- -------- -------- -------- -------- -------
Total net interest income.............. $ 16,472 $ 14,797 $ 1,675 $ 64,391 $ 57,118 $ 58,516 $ 7,273 $(1,398)
======== ======== ======== ======== ======== ======== ======== =======
</TABLE>
The increase in interest and fees on loans during the three months ended
March 31, 1996 compared to the same period during 1995 reflects higher average
balances resulting from loan fundings, loan purchases, and loans acquired in
connection with the MegaBank acquisition. As a result, the average balance of
total loans receivable increased from $658.9 million during the first quarter of
1995 to $860.2 million during the comparable 1996 period. During the three
months ended March 31, 1996 BankAtlantic funded and purchased $183.9 million of
loans compared to $127.7 million of loans during 1995. Effective December 15,
1995, all mortgage-backed and investment securities, excluding tax certificates,
then classified as held-to-maturity were reclassified as available for sale;
therefore, during the first quarter of 1996 there were no mortgage-backed
securities held for investment. The decline in interest on securities and
investments resulted from principal repayments and the sale of $73.1 million of
mortgage-backed securities available for sale. The average balance of securities
and investments declined from $897.1 million during the three month period in
1995 to $708.9 million during the comparable period in 1996.
Net interest income increased for the year ended December 31, 1995. The
increase in interest on loans during 1995 compared to the same period in 1994
was primarily due to higher average balances of and yields earned on real estate
loans and commercial business loans, and higher balances of consumer loans. The
above items were partially offset by lower average balances of banker's
acceptances and lower yields earned on consumer loans. The higher loan average
balances resulted from the 1995 MegaBank acquisition and increased loan
originations. The MegaBank acquisition increased commercial real estate,
commercial business, and consumer loans by $39.1 million, $24.5 million, and
$52.8 million, respectively. During the year
34
<PAGE> 37
ended December 31, 1995 BankAtlantic funded and purchased $648.5 million of
loans compared to $372.1 million of loans during the comparable 1994 period. As
a result, BankAtlantic's average loan balances increased from $520.9 million
during the year ended December 31, 1994 to $750.1 million during 1995. The
higher yields earned on real estate and commercial business loans reflect the
increase in the prime rate of interest from 6.00% in December 1994 to 8.50% in
December 1995. The higher real estate and commercial business loan yields were
partially offset by lower consumer loan yields as a result of the $52.8 million
acquisition of MegaBank consumer loans at a weighted average rate of 8.98% and
the repayment of higher yielding consumer loans. The loan portfolio at December
31, 1995 compared to December 31, 1994 changed due to the acquisition of
MegaBank and loan originations. The percent of consumer loans to total gross
loans at December 31, 1995 was 23.67% compared to 20.18% at December 31, 1994.
The percent of commercial business loans to total gross loans at December 31,
1995 was 6.84% compared to 4.00% at December 31, 1994. The increased income on
mortgage-backed securities during 1995 was caused by higher average balances
during the period and higher yields earned on adjustable rate mortgage-backed
securities. During the year ended December 31, 1994, $268.8 million of mortgage
backed securities were purchased and in January 1995, $75.3 million of
adjustable rate mortgage-backed securities were purchased resulting in average
mortgage-backed securities balances increasing from $514.5 million during the
year ended December 31, 1994 to $574.0 million during the comparable 1995
period. Adjustable rate mortgage-backed securities purchased in prior periods
repriced during the fourth quarter of 1994 and during 1995 resulting in an
increase in the average yields earned on the portfolio. The increase in interest
income on debt securities available for sale reflects higher average balances
partially offset by lower yields. The higher average balances reflect the
acquisition of $18.1 million of debt securities in connection with the MegaBank
acquisition and the transfer of $638.8 million of securities to available for
sale on December 15, 1995 based on the guidance from a Special Report issued by
FASB. See further discussion under "-Mortgage-backed Securities, Investment
Securities and Loans." The securities transferred increased the available for
sale average balance by $24.9 million for the year ended December 31, 1995. The
lower yields resulted primarily from the prepayments of higher yielding 15 and
30 year mortgage-backed securities. The decrease in interest and dividends on
investment securities was primarily caused by lower average balances partially
offset by a $1.4 million reversal of tax certificate interest during 1994. The
reversal of tax certificate interest resulted from a change in methodology for
classifying tax certificates and calculating the allowance for tax certificate
losses. This change in methodology was based upon discussions with certain
regulatory agencies. Previously, interest was accrued on tax certificates for a
longer period of time before the certificate was charged off. Under this prior
practice an allowance was established for any interest accrued after a specified
term after acquisition of the certificate. The new methodology charges off
certificates at the same point in time, but discontinues the practice of
accruing interest and establishing an allowance for amounts accrued after the
specified term. The 1994 tax certificate interest reversal was to previously
established allowance accounts.
Net interest income declined in 1994 compared to 1993. The increase in
interest on loans during 1994 resulted from higher yields earned in 1994
compared to 1993. The average yield earned on loans was 9.49% during 1994
compared to 9.05% during 1993. The higher loan yield was caused by the rising
interest rates during most of 1994 and a shift in the loan portfolio mix from
consumer to commercial real estate loans. The percent of commercial real estate
loans to gross loans increased from 34.2% at December 31, 1993 to 56.9% at
December 31, 1994. Whereas, the percent of consumer loans (including second
mortgages) to gross loans declined from 27.23% at December 31, 1993 to 20.2% at
December 31, 1994. The yield increase in consumer loans resulted from the
repayment of lower yielding automobile loans. The increased income on mortgage-
backed securities during 1994 compared to 1993 was caused by higher average
balances partially offset by lower yields. The average balance of
mortgage-backed securities and debt securities available for sale increased from
$517.3 million during 1993 to $579.4 million during 1994. The decline in
mortgage-backed securities average yields during 1994 was partially caused by
the repayment of higher yielding mortgage-backed securities in the available for
sale category. The balance of mortgage-backed securities available for sale
declined from $83.1 million at December 31, 1993 to $54.0 million at December
31, 1994. The $268.8 million of mortgage-backed securities purchased in 1994
were purchased to offset declining balances in the available for sale portfolio
and to replace consumer and residential loan repayments. The 1994 increase in
interest and dividends on investment securities was primarily caused by
increased asset-backed securities
35
<PAGE> 38
average balances partially offset by a $1.4 million reversal of tax certificate
accrued interest to previously established allowance accounts, and lower tax
certificate average balances and yields. The decline in tax certificate balances
and yields was attributable to increased competition at annual tax certificate
auctions. During the year ended December 31, 1994, BankAtlantic purchased $172.6
million of five-year asset-backed securities causing the asset-backed securities
average balance to increase from $120,000 during 1993 to $101.9 million during
1994. The asset-backed securities were purchased to replace declining tax
certificate balances.
The increase in interest on deposits during the three months ended March
31, 1996 compared to the same period in 1995 resulted from higher average
deposit balances during 1996, and an increased proportion of time deposits
compared to transaction accounts. The increased deposit average balances
primarily resulted from deposits acquired in connection with the acquisition of
MegaBank and increased time deposits. As a result, total average deposits
increased from $1.10 billion for the first quarter of 1995 to $1.21 billion
during the first quarter of 1996. The higher short term interest rate
environment during 1995, compared to the previous periods, contributed to a
change in the deposit mix from lower rate transaction accounts to generally
higher rate time deposits. The average deposit mix changed from 51% and 49% of
time deposits and transaction accounts, respectively, for the three months ended
March 31, 1995 to 57% and 43% of time deposits and transaction accounts,
respectively, for the same period in 1996. The increase in interest on advances
from FHLB were due to higher average balances partially offset by lower rates.
FHLB advance average balances increased from $112.1 million during the first
three months of 1995 to $145.1 million during the comparable 1996 period.
Furthermore, average FHLB advance rates declined from 5.81% during the 1995
three month period to 5.60% during the same period in 1996. Interest on
subordinated debentures and note payable relates to the $21.0 million of 9%
Debentures issued in September and October 1995 and a $4.0 million note issued
in March 1995. The decline in interest on securities sold under agreements to
repurchase resulted from lower average balances during the 1996 quarter compared
to the same period in 1995. The decline in securities sold under agreements to
repurchase average balances resulted from the higher deposit balances mentioned
above.
The increase in interest expense on deposits for the year ended December
31, 1995 resulted from higher deposit balances during 1995, a change in the
deposit mix from transaction accounts to time deposits, and higher short term
interest rates during 1995 compared to 1994. The increased deposit balances
primarily resulted from $120.2 million of deposits (including non-interest
bearing deposits) acquired with the acquisition of MegaBank and additional
growth in certificate accounts. As a result, average deposits increased from
$1.02 billion during the year ended December 31, 1994 to $1.14 billion during
the comparable 1995 period. The higher short term interest rate environment
during late 1994 through most of 1995 contributed to a change in the deposit mix
from lower rate transaction accounts to generally higher rate certificate
accounts. The average deposit mix changed from 43% and 57% certificate accounts
and transaction accounts, respectively, for the year ended December 31, 1994 to
53% and 47% certificate accounts and transaction accounts, respectively, for the
same period in 1995. At December 31, 1995 compared to 1994, certificates of
deposit greater than $100,000 increased by $79.0 million partially due to $25.0
million associated with the MegaBank acquisition and a $15.8 million increase in
public deposits. At March 31, 1996 certificates greater than $100,000 increased
by $11.5 million from December 31, 1995 primarily due to a $6.0 million increase
in public deposits. The increases in interest on advances from FHLB and interest
expense on securities sold under agreements to repurchase were due to higher
average balances and rates paid during 1995 compared to 1994. The higher
borrowings were used to fund the purchase of mortgage-backed securities,
investment securities and the acquisition of MegaBank. Interest on subordinated
debentures and note payable relates to the note payable issued in March 1995 and
$21.0 million of 9% Debentures issued in September and October 1995.
The lower interest cost on deposits during 1994 compared to 1993 was due to
lower average rates paid on transaction accounts partially offset by higher
average balances and average rates paid on certificate accounts. Average rates
paid on transaction accounts declined from 2.53% during 1993 to 2.35% during
1994. Certificate account average balances and average rates increased from
$435.6 million and 4.14% during 1993 to $442.1 million and 4.25% during 1994,
respectively. The increase in interest expense on FHLB advances during 1994 was
caused by higher average balances partially offset by lower average rates. FHLB
advance average balances increased from $43.0 million during 1993 to $99.5
million during 1994. The additional
36
<PAGE> 39
borrowings were used to purchase mortgage-backed securities. Average rates
declined due to the maturity of higher rate FHLB advances during 1993 and 1994.
The increase in interest on securities sold under agreements to repurchase was
caused by higher average balances and rates during 1994 compared to 1993. The
higher rates were the result of the rising short-term interest rate environment
during 1994. The decline in interest on Capital Notes and other subordinated
debentures was primarily due to the $6.8 million redemption of 1986 Capital
Notes, the $1.0 million redemption of 14% subordinated debentures during the
third quarter of 1993, and the June 30, 1993 conversion by BFC of approximately
$2.0 million of 13% subordinated debentures into the common stock of
BankAtlantic.
During the three months ended March 31, 1996, BankAtlantic's average
interest earning assets increased and its average interest bearing liabilities
declined compared to the same period during 1995. Furthermore, BankAtlantic's
rates earned on assets increased and rates paid on liabilities decreased. The
higher balances and yields on earning assets increased interest income by
$953,000 and $687,000, respectively. The lower balances and rates paid on
interest bearing liabilities, other than deposits, reduced interest expense by
$899,000 and $1.2 million, respectively. Such decrease was offset, however, by
higher average balances and average rates on deposits. The increased average
earning asset balances were caused by higher loan average balances partially
offset by lower mortgage-backed and investment securities average balances. The
increased loan average balances resulted from loan originations, loan purchases
and the MegaBank acquisition. The lower mortgage-backed and investment
securities average balances reflect principal repayments and the $73.1 million
mortgage-backed securities sale in March 1996. The increase in rates earned on
average assets resulted from a change in the mix of earning assets to higher
earning loans from lower earning mortgage-backed and investment securities. The
lower rates paid on liabilities, other than deposits , primarily resulted from
lower rates and balances of securities sold under agreements to repurchase.
During the year ended December 31, 1995, BankAtlantic's average earning assets
and average interest bearing liabilities increased compared to the 1994 period.
BankAtlantic's rates earned on assets and average rates paid on liabilities also
increased. The higher balances and yields on earning assets increased interest
income by $25.9 million and $5.7 million, respectively. Likewise, the higher
balances and rates paid on interest bearing liabilities increased interest
expense by $14.7 million and $9.5 million, respectively. The increase in
balances on earning assets and interest paying liabilities was the result of the
acquisition of MegaBank, loan originations, and the purchases of mortgage-backed
and investment securities during 1994 and 1995. The higher rates earned on
earning assets reflects a higher interest rate environment and a $1.4 million
reversal of tax certificate interest income in the 1994 period. The higher rates
paid on liabilities reflect the rising interest rate environment and the shift
in the deposit mix. During the year ended December 31, 1994, BankAtlantic's
average interest earning assets and interest bearing liabilities increased. The
average rates earned on assets declined whereas the rates paid on liabilities
slightly increased. The higher balances on earning assets increased interest
income by $8.7 million and the lower rates earned on assets decreased interest
income by $4.1 million. The increased interest income was partially offset by
$5.3 million of additional interest expense due to higher volume. The decline in
rates on earning assets also includes the $1.4 million reversal of tax
certificate interest income.
The net interest margin was 4.19% and 3.75% for the three months ended
March 31, 1996 and 1995, respectively. The increased margin resulted from a
change in the mix of earning assets mentioned above and, primarily, lower rates
and balances of securities sold under agreements to repurchase. The net interest
margin was 4.04%, 4.32% and 4.90% for the three years ended December 31, 1995,
1994 and 1993, respectively. The reduced margin during 1995 resulted from higher
deposit and borrowings expense due to rising short term interest rates, and the
shift in the deposit mix and increased borrowings. The increase in borrowing
rates were partially offset by higher rates earned on loans, mortgage-backed and
investment securities. The reduced margin during 1994 compared to 1993 was due
to lower yields earned on investments and mortgage-backed securities, and rising
short-term interest rates on increased borrowings. This was partially offset by
higher loan rates, and the redemption of all Capital Notes and other
subordinated debentures during late 1993. The 1994 margin was impacted by the
$1.4 million reversal of tax certificate interest income.
As described in "Asset and Liability Management", BankAtlantic has
attempted to shift the composition of its loan portfolio to shorter term,
adjustable rate, higher yielding loans from traditional fixed rate, long term
residential loans. This change in portfolio composition is intended to produce a
continuing reduction in
37
<PAGE> 40
BankAtlantic's interest rate margin volatility. However, permanent (5-7 year)
commercial real estate loans are generally considered to involve a higher risk
of default than single-family residential loans. Repayment of construction and
permanent commercial real estate loans is generally dependent on the successful
operation of the related real estate project and thus may be subject, to a
greater extent, to adverse conditions in the real estate market or in the
economy. Construction loans involve additional risks because loan funds are
advanced upon the security of the project under construction, which is of
uncertain value prior to completion of construction.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
38
<PAGE> 41
YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE YEARS ENDED
--------------------------------------------------------------- ---------------------
MARCH 31, 1996 MARCH 31, 1995 DECEMBER 31, 1995
----------------------------- ----------------------------- ---------------------
AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE
---------- -------- ----- ---------- -------- ----- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Loans:(A)
Real estate....................... $ 586,744 $13,426 9.15 % $ 449,909 $10,426 9.27 % $ 499,275 $47,591
Consumer.......................... 203,811 5,265 10.33 165,918 4,262 10.27 192,409 19,636
Commercial business............... 69,624 1,642 9.43 43,054 1,055 9.80 58,374 5,614
---------- -------- ----- ---------- -------- ----- ---------- --------
Total loans........................ 860,179 20,333 9.46 658,881 15,743 9.56 750,058 72,841
---------- -------- ----- ---------- -------- ----- ---------- --------
Banker's acceptances............... 0 0 0.00 0 0 0.00 0 0
Mortgage-backed securities held to
maturity(E)....................... 0 0 0.00 617,513 10,067 6.52 573,995 37,855
Debt securities available for
sale(B)(E)........................ 647,093 10,500 6.49 69,652 1,400 8.04 89,757 7,207
Investment securities(C)(E)........ 57,703 1,204 8.35 207,298 3,204 6.18 178,449 12,019
Federal funds sold................. 4,107 55 5.36 2,619 38 5.80 2,571 155
---------- -------- ----- ---------- -------- ----- ---------- --------
Total mortgage-backed and
investment securities........... 708,903 11,759 6.64 897,082 14,709 6.56 844,772 57,236
---------- -------- ----- ---------- -------- ----- ---------- --------
Total interest earning assets...... 1,569,082 32,092 8.18 % 1,555,963 30,452 7.83 % 1,594,830 130,077
---------- -------- ----- ---------- -------- ----- ---------- --------
Total non-interest earning
assets............................ 137,658 140,852 130,008
---------- ---------- ----------
Total assets....................... $1,706,740 $1,696,815 $1,724,838
=========== =========== ===========
INTEREST BEARING LIABILITIES
Deposits:
Savings........................... $ 105,613 $ 436 1.66 % $ 114,088 $ 540 1.92 % $ 109,068 $ 1,987
NOW, money funds and checking..... 422,211 2,569 2.44 421,965 3,185 3.06 421,135 11,591
Certificate accounts.............. 684,172 9,374 5.50 567,960 6,608 4.72 607,300 33,068
---------- -------- ----- ---------- -------- ----- ---------- --------
Total deposits..................... 1,211,996 12,379 4.10 1,104,013 10,333 3.80 1,137,503 46,646
---------- -------- ----- ---------- -------- ----- ---------- --------
Securities sold under agreements to
repurchase........................ 63,952 700 4.39 240,092 3,706 6.26 186,592 10,815
Advances from FHLB................. 145,096 2,027 5.60 112,087 1,606 5.81 125,246 7,449
Federal funds purchased............ 1,519 18 4.75 610 8 5.32
Other borrowings................... 21,001 496 9.47 80 2 10.14 7,303 776
---------- -------- ----- ---------- -------- ----- ---------- --------
Total interest bearing
liabilities....................... 1,443,564 15,620 4.34 % 1,456,882 15,655 4.36 % 1,456,644 65,686
---------- -------- ----- ---------- -------- ----- ---------- --------
NON-INTEREST BEARING LIABILITIES
DDA and escrows accounts.......... 134,863 109,573 135,027
Other liabilities................. 11,313 21,698 18,278
---------- ---------- ----------
Total non-interest bearing
liabilities....................... 146,176 131,271 153,305
---------- ---------- ----------
Stockholders' equity............... 117,000 108,662 114,889
---------- ---------- ----------
Total liabilities and stockholders'
equity............................ $1,706,740 $1,696,815 $1,724,838
=========== =========== ===========
Net interest income/net interest
spread............................ $16,472 3.84 % $14,797 3.47 % $64,391
========== ===== ========== ===== ==========
MARGIN
Interest income/interest earnings
assets............................ 8.18 % 7.83 %
Interest expense/interest earnings
assets............................ 3.99 4.08 %
----- -----
Net interest margin................ 4.19 % 3.75 %
===== =====
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
----------------------------- -----------------------------
YIELD/ AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
----- ---------- -------- ----- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Loans:(A)
Real estate....................... 9.53 % $ 372,031 $33,022 8.89 % $ 322,376 $28,194 8.75 %
Consumer.......................... 10.21 122,235 14,118 11.55 169,550 17,183 10.13
Commercial business............... 9.62 26,647 2,286 8.58 31,012 1,958 6.31
----- ---------- -------- ----- ---------- -------- -----
Total loans........................ 9.71 520,913 49,426 9.49 522,938 47,335 9.05
----- ---------- -------- ----- ---------- -------- -----
Banker's acceptances............... 0.00 12,366 406 3.28 9,379 314 3.35
Mortgage-backed securities held to
maturity(E)....................... 6.59 514,460 30,550 5.94 406,943 24,891 6.12
Debt securities available for
sale(B)(E)........................ 8.03 64,891 5,542 8.54 110,352 9,412 8.53
Investment securities(C)(E)........ 6.74 209,588 12,579 6.00 130,788 11,942 9.13
Federal funds sold................. 6.03 924 46 4.98 693 22 3.17
----- ---------- -------- ----- ---------- -------- -----
Total mortgage-backed and
investment securities........... 6.78 802,229 49,123 6.12 658,155 46,581 7.08
----- ---------- -------- ----- ---------- -------- -----
Total interest earning assets...... 8.16 % 1,323,142 98,549 7.45 % 1,181,093 93,916 7.95 %
----- ---------- -------- ----- ---------- -------- -----
Total non-interest earning
assets............................ 114,545 107,893
---------- ----------
Total assets....................... $1,437,687 $1,288,986
=========== ===========
INTEREST BEARING LIABILITIES
Deposits:
Savings........................... 1.82 % $ 122,667 $ 2,116 1.72 % $ 128,257 $ 2,363 1.84 %
NOW, money funds and checking..... 2.75 457,529 10,751 2.35 451,382 11,413 2.53
Certificate accounts.............. 5.45 442,107 18,779 4.25 435,565 18,022 4.14
----- ---------- -------- ----- ---------- -------- -----
Total deposits..................... 4.10 1,022,303 31,646 3.10 1,015,204 31,798 3.14
----- ---------- -------- ----- ---------- -------- -----
Securities sold under agreements to
repurchase........................ 5.80 105,462 4,809 4.56 33,962 1,082 3.19
Advances from FHLB................. 5.95 99,540 4,976 5.00 43,006 2,359 5.49
Federal funds purchased............
Other borrowings................... 10.63 0 0 0.00 6,161 748 12.14
----- ---------- -------- ----- ---------- -------- -----
Total interest bearing
liabilities....................... 4.51 % 1,227,305 41,431 3.38 % 1,098,333 35,987 3.28 %
----- ---------- -------- ----- ---------- -------- -----
NON-INTEREST BEARING LIABILITIES
DDA and escrows accounts.......... 97,477 92,577
Other liabilities................. 14,265 22,666
---------- ----------
Total non-interest bearing
liabilities....................... 111,742 115,243
---------- ----------
Stockholders' equity............... 98,640 75,410
---------- ----------
Total liabilities and stockholders'
equity............................ $1,437,687 1,288,986
=========== ===========
Net interest income/net interest
spread............................ 3.65 % $57,118 4.07 % $57,929 4.67 %
===== ========== ===== ========== =====
MARGIN
Interest income/interest earnings
assets............................ 8.16 % 7.45 % 7.95 %
Interest expense/interest earnings
assets............................ 4.12 3.13 3.05
----- ----- -----
Net interest margin................ 4.04 % 4.32 % 4.90 %
===== ===== =====
<CAPTION>
- ---------------
(A) Includes non-accruing loans.
(B) Average balances were based on amortized cost.
(C) Includes securities purchased under agreements to resell, tax certificates and
interest-bearing deposits.
(D) Excludes the 1993 IRS settlement interest income of $587,000.
(E) Effective December 15, 1995, all mortgage-backed and investment securities, excluding tax certificates than classified as
held to maturity were reclassified to available for sale.
</TABLE>
39
<PAGE> 42
RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1994
1996 COMPARED TO THREE MONTHS COMPARED TO YEAR ENDED DECEMBER COMPARED TO YEAR ENDED DECEMBER
ENDED MARCH 31, 1995 31, 1994 31, 1993
-------------------------------- ------------------------------- ---------------------------------
VOLUME(A) RATE TOTAL VOLUME(A) RATE TOTAL VOLUME(A) RATE TOTAL(C)
--------- ------ ------- --------- ------ ------ --------- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE)
DUE TO:
Loans................ 4,755 (165) 4,590 22,322 1,093 23,415 8 2,083 2,091
Banker's
acceptances......... 0 0 0 (406) 0 (406) 99 (7) 92
Mortgage-backed
securities.......... (10,067) 0 (10,067) 3,961 3,344 7,305 7,735 (2,076) 5,659
Debt securities
available for
sale................ 9,370 (270) 9,100 1,996 (331) 1,665 (3,877) 7 (3,870)
Investment
securities.......... (3,125) 1,125 (2,000) (2,111) 1,551(B) (560) 4,731 (4,094)(B) 637
Federal funds sold... 20 (3) 17 99 10 109 11 13 24
--------- ------ ------- --------- ------ ------ --------- ------ --------
Total earnings
assets.............. 953 687 1,640 25,861 5,667 31,528 8,707 (4,074) 4,633
--------- ------ ------- --------- ------ ------ --------- ------ --------
Interest expense:
Deposits:
Savings............. (30) (74) (104) (251) 122 (129) (93) (154) (247)
NOW, money funds,
and checking...... 38 (654) (616) (990) 1,830 840 150 (812) (662)
Certificate
accounts.......... 1,658 1,108 2,766 8,984 5,305 14,289 278 479 757
--------- ------ ------- --------- ------ ------ --------- ------ --------
Total deposits....... 1,666 380 2,046 7,743 7,257 15,000 335 (487) (152)
--------- ------ ------- --------- ------ ------ --------- ------ --------
Securities sold under
agreements to
repurchase.......... (1,884) (1,122) (3,006) 4,698 1,308 6,006 3,262 465 3,727
Advances from FHLB... 480 (59) 421 1,527 946 2,473 2,827 (210) 2,617
Federal funds
purchased........... 11 (1) 10 0 0 0 0 0 0
Other borrowings..... 494 0 494 776 0 776 (748) 0 (748)
--------- ------ ------- --------- ------ ------ --------- ------ --------
(899) (1,182) (2,081) 7,001 2,254 9,255 5,341 255 5,596
--------- ------ ------- --------- ------ ------ --------- ------ --------
Total
interest-bearing
liabilities......... 767 (802) (35) 14,744 9,511 24,255 5,676 (232) 5,444
--------- ------ ------- --------- ------ ------ --------- ------ --------
Change in net
interest income..... 186 1,489 1,675 11,117 (3,844) 7,273 3,031 (3,842) (811)
=========== ======= ======== ============ ======= ======= ============ ======= =========
</TABLE>
- ---------------
(A) Changes attributable to rate/volume have been allocated to volume.
(B) Includes $1.4 million reversal of accrued interest on tax certificates.
(C) Excludes the 1993 IRS settlement interest income of $587,000.
PROVISION FOR LOAN LOSSES AND PROVISION FOR (REVERSAL OF) LOSSES ON REAL ESTATE
OWNED
The provision for loan losses for first quarter 1996 was $940,000 compared
to $176,000 during the comparable 1995 period. The 1996 increase reflects $1.2
million of consumer loan net charge-offs compared to $362,000 during the first
quarter of 1995 and $171,000 of commercial non-mortgage loan net recoveries in
1996 compared to $491,000 of net recoveries during the first quarter of 1995.
The increase in 1996 consumer loan charge-offs related to a $692,000 increase in
indirect automobile loan charge-offs. BankAtlantic re-entered the indirect
automobile lending market upon its acquisition of MegaBank. The increase in the
indirect automobile loans was due to loans acquired in connection with the
acquisition as well as subsequent production. A determination was made during
the first quarter of 1996 to temporarily decrease production of indirect
automobile loans pending the integration of newly hired automobile lending
personnel. Subject Portfolio charge-offs during the three months ended March 31,
1996 were $278,000 compared to $340,000 during the comparable 1995 period. There
were no recoveries relating to the Covenant and the Subject Portfolio during the
three months ended March 31, 1996 and 1995.
During the years ended December 31, 1995, 1994 and 1993, the provision for
loan losses was $4.2 million, $2.3 million and $3.5 million, respectively. The
provision in each of these years was substantially impacted by increasing
consumer loan balances. Consumer loan net charge-offs amounted to $3.3 million,
$1.5 million and $2.1 million in 1995, 1994 and 1993, respectively. Consumer
loan net charge-offs were significantly impacted by recoveries of zero, $1.2
million and $1.0 million associated with the Covenant and the Subject Portfolio
during 1995, 1994 and 1993, respectively. The remaining increase in 1995
consumer loan net charge-offs resulted from the acquisition and continuation of
MegaBank's indirect automobile loan operations and portfolio ($52.8 million at
acquisition). In addition, the 1995 provision reflects $738,000 of commercial
40
<PAGE> 43
business loan recoveries compared to $565,000 and $262,000 in 1994 and 1993,
respectively. Included in commercial real estate and business loan charge-offs
during 1994 was a $1.4 million business loan. Specific allowances were
established for this loan during prior years. The allowance for loan losses
increased by $2.8 million during 1995. Of the increase in the allowance for loan
losses, $1.9 million was the amount of the MegaBank allowance for loan losses at
the date of acquisition by BankAtlantic. The remaining increase in the allowance
for loan losses resulted from a $200,000 specific allowance established for an
office building loan and a $600,000 increase in loan loss allowances based on
current delinquency trends, charge-off trends and portfolio levels.
BankAtlantic's "risk elements" consist of restructured loans and
"non-performing" assets. The classification of loans as "non-performing" is
generally based upon non-compliance with loan performance and collateral
coverage standards, as well as management's assessment of problems related to
the borrower's or guarantor's financial condition. BankAtlantic generally
designates any loan that is 90 days or more delinquent as non-performing.
BankAtlantic may also designate loans as non-performing prior to the loan
becoming 90 days delinquent if the borrower's ability to repay is questionable.
A "non-performing" classification alone does not indicate an inherent principal
loss; however, it generally indicates that management does not expect the asset
to earn a contractual rate in the current period. Restructured loans are loans
for which BankAtlantic has modified the loan terms due to the financial
difficulties of the borrower.
At March 31, 1996, December 31, 1995, 1994 and 1993, restructured loans
were $3.5 million, $2.5 million, $1.6 million and $2.6 million, respectively.
Non-performing assets, net of write downs and allowances, were $19.2 million at
March 31, 1996 compared to $21.5 million, $23.2 million and $20.0 million during
December 31, 1995, 1994 and 1993, respectively. At the February 1995 acquisition
date total non-performing assets relating to the MegaBank portfolio were
approximately $900,000.
Risk elements, net of write downs and dispositions, decreased by $1.3
million at March 31, 1996 to $22.7 million and decreased by $836,000 at December
31, 1995 to $24.0 million and increased by $2.2 million to $24.9 million at
December 31, 1994. The decrease in total risk elements at March 31, 1996
primarily relates to decreases in non-accruals and loans contractually past due
90 days or more. The above 1996 decreases were partially offset by increases in
repossessed assets and restructured loans. The $2.2 million decrease in 1996
nonaccrual loans relates to a $1.2 million commercial real estate loan
restructured during the first quarter of 1996, and the foreclosure of a $700,000
commercial real estate loan. These two loans also account for the 1996 increase
in real estate owned and restructured loans. Also during 1996, residential and
tax certificate nonaccrual balances and loans contractually past due 90 days or
more declined by $328,000, $335,000, and $241,000, respectively. The reduction
in total risk elements during 1995 primarily relates to lower levels of
non-performing assets partially offset by a higher level of restructured loans
and loans contractually past due 90 days or more and still accruing. The lower
1995 real estate owned balances resulted from the sales of $3.3 million of real
estate owned offset by a $1.2 million net reversal of allowance for losses on
real estate owned, and transfers of $1.0 million of loans to real estate owned.
Non-accrual tax certificates declined due to lower balances relating to reduced
investment in tax certificates in 1995 and 1994, repayments and charge-offs. The
lower 1995 non-accrual commercial real estate and business loan balances and the
higher amounts in restructured loans reflect the restructuring of a $3.0 million
commercial real estate loan. BankAtlantic received a $600,000 payment when the
loan was restructured. For financial statement purposes such payment was
initially recorded as a reduction in the basis of the loan. The $800,000
increase in loans contractually past due 90 days or more and still accruing
relates to two commercial real estate loans. The 1995 decrease in non-accrual
loans was partially offset by a $510,000 increase in residential real estate
non-accrual loans and a transfer of a $2.4 million commercial real estate loan
to a non-accruing status. The 1994 risk element net increase primarily related
to a $3.2 million increase in non-performing assets, partially offset by a $1.0
million decrease in restructured loans. The increase in non-performing assets
resulted from non-accrual assets increasing $7.6 million, offset by a $1.8
million decline in loans past due 90 days and still accruing, and a $2.6 million
decline in repossessed assets. The $7.6 million increase in non-accrual assets
was due to the $3.6 million increase in tax certificates and a $5.5 million
increase in non-accrual commercial real estate and business loans, partially
offset by lower residential real estate and consumer non-accruing loan balances.
The inclusion of tax certificates was caused by a change in methodology for
classifying tax certificates and for
41
<PAGE> 44
calculating the allowance for tax certificate losses. This change in methodology
was based upon discussions with certain regulatory agencies. The increase in
commercial real estate and business non-accrual loans was primarily due to three
commercial real estate loans. Loans contractually past due 90 days or more
declined $1.8 million. The change in restructured loans resulted from: (i) two
commercial real estate loans totaling $1.2 million performed based on the
restructured terms for one year and were transferred to an accruing status, (ii)
a $1.1 million commercial real estate loan became delinquent and was
reclassified as a non-accrual loan, and (iii) a $1.6 million commercial land
loan, classified as a non-performing loan at December 31, 1993 was restructured
during the year ended December 31, 1994.
At March 31, 1996 and December 31, 1995 gross real estate loans amounted to
$707.9 million and $652.3 million, respectively, of which $198.4 million and
$179.7 million, respectively, were residential real estate loans which
management believes carry minimal credit risk. The remaining real estate loans
consisted of $375.8 million and $350.2 million of commercial real estate loans
and $133.8 million and $122.4 million of construction and development loans at
March 31, 1996 and December 31, 1995, respectively. Gross other loans amounted
to $276.6 million and $286.4 million at March 31, 1996 and December 31, 1995,
respectively, and included commercial business loans and consumer (including
second mortgage) loans of $63.6 million and $64.2 million and $212.9 million and
$222.2 million at March 31, 1996 and December 31, 1995, respectively. Commercial
real estate, commercial business and consumer loans generally involve greater
risks of collectibility than residential loans; however, management does not
believe that such risks have been greater than normal industry experience for
these types of loans except for the Subject Portfolio discussed under "Financial
Condition."
During the year ended December 31, 1995, management reversed $1.2 million
from the allowance for real estate owned ($1.0 million during the three months
ended March 31, 1995). This decision primarily related to the sale of several
parcels of vacant land. Real estate owned charged-off during the year ended
December 31, 1995 was $213,000 and related to vacant land acquired in connection
with the MegaBank acquisition. There were no real estate owned charge-offs
during the three months ended March 31, 1996 and 1995. During the years ended
December 31, 1994, and 1993, BankAtlantic's provisions for losses on real estate
owned were $140,000 and $2.7 million, respectively. For the years ended December
31, 1994, and 1993 charge-offs were $40,000, and $775,000, respectively. The
allowance for real estate owned is established by management based on its
evaluation of foreclosed properties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
42
<PAGE> 45
<TABLE>
<CAPTION>
RISK ELEMENTS
-------------------------------------------------------------------------------------
DECEMBER 31,
MARCH 31, ----------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONTRACTUALLY PAST DUE 90 DAYS OR MORE
Commercial real estate and
business(1)......................... $ 1,295 $ 1,536 $ 736 $ 2,580 $ 1,108 $ 689
NON-ACCRUAL
Residential........................... 1,900 2,228 1,718 2,468 3,642 3,514
Commercial real estate and business... 6,551 8,361 9,325 3,802 5,317 5,660
Consumer.............................. 522 585 270 976 1,477 4,095
Tax certificates(2)................... 1,709 2,044 3,578 0 0 476
---------- ---------- ---------- ---------- ---------- ----------
10,682 13,218 14,891 7,246 10,436 13,745
REPOSSESSED
Residential real estate owned......... 199 231 303 319 756 1,660
Commercial real estate owned.......... 6,538 6,048 6,935 9,332 14,241 19,635
Consumer.............................. 528 461 350 512 461 902
---------- ---------- ---------- ---------- ---------- ----------
7,265 6,740 7,588 10,163 15,458 22,197
---------- ---------- ---------- ---------- ---------- ----------
TOTAL NON-PERFORMING ASSETS........... 19,242 21,494 23,215 19,989 27,002 36,631
---------- ---------- ---------- ---------- ---------- ----------
RESTRUCTURED LOANS
Commercial real estate and business... 3,456 2,533 1,648 2,647 2,661 7,580
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RISK ELEMENTS................... $ 22,698 $ 24,027 $ 24,863 $ 22,636 $ 29,663 $ 44,211
========= ========= ========= ========= ========= =========
Total risk elements as a percentage
of:
Total assets........................ 1.38 % 1.37% 1.61% 1.67% 2.28% 3.04%
========= ========= ========= ========= ========= =========
Loans, tax certificates and net real
estate owned...................... 2.44 % 2.65% 3.92% 3.78% 4.18% 5.08%
========= ========= ========= ========= ========= =========
TOTAL ASSETS.......................... $1,642,825 $1,750,689 $1,539,653 $1,359,195 $1,303,071 $1,455,822
========= ========= ========= ========= ========= =========
TOTAL LOANS, TAX CERTIFICATES AND NET
REAL ESTATE OWNED................... $ 931,237 $ 905,413 $ 634,001 $ 599,504 $ 709,482 $ 870,806
========= ========= ========= ========= ========= =========
Allowance for loan losses............. $ 18,700 $ 19,000 $ 16,250 $ 17,000 $ 16,500 $ 13,750
========= ========= ========= ========= ========= =========
Total tax certificates................ $ 42,452 $ 51,504 $ 64,117 $ 86,897 $ 121,323 $ 107,246
========= ========= ========= ========= ========= =========
Allowance for tax certificate
losses.............................. $ 1,915 $ 1,648 $ 2,985 $ 2,970 $ 1,558 $ 795
========= ========= ========= ========= ========= =========
</TABLE>
- ---------------
(1) The majority of these loans have matured and the borrower continues to make
payments under the matured loan agreement. BankAtlantic is in the process
of renewing or extending these matured loans.
(2) Classification results from a change in methodology for classifying tax
certificates and calculating related allowance from the methodology used in
1993 and prior years.
The above schedule reflects, at March 31, 1996, all loans where known
information about the possible credit problems of the borrower caused management
to have serious doubts as to the ability of the borrower to comply with present
loan repayment terms and which may result in disclosure of such loans in the
future.
Interest income which would have been recorded under the original terms of
nonaccrual and restructured loans and the interest income actually recognized
for the years indicated are summarized below (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEARS
MARCH 31, ENDED DECEMBER 31,
------------- ----------------------------
1996 1995 1995 1994 1993
---- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Interest income which would have been recorded... $321 $318 $1,393 $1,170 $1,068
Interest income recognized....................... (94) (37) (519) (443) (486)
---- ---- ------ ------ ------
Interest income foregone......................... $227 $281 $ 874 $ 727 $ 582
==== ==== ====== ====== ======
</TABLE>
43
<PAGE> 46
Changes in the allowance for loan losses were (dollars in thousands):
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
------------------- -------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning of period(1)......... $19,000 $16,250 $16,250 $17,000 $16,500 $13,750 $15,741
Charge-offs:
Commercial business loans............. (3) 0 (382) (1,647) (835) (776) (1,694)
Commercial real estate loans.......... (238) (222) (222) (220) 0 (1,028) (126)
Consumer loans........................ (1,610) (684) (4,566) (3,829) (4,322) (10,430) (18,903)
Residential real estate loans......... (3) (75) (263) (272) (302) (445) (133)
------- ------- ------- ------- ------- ------- -------
(1,854) (981) (5,433) (5,968) (5,459) (12,679) (20,856)
------- ------- ------- ------- ------- ------- -------
Recoveries:
Commercial business loans............. 174 491 738 565 262 175 191
Commercial real estate loans.......... 38 0 102 18 6 20 99
Consumer loans........................ 402 322 1,219 2,336 2,231 8,584 1,035
Residential real estate loans......... 0 0 0 0 10 0 0
------- ------- ------- ------- ------- ------- -------
614 813 2,059 2,919 2,509 8,779 1,325
------- ------- ------- ------- ------- ------- -------
Net charge-offs......................... (1,240) (168) (3,374) (3,049) (2,950) (3,900) (19,531)
Additions charged to operations......... 940 176 4,182 2,299 3,450 6,650 17,540
Allowance for loan losses acquired...... 0 1,942 1,942 0 0 0 0
------- ------- ------- ------- ------- ------- -------
Balance, end of period.................. $18,700 $18,200 $19,000 $16,250 $17,000 $16,500 $13,750
======= ======= ======= ======= ======= ======= =======
Allowance as a percentage of(1):
Total loans........................... 2.12% 2.54% 2.24% 2.89% 3.38% 2.88% 1.85%
Total loans including banker's
acceptances......................... 2.12% 2.54% 2.24% 2.89% 2.77% 2.88% 1.85%
======= ======= ======= ======= ======= ======= =======
Non-performing assets(1).............. 97.18% 79.62% 97.69% 82.75% 85.05% 61.11% 37.54%
======= ======= ======= ======= ======= ======= =======
Ratio of net charge-offs to average
outstanding loans..................... 0.58% 0.10% 0.45% 0.59% 0.56% 0.60% 2.23%
------- ------- ------- ------- ------- ------- -------
Ratio of net charge-offs to average
outstanding loans plus banker's
acceptances........................... 0.58% 0.10% 0.45% 0.57% 0.55% 0.60% 2.23%
======= ======= ======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Excluding tax certificates. The allowance for tax certificates as a
percentage of total tax certificates was 4.51% and 3.20%, 5.64%, 4.66%,
3.47%, 1.28%, and 0.74%, at March 31, 1996 and 1995 and each of the years
in the five-year period ended December 31, 1995, and as a percentage of
non-performing tax certificates was 112.05%, 98.84%, 80.63%, 83.43% and
167.02% at March 31, 1996 and 1995, and December 31, 1995, 1994 and 1991,
respectively.
The table below presents an allocation of the allowance for loan losses
among various loan classifications and sets forth the percentage of loans in
each category to total loans. The allowance shown in the table should not be
interpreted as an indication that charge-offs in future periods will occur in
these amounts or proportions or that the allowance indicates future charge off
trends.
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
------------------------ ------------------------ ------------------------ ------------------------
ALLOCATION PERCENT OF ALLOCATION PERCENT OF ALLOCATION PERCENT OF ALLOCATION PERCENT OF
OF GROSS LOANS OF GROSS LOANS OF GROSS LOANS OF GROSS LOANS
ALLOWANCE IN EACH ALLOWANCE IN EACH ALLOWANCE IN EACH ALLOWANCE IN EACH
FOR LOAN CATEGORY TO FOR LOAN CATEGORY TO FOR LOAN CATEGORY TO FOR LOAN CATEGORY TO
LOSS BY TOTAL GROSS LOSS BY TOTAL GROSS LOSS BY TOTAL GROSS LOSS BY TOTAL GROSS
CATEGORY LOANS CATEGORY LOANS CATEGORY LOANS CATEGORY LOANS
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial
business.......... $ 2,528 6.46% $ 2,288 6.84% $ 1,109 4.00% $ 1,924 5.48%
Real estate........ 6,367 71.91 6,657 69.49 8,102 75.82 6,038 67.29
Consumer(2)........ 5,427 21.63 5,346 23.67 2,527 20.18 4,687 27.23
Unallocated........ 4,378 N/A 4,709 N/A 4,512 N/A 4,351 N/A
---------- ----- ---------- ----- ---------- ----- ---------- -----
$ 18,700 100.00% $ 19,000 100.00% $ 16,250 100.00% $ 17,000 100.00%
========== =========== ========== =========== ========== =========== ========== ===========
<CAPTION>
DECEMBER 31, 1992
------------------------
ALLOCATION PERCENT OF
OF GROSS LOANS
ALLOWANCE IN EACH
FOR LOAN CATEGORY TO
LOSS BY TOTAL GROSS
CATEGORY LOANS
---------- -----------
<S> <C> <C>
Commercial
business.......... $ 2,676 5.69%
Real estate........ 5,261 57.61
Consumer(2)........ 5,613 36.70
Unallocated........ 2,950 N/A
---------- -----
$ 16,500 100.00%
========== ===========
</TABLE>
- ---------------
(1) Excludes banker's acceptances.
(2) Includes second mortgage loans.
44
<PAGE> 47
Prior to 1992, BankAtlantic did not allocate the allowance for loan loss by
category.
NON-INTEREST INCOME
A financial summary of non-interest income follows:
<TABLE>
<CAPTION>
FOR THE THREE 1995 1994 1993
MONTHS ENDED TO FOR THE YEARS TO TO
MARCH 31, 1996 ENDED DECEMBER 31, 1995 1994
--------------- ------ --------------------------- ------ ------
1996 1995 CHANGE 1995 1994 1993 CHANGE CHANGE
------ ------ ------ ------- ------- ------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loan servicing and other loan fees............... $ 838 $ 975 $(137 ) $ 3,524 $ 3,365 $ 2,229 $ 159 $1,136
Gains on sales of loans originated for resale.... 164 65 99 395 773 1,246 (378 ) (473 )
Unrealized and realized gain (losses) on trading
account securities............................. 0 310 (310 ) 589 (558) 0 1,147 (558 )
Gains on sales of mortgage servicing rights...... 0 0 0 2,744 484 0 2,260 484
Gains on sales of debt securities available for
sale 2,292 0 2,292 0 0 0 0 0
Other............................................ 3,540 2,631 909 12,136 9,699 8,163 2,437 1,536
------ ------ ------ ------- ------- ------- ------ ------
Total non-interest income.................... $6,834 $3,981 $2,853 $19,388 $13,763 $11,638 $5,625 $2,125
====== ====== ======= ======= ======= ======= ======= =======
</TABLE>
The decrease in loan servicing and other loan fees during the three month
period in 1996 compared to the same period in 1995 resulted from higher
amortization of mortgage servicing rights due to increased residential loan
prepayments.
Loan servicing and other loan fees increased during the three years ended
December 31, 1995. The increase for the year ended December 31, 1995 compared to
the same period during 1994 resulted from higher loan prepayment penalties and
increased commercial loan commitment fee income. The higher 1994 income compared
to 1993 resulted from an increase in loan servicing income. Income from loan
servicing increased due to rising long term interest rates during the period
causing lower amortization of mortgage servicing rights.
During the third quarter of 1993, BankAtlantic established an investment
policy to increase fee income by selling uncovered European put options on
five-year treasury notes with notional principal not to exceed $10.0 million.
During the three months ended March 31, 1994, BankAtlantic sold two $5.0 million
U.S. Treasury European put options with expiration dates of April 27, 1994 and
May 31, 1994, respectively. BankAtlantic acquired the two five-year treasury
notes on the respective option expiration dates for $9.7 million and recorded
the notes in the trading category. On May 11, 1995, in order to lock-in the
market values on the above treasury notes, BankAtlantic purchased two 90 day
U.S. Treasury European put options with the proceeds from the sale of two 90 day
U.S. Treasury European call options. The put options and call options had $5.0
million notional principal each and expired on August 7, 1995. The realized and
unrealized gain/loss is included in the Consolidated Statement of Operations
under "trading account securities" and amounted to an unrealized gain of
$310,000 for the three months ended March 31, 1995 and an unrealized loss of
$558,000 for the year ended December 31, 1994, with the 1994 option proceeds
reducing the call on the treasury notes. A net realized gain of $589,000 was
recognized, inclusive of the 1995 options, for the year ended December 31, 1995
on the sale of the trading account securities upon exercise of the call option.
During the year ended December 31, 1995 and 1994, BankAtlantic sold
mortgage servicing rights with a book value of $5.6 million and $2.4 million,
respectively, for gains as reported in the above table. These rights related to
approximately $492.1 million and $233.0 million of loans serviced for others
during 1995 and 1994, respectively. At March 31, 1996, December 31, 1995, 1994
and 1993, BankAtlantic serviced loans for the benefit of others amounting to
approximately $2.3 billion, $1.8 billion, $1.9 billion and $1.9 billion,
respectively. On February 1, 1996 BankAtlantic began sub-servicing $540 million
of loans for BNA.
The increase in other non-interest income during the first quarter of 1996
compared to the same 1995 period was due to higher fees earned on checking
accounts, ATM services, lease income, and a $125,000 litigation settlement.
Checking account income and ATM fees were $1.9 million and $668,000 for the
first quarter 1996, respectively, compared to $1.6 million and $439,000 during
the comparable 1995 period, respectively. Lease income increased from $96,000
during 1995 to $364,000 during the first quarter 1996. The additional lease
income resulted from a rent settlement related to a leased property located in
Broward
45
<PAGE> 48
County. Non-interest income-other increased during the three years ended
December 31, 1995. The higher income during the three year period primarily
related to transaction account and ATM fee income. Transaction account and ATM
fee income increased by $2.6 million during 1995 and $800,000 during 1994.
Transaction account fee income was $7.0 million during 1995 compared to $5.4
million in 1994 and $4.9 million during 1993. The higher fee income during 1995
resulted from an increase in transaction account balances primarily from the
MegaBank acquisition and an increase in the fees charged during the latter part
of
1994 and 1995. ATM fee income was $2.0 million during 1995 compared to $958,000
and $639,000 during 1994 and 1993, respectively. During 1994, BankAtlantic
installed 151 ATMs in Florida Wal-Mart and Sam's Club locations. In addition,
1994 other non-interest income was also favorably impacted by a $291,000 gain on
the sale of an office building and a $332,000 dormant account settlement with
the State of Florida. The settlement related to a review by the Florida
Comptroller's Office (the "Comptroller") of BankAtlantic's procedures for the
assessment of fees on dormant accounts. On June 30, 1994, all issues with the
Comptroller were resolved, and in connection with such resolution, BankAtlantic
remitted $250,000 to the Comptroller and reversed the remaining allowance and
previously deferred fees, an aggregate of $332,000, to other non-interest
income.
NON-INTEREST EXPENSE
A financial summary of non-interest expense follows:
<TABLE>
<CAPTION>
FOR THE THREE 1995 1994 1993
MONTHS ENDED TO FOR THE YEARS TO TO
MARCH 31, 1996 ENDED DECEMBER 31, 1995 1994
----------------- ------ --------------------------- ------ -------
1996 1995 CHANGE 1995 1994 1993 CHANGE CHANGE
------- ------- ------ ------- ------- ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Employee compensation and benefits............. $ 7,368 $ 6,544 $ 824 $25,403 $22,382 $19,617 $3,021 $ 2,765
Occupancy and equipment........................ 2,785 2,594 191 10,831 8,061 8,417 2,770 (356)
Federal insurance premium...................... 591 687 (96 ) 2,750 2,673 2,750 77 (77)
Advertising and promotion...................... 507 612 (105 ) 2,144 1,495 960 649 535
Foreclosed asset activity, net................. (162) (1,163) 1,001 (3,178) (2,290) 1,243 (888 ) (3,533)
Amortization of cost over fair value of net
assets acquired.............................. 306 204 102 1,122 0 0 1,122 0
Other.......................................... 3,120 2,397 723 12,088 9,764 10,546 2,324 (782)
------- ------- ------ ------- ------- ------- ------ -------
Total non-interest expenses................ $14,515 $11,875 $2,640 $51,160 $42,085 $43,533 $9,075 $(1,448)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
The increase in employee compensation and benefits for first quarter 1996
resulted from the number of employees increasing from 624 at December 31, 1994
to 746 at December 31, 1995 to 784 at March 31, 1996, as well as annual salary
increases during 1995. The increase in the number of employees primarily relates
to the acquisition of MegaBank effective February 1, 1995 and the opening of six
branches during 1995. BankAtlantic opened three additional Wal-Mart Super Store
branches during the second quarter of 1996 and the personnel for those branches
were on staff at March 31, 1996. Occupancy and equipment expenses increased due
to the new branches mentioned above and the branches acquired with the MegaBank
acquisition. Depreciation expense increased during the comparative three month
periods by $72,000. The additional depreciation expense resulted from the
acquisition of MegaBank and the purchase of $5.5 million and $2.6 million of
fixed assets during the year ended December 31, 1995 and the three months ended
March 31, 1996, respectively. The increase in employee compensation and benefits
for the year ended December 31, 1995 resulted from the increased number of
full-time equivalent employees as well as annual salary increases during 1995.
Approximately 70 of the new employees were associated with the acquisition of
MegaBank and the remaining new employees primarily related to the six new
branches opened during 1995. The increase in employee compensation and benefits
for the year ended December 31, 1994 resulted from increased pension expense,
annual salary increases, higher 1994 incentive bonuses and executive deferred
compensation.
Occupancy and equipment expenses increased during the year ended December
31, 1995 compared to the 1994 period due to the acquisition of MegaBank and the
opening of three additional Florida west coast branches and three branches in
South Florida. Furthermore, in December 1994 BankAtlantic converted to a
46
<PAGE> 49
service bureau for the servicing of its residential loans resulting in servicing
expenses of $350,000 during the year ended December 31, 1995 compared to $93,000
during 1994. The service bureau conversion expanded BankAtlantic's capacity to
service loans and is also intended to improve BankAtlantic's customer service.
The decline in occupancy and equipment expense during 1994 when compared to 1993
resulted primarily from reduced depreciation expense partially offset by higher
ATM rental expenses for leased ATMs in Florida Wal-Mart and Sam's Club locations
during the same period.
The increase in advertising and promotion for the year ended December 31,
1995 resulted from increased promotion of lending activities, branch openings
and acquisition related advertising. The increase in advertising expense during
the year ended December 31, 1994 was primarily due to increased media expenses
incurred to promote new transaction account packages and lending activities.
The components of "Foreclosed asset activity, net" are (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEARS
MARCH 31, ENDED DECEMBER 31,
----------------- -------------------------------
1996 1995 1995 1994 1993
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Real estate acquired in settlement of
loans:
Operating expenses (income), net........... $ (13) $ (27) $ 41 $ (325) $ (221)
Provision for (reversal of) losses on 0 (1,000) (1,187) 140 2,675
REO......................................
Net (gains) on sales(A).................... (149) (136) (2,032) (2,105) (1,211)
----- ------- ------- ------- -------
Net (income) expense....................... $(162) $(1,163) $(3,178) $(2,290) $ 1,243
===== ======= ======= ======= =======
</TABLE>
- ---------------
(A) Including a $1.3 million gain related to a property originally acquired
through a tax deed during the year ended December 31, 1995.
The lower earnings in foreclosed asset activity, net during the three
months ended March 31, 1996 was primarily due to a $1.0 million reversal of the
allowance for losses on real estate owned during the three months ended March
31, 1995. This reversal reflected the sales of several parcels of vacant land.
The improvement in foreclosed asset activity, net during the 1995 period
compared to the same period in 1994 was primarily due to the reversal discussed
above. The improvement in foreclosed asset activity, net during the year ended
December 31, 1994 was primarily due to sales of real estate owned which resulted
in lower related operating expenses, a lower provision for losses on real estate
owned and an increase in gains on sales of foreclosed properties. For a further
discussion, see "Provision for Loan Losses and Provision for (Reversal of)
Losses on Real Estate Owned."
The amortization of cost over fair value of net assets acquired relates to
the MegaBank acquisition.
The increase in other non-interest expense during the 1996 quarter compared
to the 1995 quarter was caused by $220,000 of higher legal expenses, $217,000
increase in the provision for tax certificates, $126,000 of higher check losses,
and $122,000 of additional stationery, printing, supplies and telephone expense.
The higher legal expenses related to indirect consumer lending. The provision
for tax certificates was $125,000 during the first quarter of 1996 compared to a
$92,000 recovery during 1995. The additional stationery, printing, supplies and
telephone expenses resulted from the additional six branches opened during 1995
and the MegaBank acquisition. Other non-interest expense increased during the
year ended December 31, 1995 and decreased during the 1994 period. The
additional 1995 non-interest expenses related to $538,000 of increased
stationery, printing, supplies and telephone expenses, $660,000 of higher legal
costs, a $283,000 increase in ATM expenses, a $260,000 decline in the provision
for tax certificates and a write-off of $400,000 associated with a Senior Note
offering withdrawn in March 1995. The increased stationery, printing, supplies
and telephone expense were associated with the acquisition of five MegaBank
branches and the opening of three South Florida branches and three Florida west
coast branches. The higher legal expenses during 1995
47
<PAGE> 50
related to $1.1 million of Subject Portfolio legal costs. During 1994 and 1993,
legal costs were reimbursed pursuant to the terms of the Covenant, while only
$120,000 were reimbursed during 1995. The ATM expense increase resulted from the
addition of approximately 151 ATMs in Wal-Mart and Sam's Club Florida locations
during 1994. Other non-interest expense decreased during the year ended December
31, 1994 due to a reduction of $1.5 million in the provision for tax
certificates, partially offset by increased legal fees, ATM related expenses and
operating expenses. The decline in the provision for tax certificates related to
the change in methodology for classification of tax certificates and
determination of the related allowance previously discussed under "Provision for
Loan Losses and Provision for (Reversal of) Losses on Real Estate Owned". ATM
related expenses during 1994 increased due to the ATM installations discussed
above. Legal fees were $200,000 higher in 1994 primarily due to legal fee
recoveries reflected in 1993 for various corporate loans.
MORTGAGE-BACKED SECURITIES, INVESTMENT SECURITIES AND LOANS
In 1994, Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities ("FAS 115") was
implemented and upon implementation, BankAtlantic transferred all of its fixed
rate mortgage-backed securities having original terms of 15 and 30 years to
maturity which were classified as held for sale during prior periods to
available for sale at December 31, 1994. The effect of implementing FAS 115 at
December 31, 1994 was to increase the amount stated for mortgage-backed
securities available for sale by $314,000, record related deferred income taxes
of $121,000, and reflect the net of these amounts, $193,000, as a separate
component of stockholders' equity. During the year ended December 31, 1995
BankAtlantic acquired $10.0 million and $8.1 million of government obligations
and collateralized mortgage obligations in connection with the MegaBank
acquisition and designated these securities as available for sale. Based upon
the guidance provided in a Special Report issued by the Financial Accounting
Standards Board ("FASB"), BankAtlantic reassessed its security classifications,
considering, among other issues, flexibility in management of the portfolio for
liquidity and interest rate risk management as well as the potential SAIF
special assessment discussed under "Liquidity and Capital Resources". As a
result of this reassessment, effective December 15, 1995, BankAtlantic
transferred all of its mortgage-backed securities and investment securities,
excluding tax certificates, classified as held-to-maturity to available for
sale. The securities transferred had a carrying value of $638.8 million and an
estimated fair value of $644.1 million resulting in a net increase to
stockholders' equity for the net unrealized appreciation of $3.3 million after
deduction of applicable income taxes of $1.2 million. During the three months
ended March 31, 1996 BankAtlantic sold $52.6 million of adjustable rate
mortgage-backed securities and $20.5 million of 15 year mortgage-backed
securities for a $2.3 million gain. During the three months ended March 31, 1996
and 1995, BankAtlantic sold $15.2 million and $4.6 million, respectively, of
recently originated residential loans for gains of $164,000 and $65,000,
respectively. During the years ended December 31, 1995, 1994 and 1993,
BankAtlantic sold $34.2 million, $38.2 million and $45.0 million, respectively
of recently originated fixed rate and adjustable rate residential loans for
gains of $395,000, $773,000 and $1.2 million, respectively. BankAtlantic
currently sells substantially all fixed rate residential real estate loans it
originates and retains a portion of adjustable rate mortgages originated. During
the year ended December 31, 1995 two $5.0 million treasury notes classified as
trading account securities were sold for a $589,000 net realized gain. At
December 31, 1994, the market value of trading account securities was less than
BankAtlantic's original cost. The unrealized loss on trading account securities
of $558,000 is reflected in the consolidated statement of operations for the
year ended December 31, 1994. An unrealized gain on trading account securities
of $310,000 was recognized as of March 31, 1995.
48
<PAGE> 51
A summary of the cost and gross unrealized appreciation or depreciation of
estimated fair value compared to cost of investment securities held to maturity,
investment securities held for trading, mortgage-backed securities held to
maturity, and debt securities available for sale, follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST APPRECIATION DEPRECIATION VALUE
--------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Tax certificates held to maturity:
Cost equals market................... $ 40,537 $ 0 $ 0 $ 40,537
Investment securities available for
sale(1):
Cost equals market................... 1,912 0 0 1,912
Market over cost..................... 31,667 599 0 32,266
Cost over market..................... 48,199 0 430 47,769
Mortgage-backed securities available
for sale(1):
Cost equals market................... 4,630 0 0 4,630
Market over cost..................... 257,074 4,818 0 261,892
Cost over market..................... 213,015 0 1,709 211,306
--------- ------------ ------------ ---------
Total........................ $597,034 $5,417 $2,139 $600,312
========= =========== =========== =========
</TABLE>
- ---------------
(1) Amortized cost excludes net unrealized appreciation of $3.1 million and
$169,000 on mortgage-backed and investment securities available for sale,
respectively.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST APPRECIATION DEPRECIATION VALUE
--------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Tax certificates held to maturity:
Cost equals market......................... $ 49,856 $ 0 $ 0 $ 49,856
Investment securities available for sale(1):
Cost equals market......................... 1,956 0 0 1,956
Market over cost........................... 43,482 827 0 44,309
Cost over market........................... 48,075 0 288 47,787
Mortgage-backed securities available for
sale(1):
Market over cost........................... 449,509 9,822 0 459,331
Cost over market........................... 139,447 0 1,027 138,420
--------- ------------ ------------ ---------
Total.............................. $732,325 $ 10,649 $1,315 $741,659
========= =========== =========== =========
</TABLE>
- ---------------
(1) Amortized cost excludes net unrealized appreciation of $8.8 million and
$539,000 on mortgage-backed and investment securities available for sale,
respectively.
49
<PAGE> 52
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST APPRECIATION DEPRECIATION VALUE
--------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Investment securities held to maturity and
trading account securities:
Cost equals market......................... $ 70,316 $ 0 $ 0 $ 70,316
Cost over market(1)........................ 141,460 0 5,006 136,454
Mortgage-backed securities held to maturity:
Market over cost........................... 5,407 22 0 5,429
Cost over market........................... 568,506 0 23,801 544,705
Mortgage-backed securities available for
sale:(2)
Market over cost........................... 46,073 487 0 46,560
Cost over market........................... 7,582 0 173 7,409
--------- ------ ------------ ---------
Total.............................. $839,344 $509 $ 28,980 $810,873
========= =========== =========== =========
</TABLE>
- ---------------
(1) Amortized cost reflects $558 of gross unrealized depreciation for investment
securities classified as trading account securities.
(2) Amortized cost excludes net unrealized appreciation of $314 on debt
securities available for sale.
<TABLE>
<CAPTION>
DECEMBER 31, 1993
--------------------------------------------------
GROSS GROSS ESTIMATED
BOOK UNREALIZED UNREALIZED FAIR
VALUE APPRECIATION DEPRECIATION VALUE
-------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Investment securities held to maturity:
Cost equals market.......................... $ 83,927 $ 0 $ 0 $ 83,927
Cost over market............................ 13,774 0 113 13,661
Mortgage-backed securities held to maturity:
Market over cost............................ 406,337 10,164 0 416,501
Cost over market............................ 36,912 0 67 36,845
Mortgage-backed securities available for sale:
Market over cost............................ 83,116 4,456 0 87,572
-------- ------------ ------ ---------
Total............................... $624,066 $ 14,620 $180 $638,506
======== =========== =========== =========
</TABLE>
50
<PAGE> 53
At March 31, 1996 and December 31, 1995 all mortgage-backed and investment
securities, excluding tax certificates, were available for sale, whereas during
1994 and 1993 only certain mortgage-backed securities with a fair value and
amortized cost of $54.0 million and $53.7 million, respectively, at December 31,
1994 and $87.6 million and $83.1 million, respectively, at December 31, 1993
were classified as available for sale. During the three months ended March 31,
1996 BankAtlantic sold $73.1 million of mortgage-backed securities for a $2.3
million gain. During the three years ended December 31, 1995 there were no sales
of any mortgage-backed or investment securities except $852,000 of securities
categorized as available for sale upon their inclusion in BankAtlantic's
portfolio in connection with the MegaBank acquisition. The composition, yields
and maturities of debt securities (other than trading account securities) were
as follows (in thousands):
<TABLE>
<CAPTION>
U.S.
TREASURY,
AGENCIES MORTGAGE ASSET WEIGHTED
AND TAX BACKED BACKED AVERAGE
CORPORATIONS CERTIFICATES SECURITIES SECURITIES TOTAL YIELD
------------ ------------ ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
MARCH 31, 1996:
MATURITY:(1)
One year or less................. $ 6,276 $ 30,920 $ 23,425 $ 0 $ 60,621 7.50 %
After one through five years..... 17,105 9,617 332,341 57,152 416,215 6.12
After five through ten years..... 983 0 12,054 0 13,037 8.11
After ten years.................. 431 0 110,008 0 110,439 8.08
------------ ------------ ----------- ---------- ---------- ---------
Fair value......................... $ 24,795 $ 40,537 $ 477,828 $ 57,152 $ 600,312 6.62 %
------------ ------------ ----------- ---------- ---------- ---------
Amortized cost..................... $ 24,558 $ 40,537 $ 474,719 $ 57,220 $ 597,034 6.65 %
============ =========== =========== ========= ========== =========
Weighted average yield based on
fair value....................... 5.40% 7.91% 6.76% 4.82 % 6.65%
Weighted average maturity.......... 2.6 years 2.0 years 8.08 years 3.2 years 6.97 years
------------ ------------ ----------- ---------- ----------
DECEMBER 31, 1995:
MATURITY:(1)
One year or less................. $ 6,336 $ 38,158 $ 5,800 $ 0 $ 50,294 7.52 %
After one through five years..... 17,305 11,698 367,540 68,939 465,482 6.56
After five through ten years..... 1,007 0 36,207 0 37,214 6.85
After ten years.................. 465 0 188,204 0 188,669 6.87
------------ ------------ ----------- ---------- ---------- ---------
Fair value......................... $ 25,113 $ 49,856 $ 597,751 $ 68,939 $ 741,659 6.72 %
============ =========== =========== ========= ========== =========
Amortized cost..................... $ 24,606 $ 49,856 $ 588,956 $ 68,907 $ 732,325 6.81 %
============ =========== =========== ========= ========== =========
Weighted average yield based on
fair value....................... 6.04% 7.86% 6.87% 4.81 % 6.72%
Weighted average maturity.......... 3.1 years 2.0 years 10.86 years 3.5 years 9.84 years
------------ ------------ ----------- ---------- ----------
DECEMBER 31, 1994
Fair value......................... $ 12,279 $ 61,132 $ 604,103 $ 124,259 $ 801,773 6.49 %
============ =========== =========== ========= ========== =========
Amortized cost..................... $ 13,563 $ 61,132 $ 627,568 $ 127,981 $ 830,244 6.27 %
============ =========== =========== ========= ========== =========
DECEMBER 31, 1993
Fair value......................... $ 13,550 $ 83,927 $ 540,918 $ 111 $ 638,506 6.67 %
============ =========== =========== ========= ========== =========
Amortized cost..................... $ 13,663 $ 83,927 $ 526,365 $ 111 $ 624,066 6.82 %
============ =========== =========== ========= ========== =========
</TABLE>
- ---------------
(1) Maturities are based on contractual maturities. Tax certificate maturities
are based on historical repayment experience and BankAtlantic's charge-off
policies since tax certificates do not have contractual maturities.
51
<PAGE> 54
Activity in the allowance for tax certificate losses was (dollars in
thousands):
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEARS
MARCH 31, ENDED DECEMBER 31,
----------------- ------------------------------
1996 1995 1995 1994 1993
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period............. $1,648 $2,985 $ 2,985 $ 2,970 $1,558
Charge-offs.............................. (43) (108) (1,854) (1,892) (810)
Recoveries............................... 185 124 662 1,792 562
------ ------ ------- ------- ------
Net (charge-offs) recoveries............. 142 16 (1,192) (100) (248)
Additions (reversals) charged to
operations............................. 125 (92) (145) 115 1,660
------ ------ ------- ------- ------
Balance, end of period................... $1,915 $2,909 $ 1,648 $ 2,985 $2,970
====== ====== ======= ======= ======
Average yield on tax certificates during
the period(1).......................... 8.82% 8.41% 9.27% 7.43% 10.36%
====== ====== ======= ======= ======
</TABLE>
- ---------------
(1) During the year ended December 31, 1994 BankAtlantic reversed $1.4 million
of accrued interest on tax certificates. The average yield on tax
certificates during the period, excluding the reversal of $1.4 million, was
9.31%
Included in gains on sales of real estate owned for the year ended December
31, 1995 was approximately $1.3 million related to a property originally
acquired through a tax deed.
FINANCIAL CONDITION
BankAtlantic's total assets at March 31, 1996 were $1.64 billion compared
to $1.75 billion at December 31, 1995. Debt securities available for sale and
tax certificates decreased by $132.0 million and $9.3 million, respectively,
whereas loans receivable-net increased $34.7 million. The decline in debt
securities available for sale reflects the sale of $73.1 million of
mortgage-backed securities and $52.9 million of principal repayments. The
decline in tax certificate balance reflects $9.4 million of redemptions during
1996. The increase in loan receivable balances is due to loan fundings,
including loans funded for resale, and loan purchases during 1996 amounting to
$183.9 million, and loan sales and repayments amounting to $147.8 million.
BankAtlantic's total assets at December 31, 1995 and 1994 were $1.75 billion and
$1.54 billion, respectively. The increase in total assets was primarily the
result of a $282.2 million increase in loans receivable partially offset by a
$86.7 million decrease in debt securities (debt securities in 1994 includes
mortgage-backed and investment securities held to maturity and trading account
securities but excludes tax certificates) and a $11.3 million decrease in tax
certificates. The loans receivable increase reflects $116.4 million of loans
acquired in the MegaBank acquisition and $648.5 million of loan fundings and
purchases during 1995. The loan fundings were partially offset by $444.9 million
of principal reductions on loans and $34.2 million of loan sales. The decline in
mortgage-backed securities balances resulted from $199.8 million of principal
reductions, partially offset by the purchase of approximately $75.3 million of
adjustable rate debt securities and the $18.1 million of debt securities
acquired in connection with the MegaBank acquisition. The 1995 tax certificate
balance reflects repayments of $63.1 million partially offset by the purchase of
$44.0 million of tax certificates at auction and $7.7 million purchased in
connection with Applications for Deed.
During first quarter 1996 deposits increased by $22.9 million. The increase
in net deposits resulted from time deposit and interest free checking growth.
Time deposits and interest free checking increased from $676.3 million and $99.0
million at December 31, 1995 to $690.0 million and $107.9 million, respectively,
at March 31, 1996. FHLB advances, securities sold under agreements to
repurchase, and federal funds purchased declined by $138.3 million, $22.4
million and $1.2 million, respectively, from December 1995 balances. The
repayment of FHLB advances, securities sold under agreements to repurchase, and
federal funds purchased were funded through deposit inflows, proceeds from the
sale of debt securities available for sale, proceeds from the issuance of Class
A Common Stock, and investment securities repayments. At
52
<PAGE> 55
December 31, 1995, deposits increased by $214.6 million including deposits
acquired in connection with the MegaBank acquisition ($120.2 million at
acquisition). The remaining net deposit increase resulted from an increase in
certificates of deposit. Securities sold under agreements to repurchase declined
by $83.6 million. The redemption of preferred stock, repayment of securities
sold under agreement to repurchase, the acquisition of MegaBank, loan
originations, and the purchases of loans, debt securities and tax certificates
were primarily funded through proceeds from FHLB advances, federal funds
purchased, loan and debt securities repayments, and proceeds from the issuance
of 9% Debentures.
Loan Activity -- The following table shows loan activity by major
categories for the periods indicated (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEARS
MARCH 31, ENDED DECEMBER 31,
-------------------- ---------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- -------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
LOAN FUNDINGS:(1)
Residential real estate
loans.................... $ 33,571 $ 12,918 $ 111,361 $ 40,706 $ 52,674 $ 41,336 $ 17,320
Construction and
development loans........ 29,676 18,560 93,102 22,958 13,744 18,912 10,157
Commercial real estate and
business loans........... 96,977 76,267 319,530 259,285 186,584 108,744 85,931
Consumer loans(2).......... 21,397 19,977 114,607 45,159 10,222 7,075 27,859
--------- -------- --------- --------- --------- --------- ---------
Total loan
fundings.......... 181,621 127,722 638,600 368,108 263,224 176,067 141,267
--------- -------- --------- --------- --------- --------- ---------
PURCHASES:(3)(4)
Residential real estate
loans.................... 2,237 0 9,930 0 0 0 0
Commercial real estate and
business loans........... 0 0 0 3,989 5,142 0 0
Consumer loans............. 0 0 0 0 0 0 0
--------- -------- --------- --------- --------- --------- ---------
Total purchases..... 2,237 0 9,930 3,989 5,142 0 0
--------- -------- --------- --------- --------- --------- ---------
Total loan
production........ 183,858 127,722 648,530 372,097 268,366 176,067 141,267
--------- -------- --------- --------- --------- --------- ---------
Loan sales................... (15,181) (4,571) (34,153) (38,168) (44,983) (36,054) (14,949)
Principal reduction on
loans(1)................... (132,570) (87,207) (444,867) (270,986) (289,037) (297,263) (298,076)
Loan securitization.......... 0 0 0 0 0 0 (40,361)
Transfer to real estate
owned...................... (856) (539) (1,029) (1,282) (2,396) (7,994) (6,729)
--------- -------- --------- --------- --------- --------- ---------
NET LOAN ACTIVITY... $ 35,251 $ 35,405 $ 168,481 $ 61,661 $ (68,050) $(165,244) $(218,848)
========== ========= ========== ========== ========== ========== ==========
</TABLE>
- ---------------
(1) Does not include banker's acceptances.
(2) Includes second mortgage loans.
(3) Does not include indirect consumer loans purchased through dealers; such
loans are included as originations.
(4) Excludes $116.4 million loans acquired in the MegaBank acquisition.
Total loan originations for the three months ended March 31, 1996 and 1995
and the years ended December 31, 1995, 1994 and 1993 were $34.3 million, $12.4
million, $111.0 million, $36.1 million and $47.5 million for residential real
estate loans, and $64.7 million, $50.1 million, $224.7 million, $203.3 million
and $95.1 million for commercial real estate and business loans (including
construction and development loans), $16.8 million, $11.3 million, $55.8
million, $47.7 million and $14.0 million, for direct consumer loans, and $4.5
million, $8.3 million, $56.1 million, $0 and $0 for indirect consumer loans
(exclusively indirect automobile loans), respectively.
53
<PAGE> 56
Principal Repayments -- The following table sets forth the scheduled
contractual principal repayments at maturity date of BankAtlantic's loan
portfolios and debt securities available for sale at March 31, 1996. As of March
31, 1996, the total amount of principal repayments on loans and debt securities
available for sale contractually due after March 31, 1997 was $1.36 billion,
$772.4 million having fixed interest rates and $583.6 million having floating or
adjustable interest rates.
<TABLE>
<CAPTION>
OUTSTANDING
ON
FOR THE PERIOD ENDING MARCH 31,(1) MARCH 31,
------------------------------------------------------------------------------- -----------
1997 1998 1999 2000-2001 2002-2006 2007-2011 THEREAFTER 1996
-------- -------- -------- --------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and residential real
estate....................... $ 69,048 $ 70,883 $ 62,954 $125,167 $ 70,668 $18,288 $157,178 $ 574,186
Construction and development... 33,122 56,692 15,021 28,927 0 0 0 133,762
Consumer(2).................... 6,292 9,131 16,703 90,210 52,584 35,839 2,184 212,943
Commercial business............ 50,113 3,311 2,368 5,131 2,699 0 0 63,622
-------- -------- -------- --------- --------- --------- ---------- -----------
TOTAL LOANS(3)............. $158,575 $140,017 $ 97,046 $249,435 $125,951 $54,127 $159,362 $ 984,513
======== ======== ======== ========= ========= ========= ========= ==========
TOTAL DEBT SECURITIES AVAILABLE
FOR SALE(3).................. $ 29,701 $ 33,779 $176,402 $196,416 $ 13,037 $ 8,080 $102,360 $ 559,775
======== ======== ======== ========= ========= ========= ========= ==========
</TABLE>
- ---------------
(1) Does not include deductions for undisbursed portion of loans in process,
deferred loan fees, unearned discounts and allowance for loan losses.
(2) Includes second mortgage loans.
(3) Actual principal repayments may differ from information shown above.
Loan Concentration -- BankAtlantic's geographic loan concentration at March
31, 1996 was:
<TABLE>
<S> <C>
Florida........................................................ 89%
Northeast...................................................... 4%
Other.......................................................... 7%
---
Total................................................ 100%
===
</TABLE>
The loan concentration for BankAtlantic's portfolio is primarily in South
Florida where economic conditions have generally remained stable during the
three months ended March 31, 1996 and the three years ended December 31, 1995.
The concentration of BankAtlantic's loan portfolio in the Northeastern states is
primarily related to those loans identified in the Subject Portfolio. The
remainder of the portfolio is located throughout the United States without any
specific concentration.
Loan maturities and sensitivity of loans to changes in interest rates for
commercial business loans and real estate construction loans at March 31, 1996
were (in thousands):
<TABLE>
<CAPTION>
CONSTRUCTION
COMMERCIAL AND
BUSINESS DEVELOPMENT TOTAL
---------- ----------- --------
<S> <C> <C> <C>
One year or less..................................... $ 62,055 $ 133,762 $195,817
Over one year, but less than five years.............. 1,567 0 1,567
Over five years...................................... 0 0 0
---------- ----------- --------
$ 63,622 $ 133,762 $197,384
=========== =========== ========
Pre-determined interest rate......................... $ 1,567 $ 0 $ 1,567
Floating or adjustable interest rate................. 0 0 0
---------- ----------- --------
$ 1,567 $ 0 $ 1,567
=========== =========== ========
</TABLE>
54
<PAGE> 57
Deposits -- Deposit accounts consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------------------------
1996 1995 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Non-interest bearing deposits................... $ 107,860 $ 98,964 $ 69,658 $ 62,065
Interest bearing deposits:
Insured money fund savings.................... 248,243 249,273 267,770 301,572
NOW account................................... 172,138 171,726 151,890 152,186
Savings account............................... 104,302 103,759 113,578 124,699
Time deposits less than $100,000.............. 530,738 528,163 413,415 384,411
Time deposits $100,000 and over............... 159,948 148,492 69,471 51,427
---------- ---------- ---------- ----------
Total................................. $1,323,229 $1,300,377 $1,085,782 $1,076,360
========= ========= ========= =========
</TABLE>
Time deposits $100,000 and over, have the following maturities:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
<S> <C> <C>
Less than 3 months................................ $ 11,673 $ 14,593
3 to 6 months..................................... 27,544 25,111
6 to 12 months.................................... 49,353 49,167
More than 12 months............................... 71,378 59,621
--------- ------------
Total................................... $159,948 $148,492
========= =============
</TABLE>
BankAtlantic has no brokered deposits. BankAtlantic's deposit accounts are
insured by the FDIC primarily through SAIF and, secondarily through BIF up to a
maximum of $100,000 for each insured depositor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
55
<PAGE> 58
The stated rates and balances at which BankAtlantic paid interest on
deposits were (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------------------------
1996 1995 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest free checking.......................... $ 107,860 $ 98,964 $ 69,658 $ 62,065
Insured money fund savings: 3.19% at March 31,
1996, 3.22% at December 31, 1995, and 3.71% at
December 31, 1994, 2.52% at December 31,
1993.......................................... 248,243 249,273 267,770 301,572
NOW accounts: 1.42% at March 31, 1996, 1.66% at
December 31, 1995, and 1.57% at December 31,
1994, 1.79% at December 31, 1993.............. 172,138 171,726 151,890 152,186
Savings accounts: 1.61% at March 31, 1996, 1.71%
at December 31, 1995, and 1.87% December 31,
1994, 1.78% at December 31, 1993.............. 104,302 103,759 113,578 124,699
---------- ---------- ---------- ----------
Total non-certificate accounts.................. 632,543 623,722 602,896 640,522
---------- ---------- ---------- ----------
Certificate accounts:
0.00% to 3.00%................................ 55,987 56,667 54,738 106,521
3.01% to 4.00%................................ 21,734 25,602 82,934 135,753
4.01% to 5.00%................................ 175,157 135,107 182,518 105,214
5.01% to 6.00%................................ 333,113 303,497 123,016 48,770
6.01% to 7.00%................................ 90,032 137,917 27,857 15,690
7.01% and greater............................. 13,981 17,543 11,674 23,757
---------- ---------- ---------- ----------
Total certificate accounts...................... 690,004 676,333 482,737 435,705
---------- ---------- ---------- ----------
Total deposit accounts.......................... 1,322,547 1,300,055 1,085,633 1,076,227
---------- ---------- ---------- ----------
Interest earned not credited to deposit
accounts...................................... 682 322 149 133
---------- ---------- ---------- ----------
Total deposit accounts................ $1,323,229 $1,300,377 $1,085,782 $1,076,360
========== ========== ========== ==========
Weighted average stated interest rate on
deposits at the end of each period............ 3.72% 3.85% 3.45% 2.83%
========== ========= ========= =========
</TABLE>
The amounts of scheduled maturities of certificate accounts were (dollars
in thousands):
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
-------------------------------------------------------------
MARCH 31, 1996 1997 1998 1999 2000 2001 THEREAFTER
- -------------------------------- -------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
0.00% to 3.00%.................. $ 36,549 $10,140 $ 3,421 $ 2,887 $ 2,151 $ 839
3.01% to 4.00%.................. 21,366 37 70 261 0 0
4.01% to 5.00%.................. 152,301 17,426 4,994 158 130 148
5.01% to 6.00%.................. 291,156 24,157 12,556 2,123 2,861 260
6.01% to 7.00%.................. 66,791 15,792 1,601 3,587 2,086 175
7.01% and greater............... 7,756 1,160 307 3,489 1,269 0
-------- ------- ------- ------- ------- ----------
Total................. $575,919 $68,712 $22,949 $12,505 $ 8,497 $1,422
======== ======= ======= ======= ======= ==========
</TABLE>
56
<PAGE> 59
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-------------------------------------------------------------
DECEMBER 31, 1995 1996 1997 1998 1999 2000 THEREAFTER
- -------------------------------- -------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
0.00% to 3.00%.................. $ 35,806 $11,687 $ 3,428 $ 2,056 $ 3,130 $ 560
3.01% to 4.00%.................. 25,036 124 0 442 0 0
4.01% to 5.00%.................. 120,490 9,869 3,979 643 64 62
5.01% to 6.00%.................. 260,785 23,762 12,661 4,085 1,916 288
6.01% to 7.00%.................. 109,194 20,738 1,667 3,119 3,026 173
7.01% and greater............... 8,369 3,863 520 775 3,991 25
-------- ------- ------- ------- ------- ------
Total................. $559,680 $70,043 $22,255 $11,120 $12,127 $1,108
======== ======= ======= ======= ======= ======
</TABLE>
The following table sets forth the deposit activities for the periods
indicated (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEARS
MARCH 31, ENDED DECEMBER 31,
-------------------- ----------------------------------
1996 1995 1995 1994 1993
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net increase (decrease) before $12,345 $ 8 $ 51,093 $(20,814) $(59,370)
interest credited..................
Deposits acquired net of purchase 0 120,145 120,055 0 0
accounting amortization............
Interest credited.................... 10,507 9,023 43,447 30,236 27,615
------- -------- -------- -------- --------
Total...................... $22,852 $129,176 $214,595 $ 9,422 $(31,755)
======= ======== ======== ======== ========
</TABLE>
Subject Portfolio -- From 1987 through 1990, BankAtlantic purchased in
excess of $50 million of indirect home improvement loans from certain dealers,
primarily in the northeastern United States. BankAtlantic ceased purchasing
loans from such dealers in the latter part of 1990. These dealers are affiliated
with each other but are not affiliated with BankAtlantic. In connection with
loans originated through these dealers, BankAtlantic funded amounts to the
dealers as a dealer reserve. Such loans and related dealer reserves are
hereafter referred to as the Subject Portfolio. The risk of amounts advanced to
the dealers is primarily associated with loan performance but secondarily is
dependent on the financial condition of the dealers. The dealers were to be
responsible to BankAtlantic for the amount of the reserve only if the loan
giving rise to the reserve became delinquent or was prepaid. One of the dealers
filed for protection under the bankruptcy laws of the United States, while the
other dealers have not indicated any financial ability to meet any obligation
relating to the dealer reserve.
In late 1990, questions arose relating to the practices and procedures used
in the origination and underwriting of the Subject Portfolio, which suggested
that the dealers, certain home improvement contractors and borrowers, together
with certain former employees of BankAtlantic, engaged in practices intended to
defraud BankAtlantic. Due to these questions and potential exposure,
BankAtlantic performed, and continues to perform, certain investigations,
notified appropriate regulatory and law enforcement agencies, and notified its
fidelity bond carrier (the "carrier"). After an initial review and discussions
with the carrier, BankAtlantic concluded that any losses sustained from the
Subject Portfolio would adequately be covered by its fidelity bond coverage and,
in fact, on August 13, 1991, the carrier advanced $1.5 million against
BankAtlantic's losses. This payment and other payments by the carrier were
subject to identification and confirmation of the losses which are appropriately
covered under the fidelity bond.
Subsequently, commencing in September, 1991, as a consequence of issues
raised by the carrier, BankAtlantic reviewed the Subject Portfolio without
regard to the availability of any fidelity bond coverage. As a result of the
review, the provision for loan losses for the year ended December 31, 1991 was
increased by approximately $5.7 million, approximately $5.5 million of loans
were charged off, and $2.7 million of dealer reserves were charged to current
operations. On December 20, 1991, the carrier denied coverage and BankAtlantic
thereafter filed an appropriate action against the carrier. On October 30, 1992,
BankAtlantic and
57
<PAGE> 60
the carrier entered into the Covenant not to Execute (the "Covenant"). Pursuant
to the Covenant, BankAtlantic will continue to pursue its litigation against the
carrier, but has agreed to limit execution on any judgment obtained against the
carrier to $18 million. Further, BankAtlantic agreed to join certain third
parties as defendants in that action. The carrier paid BankAtlantic $6.1 million
during the fourth quarter of 1992, $3 million in November 1993, and an
additional $2.9 million in November 1994. Such amounts related to losses and
expenses previously charged to operations by BankAtlantic. Additional
reimbursements have been made on a quarterly reporting basis commencing with the
period ended December 31, 1992. Reimbursable amounts are as defined in the
Covenant. Based upon such definitions BankAtlantic recorded estimated charges to
operations in advance of when such charges became reimbursable. Amounts
reimbursed were reflected in the period for which the reimbursement is related.
Through December 31, 1995 and 1994, the carrier paid or committed to pay
approximately $18.0 million and $17.9 million, respectively. The financial
statement effect of the Covenant for the fourth quarter and year ended December
31, 1992 was to reduce expenses by $3.3 million, increase interest income by
$1.9 million and to record $7.3 million of loan loss recoveries. Included in
other assets at December 31, 1994 was $594,000 due from the carrier but no
amounts were due from the carrier at March 31, 1996 or December 31, 1995. In no
event will the carrier be obligated to pay BankAtlantic in the aggregate more
than $18 million, which amount has been fully paid. However, in the event of
recovery by BankAtlantic of damages from third party wrongdoers, BankAtlantic
will be entitled to retain such amounts until such amounts, plus any payments
received from the carrier, equal $22 million. Thereafter, the carrier will be
entitled to any such recoveries to the extent of its payments to BankAtlantic.
To the extent that BankAtlantic incurs losses in excess of $18 million plus
available recoveries from third parties, BankAtlantic will be required to absorb
any such losses. At March 31, 1996 and December 31, 1995, the remaining amount
of reimbursement available from the carrier was approximately zero, and such
amount was approximately $120,000 at December 31, 1994. BankAtlantic also agreed
to exercise reasonable collection activities with regard to the Subject
Portfolio and to provide the carrier with a credit for any recoveries with
respect to such loans against future losses that the carrier would otherwise be
obligated to reimburse. The carrier has no further obligations for
reimbursement. In August 1994, BankAtlantic filed an action against the dealers,
certain home improvement contractors, and various individuals seeking
compensatory and other damages. On February 17, 1995, the United States Attorney
for the Eastern District of New York and the Assistant Attorney General, Tax
Division, United States Department of Justice, announced that the President of
the dealers noted above had pleaded guilty to bank fraud, bribery and tax fraud
conspiracy charges. The guilty plea states that BankAtlantic was one of the
financial institutions which was defrauded by the dealers and various home
improvement contractors.
Three actions have been filed, two in New Jersey and one in New York,
relating to the Subject Portfolio. One of the New Jersey actions was brought on
behalf of the State of the New Jersey and the others purport to be class actions
on behalf of named and unnamed plaintiffs that may have obtained loans from
dealers who subsequently sold the loans to financial institutions including
BankAtlantic. Each of the New Jersey actions seek civil remedies against certain
contractors and a named dealer and also seeks to cancel or modify certain
mortgage loans. Although BankAtlantic was not a named party in the State of New
Jersey action, it sought to protect its interest in certain loans and entered
into an Alternative Dispute Resolution Agreement (the "ADR") with the state of
New Jersey. The ADR established procedures for determining whether certain
consumers were entitled to relief under the terms of their loans. Pursuant to
the ADR, BankAtlantic offered relief to certain consumers in the form of reduced
future interest rates, or reductions or forgiveness of principal. As part of the
ADR, the State of New Jersey agreed not to seek rescission of any of the
mortgage loans held by BankAtlantic. The ADR was completed in 1995 and
BankAtlantic obtained a release from the State of New Jersey for any claims
relating to the mortgage loans. The second New Jersey action was commenced
immediately after completion of the ADR. The New York and New Jersey actions,
which were brought against over 25 parties, including BankAtlantic, purport to
be class actions on behalf of named and unnamed plaintiffs that may have
obtained loans from dealers who subsequently sold the loans to financial
institutions including BankAtlantic. Both the remaining New Jersey action and
the New York action seek, among other things, rescission of the loan agreements
and damages. In November 1995, the court in the second New Jersey action entered
an order dismissing the complaint against BankAtlantic; plaintiffs appealed this
ruling. In January 1996, the Appellate Court reversed the lower court's decision
and remanded the case
58
<PAGE> 61
back to trial court to determine whether the action may be maintained as a class
action. The reversal was without prejudice to BankAtlantic's right to renew
their summary judgment motion after the trial court has made a determination as
to plaintiff's ability to maintain this case as a class action. In October 1995,
the court in the New York action preliminarily approved a settlement proposed by
the parties pursuant to which members of the class who timely file a proof of
claim would be entitled to relief in the form of reduced future interest rates
and reductions of principal. The settlement, as presently structured, will have
no significant impact on the Company's financial condition or results of
operations.
The balance of the loans associated with the Subject Portfolio amounted to
approximately $13.0 million, $14.2 million and $18.7 million at March 31, 1996,
December 31, 1995 and 1994, respectively. The related dealer reserve had been
completely charged-off by December 31, 1993. Charge-offs relating to the Subject
Portfolio amounted to $278,000 and $340,000 for the three months ended March 31,
1996 and 1995, respectively, and $1.0 million, $1.2 million and $972,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. All 1994 and 1993
charge-offs were recovered from the carrier while no charged-off amounts were
recovered from the carrier in 1995 and 1996. At March 31, 1996 and December 31,
1995, 10% of the loans were secured by collateral in South Florida and 90% were
secured by collateral in the northeastern United States. Collateral for these
loans is generally a second mortgage on the borrower's property. However, it
appears that in most cases the property is encumbered with loans having high
loan to value ratios. Loans in the Subject Portfolio are charged-off if payments
are more than 90 days delinquent. While management believes that established
reserves will be adequate to cover any additional losses that BankAtlantic may
incur from the Subject Portfolio or the above described litigation, there is no
assurance that this will be the case.
59
<PAGE> 62
Loans receivable composition, including mortgage-backed securities, at the
dates indicated was (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------------
MARCH 31, 1996 1995 1994 1993
-------------------- -------------------- -------------------- --------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LOANS RECEIVABLE:
REAL ESTATE LOANS:
Residential real estate..... $179,022 20.74 % $157,361 18.99 % $102,677 18.79 % $120,531 24.80%
Residential real estate
available for sale........ 14,458 1.67 17,122 2.07 6,843 1.25 5,752 1.19
Construction and
development............... 133,762 15.49 122,371 14.77 45,725 8.37 11,333 2.34
FHA and VA insured.......... 4,924 0.57 5,183 0.63 6,395 1.17 7,972 1.64
Commercial real estate...... 375,782 43.53 350,256 42.27 303,877 55.61 198,095 40.76
Other loans:
Second mortgage -- direct... 65,463 7.58 63,052 7.61 40,564 7.42 15,971 3.29
Second
mortgage -- indirect...... 23,648 2.74 25,621 3.09 34,585 6.33 47,307 9.73
Commercial business......... 63,622 7.37 64,194 7.75 24,566 4.50 27,979 5.76
Consumer -- other direct.... 33,924 3.93 37,502 4.53 16,386 3.00 19,667 4.05
Consumer -- other
indirect.................. 89,908 10.42 96,042 11.59 32,373 5.93 56,896 11.71
-------- ------- -------- ------- -------- ------- -------- -------
Total................. 984,513 114.04 938,704 113.30 613,991 112.37 511,503 105.27
-------- ------- -------- ------- -------- ------- -------- -------
Deduct:
Undisbursed portion of loans
in process.................. 101,384 11.74 89,896 10.85 49,981 9.15 5,570 1.15
Other......................... 0 0.00 0 0.00 63 0.01 33 0.01
Unearned discounts on
commercial real estate
loans....................... 772 0.09 793 0.10 874 0.16 2,124 0.44
Unearned discounts on
purchased and consumer
loans....................... 309 0.04 385 0.05 427 0.08 820 0.17
Allowance for loan losses..... 18,700 2.17 19,000 2.30 16,250 2.97 17,000 3.50
-------- ------- -------- ------- -------- ------- -------- -------
Total loans
receivable, net..... $863,348 100.00 % $828,630 100.00 % $546,396 100.00 % $485,956 100.00%
======== ======= ======== ======= ======== ======= ======== =======
Mortgage-backed securities:
FNMA participation
certificates................ $125,420 26.25 % $132,554 22.18 % $147,652 23.52 % $178,928 33.99%
GNMA and FHLMC mortgage-backed
securities.................. 352,408 73.75 465,197 77.82 480,230 76.48 347,437 66.01
-------- ------- -------- ------- -------- ------- -------- -------
Total mortgage-backed
securities(1)....... $477,828 100.00 % $597,751 100.00 % $627,882 100.00 % $526,365 100.00%
======== ======= ======== ======= ======== ======= ======== =======
Banker's acceptances.......... $ 0 0.00 % $ 0 0.00 % $ 0 0.00 % $109,931 100.00%
======== ======= ======== ======= ======== ======= ======== =======
<CAPTION>
1992 1991
-------------------- --------------------
AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- -------
<S> <C<C> <C> <C> <C>
LOANS RECEIVABLE:
REAL ESTATE LOANS:
Residential real estate..... $147,654 26.52 % $185,677 25.49 %
Residential real estate
available for sale........ 7,641 1.37 3,807 0.52
Construction and
development............... 12,961 2.33 23,913 3.28
FHA and VA insured.......... 9,854 1.77 11,459 1.57
Commercial real estate...... 156,844 28.18 157,878 21.67
Other loans:
Second mortgage -- direct... 7,434 1.34 11,654 1.60
Second
mortgage -- indirect...... 65,074 11.69 88,902 12.20
Commercial business......... 33,071 5.94 38,742 5.32
Consumer -- other direct.... 31,722 5.70 43,892 6.03
Consumer -- other
indirect.................. 109,187 19.61 189,273 25.98
-------- ------- -------- -------
Total................. 581,442 104.45 755,197 103.66
-------- ------- -------- -------
Deduct:
Undisbursed portion of loans
in process.................. 6,492 1.17 9,033 1.24
Other......................... 55 0.01 99 0.01
Unearned discounts on
commercial real estate
loans....................... 0 0.00 0 0.00
Unearned discounts on
purchased and consumer
loans....................... 1,733 0.31 3,800 0.52
Allowance for loan losses..... 16,500 2.96 13,750 1.89
-------- ------- -------- -------
Total loans
receivable, net..... $556,662 100.00 % $728,515 100.00 %
======== ======= ======== =======
Mortgage-backed securities:
FNMA participation
certificates................ $174,666 35.83 % $214,700 46.59 %
GNMA and FHLMC mortgage-backed
securities.................. 312,828 64.17 246,080 53.41
-------- ------- -------- -------
Total mortgage-backed
securities(1)....... $487,494 100.00 % $460,780 100.00 %
======== ======= ======== =======
Banker's acceptances.......... $ 0 0.00 % $ 0 0.00 %
======== ======= ======== =======
</TABLE>
- ---------------
(1) Includes gross unrealized appreciation on mortgage-backed securities
available for sale of $3.1 million, $8.8 million and $314,000 at March 31,
1996, December 31, 1995 and 1994, respectively.
60
<PAGE> 63
ASSET AND LIABILITY MANAGEMENT
BankAtlantic's operating objectives have in the past included actions to
increase its regulatory capital and to reduce its negative interest rate
sensitivity gap. However, activities in furtherance of these objectives
sometimes involve conflicting short term strategies. In general, BankAtlantic
has attempted to address its interest rate sensitivity objectives through (i)
the replacement of fixed rate, long term securities with floating rate
mortgage-backed securities and commercial loans or intermediate term fixed rate,
balloon mortgage-backed securities, (ii) restructuring deposit liabilities by
reducing interest rate sensitive certificates of deposit as a percent of total
liabilities and focusing on transaction accounts, and (iii) changing the
emphasis of loan originations. See "Mortgage-Backed Securities, Investment
Securities and Loans."
Included in investment securities are tax certificates, adjustable rate
mortgage-backed securities, five and seven-year balloon mortgage-backed
securities, REMICs and asset-backed securities with balances of approximately
$40.5 million and $49.9 million, $100.3 million and $168.8 million, $350.3
million and $371.1 million, $7.6 million and $7.2 million, and $57.2 million and
$69.4 million respectively, at March 31, 1996 and December 31, 1995.
At March 31, 1996 and December 31, 1995, debt securities available for sale
included $3.4 million in face amount of fixed rate corporate bonds and $21.2
million in face amount of Federal Agency obligations which have fixed maturities
during 1996 and 1998, respectively. Absent a change in credit quality, the fair
value of these securities will generally increase in a declining interest rate
environment and will generally decrease in a rising interest rate environment.
However, any such increase or decrease in fair value over par value will
diminish as the security approaches maturity at which time the fair value will
generally equal the par value. Also included in debt securities available for
sale are fixed rate "asset-backed securities" for which monthly principal and
interest payments are received. The impact on fair values of this type of
security is similar to that for the corporate bonds and Federal Agency
obligations discussed above. During a rising (declining) interest rate
environment it is possible that prepayments of the underlying loans will
decrease (increase). However, the maximum term of the securities is
approximately five years and management estimates that approximately 50% of the
original principal amount of these securities will be paid within 18 months of
the issuance date.
BankAtlantic has been attempting to change the composition of its loan
portfolio from predominately long term, fixed rate residential real estate loans
by emphasizing the origination of floating rate commercial business and
commercial real estate loans, which generally are of a two to five year
duration. These types of loans generally have higher interest rates than
residential loans. However, these loans also involve a greater credit risk and
will generally result in higher loan loss experience than that of traditional
residential lending. Management is of the opinion that the increased credit risk
will be offset by the increased rates earned on such loans and the positive
effect these shorter terms have on the interest rate sensitivity gap.
Origination and underwriting policies and practices for such loans are designed
to limit BankAtlantic's exposure to normal industry risk for this form of
lending. Upon the acquisition of MegaBank in February 1995, BankAtlantic
continued MegaBank's indirect installment lending program with automobile
dealerships in South Florida that had established relationships with the former
MegaBank. The loans originated through this program generally have greater
credit risk than direct consumer lending. BankAtlantic anticipates consumer loan
originations during 1996 will increase from amounts originated in the three
years prior to the acquisition of MegaBank and intends to expand indirect
automobile lending beyond MegaBank's prior activities. A determination was made
during the first quarter of 1996 to temporarily decrease production of indirect
automobile loans pending the integration of newly hired automobile lending
personnel. BankAtlantic continues to originate fixed rate residential real
estate loans with 15 and 30 year amortization periods, but substantially all
these loans are originated for sale. BankAtlantic currently has plans to
increase the number of residential loans which it originates or acquires from
others. Banker's acceptances at December 31, 1993 were $109.9 million, all of
which were purchased in the fourth quarter of 1993 and all of which matured in
the first quarter of 1994. Based upon BankAtlantic's capital position, alternate
uses for funds and availability of acceptable borrowing alternatives,
BankAtlantic may continue to utilize banker's acceptances to increase interest
income.
61
<PAGE> 64
INTEREST RATE SENSITIVITY
BankAtlantic's net earnings are materially impacted by the difference
between the income it receives from its loan portfolio, tax certificates and
debt securities available for sale (primarily mortgage-backed securities) and
its cost of funds. The interest paid by BankAtlantic on deposits and borrowings
determines its cost of funds. The yield on BankAtlantic's loan portfolio changes
principally as a result of loan repayments, the interest rate and the volume of
new loans. Fluctuations in income from debt securities will occur based on the
amount invested during the period and interest rate levels yielded by such
securities. BankAtlantic's net interest spread will fluctuate in response to
interest rate changes.
Like many savings institutions, BankAtlantic's interest rate sensitive
liabilities (generally, deposits with maturities of one year or less) have in
the past exceeded its interest rate sensitive assets (assets which reprice based
on an index or which have short term maturities). This imbalance is referred to
as a negative interest rate sensitivity gap, and measures an institution's
ability to adjust to changes in the general level of interest rates. The effect
of the "mismatch" is that a rise in interest rates will have a negative impact
on earnings as the cost of funds increases to a greater extent than the yield
earned on interest-earning assets, while a decline in interest rates will have a
positive impact on earnings. The larger the gap, whether positive or negative,
the greater the impact of changing interest rates. Currently, BankAtlantic has a
positive interest rate sensitivity gap, which provides the opportunity to
increase earnings in a rising interest rate environment due to its ability to
reprice more assets than liabilities.
One of BankAtlantic's long term objectives has been the reduction of its
interest rate sensitivity gap. However, short-term strategies may differ from
this objective in order to meet other objectives, such as compliance with
applicable regulatory requirements. Nonetheless, BankAtlantic has taken steps,
when possible, to minimize its interest rate sensitivity gap. Such actions have
in the past included reducing fixed rate residential mortgage loan production
held for portfolio, purchasing shorter term and adjustable rate mortgage-backed
securities and increasing its emphasis on the production of floating rate
commercial business loans and commercial real estate loans which generally have
a shorter duration and a higher yield than longer term fixed rate residential
mortgage loans. Also, extensive efforts have been made to attract transaction
accounts which are non-interest bearing or are generally less rate sensitive
than other types of accounts. These actions have involved employing experienced
commercial bankers, focusing sales and marketing on transaction oriented
customer segments, training existing staff in product sales and commercial
operations, offering new transaction products, improving data processing so as
to handle increased check clearing and building and remodeling branches so as to
accommodate transaction account customers. Further, BankAtlantic has reduced the
rates which it offers on certificates of deposit to the rates generally offered
by commercial banks (rates generally lower than those offered by savings and
loan institutions).
BankAtlantic's one year interest rate sensitivity gap ratio, which is the
difference between the amount of interest bearing liabilities which are
projected to mature or reprice within one year and the amount of interest
earning assets which are similarly projected to mature or reprice, all divided
by total assets, amounted to a negative 13.74% at December 31, 1994. The gap
ratio was a negative 2.49% at December 31, 1995 and a positive 1.80% at March
31, 1996. The changes in the interest rate sensitivity gap ratio reflects the
purchase of adjustable rate mortgage-backed securities, the origination of
floating rate commercial loans, and declining interest rates during the latter
part of 1995. The absolute amount of BankAtlantic's one year gap changed from a
negative $211.6 million at December 31, 1994, to a negative $43.6 million at
December 31, 1995 to a positive $29.6 million at March 31, 1996.
At March 31, 1996 BankAtlantic had a positive one year cumulative gap of
1.80% and a positive cumulative gap of 7.96%, 9.87%, 19.60%, 20.43%, 15.96%,
16.49% and 16.49% for 0-90 days, 91-180 days, 1-3 years, 3-5 years, 5-10 years,
10-20 years and greater than 20 years, respectively. The positive one year gap
position at March 31, 1996 may, as noted above, have a negative impact on
earnings in a falling interest rate environment.
Management considers BankAtlantic's current gap position to be within
acceptable parameters. To the extent the gap position deviates from this
position, actions which could be taken, if deemed appropriate, include the
lengthening or shortening of maturities for borrowings and investment security
purchases,
62
<PAGE> 65
disposing of debt securities which are available for sale as well as purchasing
variable rate rather than fixed rate investment securities.
In August 1993, the OTS adopted a final rule incorporating an interest-rate
risk component into the risk-based capital regulation. Under the rule, an
institution with a greater than "normal" level of interest-rate risk will be
subject to a deduction of its interest-rate risk component from total capital
for purposes of calculating the risk-based capital requirement. As a result,
such an institution will be required to maintain additional capital in order to
comply with the risk-based capital requirement. An institution with a greater
than normal interest-rate risk is defined as an institution that would suffer a
loss of net portfolio value exceeding 2.0% in the event of a 200 basis point
increase or decrease (with certain minor exceptions) in interest rates. Net
portfolio value is the difference between incoming and outgoing discounted cash
flows from assets, liabilities and off balance sheet contracts. One-half of the
difference between this loss of net portfolio value and 2.0% multiplied by the
market value of its assets is the interest rate risk component as calculated
quarterly. The rule also authorizes the director of the OTS, or his designee, to
waive or defer an institution's interest-rate risk component on a case-by-case
basis. The OTS implemented the interest-rate risk capital deduction on June 30,
1995. However, in a letter dated March 20, 1995, the OTS stated no institution
would be required to deduct capital for interest rate risk or to report such a
deduction until guidance is issued describing the appeals process for the
deduction. Any December 31, 1995 deduction would have been based on the lesser
of the March 1995, June 1995 or September 1995 interest rate risk components,
likewise the March 31, 1996 deduction would have been based on the lesser of the
June 1995, September 1995 and December 1995 interest rate risk components. Based
on the foregoing, at March 31, 1996 and December 31, 1995, no interest rate risk
deduction to capital would have been required.
Presented below is an analysis of BankAtlantic's interest rate risk at
December 31, 1995 (the latest date for which information was available), as
calculated by the OTS, based on information provided to the OTS by BankAtlantic.
The table measures changes in BankAtlantic's net portfolio value for
instantaneous and parallel shifts in the yield curve in 100 basis point
increments up or down at the date measured. (dollars in thousands):
<TABLE>
<CAPTION>
NET PORTFOLIO VALUE
CHANGE ---------------------
IN RATES $ AMOUNT $ CHANGE
------------------------------------ -------- --------
<S> <C> <C>
+200bp.............................. 168,693 (9,176)
+100bp.............................. 175,294 (2,576)
0bp................................ 177,870 0
-100bp.............................. 177,168 (702)
-200bp.............................. 173,154 (4,716)
</TABLE>
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
63
<PAGE> 66
BANKATLANTIC'S CUMULATIVE RATE SENSITIVITY GAP AT MARCH 31, 1996
<TABLE>
<CAPTION>
0-90 91-180 181 DAYS 1 - 3 3 - 5 5 - 10 10 - 20 >20
DAYS DAYS 1-YEAR YEARS YEARS YEARS YEARS YEARS TOTAL
-------- -------- --------- -------- -------- -------- -------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning
assets:
Investment
securities(5)(7)... $ 10,987 $ 8,556 $ 20,217 $ 9,617 $ 0 $ 0 $ 0 $ 0 $ 49,377
Debt securities
available for
sale-fixed
rates(3)(6)........ 35,223 25,856 47,185 330,094 6,102 7,049 232 8 451,749
Debt securities
available for sale
floating rates..... 23,750 47,981 36,295 0 0 0 0 0 108,026
Residential
loans(1)(2)
Conventional single
family........... 1,396 1,220 2,368 8,556 7,264 19,001 1,151 40 40,996
Adjustable single
family........... 37,523 35,256 52,930 31,699 0 0 0 0 157,408
Commercial real
estate loans....... 63,310 11,268 21,362 71,512 41,815 0 0 0 209,267
Adjustable
commercial real
estate loans....... 234,507 65,770 0 0 0 0 0 0 300,277
Other loans:
Commercial
business........... 147 147 287 1,094 473 0 0 0 2,148
Commercial business
adjustable......... 61,474 0 0 0 0 0 0 0 61,474
Consumer............ 14,069 13,274 24,320 72,677 37,773 3,846 7,366 0 173,325
Consumer prime
rate............... 39,618 0 0 0 0 0 0 0 39,618
-------- -------- --------- -------- -------- -------- -------- -------- ----------
Total interest
earning assets..... 522,004 209,328 204,964 525,249 93,427 29,896 8,749 48 1,593,665
-------- -------- --------- -------- -------- -------- -------- -------- ----------
Interest bearing
liabilities:
Money fund
savings(4)......... 49,028 39,345 63,149 50,672 24,125 21,924 0 0 248,243
Savings and
NOW(4)............. 19,808 18,240 33,135 90,465 34,702 80,090 0 0 276,440
Certificate
accounts........... 215,030 120,444 241,127 91,661 21,002 1,422 0 0 690,686
Borrowings:
Securities sold
under agreements to
repurchase......... 43,881 0 0 0 0 0 0 0 43,881
Advances from
FHLB............... 63,485 0 0 0 0 0 0 0 63,485
-------- -------- --------- -------- -------- -------- -------- -------- ----------
Total
interest-bearing
liabilities........ $391,232 $178,029 $ 337,411 $232,798 $ 79,829 $103,436 $ 0 $ 0 $1,322,735
========= ========= ========== ========= ========= ========= ========= ========= ===========
Interest rate
sensitivity GAP
(repricing
difference)........ $130,772 $ 31,299 $(132,447) $292,451 $ 13,598 $(73,540) $ 8,749 $ 48 $ 270,930
Cumulative GAP...... $130,772 $162,071 $ 29,624 $322,075 $335,673 $262,133 $270,882 $270,930
Cumulative ratio of
GAP to total
assets............. 7.96% 9.87% 1.80% 19.60% 20.43% 15.96% 16.49% 16.49%
========= ========= ========== ========= ========= ========= ========= =========
</TABLE>
- ---------------
(1) Fixed rate mortgages are shown in periods which reflect normal amortization
plus prepayments of 8-12% per annum, depending on coupon.
(2) Adjustable rate mortgages and debt securities available for sale-floating
rate are shown in the periods in which the mortgages are scheduled for
repricing.
(3) Fixed rate debt securities available for sale are shown in periods which
reflect normal amortization plus prepayments equal to BankAtlantic's
experience of 15-30% per annum.
(4) BankAtlantic determines deposit run-off on money fund checking, savings and
NOW accounts based on statistics obtained from external sources.
BankAtlantic does not believe its experience differs significantly from
these sources. Interest-free transaction accounts are non-interest bearing
liabilities and are accordingly, excluded from the cumulative rate
sensitivity gap analysis.
<TABLE>
<CAPTION>
WITHIN 1 - 3 3 - 5 OVER 5
1 YEAR YEARS YEARS YEARS
------ ----- ----- ------
<S> <C> <C> <C> <C>
Savings accounts decay rates.................... 17.00 % 17.00% 16.00% 14.00 %
Insured money fund savings (excluding tiered
savings) decay rates.......................... 79.00 % 31.00% 31.00% 31.00 %
NOW and tiered savings accounts decay rates..... 37.00 % 32.00% 17.00% 17.00 %
====== ===== ===== ======
</TABLE>
(5) Includes FHLB Stock.
(6) Asset-backed securities are shown in periods which reflect normal
amortization plus prepayments equal to BankAtlantic's experience of 47% per
annum.
(7) Tax certificates are shown in periods which reflects normal repayment equal
to BankAtlantic's experience of 10% of the outstanding monthly balance.
64
<PAGE> 67
LIQUIDITY AND CAPITAL RESOURCES
Liquidity refers to BankAtlantic's ability to generate sufficient cash to
meet funding needs to support loan demand, to meet deposit withdrawals and to
pay operating expenses. BankAtlantic's securities portfolio provides an internal
source of liquidity as a consequence of its short-term investments as well as
scheduled maturities and interest payments. Loan repayments and sales also
provide an internal source of liquidity.
A summary of the Company's consolidated cash flows follows (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEARS
MARCH 31, ENDED DECEMBER 31,
---------------------- -----------------------------------
1996 1995 1995 1994 1993
--------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities............ $ 9,369 $ 6,344 $ 35,597 $ 12,199 $ 46,437
Investing activities............ 92,343 (78,775) (65,233) (162,055) (77,187)
Financing activities............ (110,446) 68,237 43,523 169,485 35,893
--------- -------- -------- --------- --------
Increase (decrease) in cash and
due from banks.................. $ (8,734) $ (4,194) $ 13,887 $ 19,629 $ 5,143
========= ======== ======== ========= ========
</TABLE>
The changes in cash used or provided in operating activities are affected
by the changes in operations, which are discussed elsewhere herein, and by
certain other adjustments. These other adjustments include additions to
operating cash flows for nonoperating charges such as depreciation and the
provision for loan losses and write downs of assets. Cash flow from operating
activities is also adjusted to reflect the use or the providing of cash for
increases and decreases in operating assets and decreases or increases in
operating liabilities. Accordingly, the changes in cash flow of 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.
Management believes that the Company and BankAtlantic have adequate
liquidity to meet their business needs and regulatory requirements.
The Company's primary sources of funds during the first three months of
1996 were the proceeds of the issuance of Class A Common Stock and dividends
from BankAtlantic. The primary use of funds was to pay cash dividends to common
stockholders and interest expense on its outstanding $21.0 million of 9%
Debentures and contribute capital to BankAtlantic. It is anticipated that funds
for payments of interest and dividends will continue to be obtained from
BankAtlantic. Additionally, the ultimate repayment by the Company of its
outstanding 9% Debentures and the Debentures offered hereby may be dependent
upon dividends from BankAtlantic, refinancing of the debt or raising additional
equity capital by the Company. The Company currently anticipates that it will
pay regular quarterly cash dividends on its common stock. Funds for dividend
payments and interest expense on the Debentures offered hereby are in part
dependent upon BankAtlantic's ability to pay dividends to the Company.
BankAtlantic's primary sources of funds during the first three months of
1996 were from operations, principal collected on loans, mortgage-backed
securities, investment securities, sales of debt securities available for sale,
deposits inflows, proceeds from the capital contribution from the Company and
receipts of advances by borrowers for taxes and insurance. These funds were
primarily utilized for loan fundings, repayments of FHLB advances, securities
sold under agreements to repurchase and federal funds purchased. At March 31,
1996, BankAtlantic met all applicable liquidity and regulatory capital
requirements.
Historically, BankAtlantic's primary sources of funds have been deposits,
principal repayments of loans, debt securities available for sale and tax
certificates, proceeds from the sale of loans originated for sale,
mortgage-backed securities and investment securities, proceeds from securities
sold under agreements to repurchase, advances from the FHLB, operations, other
borrowing, and capital transactions. These funds were primarily utilized to fund
loan disbursements, repayments of securities sold under agreements to
repurchase, maturities of advances from the FHLB, repay the note payable, redeem
the preferred stock, purchases of mortgage-backed securities, asset-backed
securities, tax certificates and banker's acceptances and payments of
65
<PAGE> 68
maturing certificates of deposit. During October 1992 and December 1993, the
FHLB granted BankAtlantic, subject to various terms and conditions, lines of
credit for $300 million and $115 million expiring in October 1995 and December
1994, respectively. These existing FHLB lines of credit were canceled in August
1994, and a $300 million credit availability was established with a maximum term
of ten years. BankAtlantic also has three $5.0 million lines of credit with
three federally insured banking institutions to purchase Federal Funds. At March
31, 1996 and December 31, 1995, the outstanding balances for these lines of
credit were none and $1.2 million, respectively.
Regulations currently require that savings institutions maintain an average
daily balance of liquid assets (cash and short-term United States Government and
other specified securities) equal to 5% of net withdrawable accounts and
borrowings payable in one year or less. BankAtlantic had a liquidity ratio of
21.42% and 23.24% under these regulations at March 31, 1996 and December 31,
1995, respectively. See "Regulation and Supervision -- Savings Institution
Regulations -- Liquidity Requirements of the OTS."
Total commitments to originate loans and purchase asset-backed securities
and mortgage-backed securities, excluding the undisbursed portion of loans in
process, were approximately $95.4 million, $69.7 million, $83.9 million, and
$64.3 million at March 31, 1996, December 31, 1995, 1994 and 1993, respectively.
BankAtlantic funded its commitments out of loan repayments and, for a limited
period of time, short-term borrowings. At March 31, 1996 and December 31, 1995,
loan commitments were approximately 11.05% and 8.42% of loans receivable, net,
respectively.
On August 8, 1995, the FDIC established a reduced deposit insurance
assessment rate schedule of 4 to 31 basis points ($.04 to $.31 for every $100 of
assessable deposits) for BIF members retroactive to May 1995. The FDIC further
reduced the premiums applicable to BIF deposits, effective January 1, 1996, to a
minimum flat fee of $2,000 to a maximum assessment of 27 basis points. Under the
new assessment rate schedule, approximately 92% of BIF members will pay only the
minimum fee while SAIF members are subject to the existing assessment rate
schedule of 23 to 31 basis points. BankAtlantic pays deposit insurance premiums
primarily to the SAIF and secondarily, to the BIF in connection with the
deposits it acquired as a result of the acquisition of MegaBank. At March 31,
1996, BankAtlantic had approximately $135 million of deposits subject to BIF
premiums and $1.2 billion subject to SAIF premiums.
The disparity in insurance premiums between those required for financial
institutions with all or primarily SAIF insured deposits and those with all or
primarily BIF deposits generally allows BIF members to attract and retain
deposits at a lower effective cost. The resulting competitive disadvantage could
also result in BankAtlantic having to raise its deposit rates to remain
competitive or lose deposits to BIF members who may decide to pay higher rates
of interest on deposits because of the lower deposit insurance premiums.
Although BankAtlantic has other sources of funds, such sources may be more
costly than the cost of deposits.
Several alternatives to mitigate the effect of the BIF/SAIF premium
disparity have been proposed by the U.S. Congress, federal regulators, industry
lobbyists and the Clinton Administration. One plan to recapitalize the SAIF that
has gained the support of several sponsors would require all SAIF members
institutions, including BankAtlantic, to pay a one-time fee of approximately 85
basis points on the amount of SAIF-insured deposits held by the member
institution at March 31, 1995. This fee would amount to approximately $6.1
million on an after tax basis to BankAtlantic and, if this proposal is enacted
into law, the effect would most likely be an immediate charge to earnings. In
addition, BNA is also subject to the proposed one-time fee since all of its
deposits are SAIF-insured deposits; however, management believes that the
assessment would be reduced by 20% based on BNA's status as a "de novo sasser
bank" as defined by the proposed legislation. The fee associated with BNA's
SAIF-insured deposits would amount to approximately $1.8 million on an after tax
basis. The Company is unable to predict whether this proposal or any similar
proposal will be enacted or whether ongoing SAIF premiums will be reduced to a
level equal to that of BIF premiums.
The Company has been considering converting BankAtlantic's charter to that
of a commercial bank. If BankAtlantic's charter were to be converted, the impact
to the Consolidated Statement of Operations under current regulations would be a
charge to income of approximately $3.2 million relating to the recapture of the
bad debt deduction for Federal income tax purposes. The Company is not presently
pursuing a conversion of BankAtlantic's charter since it is awaiting the outcome
of the legislative proposals relating to the disparity of
66
<PAGE> 69
the BIF/SAIF premiums, which include a consideration of the treatment of the
recapture of the bad debt deduction as well as the possible consolidation of
bank and thrift charters. Even if BankAtlantic's charter was converted to that
of a commercial bank, under current regulations BankAtlantic's current SAIF
deposits would remain subject to SAIF assessments unless BankAtlantic paid
significant entrance and exit fees and assessments.
During 1995, the Company issued in a public offering $21.0 million in
principal amount of 9% Debentures due October 1, 2005. The 9% Debenture
Indenture provides that the Company cannot declare or pay dividends on, or
purchase, redeem or acquire for value its capital stock, return any capital to
holders of capital stock as such, or make any distribution of assets to holders
of capital stock as such, unless, from and after the date of any such dividend
declaration (a "Declaration Date") or the date of any such purchase, redemption,
payment or distribution (a "Redemption Date"), the Company retains cash, cash
equivalents (as determined in accordance with generally accepted accounting
principles) or marketable securities (with a market value as measured on the
applicable Declaration Date or Redemption Date) in an amount sufficient to cover
the two consecutive semi-annual interest payments that will be due and payable
on the Debentures following such Declaration Date or Redemption Date, as the
case may be. The 9% Debentures further provides that the amount of any interest
payment made by the Company with respect to the 9% Debentures after any
applicable Declaration Date or Redemption Date shall be deducted from the
aggregate amount of cash or cash equivalents which the Company shall be required
to retain pursuant to the foregoing provision. At March 31, 1996 and December
31, 1995 the Company designated $1.9 million of Federal Agency investments to
satisfy the above provision. The Debentures offered herein will rank pari passu
with the 9% Debentures.
On April 9, 1996, BankAtlantic, entered into an agreement to acquire BNAB
for approximately $54 million in cash. The acquisition will be accounted for as
a purchase for financial reporting purposes. BNAB's primary asset is its wholly
owned subsidiary, BNA, a Florida chartered commercial bank. BNA has 13 branches,
with 11 located in Broward county, one in Dade county and one in Palm Beach
county. Closing of the acquisition is expected to occur in the fourth quarter of
1996, subject to certain conditions including receipt of all required regulatory
approvals. It is anticipated that a significant portion of the proceeds of this
offering will be contributed by the Company to BankAtlantic. (See "Use of
Proceeds").
On April 24, 1996, BankAtlantic signed a contract with M&I Data Services a
division of the Marshall & Ilsley Corporation, ("M&I") to provide data
processing services for seven years. The conversion to the M&I service bureau is
anticipated to be completed in the fourth quarter of 1996. The purpose of the
conversion is to increase capacity as well as improve customer service and
operational effectiveness. The estimated annual expenses for the service bureau
are approximately $2.4 million. The Company anticipates that it will be
investing $2.1 million in technology upgrades, primarily computer equipment.
As more fully described under "Regulation and Supervision -- Savings
Institution Regulations -- Capital Requirements," BankAtlantic is required to
meet all capital standards promulgated pursuant to FIRREA and FDICIA.
67
<PAGE> 70
BankAtlantic's regulatory capital position at March 31, 1996 and December
31, 1995 was (dollars in thousands):
<TABLE>
<CAPTION>
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
-------- -------- ----------
<S> <C> <C> <C>
MARCH 31, 1996
GAAP stockholders' equity................................ $150,547 $150,547 $150,547
Adjustments:
Non-qualifying intangible assets.................... (11,143) (11,143) (11,143)
Non-includable subsidiaries......................... (110) (110) (110)
Unrealized holding gains............................ (2,014) (2,014) (2,014)
Additional capital:
Allowable allowances for loans and tax certificate
losses......................................... 0 0 14,290
-------- -------- ----------
Regulatory capital....................................... 137,280 137,280 151,570
Minimum capital requirement.............................. 24,373 48,746 91,025
-------- -------- ----------
Regulatory capital excess................................ $112,907 $ 88,534 $ 60,545
======== ======== ==========
Regulatory capital as a percent of adjusted total assets:
Required............................................... 1.50% 3.00% 8.00%
-------- -------- ----------
Actual................................................. 8.45% 8.45% 13.32%
======== ======== ==========
DECEMBER 31, 1995
GAAP stockholders' equity................................ $136,815 $136,815 $136,815
Adjustments:
Non-qualifying intangible assets.................... (11,521) (11,521) (11,521)
Non-includable subsidiaries......................... (110) (110) (110)
Unrealized holding gains............................ (5,733) (5,733) (5,733)
Additional capital:
Allowable allowances for loans and tax certificate
losses......................................... 0 0 14,396
-------- -------- ----------
Regulatory capital....................................... 119,451 119,451 133,847
Minimum capital requirement.............................. 25,949 51,899 91,770
-------- -------- ----------
Regulatory capital excess................................ $ 93,502 $ 67,552 $ 42,077
======== ======== ==========
Regulatory capital as a percent of adjusted total assets:
Required............................................... 1.50% 3.00% 8.00%
======== ======== ==========
Actual................................................. 6.90% 6.90% 11.67%
======== ======== ==========
</TABLE>
- ---------------
To be considered "well capitalized," 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%. Management
believes that at March 31, 1996 and December 31, 1995, BankAtlantic met the
definition of "well capitalized".
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.
Unlike most industrial companies, virtually all of the assets and
liabilities of BankAtlantic are monetary in nature. As a result, interest rates
have a more significant impact on BankAtlantic'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. The possible
effect of fluctuating interest rates is discussed more fully under the previous
section entitled "Interest Rate Sensitivity."
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BUSINESS
GENERAL
The Company, formed in April 1994 under the laws of the State of Florida,
is the holding company for BankAtlantic. The Company acquired all of the capital
stock of BankAtlantic on July 13, 1994 pursuant to the holding company
reorganization. The Company's principal asset is its ownership of all of the
capital stock of BankAtlantic. As a unitary savings bank holding company, the
Company is registered with the OTS and is subject to OTS regulations,
examinations, supervision and reporting. See "Regulation and Supervision."
BankAtlantic is a federal savings bank headquartered in Ft. Lauderdale,
Florida that provides traditional retail banking services, a full range of
commercial banking products and related financial services directly and through
subsidiary corporations. The principal business of BankAtlantic is attracting
checking and savings deposits from the public and general business customers and
using these deposits to originate commercial, residential and consumer loans and
to make other permitted investments such as mortgage-backed securities and other
investment securities. BankAtlantic has attempted to shift its primary
activities from those of a traditional savings and loan to those generally
associated with commercial banking. In an effort to cause its loan portfolio to
adjust more rapidly to market conditions, BankAtlantic has shifted its emphasis
in lending from fixed-rate, long-term residential loans to shorter term and
variable rate consumer and commercial loans and investments. BankAtlantic
currently operates through 46 branch offices primarily located in Dade, Broward
and Palm Beach Counties in South Florida. As reported by an independent
statistical reporting service, BankAtlantic is currently the largest independent
financial institution headquartered in Broward County, Florida and third in size
among all savings institutions headquartered in the State of Florida, based on
consolidated assets at December 31, 1995, the most recent date utilized by such
reporting service. BankAtlantic is regulated and examined by the OTS and the
FDIC and its deposit accounts are insured up to applicable limits by the FDIC.
BankAtlantic's revenues are derived principally from interest earned on
loans, mortgage-backed securities, tax certificates, investment securities and
fees earned on deposits. BankAtlantic's major expense items are interest paid on
deposits and borrowings, provision for loan losses and general and
administrative expenses.
LENDING ACTIVITIES
General -- BankAtlantic's lending activities are currently divided into
three primary segments: residential real estate lending, commercial lending
(consisting of commercial real estate and commercial business lending) and
consumer lending (primarily consisting of loans secured by second liens on
residential real property, loans secured by automobiles and boats and unsecured
signature loans). See "Regulation and Supervision" for a description of
restrictions on BankAtlantic's lending activities.
Commercial lending is currently BankAtlantic's main lending focus.
Substantially all of BankAtlantic's commercial loans relate to assets of
borrowers located in Dade, Broward and Palm Beach Counties, Florida.
BankAtlantic has, however, made commercial real estate loans elsewhere in
Florida and anticipates increasing this expansion. BankAtlantic's residential
real estate lending consists primarily of home mortgage loans secured by
residential real estate located in Dade, Broward and Palm Beach Counties,
Florida. BankAtlantic also purchases residential loans in the secondary market
and from mortgage brokers. Direct consumer loans are solicited primarily through
mass and direct marketing and through the distribution and display of
advertising materials at branch offices. BankAtlantic also obtains automobile
loans indirectly through automobile dealerships located in South Florida.
BankAtlantic's loan underwriting procedures are designed to assess both the
borrower's ability to make principal and interest payments and the value of the
collateral securing the loan. Employment and financial information is solicited
from prospective borrowers, credit records are reviewed and the value of any
collateral for the loan is analyzed. Loan information supplied by a prospective
borrower is independently verified. Loan officers or other loan production
personnel in a position to directly benefit monetarily through loan solicitation
fees from individual loan transactions do not have approval authority and
commercial real estate and business and residential loans of $500,000 or more
and consumer loans of $100,000 or more require the approval of
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BankAtlantic's Major Loan Committee. The Major Loan Committee consists of the
Chairman of the Board, the Vice Chairman, the President, the Senior Executive
Vice President, certain Executive Vice Presidents and certain other officers of
BankAtlantic.
Interest rates and origination fees charged on loans originated by
BankAtlantic are generally competitive with other financial institutions and
other mortgage originators in BankAtlantic's general market area. BankAtlantic
has an affirmative obligation, under the provisions of the Community
Reinvestment Act of 1977, as amended (the "CRA"), to serve the credit needs of
the communities in which it operates, and management believes that BankAtlantic
fulfills its obligations under the CRA. See "Regulation and Supervision --
Community Reinvestment."
Commercial Real Estate Loans -- BankAtlantic's commercial real estate loans
include permanent mortgage loans on commercial and industrial properties,
construction loans secured by income producing properties (or for residential
development and land acquisition) and development loans. These loans are
originated on both a one year line of credit basis and on a fixed-term basis
generally ranging from one to five years. BankAtlantic generally lends not more
than 75% of the securing property's appraised value and requires borrowers to
maintain, at BankAtlantic, appropriate escrow accounts for the secured
property's real estate taxes and insurance. In making lending decisions,
BankAtlantic generally considers, among other things, the overall quality of the
loan, the credit of the borrower, the location of the real estate, the projected
income stream of the property and the reputation and quality of management
constructing or administering the property. No one factor is determinative and
such factors may be accorded different weights in any particular lending
decision. As a general rule, BankAtlantic also requires that these loans be
guaranteed by one or more of the individuals who have made a significant equity
investment in the property. Commercial real estate loans generally have shorter
terms, prime-based interest rates which adjust more rapidly to interest rate
fluctuations and bear higher rates of interest than alternative investments.
Accordingly, income from this type of loan should be more responsive to changes
in the general level of interest rates. However, permanent commercial real
estate and construction lending is generally considered to have higher credit
risk than single-family residential lending because of the concentration of
principal in a limited number of loans and borrowers and is dependent on the
successful operation of the related real estate project and thus may be subject,
to a greater extent, to adverse conditions in the real estate market or the
economy, generally. BankAtlantic's risk of loss on a construction loan is
dependent largely upon the accuracy of the initial estimate of the property's
sell-out value upon completion of the project and the estimated cost of the
project. If the estimated cost of construction or development proves to be
inaccurate, BankAtlantic may be compelled to advance funds beyond the amount
originally committed to permit completion of the project. If the estimate of
value proves to be inaccurate, BankAtlantic may be confronted, at or prior to
the maturity of the loan, with a project value which is insufficient to assure
full repayment. As loan payments become due, the cash flow from the project may
not be adequate to service total debt and the borrower may seek to modify the
terms of the loan. In addition, the nature of these loans is such that they are
generally less predictable and more difficult to evaluate and monitor and
collateral may be difficult to dispose of. BankAtlantic has sought to minimize
these risks by lending primarily to established entities and generally
restricting such loans to its primary market area.
Commercial Business Loans -- BankAtlantic's corporate lending activities
are generally directed towards small to medium size companies located in Dade,
Broward and Palm Beach Counties, Florida. BankAtlantic's corporate lending
division makes both secured and unsecured loans, although the majority of such
lending is done on a secured basis. The average balance of new commercial
business loans is in excess of $1 million and such loans are generally secured
by the receivables, inventory, equipment, and/or general corporate assets of the
borrowers. These loans are originated on both a one year line of credit basis
and on a fixed-term basis ranging from one to five years. Commercial business
loans generally have annual maturities and prime-based interest rates. However,
commercial business loans generally have a higher degree of credit risk than
residential loans because they are more likely to be adversely affected by
unfavorable economic conditions. The development of ongoing customer
relationships with commercial borrowers is an important part of BankAtlantic's
efforts to attract more low-interest and non-interest bearing demand deposits
and to generate other fee-based, non-lending services.
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Residential Real Estate Loans -- BankAtlantic's branch banking network
originates residential loans but BankAtlantic also enlists the services of
outside brokers to originate residential loans. These outside brokers receive a
fee upon the successful underwriting and closing of the loan. BankAtlantic
originates fixed rate loans with amortization periods of up to 30 years;
however, substantially all of these loans are sold to correspondents.
BankAtlantic also originates adjustable rate mortgage loans ("ARMs") with
amortization periods of up to 30 years which are either retained for portfolio
or sold to correspondents based on specific criteria. During 1995 and 1996
BankAtlantic purchased residential loans from unrelated third parties and will
continue to purchase residential loans in the future. Applicable regulations
require that all loans in excess of 90% of appraised value be insured by private
mortgage insurance. BankAtlantic's policy is to require private mortgage
insurance on all residential loans with a loan to value ratio greater than 80%.
In connection with residential loans insured by the Federal Housing
Administration ("FHA") or guaranteed by the Veterans Administration ("VA"),
BankAtlantic may lend up to the maximum percentage of the appraised value
acceptable to the insuring or guaranteeing agency. Appraised values are
determined by on-site inspections conducted by qualified independent appraisers.
BankAtlantic generally follows regulatory and agency guidelines when it
originates such loans for sale.
Federal regulations permit savings institutions to originate and purchase
mortgage loans secured by one-to-four family residences on which the payment
amount, the loan terms, the principal balance or a combination thereof change
periodically as a result of changes in interest rates. Pursuant to such
regulations, changes in the interest rate must be based on the movement of an
index that is beyond the control of the institution and must be agreed to by the
institution and the borrower. Under such regulations, ARMs must specify the
maximum interest rate which may be imposed during the term of the loan.
One-to-four family residential loans generally are of a longer duration and bear
lower rates of interest than commercial or consumer loans; however, there is
generally a lower credit risk associated with these types of loans.
During the second quarter of 1996 BankAtlantic began purchasing, for
portfolio, seasoned fixed and adjustable rate residential first mortgage loans
from various mortgage bankers and financial institutions located in various
states. BankAtlantic intends to concentrate its efforts on such loan purchases
in the secondary market. Loans purchased in the secondary market generally have
lower yields than can be obtained by originating loans, but management believes
purchasing loans to be cost effective. The Company has a wholesale lending
policy setting forth; among other things, procedures for reviewing of
underwriting and appraisals applicable to loans to be acquired and various
restrictions, including loan size and geographical concentrations.
In connection with its purchase of loans and MBSs, BankAtlantic makes
commitments to mortgage bankers; investment bankers, and other lenders to
purchase loans or MBSs on specific terms. BankAtlantic generally agrees to
purchase loans at a yield fixed on the date of the commitment with delivery of
the loans to be taken within 30 to 60 days thereafter.
Consumer Loans -- BankAtlantic significantly reduced its consumer lending
activities during early 1991 by eliminating indirect consumer loans (consumer
loans made by others and acquired by BankAtlantic) and significantly decreasing
originations of direct consumer loans (loans made directly to consumers rather
than through dealers). However, commencing in 1993, BankAtlantic has focused on
originating consumer loans bearing both fixed and prime-based interest rates
primarily ranging in terms up to 5 years, excluding second mortgage loans,
directly through its branch network. During 1995, BankAtlantic established a
relationship with the Automotive Dealers Marketing Inc. ("ADMI") to originate
direct automobile loans through a major automobile service club's Florida
network. These loans are underwritten by BankAtlantic and a fee is remitted to
ADMI upon the successful underwriting and closing of the loan. The volume of
direct consumer lending increased in 1996 and 1995 from 1994 levels primarily in
second mortgage loans. Through its acquisition of MegaBank in February 1995,
BankAtlantic reentered the indirect automobile lending market. MegaBank
historically obtained fixed-rate automobile loans indirectly through various
automobile dealerships located in Dade County, Florida and BankAtlantic has
continued this practice. A determination was made during the first quarter of
1996 to temporarily decrease production of indirect automobile loans pending the
integration of newly hired automobile lending personnel. Federal savings
institutions are authorized to make secured and unsecured consumer installment
loans in an aggregate amount of up to 35% of their assets. In addition, savings
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institutions have lending authority above this 35% limit for certain consumer
loans, such as second mortgages, home improvement loans, mobile home loans and
loans secured by savings accounts. Consumer loans typically involve a higher
degree of credit risk than one-to-four family residential loans secured by first
mortgages, but they generally carry higher yields and have shorter terms to
maturity. BankAtlantic's main focus in recent years has been the origination of
direct second mortgage loans primarily representing home equity loans which are
secured by a junior lien on residential real property and are typically based on
a maximum 80% loan-to-value ratio; however, loan-to-value ratios up to 100%
exist with a maximum cap of $20,000 subject to certain limitations. Second
mortgage loans generally are originated on both a line of credit basis and on a
fixed term basis ranging from 5 to 15 years. Personal loans may be secured by
various forms of collateral, both real and personal, or to a minimal extent, may
be made on an unsecured basis. Such loans generally bear interest at floating
rates with the exception of personal unsecured loans which bear interest at a
fixed rate.
The indirect origination of consumer loan products generally requires
funding of dealer reserves to dealers who originated such loans. The risk of
amounts previously advanced to the dealer is primarily dependent upon loan
performance but, secondarily, is dependent upon the financial condition of the
dealer. The dealer is generally responsible to BankAtlantic for the amount of
the reserve only if a loan giving rise to the reserve becomes delinquent or is
prepaid. However, the dealer's ability to refund any portion of the unearned
reserve to BankAtlantic is subject to economic conditions, generally, and the
financial condition of the dealer. A decline in economic conditions could
adversely affect both the performance of the loans and the financial condition
of the dealer. There is no assurance that BankAtlantic can successfully recover
amounts advanced in the event it pursues the dealer for amounts due. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" regarding BankAtlantic's experience relating to the Subject Portfolio
and recovery from its fidelity bond carrier of certain amounts.
Loan Commitments -- BankAtlantic issues commitments to make residential and
commercial real estate loans and commercial business loans on specified terms
which are conditioned upon the occurrence of stated events. Loan commitments are
generally issued in connection with (i) the origination of loans for the
financing of residential properties by prospective purchasers, (ii) construction
or permanent loans secured by commercial and multi-unit residential
income-producing properties, (iii) loans to corporate borrowers in connection
with loans secured by corporate assets and (iv) the origination of loans for the
refinancing of residential properties by existing owners.
The commitment procedure followed by BankAtlantic depends on the type of
loan underlying the commitment. Residential loan commitments are generally
limited to 30 days and are issued after the loan is approved. However, loan
commitments may be extended based on the circumstances. BankAtlantic offers
interest rate "locks" for periods of up to 150 days. BankAtlantic also issues
short-term commitments on commercial real estate loans and commercial business
loans. Short-term commitments generally remain open for no more than 90 days.
BankAtlantic usually charges a commitment fee of 1% to 2% on short-term
commitments relating to commercial real estate loans and commercial business
loans. In most cases, half of the fee is payable upon the acceptance of the
commitment and is non-refundable. If the loan is ultimately made, the remainder
of the commitment fee is collected at closing.
Loan Servicing Rights -- BankAtlantic generally retains servicing rights on
fixed rate loans which are generally originated for sale. On an on-going basis
BankAtlantic purchases servicing rights from third parties. The fees derived
from servicing mortgage loans include mortgage servicing fees as well as return
check and late charge fees. BankAtlantic has in the past sold bulk purchased
mortgage servicing rights based on market conditions, capital constraints and
capacity. BankAtlantic plans such sales in the future. The amount of revenue
earned from loan servicing is dependent on the prepayments of the underlying
loans. Generally, as interest rates fall, loan prepayments accelerate, resulting
in lower net revenues earned on loan servicing rights as well as write-offs of
purchased mortgage servicing rights. A decline in the value of purchased
mortgage servicing rights may also reduce regulatory capital. (See "Regulation
and Supervision -- Savings Institutions Regulation"). Conversely, as interest
rates rise, loan prepayments decline, resulting in higher net revenues earned on
loan servicing rights.
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The lower of cost or market value for mortgage loans originated for resale
is determined on an aggregate basis. In May 1995 the FASB issued Statement of
Financial Accounting Standard No. 122 ("FAS 122") which eliminated the
accounting distinction between rights to service mortgage loans for others that
are acquired through loan origination activities and those acquired through
purchase transactions. FAS 122 requires an entity to recognize as separate
assets rights to service mortgage loans for others, however those servicing
rights are acquired. FAS 122 requires the periodic evaluation of capitalized
mortgage servicing rights for impairment based on fair value. On January 1,
1996, this statement was implemented prospectively. The initial valuation of
mortgage servicing rights ("MSR's") is on an individual loan basis. MSR's
acquired either through purchase or origination are amortized to expense using
the level yield method over the estimated life of the loan and continually
adjusted for prepayments. For the purpose of evaluating and measuring impairment
of MSR's, management stratifies those rights based on the predominant risk
characteristics of the underlying loans. Those characteristics include loan
type, note rate and term. Upon implementation of FAS 122, no additional
valuation allowance was required. Adjustments to the valuation allowance are
reflected in operations.
Usury Limitations -- The maximum rate of interest that BankAtlantic may
charge for any particular loan transaction varies depending upon the purpose of
the loan, the nature of the borrower, the security and other various factors set
forth in Florida and federal interest rate laws. Under Florida law, BankAtlantic
is not subject to any usury ceiling on loans secured by a first lien on
residential real estate and certain other secured loans. Other types of loans
are subject to Florida's statutory usury ceiling which is currently 18% per
annum, although certain types of loans in excess of $500,000 may legally carry
an interest rate of up to 25% per annum.
Non-Performing and Classified Assets, Loan Delinquencies and
Defaults -- When a borrower fails to make a required payment on a loan,
BankAtlantic attempts to have the deficiency cured by communicating with the
borrower. In most cases, deficiencies are cured promptly. If the delinquency is
not cured within 90 days, it is BankAtlantic's general policy to institute
appropriate legal action to collect the loan, including foreclosing on any
collateral securing the loan and obtaining a deficiency judgment against the
borrower, if appropriate.
Current regulations provide for the classification of loans and other
assets considered by examiners to be of lesser quality as "special mention,"
"substandard," "doubtful" or "loss" assets. The special mention category applies
to assets not warranting classification as substandard but possessing credit
deficiencies or potential weaknesses necessitating management's close attention.
Substandard assets have one or more defined weaknesses and are characterized by
the distinct possibility that the insured institution will sustain some loss if
the deficiencies are not corrected. Doubtful assets have the weaknesses of
substandard assets with the additional characteristic that such weaknesses make
collection of the loan or liquidation in full on the basis of currently existing
facts, conditions and values, highly questionable or improbable.
For components of the portfolio that are not classified, including special
mention, estimated losses for the upcoming twelve months are provided for. For
loans classified as substandard or doubtful, whether analyzed and provided for
individually or as part of pools, all estimated credit losses over the lives of
these loans are provided for. Prompt charge-off is required for loans or
portions of loans that available information confirms to be uncollectible.
Assets classified as a loss are considered uncollectible and of such little
value that their continued treatment as assets is not warranted.
The asset classification regulations require insured institutions to
classify their own assets and to establish prudent general allowances for loan
losses. However, regulators have considerable discretion to review asset
classifications and loss allowances of insured institutions, and, if a regulator
concludes that the valuation allowances established by an institution are
inadequate, the regulator may determine, subject to certain reviews, the need
for, and extent of, any increase necessary in the institution's general
allowance for loan losses.
Management of BankAtlantic has identified certain loans as non-performing
or restructured assets. These assets include: (i) loans accounted for on a
non-accrual basis; (ii) loans not included in category (i), which are
contractually 90 days or more past due as to interest or principal payments;
(iii) assets acquired in
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settlement of loans; (iv) restructured loans, and (v) non-accrual tax
certificates. Non-accrual loans are loans on which interest recognition has been
suspended until realized because of doubts as to the borrower's ability to repay
principal or interest. Restructured loans are loans on which the terms have been
altered to provide a reduction or deferral of interest or principal because of a
deterioration in the borrower's financial position. Such restructured loans may
be removed from the restructured category based upon various factors, including
a period of satisfactory loan performance under the revised terms.
Allowance for Loan Losses -- BankAtlantic prospectively adopted SFAS No.
114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No.
118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition and
Disclosures" ("FAS 114"), effective January 1, 1995. There was no impact to the
consolidated statement of financial condition or the consolidated statement of
operations upon implementation. FAS 114 does not apply to large groups of
smaller balance homogeneous loans that are collectively evaluated for
impairment. Loans collectively reviewed by BankAtlantic for impairment include
all residential and consumer loans and performing commercial real estate and
business loans under $500,000, excluding loans which are individually reviewed
based on specific criteria, such as delinquency and condition of collateral
property. BankAtlantic's impaired loans within the scope of FAS 114 include
nonaccrual commercial loans, restructured loans, and performing commercial loans
less than 90 days delinquent, where management does not expect the loans to be
repaid in accordance with their contractual terms but which are expected to be
collected in full. Generally, BankAtlantic recognizes interest income on
impaired loans on a cash basis.
BankAtlantic, beginning on January 1, 1995, bases the measurement of loan
impairment on the fair value of the loan's collateral in accordance with FAS
114. Non-collateral dependent loan impairment is based on the present value of
the estimated future cash flows. Impairment losses are included in the allowance
for loan losses through a charge to the provision for loan losses. Adjustments
to impairment losses resulting from changes in the fair value of an impaired
loan's collateral or projected cash flows are included in the provision for loan
losses. Upon disposition of an impaired loan, any related valuation allowance is
relieved from the allowance for loan losses.
The allowance for loan losses is maintained by additions charged to
operations as a provision for loan losses and by loan recoveries, while
charge-offs reduce the allowance. BankAtlantic's process for evaluating the
adequacy of the allowance for loan losses has three basic elements: first, the
identification of impaired loans; second, the establishment of appropriate loan
loss allowances once individual specific impaired loans are identified; and
third, a methodology for estimating loan losses based on the inherent risk in
the remainder of the loan portfolio.
INVESTMENT ACTIVITIES
General -- BankAtlantic maintains an investment portfolio consisting
primarily of mortgage-backed securities, tax certificates, Federal agency
obligations, Treasury Notes, corporate bonds and asset-backed securities.
Additionally, BankAtlantic has, in the past, purchased banker's acceptances.
Federal regulations limit the types and quality of instruments in which
BankAtlantic may invest.
Mortgage-backed securities are pools of residential loans which are made to
consumers and then generally sold to governmental agencies, such as the
Government National Mortgage Corporation ("GNMA"), Federal National Mortgage
Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC").
Mortgage-backed securities have either 15-30 year maturities, 5-7 year balloon
maturities or are ARMs. BankAtlantic generally invests in ARMs or 5-7 year
balloon maturity mortgage-backed securities. Banker's acceptances are
unconditional obligations of the issuing bank and are collateralized by various
means, including the inventory and receivables of borrowers of the issuing bank.
Asset-backed securities consist of pooled automobile receivables and are limited
to only those that are investment grade. Corporate bonds consist of investment
grade obligations of corporate borrowers with an average duration not to exceed
three years.
In May 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities
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("FAS 115"). FAS 115 was implemented, prospectively, by BankAtlantic on January
1, 1994. Under FAS 115, investments in debt securities which BankAtlantic has a
positive intent and ability to hold to maturity are classified as "securities
held to maturity" and are carried at cost, adjusted for discounts and premiums
which are accreted or amortized to estimated maturity under the interest method.
In accordance with FAS 115, a security cannot be classified as held to maturity
if it might be sold in response to changes in market interest rates, related
changes in the security's prepayment risk, liquidity needs, changes in the
availability of and the yield on alternative investments, and changes in funding
sources and terms. Prior to the adoption of FAS 115, securities that were held
for sale were stated at the lower of amortized cost or market. Upon adoption of
FAS 115, all securities that were previously classified as held for sale were
designated as "available for sale".
Debt and equity securities and options related thereto, purchased or sold
for the purpose of a short-term profit are classified as "trading account
securities" and are recorded at fair value. Unrealized gains and losses in
trading account securities are reflected in operations.
Debt and equity securities not classified as held to maturity or trading
account securities are classified as "available for sale". Debt and equity
securities available for sale are carried at fair value, with the related
unrealized appreciation or depreciation, net of deferred income taxes, reported
as a separate component of stockholders' equity.
On November 15, 1995, the FASB issued Special Report No. 155-B, A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities (the "Special Report"). Pursuant to the Special Report,
BankAtlantic was permitted to conduct a one-time reassessment of the
classifications of all securities held at that time. Any reclassifications from
the held-to-maturity category made in conjunction with that reassessment would
not call into question an enterprise's intent to hold other debt securities to
maturity in the future. Based upon the guidance provided in the Special Report,
BankAtlantic reassessed its security classifications considering, among other
issues, flexibility in management of the portfolio for liquidity and interest
rate risk management as well as the potential SAIF special assessment. As a
result of this reassessment, BankAtlantic, on December 15, 1995 reclassified all
mortgage-backed securities, and investment securities, excluding tax
certificates, which were previously categorized as "held to maturity" to the
"available for sale" category.
Tax Certificates -- BankAtlantic's portfolio also includes tax certificates
issued by various counties in the State of Florida. Tax certificates are
evidences of tax obligations that are auctioned by county taxing authorities on
an annual basis when the property owner fails to pay the real estate taxes on
the property when due. Tax certificates represent a priority lien against the
real property for which the assessed real estate taxes are delinquent. Interest
accrues on the tax certificates at the rate established at the auction. The
minimum repayment on tax certificates in order to satisfy the lien is the
certificate amount plus the greater of five percent of the certificate amount or
the interest accrued through the redemption date. Although tax certificates have
no payment schedule or stated maturity, the certificate holder has the right to
collect the delinquent tax amount, plus interest and can file for a deed to the
underlying property if the delinquent tax amount is unpaid at the end of two
years. If the certificate holder does not file for the deed within seven years,
the certificate becomes null and void. BankAtlantic's experience with this type
of investment has been favorable as rates earned are generally higher than many
alternative investments, substantial repayment generally occurs over a two year
period and losses to date have been minimal. The primary risks BankAtlantic has
experienced with tax certificates have related to the risk that additional funds
may be required to purchase other certificates relating to the property, the
risk that the liened property may be unusable and the risk that potential
environmental concerns may make taking title to the property untenable.
The OTS has reviewed the amount invested in, and procedures utilized in the
acquisition and administration of tax certificates by savings institutions. The
purpose of such review is believed to have been the establishment of specific
regulatory guidelines and procedures so as to insure the safety and soundness of
the investment by savings institutions. BankAtlantic participated with the OTS
in this review. After such review, the Southeast Regional Office of the OTS
recommended that the maximum amount of tax certificates purchased be based on a
formula whereby the rolling twelve month average of aggregate investments in tax
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certificates, including interest thereon, not exceed 100% of risk-based capital.
Based on market conditions, BankAtlantic purchased approximately $44 million,
$47 million and $64 million in tax certificates at auctions in 1995, 1994 and
1993, respectively, less than that permissible under the OTS recommendation. At
March 31, 1996, BankAtlantic had an outstanding balance of approximately $40
million in tax certificates. BankAtlantic is also aware that on November 17,
1992, the Federal Deposit Insurance Corporation ("FDIC") issued an Interpretive
Letter stating its view that it constitutes an unsafe or unsound banking
practice for a non-member commercial bank to invest in tax certificates. While
BankAtlantic is not aware of any similar statement published by the FDIC
concerning investments in tax certificates by savings banks, the Atlanta
Regional Office of the FDIC has advised BankAtlantic that the FDIC believes that
tax certificates "inherently have an objectionable level of risk for financial
institution investment." However, if in the future the FDIC or the OTS makes a
determination that investments in tax certificates are improper, either
regulator could seek to impose restrictions or sanctions, prohibit or limit
investments in tax certificates or require additional regulatory reserves with
respect to these investments. In April 1996, an interpretive letter was released
by the OCC which rescinds all previous prohibitions related to the purchase of
tax certificates by national banks, provided they follow the appropriate
guidelines and policies. For descriptions of BankAtlantic's investments in tax
certificates and other investment securities, see Note 2 to the Consolidated
Financial Statements.
Management of BankAtlantic establishes allowances for tax certificate
losses in amounts which it believes is sufficient to provide for potential
future losses. In establishing its allowances for tax certificates, management
considers past loss experience, present indicators such as the length of time
the certificate has been outstanding, economic conditions and collateral values.
Tax certificates and resulting deed applications are classified as nonaccrual
when a tax certificate is outstanding 48 months and a deed has aged 48 months
from BankAtlantic's acquisition date. At that time, interest ceases to be
accrued and previously accrued interest is reversed. Prior to 1994 the practice
was to establish an allowance for any interest accrued after a specified term
after acquisition of the certificate. The new methodology charges off
certificates at the same point in time, but discontinues the practice of
accruing interest and establishing an allowance for amounts accrued after the
specified term.
SOURCES OF FUNDS
General -- Historically, deposits have been the principal source of
BankAtlantic's funds for use in lending and for other general business purposes.
Loan repayments, sales of securities, capital contributions from the Company,
advances from the Federal Home Loan Bank ("FHLB") of Atlanta and other
borrowings, including the issuance of subordinated debentures, and the use of
repurchase agreements have been additional sources of funds. Loan amortization
payments and deposit inflows and outflows are significantly influenced by
general interest rates. Borrowings may be used by BankAtlantic on a short-term
basis to compensate for reductions in normal sources of funds such as savings
inflows, and to provide additional liquidity investments. On a long-term basis,
borrowings may support expanded lending activities. Historically, BankAtlantic
has borrowed primarily from the FHLB of Atlanta and through the use of
repurchase agreements.
Deposit Activities -- BankAtlantic offers several types of deposit programs
designed to attract both short-term and long-term funds from the general public
by providing an assortment of accounts and rates. BankAtlantic believes that its
product line is comparable to that offered by its competitors. BankAtlantic
offers the following accounts: commercial and retail demand deposit accounts;
regular passbook and statement savings accounts; money market accounts;
fixed-rate, fixed-maturity certificates of deposit, ranging in maturity from 30
days to 8 years; variable-maturity jumbo certificates of deposit; and various
NOW accounts. BankAtlantic also offers IRA and Keogh retirement accounts.
BankAtlantic's deposit accounts are insured by the FDIC through the SAIF and the
BIF up to a maximum of $100,000 for each insured depositor.
BankAtlantic solicits deposits through advertisements in newspapers and
magazines of general circulation and on radio and television in Dade, Broward
and Palm Beach Counties, Florida. Most of its depositors are residents of these
three counties at least part of the year. BankAtlantic does not hold any
deposits obtained through brokers. In February 1995, in connection with the
acquisition of MegaBank, BankAtlantic acquired approximately $20 million of
deposits from non-resident aliens solicited through business development
officers.
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Borrowings -- BankAtlantic has utilized wholesale repurchase agreements as
a means of obtaining funds and increasing yields on its investment portfolio. In
a wholesale repurchase transaction, BankAtlantic sells a portion of its current
investment portfolio (usually government and mortgage-backed securities) at a
negotiated rate and agrees to repurchase the same assets on a specified date.
Proceeds from such transactions are treated as secured borrowings pursuant to
applicable regulations. See Note 9 to the Consolidated Financial Statements.
BankAtlantic is a member of the FHLB and is authorized to apply for secured
advances from the FHLB of Atlanta. See "Regulation and Supervision."
BankAtlantic uses advances from the FHLB to repay other borrowings, meet deposit
withdrawals and expand its lending and short-term investment activities. See
Note 8 to the Consolidated Financial Statements.
Federal Funds Borrowings -- BankAtlantic has established three $5.0 million
unsecured facilities from three federally insured banking institutions to
purchase Federal Funds. The facilities are used on an overnight borrowing basis
to assist in managing BankAtlantic's cash flow requirements. These Federal Fund
lines are subject to periodic review and may be terminated at any time by the
issuer institution.
COMPETITION
As reported by an independent statistical reporting service, BankAtlantic
ranked third in size among all savings institutions headquartered in the State
of Florida and first in size among all independent financial institutions
headquartered in Broward County, Florida, based on consolidated assets at
December 31, 1995, the most recent date utilized by such reporting service.
BankAtlantic's operating goal is to provide a broad range of financial services
with a strong emphasis on customer service to individuals and businesses in
South Florida.
BankAtlantic has substantial competition in attracting and retaining
deposits and in lending funds. The primary factors in competing for deposits are
the range and quality of financial services offered, the ability to offer
attractive rates and the availability of convenient office locations. There is
direct competition for deposits from credit unions and commercial banks and
other savings institutions. Additional significant competition for savings
deposits comes from other investment alternatives, such as money market mutual
funds and corporate and government securities. The primary factors in competing
for loans are the range and quality of lending services offered, interest rates
and loan origination fees. Competition for the origination of real estate loans
normally comes from other savings and financial institutions, commercial banks,
mortgage bankers and insurance companies.
On August 8, 1995, the FDIC established a reduced deposit insurance
assessment rate schedule of 4 to 31 basis points ($.04 to $.31 for every $100 of
assessable deposits) for BIF members retroactive to May 1995. The FDIC further
reduced the premiums applicable to BIF deposits, effective January 1, 1996, to a
minimum flat fee of $2,000 to a maximum assessment of 27 basis points. Under the
new assessment rate schedule, approximately 92% of BIF members will pay only the
minimum fee while SAIF members retain the existing assessment rate schedule of
23 to 31 basis points. BankAtlantic pays deposit insurance premiums primarily to
the SAIF and secondarily, to the BIF in connection with the deposits it acquired
as a result of the acquisition of MegaBank. At March 31, 1996, BankAtlantic had
approximately $135 million of deposits subject to BIF premiums and $1.2 billion
subject to SAIF premiums.
The disparity in insurance premiums between those required for financial
institutions with all or primarily SAIF insured deposits and those with all or
primarily BIF deposits could allow BIF members to attract and retain deposits at
a lower effective cost. The resulting competitive disadvantage could also result
in BankAtlantic having to raise its deposit rates to remain competitive or lose
deposits to BIF members who may decide to pay higher rates of interest on
deposits because of the lower deposit insurance premiums. Although BankAtlantic
has other sources of funds, such sources may be more costly than the cost of
deposits.
Several alternatives to mitigate the effect of the BIF/SAIF premium
disparity have been proposed by the U.S. Congress, federal regulators, industry
lobbyists and the Clinton Administration. One plan to recapitalize the SAIF that
has gained support of several sponsors would require all SAIF member
institutions, including
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BankAtlantic, to pay a one-time fee of approximately 85 basis points on the
amount of deposits held by the member institution at March 31, 1995. This fee
would amount to approximately $6.1 million on an after tax basis to BankAtlantic
and , if this proposal is enacted into law, the effect would most likely be an
immediate charge to earnings. In addition, BNA is also subject to the proposed
one-time fee since all of its deposits are SAIF-insured deposits; however,
management believes that the assessment would be reduced by 20% based on BNA's
status as a "de novo sasser bank" as defined by the proposed legislation. The
fee associated with BNA's SAIF-insured deposits would amount to approximately
$1.8 million on an after tax basis.
Past legislative and regulatory action has increased competition between
savings institutions and other financial institutions, such as commercial banks,
by expanding the range of financial services that may be offered by savings
institutions (e.g., interest bearing checking accounts, trust services and
installment and commercial lending authority), while reducing or eliminating the
difference between thrift institutions and commercial banks with respect to
long-term lending authority, taxation and maximum rates of interest that may be
paid on savings deposits. Current and future regulatory requirements may
adversely affect BankAtlantic's competitive position by restricting its
operations. Legislative developments related to interstate branching and banking
are expected to continue the consolidation of smaller thrifts and banks, and
also provide easier access to larger financial institutions in the marketplace.
Accordingly, BankAtlantic expects increased competition in the immediate future.
See further discussion under "Regulation and Supervision -- Legislative
Developments -- Interstate Banking".
EMPLOYEES
The Company does not have any employees who are not also employees of
BankAtlantic. At March 31, 1996 BankAtlantic employed 762 full-time and 44
part-time employees. Management believes that its relations with its employees
are satisfactory. BankAtlantic currently maintains a comprehensive employee
benefits program providing, among other benefits, a qualified pension plan,
managed health care programs and life insurance. These employee benefits are
considered by management to be generally competitive with employee benefits
provided by other major employers in Florida. BankAtlantic's employees are not
represented by any collective bargaining group.
PROPERTIES
The Company's and BankAtlantic's principal and executive offices are
located at 1750 East Sunrise Boulevard, Fort Lauderdale, Florida 33304. In
addition to its principal office, BankAtlantic currently conducts business at 45
branch offices primarily located in Dade, Broward, and Palm Beach Counties,
Florida. BankAtlantic owns the land and building on which its executive offices
are located and also owns 22 of its branch office locations. BankAtlantic leases
either the land, the building or both in connection with the operation of its 20
other branch offices. BankAtlantic has seven leased branch office sites in
Broward County, with lease expiration dates ranging from 1996 to 2001; nine
leased branch office sites in Dade County, with lease expiration dates ranging
from 1996 to 2005; one leased branch office in Palm Beach County, with a lease
expiring in 1999; and six leased branch offices located in Wal-Mart stores in
Lee, Sarasota and Charlotte Counties, with leases expiring in 1999 and 2000.
BankAtlantic also maintains two ground leases in Broward County expiring in
1996, 1999 and 2072 and one ground lease in Palm Beach County expiring in 2000.
At March 31, 1996, the aggregate net book value of premises and equipment,
including leasehold improvements and equipment, was $42.6 million.
REGULATION AND SUPERVISION
GENERAL
The Company, by virtue of its ownership of all of the outstanding stock of
BankAtlantic, is a unitary savings bank holding company subject to regulatory
oversight by the OTS. As such, the Company is required to register with and be
subject to OTS examination, supervision and certain reporting requirements.
Further, as a company having a class of publicly held equity securities, the
Company is subject to the reporting and the other requirements of the Exchange
Act. In addition, based on its ownership at March 31, 1996 of 46% of the
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Company's Class B Common Stock, BFC is subject to the same oversight by the OTS
as discussed herein with respect to the Company.
BankAtlantic is a member of the FHLB system and its deposit accounts are
insured up to applicable limits by the FDIC. BankAtlantic is subject to
supervision, examination and regulation by the OTS and to a lesser extent by the
FDIC as the insurer of its deposits. BankAtlantic must file reports with the OTS
and the FDIC concerning its activities and financial condition, in addition to
obtaining regulatory approvals prior to entering into certain transactions.
There are periodic examinations by the OTS and the FDIC to examine
BankAtlantic's compliance with various regulatory requirements. The regulatory
structure also gives regulatory authorities extensive discretion in connection
with their supervisory and enforcement policies with respect to the
classification of non-performing and other assets and the establishment of
adequate loan loss reserves for regulatory purposes.
HOLDING COMPANY REGULATIONS
The Home Owner's Loan Act ("HOLA") prohibits a savings bank holding company
from directly or indirectly acquiring control, including through an acquisition
by merger, consolidation or purchase of assets, of any savings association (as
defined in Section 3 of the Federal Deposit Insurance Act) or any other savings
and loan or savings bank holding company, without prior OTS approval. In
considering whether to grant approval for any such transaction, the OTS will
take into consideration a number of factors, including the competitive effects
of the transaction, the financial and managerial resources and future prospects
of the holding company and its bank or thrift subsidiaries following the
transaction, and the compliance records of such subsidiaries with the CRA.
Generally, a savings bank holding company may not acquire more than 5% of the
voting shares of any savings association unless by merger, consolidation or
purchase of assets, in each case subject to prior OTS approval. A savings bank
holding company may not acquire as a separate subsidiary an insured institution
which has its principal offices outside of the state where the principal offices
of its subsidiary institution is located, except in the case of certain
emergency acquisitions approved by the FDIC, or when the laws of the state in
which the insured institution to be acquired is located specifically authorize
such an acquisition. However, a savings bank holding company may acquire up to
5% of the voting shares of any savings association or savings bank holding
company not a subsidiary thereof without prior regulatory approval. Another
provision of HOLA permits a savings bank holding company to acquire up to 15% of
the voting shares of certain undercapitalized savings associations.
Federal law empowers the Director of the OTS to take substantive action
when it determines that there is reasonable cause to believe that the
continuation by a savings bank holding company of any particular activity
constitutes a serious risk to the financial safety, soundness, or stability of a
savings bank holding company's subsidiary savings institution. The Director of
the OTS has oversight authority for all holding company affiliates, not just the
insured institution. Specifically, the Director of the OTS may, as necessary,
(i) limit the payment of dividends by the savings institution; (ii) limit
transactions between the savings institution, the holding company and the
subsidiaries or affiliates of either; or (iii) limit any activities of the
savings institution that might create a serious risk that the liabilities of the
holding company and its affiliates may be imposed on the savings institution.
Any such limits would be issued in the form of a directive having the legal
effect of a cease and desist order.
Activities Limitations -- The Company will remain a unitary savings bank
holding company under applicable law until it acquires as a separate subsidiary
another savings institution. A savings bank holding company whose sole
subsidiary qualifies as a qualified thrift lender ("QTL"), described below,
generally has the broadest authority to engage in various types of business
activities with little to no restrictions on its activities, except that
historically savings bank holding companies have not been permitted to acquire
or be acquired by an entity engaged in securities underwriting or market making.
A holding company that acquires another institution and maintains it as a
separate subsidiary or whose sole subsidiary fails to meet the QTL test will
become subject to the activities limitations applicable to multiple savings bank
holding companies. In general, a multiple savings bank holding company (or
subsidiary thereof that is not an insured institution) may not commence, or
continue for more than a limited period of time after becoming a multiple
savings bank holding company (or a subsidiary thereof), any business activity
other than (i) furnishing or performing
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management services for a subsidiary insured institution; (ii) conducting an
insurance agency or an escrow business; (iii) holding, managing or liquidating
assets owned by or acquired from a subsidiary insured institution; (iv) holding
or managing properties used or occupied by a subsidiary insured institution; (v)
acting as trustee under deeds of trust; (vi) those activities previously
directly authorized by the OTS by regulation as of March 5, 1987 to be engaged
in by multiple savings bank holding companies; or (vii) subject to prior
approval of the OTS, those activities authorized by the Federal Reserve Board
("FRB") as permissible investments for bank holding companies. These
restrictions do not apply to a multiple savings bank holding company if (a) all,
or all but one, of its insured institution subsidiaries were acquired in
emergency thrift acquisitions or assisted acquisitions and (b) all of its
insured institution subsidiaries are QTLs.
Restrictions on Transactions with BankAtlantic -- BankAtlantic is subject
to restrictions in its dealings with the Company and any other companies that
are "affiliates" of the Company under HOLA and certain provisions of the Federal
Reserve Act ("FRA") that are made applicable to savings institutions by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
and OTS regulations.
As a result of FIRREA, a savings institution's transactions with its
affiliates are subject to limitations set forth in the HOLA and OTS regulations,
which incorporate Sections 23A, 23B, 22(g) and 22(h) of the FRA and Regulation O
adopted by the FRB. Under Section 23A, an "affiliate" of an institution is
defined generally as (i) any company that controls the institution and any other
company that is controlled by the company that controls the institution, (ii)
any company that is controlled by the shareholders who control the institution
or any company that controls the institution or (iii) any company that is
determined by regulation or order to have a relationship with the institution
(or any subsidiary or affiliate of the institution) such that "covered
transactions" with the company may be affected by the relationship to the
detriment of the institution. "Control" is determined to exist if a percentage
stock ownership test is met or if there is control over the election of
directors or the management or policies of the company or institution. "Covered
transactions" generally include loans or extensions of credit to an affiliate,
purchases of securities issued by an affiliate, purchases of assets from an
affiliate (except as may be exempted by order or regulation), and certain other
transactions. See "Regulation and Supervision -- Savings Institution
Regulations -- Transactions with Affiliates" below for a general discussion of
the restrictions on dealing with affiliates.
LEGISLATIVE DEVELOPMENTS
Over the years measures have been taken to reform the thrift and banking
industries and to strengthen the insurance funds for depository institutions. In
1991, a comprehensive deposit insurance and banking reform plan, the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), became law.
Although FDICIA's primary purpose was to recapitalize the insurance fund, FDICIA
also affects the supervision and regulation of all federally insured depository
institutions, including federal savings banks such as BankAtlantic and financial
institution holding companies such as the Company.
FDICIA requires each federal banking agency to establish standards relating
to internal controls, information systems, and internal audit systems that are
designed to assess the financial condition and management of the institution,
loan documentation, credit underwriting, interest rate exposure, asset growth,
and compensation, fees and benefits. FDICIA lowered the QTL investment
percentage applicable to institutions insured by SAIF. See "Savings Institution
Regulations -- Qualified Thrift Lender." FDICIA further requires annual on-site
full examinations of depository institutions, with certain exceptions, and
annual reports on institutions' financial and management controls.
The Riegle Community Development and Regulatory Improvement Act of 1994
(the "Riegle Act") -- The Riegle Act, passed in September 1994, consolidated
several proposals into a single bill for funding for community development,
reduction of regulatory paperwork burdens of banks, small business
securitization, consumer protection, currency transaction reporting reforms and
reforms to the National Flood Insurance programs.
Interstate Banking -- The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 ("RNA") authorizes interstate acquisition of banks and
bank holding companies without geographic limitation beginning one year after
enactment. In addition, beginning June 1, 1997, a bank may merge with a
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bank in another state as long as neither of the states has opted out of
interstate branching between the date of enactment of the RNA and May 31, 1997.
The RNA further provides that states may enact laws permitting interstate merger
transactions prior to June 1, 1997. A bank may establish and operate a de novo
branch in a state in which the bank does not maintain a branch if that state
expressly permits de novo branching. Once a bank has established branches in a
state through an interstate merger transaction, the bank may establish and
acquire additional branches at any location in the state where any bank involved
in the interstate merger transaction could have established or acquired branches
under applicable federal or state law. A bank that has established a branch in a
state through de novo branching may establish and acquire additional branches in
such state in the same manner and to the same extent as a bank having a branch
in such state as a result of an interstate merger. If a state opts out of
interstate branching within the specified time period, no bank in any other
state may establish a branch in the opting out state, whether through an
acquisition or de novo.
Expanded Non-Banking Activities -- Various bills have been introduced into
the United States Congress that would repeal in some respects the provisions of
the Glass-Steagall Act prohibiting certain banking organizations from engaging
in certain securities activities and the provisions of the Bank Holding Company
Act prohibiting affiliations between banking organizations and non-banking
organizations. This legislation is still under discussion.
SAVINGS INSTITUTION REGULATIONS
Regulatory Capital -- Both the OTS and the FDIC have promulgated
regulations establishing capital requirements applicable to savings
institutions. The effect and interrelationship of these regulations is discussed
below.
Savings institutions must meet the OTS' specific capital standards which by
law must be no less stringent than capital standards applicable to national
banks, with exceptions for risk-based capital requirements to reflect interest
rate risk or other risk. Capital calculated pursuant to the OTS' regulations
varies substantially from capital calculated pursuant to GAAP. At March 31, 1996
and December 31, 1995, BankAtlantic met all applicable regulatory capital
requirements. The capital requirements are as follows:
(a) The leverage limit requires savings institutions to maintain core
capital of at least 3% of adjusted total assets. Adjusted total assets are
calculated as GAAP total assets, minus intangible assets (except those included
in core capital as described below). Core capital consists of common
shareholders' equity, including retained earnings, noncumulative perpetual
preferred stock and related surplus, less specified intangible assets (including
goodwill and MSRs. However, a portion of MSRs may be included in adjusted assets
and core capital. Generally, an amount may be included equal to the lower of (i)
90% of the fair market value of readily marketable MSRs (ii) the current
amortized book value as determined under GAAP or (iii) 50% of core capital. At
March 31, 1996, BankAtlantic had core capital of approximately $137.3 million
and a core capital ratio of 8.45%. This amount was $88.5 million above the 3%
requirement on that date. At March 31, 1996, MSRs amounted to approximately
$24.5 million.
(b) Under the tangible capital requirement, savings institutions must
maintain tangible capital in an amount not less than 1.5% of adjusted total
assets. Tangible capital is defined in the same manner as core capital, except
that all intangible assets, except MSRs, must be deducted. The percentage of
MSRs which may be included in tangible capital is equal to the lesser of (a)
100% of the amount of tangible capital that exists before the deduction of any
disallowed MSRs or (b) the amount of MSRs allowed to be included in core
capital. As of March 31, 1996 BankAtlantic had tangible capital of approximately
$137.3 million and a tangible capital ratio of 8.45%. This amount was $112.9
million above the 1.5% requirement on that date.
(c) The risk-based standards of the OTS currently require maintenance of
core capital equal to at least 4% of risk-weighted assets, and total capital
equal to at least 8% of risk-weighted assets. Total capital includes core
capital plus supplementary capital, but supplementary capital that may be
included in computing total capital for this purpose may not exceed core
capital. Supplementary capital includes cumulative perpetual preferred stock,
allowable subordinated debt and general loan loss allowances, within specified
limits. Such general loss allowances may not exceed 1.25% of risk-weighted
assets.
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Risk-weighted assets are determined by assigning to all assets designated
risk weights ranging from 0% to 100%, based on the credit risk assumed to be
associated with the particular asset. Generally, zero weight is assigned to
risk-free assets, such as cash and unconditionally guaranteed United States
government securities such as mortgage-backed securities issued or guaranteed by
GNMA. A weight of 20% is assigned to, among other things, certain obligations of
United States government-sponsored agencies (such as the FNMA and the FHLMC),
stock of a FHLB and high quality mortgage-related securities. A weight of 50% is
assigned to qualifying mortgage loans and certain other residential
mortgage-related securities. A weight of 100% is assigned to consumer,
commercial and other loans, repossessed assets and assets that are 90 days or
more past due and all other assets not identified in the categories above. As of
March 31, 1996 BankAtlantic had total risk-based capital equal to approximately
$151.6 million and a risk-based capital ratio of 13.32%. This amount was $60.5
million above the 8% requirement on that date.
In addition to the capital requirements set forth in the OTS' regulations,
the OTS has delegated to its Regional Directors the authority to establish
higher individual minimum capital requirements for savings institutions based
upon a determination that the institution's capital is or may become inadequate
in view of its circumstances. For example, circumstances which may be considered
by the Regional Directors include situations where the institution is: (i)
receiving special supervisory attention; (ii) having or expected to have losses
resulting in capital inadequacy; (iii) having a high degree of exposure to
interest-rate, prepayment, credit or similar risks or a high proportion of
off-balance sheet risk; (iv) having poor liquidity or cash flow; (v) growing,
internally or through acquisitions, at such a rate that supervisory problems are
presented that are not dealt with adequately by other OTS regulations; (vi)
having potential adverse effects from the activities or condition of its
affiliates or others with which it has significant business relationships,
including concentrations of credit; (vii) having a portfolio reflecting weak
credit quality; (viii) having inadequate underwriting policies or procedures for
loans and investments; (ix) experiencing operational losses that exceeds the
average of other, similarly situated savings institutions; (x) having management
deficiencies; (xi) experiencing a poor record of supervisory compliance; or
(xii) having a high degree of exposure to interest rate risk, credit risk,
concentration of credit risk, certain risks arising from non-traditional
activities or similar risks or a high proportion of off balance sheet risk.
The OTS amended its risk-based capital rules to incorporate interest-rate
risk ("IRR") requirements which require a savings association to hold additional
capital if it is projected to experience an excessive decline in net portfolio
value in the event interest rates increase or decrease by two percentage points.
The additional capital required is equal to one-half of the amount by which any
decline in net portfolio value exceeds 2 percent of the savings association's
total net portfolio value. BankAtlantic does not expect the interest-rate risk
requirements to have a material impact on its required capital levels at the
present time.
Additionally, the Office of the Comptroller of the Currency (the "OCC"),
which is the primary regulator for national banks has adopted a rule increasing
the leverage ratio requirements for all but the most highly rated national
banks. Pursuant to FIRREA, the OTS is required to issue capital standards for
savings institutions that are no less stringent than those applicable to
national banks. Based on the OCC rule, savings institutions would be required to
maintain a leverage ratio (defined as the ratio of core capital to adjusted
total assets) of between 4% and 5%. If the OCC's rule and the interest rate risk
component discussed above were in effect for OTS regulated financial
institutions at March 31, 1996, Bank Atlantic believes it would be in full
compliance with the new rules and would have risk-based capital in excess of the
applicable risk-based capital requirement.
The OTS also issued a final rule, effective March 1, 1994, which excludes
core deposit intangibles ("CDIs") in the determination of regulatory capital.
BankAtlantic has not had CDIs since the effective date of the final rule and
accordingly, BankAtlantic is not currently affected by this exclusion from
capital; however, as a result of the MegaBank acquisition, BankAtlantic recorded
as intangible assets amounts representing the excess of the cost of the net
assets acquired over the fair value of such assets and the cost of the
non-competition agreement with a principal of MegaBank. Such amounts are
deducted in full from tangible, core and risk-based capital. At March 31, 1996
$11.1 million has been deducted in connection with the MegaBank acquisition
based upon the intangible exclusion. It is anticipated that the proposed
acquisition of BNAB will result in additional intangible assets which will also
be excluded in the determination of
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regulatory capital. For a further discussion of the Company's acquisitions, see
Note 20 of the Consolidated Financial Statements.
Insurance of Accounts -- BankAtlantic's deposits are insured by the SAIF
and BIF for up to $100,000 for each insured account holder, the maximum amount
currently permitted by law. Pursuant to the FDICIA, the FDIC adopted
transitional regulations implementing risk-based insurance premiums that became
effective on January 1, 1993. Under these regulations, institutions are divided
into groups based on criteria consistent with those established pursuant to the
prompt regulatory action provisions of the FDICIA (see "Savings Institution
Regulations -- Prompt Regulatory Action", below). Each of these groups is
further divided into three subgroups, based on a subjective evaluation of
supervisory risk to the insurance fund posed by the institution. Insurance
premiums range from 23 to 31 basis points, with well capitalized institutions in
the highest supervisory subgroup paying 23 basis points and undercapitalized
institutions in the lowest supervisory subgroup paying 31 basis points.
BankAtlantic also pays BIF premiums based on the deposits it acquired in
connection with the MegaBank acquisition. The deposits associated with the
proposed acquisition of BNAB are primarily SAIF insured deposits.
As an insurer, the FDIC issues regulations and conducts examinations of its
insured members. Insurance of deposits by the FDIC may be terminated by the
FDIC, after notice and hearing, upon a finding that an institution has engaged
in unsafe and unsound practices, is in an unsafe and unsound condition to
continue operations, or has violated any applicable law, regulation, rule, order
or condition imposed by the OTS or the FDIC. When conditions warrant, the FDIC
may impose less severe sanctions as an alternative to termination of insurance.
BankAtlantic's management does not know of any present condition pursuant to
which the FDIC would seek to impose sanctions on BankAtlantic or terminate
insurance of its deposits. See "Competition" for potential changes in insurance
assessments.
The OTS has proposed amendments to its capital distribution regulations to
conform regulations to the "prompt corrective action" provisions of FDICIA. As
proposed, adequately or well capitalized savings associations that (i) are not
held by savings and loan holding companies; (ii) have a composite rating of "1"
or "2", (iii) are not deemed to be in "troubled condition"; and (iv) will remain
at least adequately capitalized after the proposed capital distribution, will
not be required to provide notice to the OTS before making capital
distributions. Because it is in a holding company structure, the proposal, if
adopted, will still require BankAtlantic to file a notice with the OTS before
making a capital distribution, regardless of its capital condition.
A "well capitalized" institution must have risk-based capital of 10% or
more, core capital of 5% or more and Tier 1 risk-based capital (based on the
ratio of core capital to risk-weighted assets) of 6% or more and may not be
subject to any written agreement, order, capital directive or prompt corrective
action directive issued by the OTS to meet and maintain a specific capital level
for a specific capital measure. An institution will be categorized as:
"adequately capitalized" if it has total risk-based capital of 8% or more, Tier
1 risk-based capital of 4% or more and core capital of 4% or more;
"undercapitalized" if it has total risk-based capital of less than 8%, Tier 1
risk-based capital of less than 4% or core capital of less than 4%;
"significantly undercapitalized" if it has total risk-based capital of less than
6%, Tier 1 risk-based capital of less than 3% or core capital of less than 3%;
and "critically undercapitalized" if it has tangible capital of less than 2%.
Any savings institution that fails its regulatory capital requirement is subject
to enforcement action by the OTS or the FDIC. At March 31, 1996 BankAtlantic met
the capital requirements of a "well capitalized" institution as defined above.
Under FDICIA, an insured depository institution cannot make a capital
distribution (as broadly defined to include, among other things, dividends,
redemptions and other repurchases of stock), or pay management fees to any
person that controls the institution, if thereafter it would be
undercapitalized. The appropriate Federal banking agency, however, may (after
consultation with the FDIC) permit an insured depository institution to
repurchase, redeem, retire or otherwise acquire its shares if such action (i) is
taken in connection with the issuance of additional shares or obligations in at
least an equivalent amount and (ii) will reduce the institution's financial
obligations or otherwise improve its financial condition. An undercapitalized
institution is generally prohibited from increasing its average total assets. An
undercapitalized institution is also generally
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prohibited from making any acquisitions, establishing any branches or engaging
in any new line of business except in accordance with an accepted capital
restoration plan or with the approval of the FDIC. In addition, the appropriate
Federal banking agency is given authority with respect to any undercapitalized
depository institution to take any of the actions it is required to or may take
with respect to a significantly undercapitalized institution as described below
if it determines "that those actions are necessary to carry out the purpose" of
FDICIA.
Restrictions on Dividends and Other Capital Distributions -- 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 or exceeds 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 (i) 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 the minimum regulatory capital requirements but
does not meet the 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 the 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 distributions. All capital distributions are
subject to the OTS' right to object to a distribution on safety and soundness
grounds.
The FHLB System -- BankAtlantic is a member of the FHLB system, which
consists of 12 regional FHLBs governed and regulated by the Federal Housing
Finance Board ("FHFB"). The FHLBs provide a central credit facility for member
institutions. BankAtlantic, as a member of the FHLB of Atlanta, is required to
acquire and hold shares of capital stock in the FHLB of Atlanta in an amount at
least equal to the greater of 1% of the aggregate principal amount of its unpaid
residential mortgage loans, home purchase contracts and similar obligations as
of the close of each calendar year, or 5% of its borrowings from the FHLB of
Atlanta (including advances and letters of credit issued by the FHLB on
BankAtlantic's behalf). BankAtlantic is currently in compliance with this
requirement.
Each FHLB makes loans (advances) to members in accordance with policies and
procedures established by the board of directors of the FHLB. These policies and
procedures are subject to the regulation and oversight of the FHFB. The FHLB Act
establishes collateral requirements for advances from the FHLB. All advances
from the FHLB must be fully secured by sufficient collateral as determined by
the FHLB of Atlanta. The FHLB Act prescribes eligible collateral as first
mortgage loans less than 90 days delinquent or securities evidencing interests
therein, securities (including mortgage-backed securities) issued, insured or
guaranteed by the Federal government or any agency thereof, deposits with the
FHLB and, to a limited extent, real estate with readily ascertainable value in
which a perfected security interest may be obtained. All long-term advances are
required to provide funds for residential home financing. The FHLB of Atlanta
has established standards of community service that members must meet to
maintain access to long-term advances.
Fees and Assessments of the OTS -- The OTS has adopted regulations to
assess fees on savings institutions to fund the operations of the OTS. The
regulations provide for the OTS' assessments to be made based on the total
consolidated assets of a savings institution as shown on its most recent report
to the agency. Troubled savings institutions (generally, those operating in
conservatorship or with the lowest two (of five) supervisory subgroup ratings)
are to be assessed at a rate 50% higher than similarly sized thrifts that are
not experiencing problems.
Investment Activities -- As a federally-chartered savings bank,
BankAtlantic is subject to various restrictions and prohibitions with respect to
its investment activities. These restrictions and prohibitions are set
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forth in HOLA and in the rules of the OTS and include dollar amount limitations
and procedural limitations. BankAtlantic is in compliance with these
restrictions.
Under the Federal Deposit Insurance Act ("FDIA"), a savings institution is
required to provide 30 days prior notice to the FDIC and the OTS of its desire
to establish or acquire a new subsidiary or conduct any new activity through a
subsidiary. The institution is also required to conduct the activities of the
subsidiary in accordance with the OTS' orders and regulations. The Director of
the OTS has the power to force divestiture of any subsidiary or the termination
of any activity it determines is a serious threat to the safety, soundness or
stability of the savings institution or is otherwise inconsistent with sound
banking principles. Additionally, the FDIC is authorized to determine whether
any specific activity poses a threat to SAIF and to prohibit any member of SAIF
from engaging directly in the activity, even if it is an activity that is
permissible for a federally-chartered savings institution or for a subsidiary of
a state-chartered savings institution.
Safety and Soundness -- Operational and managerial standards for internal
controls, information systems, loan documentation, credit underwriting, interest
rate exposure, asset growth and compensation and benefits for bank officers,
employees, directors and principal shareholders are all the subject of extensive
requirements. Additionally, the OTS is empowered to set standards for any other
facet of an institution's operations, not specifically covered by regulations.
The OTS is required to prescribe asset quality, earnings and stock valuation
standards specifying: (i) a maximum ratio of classified assets to capital; (ii)
minimum earnings sufficient to absorb losses without impairing capital; (iii) to
the extent feasible, a minimum ratio of market value to book value for publicly
traded shares of the institution; and (iv) such other standards relating to
asset quality, earnings and valuation as the OTS deems appropriate.
An institution failing to meet these standards may be required to file a
plan to bring the institution into compliance and have the plan approved by the
OTS. Continued non-compliance allows the OTS to prohibit growth, require higher
capital, restrict interest rates paid on deposits or take any other appropriate
action.
The Riegle Act amends the FDIA to allow the federal agencies to implement
the standards as guidelines rather than regulations. By allowing the agencies to
implement the standards as guidelines, the agencies are given the flexibility to
decide whether to compel an institution that fails to meet a standard to submit
a compliance plan.
Loans to One Borrower -- Generally, a savings institution's total loans and
extensions of credit to one borrower or related group of borrowers, outstanding
at one time and not fully secured by readily marketable collateral, may not
exceed 15% of the institution's unimpaired capital and surplus. Except as set
forth below for certain highly rated securities, an institution's investment in
commercial paper and corporate debt securities of any one issuer or related
entity must be aggregated "loans" for purposes of the immediately preceding
sentence.
Savings institutions may invest, in addition to the 15% general limitation,
up to 10% of unimpaired capital and surplus in commercial paper of one issuer
rated by two nationally recognized rating services in the highest category, or
in corporate debt securities rated in one of the two highest categories by at
least one such service. A savings institution may also lend up to 10% of
unimpaired capital and surplus, if the loan is fully secured by readily
marketable collateral. Readily marketable collateral is defined to include
certain securities and bullion, but generally does not include real estate.
A savings institution which meets its capital requirements may make loans
to one borrower to develop domestic residential housing units, up to the lesser
of $30,000,000 or 30% of the savings institution's unimpaired capital and
surplus if certain other conditions are satisfied. These loans are an
alternative to the 15% limitation and not in addition to that limitation. At
March 31, 1996, BankAtlantic was in compliance with the loans to one borrower
limitations.
Qualified Thrift Lender -- BankAtlantic, like all savings institutions, is
required to meet the QTL test for, among other things, future eligibility for
advances from the FHLB. The QTL test requires that a savings institution's
qualified thrift investments equal or exceed 65% of the savings institution's
portfolio assets calculated on a monthly average basis in nine out of every
twelve months. For the purposes of the QTL test, portfolio assets are total
assets less intangibles, properties used to conduct business and liquid assets
(up to
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20% of total assets). The following assets are included as qualified thrift
investments without limit: (i) domestic residential housing or manufactured
housing loans; (ii) home equity loans and mortgage-backed securities secured by
residential housing or manufactured housing loans; and (iii) certain obligations
of the FDIC and other related entities. Other qualifying assets which may be
included up to an aggregate of 20% of portfolio assets are: (i) 50% of
originated residential mortgage loans sold within 90 days of origination; (ii)
investments in debt or equity securities of service corporations that derive at
least 80% of their gross revenues from housing-related activities; (iii) 200% of
certain loans to and investments in low-cost, one-to-four family housing; (iv)
200% of loans for residential real property, churches, nursing homes, schools
and small businesses in areas where credit needs of low-to-moderate income
families are not met; (v) other loans for churches, schools, nursing homes and
hospitals; and (vi) consumer and education loans up to 10% of total portfolio
assets.
Any savings institution that fails to meet the QTL test must convert to a
commercial bank charter or limit its future investments and activities to those
permitted for both savings institutions and national banks. Additionally, any
such savings institution that does not convert to a commercial bank charter will
be ineligible to receive future advances from the FHLB and, beginning three
years after the loss of QTL status, will be required to repay all outstanding
advances, from the FHLB except for special liquidity advances, and dispose of or
discontinue all preexisting investments and activities not permitted for both
savings institutions and national banks. If an institution converts to a
commercial bank charter, its deposits remain insured by SAIF until the FDIC
permits it to transfer to BIF. If any institution that fails the QTL test
advances and is controlled by a holding company, then, within one year after the
failure, the holding company must register as a bank holding company and will be
subject to all applicable restrictions on bank holding companies. At March 31,
1996, BankAtlantic was in compliance with current QTL requirements.
Transaction with Affiliates -- As a federally chartered savings
institution, BankAtlantic is subject to the OTS' regulations relating to
transactions with affiliates, including officers and directors. BankAtlantic is
subject to substantially similar restrictions regarding affiliate transactions
as those imposed on member banks under Sections 22(g), 22(h), 23A, and 23B of
the FRA.
Sections 22(g) and 22(h) establish restrictions on loans to directors,
controlling shareholders and their related companies and certain officers.
Section 22(g) provides that no institution may extend credit to an executive
officer unless (i) the bank would be authorized to make such extension of credit
to borrowers other than its officers, (ii) the extension of credit is on terms
not more favorable than those afforded to other borrowers, (iii) the officer has
submitted a detailed current financial statement and (iv) the extension of
credit is on the condition that it shall become due and payable on demand at any
time that the officer is indebted to any other bank or banks on account of
extensions of credit in any one of the following three categories, respectively,
in an aggregate amount greater than the amount of credit of the same category
that could be extended to the officer by the institution: (a) an extension of
credit secured by a first lien on a dwelling which is expected to be owned by
the officer and used by the officer as his or her residence; (b) an extension of
credit to finance the education of the children of the officer; or (c) for any
other purpose prescribed by the OTS. Section 22(g) also imposes reporting
requirements on both the officers to whom it applies and on the institution.
Section 22(h) requires that loans to directors, controlling shareholders and
their related companies and certain officers be made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons and that those loans do not
involve more than the normal risk of repayment or present other unfavorable
features.
Section 23A limits transactions with any one affiliate to 10% of the
institution's capital and surplus and limits aggregate affiliate transactions to
20% of such capital and surplus. Sections 23A and 23B provide that a loan
transaction with an affiliate generally must be collateralized (other than by a
low-quality asset or by securities issued by an affiliate) and that all covered
transactions as well as the sale of assets, the payment of money or the
providing of services by a savings institution to an affiliate must be on terms
and conditions that are substantially the same, or at least as favorable to the
savings institution, as those prevailing for comparable non-affiliated
transactions. A covered transaction is defined as a loan to an affiliate, the
purchase of securities issued by an affiliate, the purchase of assets from an
affiliate (with some exceptions), the acceptance of securities issued by an
affiliate as collateral for a loan or the issuance of a guarantee, acceptance or
letter of
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credit on behalf of an affiliate. The OTS regulations clarify that transactions
between either a thrift or a thrift subsidiary and an unaffiliated person that
benefit an affiliate are considered covered transactions. A savings institution
may make loans to or otherwise extend credit to an affiliate only if the
affiliate is engaged solely in activities permissible for bank holding
companies. In addition, no savings institution may purchase the securities of
any affiliate other than the shares of a subsidiary. The Director of the OTS may
further restrict these transactions in the interest of safety and soundness. At
March 31, 1996, BankAtlantic was in compliance with the restrictions regarding
affiliate transactions.
Subordinated Debentures -- At March 31, 1996, BankAtlantic had no
subordinated debentures outstanding. BankAtlantic may increase its regulatory
risk-based capital by selling subordinated debentures only with the prior
written approval of the OTS. Applicable regulations also prohibit the inclusion
of subordinated debentures which have an original maturity of less than seven
years in the regulatory risk-based capital and restrict the timing of sinking
fund payments with respect to such securities. Inclusion in regulatory capital,
once issued with regulatory approval, is limited based on one of two elections
to be chosen by the issuing institution. The institution may elect to phase
capital inclusion out on a straight-line basis over the last five years to
maturity of the instrument, or may elect to limit the inclusion of the
subordinated debt with less than seven years to maturity to 20% of the
institution's capital. The OTS is permitted to determine the treatment of
subordinated debentures if an institution is in receivership.
Liquidity Requirements of the OTS -- The OTS' regulations currently require
all member savings institutions to maintain an average daily balance of liquid
assets (cash, certain time deposits, banker's acceptances, specified United
States government, state or Federal agency obligations and other corporate debt
obligations and commercial paper) equal to 5% of the sum of the average daily
balance during the preceding calendar month of net withdrawable accounts and
short-term borrowings payable in one year or less. The liquidity requirement may
vary from time to time (between 4% and 10%) depending upon economic conditions
and savings flows of all savings institutions. All savings institutions are also
required to maintain an average daily balance of short-term liquid assets
(generally having maturities of 12 months or less) equal to at least 1% of the
average daily balance of net withdrawable accounts and current borrowings.
Monetary penalties may be imposed by the OTS for failure to meet liquidity
requirements. At March 31, 1996, BankAtlantic was in compliance with all
applicable liquidity requirements.
The Federal Reserve System -- BankAtlantic is subject to certain
regulations promulgated by the FRB. Pursuant to such regulations, savings
institutions are required to maintain non-interest bearing reserves against
their transaction accounts (which include deposit accounts that may be accessed
by writing checks) and non-personal time deposits. The FRB has authority to
adjust reserve percentages and to impose in specified circumstances emergency
and supplemental reserves in excess of the percentage limitations otherwise
prescribed. The balances maintained to meet the reserve requirements imposed by
the FRB may be used to satisfy liquidity requirements which may be imposed by
the OTS. In addition, FRB regulations limit the periods within which depository
institutions must provide availability for and pay interest on deposits to
transaction accounts. Depository institutions are required to disclose their
check holding policies and any changes to those policies in writing to
customers. BankAtlantic believes that it is in compliance with all such FRB
regulations.
Community Reinvestment Act -- Under the CRA, as implemented by OTS
regulations, a savings institution has a continuing and affirmative obligation
consistent with its safe and sound operation to help meet the credit needs of
its entire community, including low- and moderate-income neighborhoods. The CRA
does not establish specific lending requirements or programs for financial
institutions nor does it limit an institution's discretion to develop the types
of products and services that it believes are best suited to its particular
community, consistent with the CRA. The CRA requires the OTS, in connection with
its examination of a savings institution, to assess the institution's record of
meeting the credit needs of its community and to take such record into account
in its evaluation of certain applications by such institution. The CRA, as
amended by FIRREA, requires public disclosure of an institution's CRA rating and
requires that the OTS provide a written evaluation of an institution's CRA
performance utilizing a four-tiered descriptive rating system. The four ratings
are "outstanding record of meeting community credit needs", "satisfactory record
of meeting community credit needs", "needs to improve record of meeting
community
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credit needs" and "substantial non-compliance in meeting community credit
needs." An institution's CRA rating is taken into account in determining whether
to grant charters, branches and other deposit facilities, relocations, mergers,
consolidations and acquisitions. Poor CRA performance maybe the basis for
denying an application. BankAtlantic received a "satisfactory record of meeting
community credit needs" during its most recent OTS examination.
NEW ACCOUNTING STANDARDS AND POLICIES
On October 23, 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123"). This Statement applies to all
transactions in which an entity acquires goods or services by issuing equity
instruments or by incurring liabilities where the payment amounts are based on
the entity's common stock price. The Statement covers transactions with
employees and non-employees and is applicable to both public and non-public
entities. Entities are allowed (1) to continue to use the APB Opinion No. 25
method ("APB 25"), or (2) to adopt the FAS 123 fair value based method. Once the
method is adopted, an entity cannot change and the method selected applies to
all of an entity's compensation plans and transactions. For entities not
adopting the FAS 123 fair value based method, FAS 123 requires pro forma net
income and earnings per share information as if the fair value based method has
been adopted. For entities not adopting the fair value based method the
disclosure requirements of FAS 123, including the pro forma information, are
effective for financial statement for fiscal years beginning after December 15,
1995 (calendar year 1996). The pro forma disclosures are to include all awards
granted in fiscal years that begin after December 15, 1994 (calendar year 1995).
However, the disclosures, including the pro forma net income and earnings per
share disclosure, for the first fiscal year beginning after December 15, 1994
(calendar year 1995) will not be included in that year's financial statements
but will be included in the following year's (calendar year 1996) financial
statements if the first fiscal year is presented for comparative purposes.
Management intends to continue to use APB 25 and disclose the pro forma net
income and earnings per share information in the December 31, 1996 financial
statements.
FEDERAL AND STATE TAXATION
For Federal income tax purposes, BankAtlantic reports its income and
expenses on the accrual method of accounting. Savings institutions that meet
certain definitional tests and other conditions prescribed by the Internal
Revenue Code of 1986 (the "Code") relating primarily to the composition of their
assets and the nature of their business activities are, within certain
limitations, permitted to establish, and deduct additions to, reserves for bad
debts in amounts in excess of those which would otherwise be allowable on the
basis of actual loss experience. A qualifying savings institution may elect
annually, and is not bound by such election in any subsequent year, one of the
following two methods for computing additions to its bad debt reserves for
losses on "qualifying real property loans" (generally, loans secured by
interests in improved real property): (i) the experience method or (ii) the
percentage of taxable income method. BankAtlantic has utilized both the
percentage of taxable income method and the experience method in computing the
tax-deductible addition to its bad debt reserves. Additions to the reserve for
losses on non-qualifying loans, however, must be computed under the experience
method and reduce the current year's addition to the reserve for losses on
qualifying real property loans, unless that addition also is determined under
the experience method. The sum of the addition to each reserve for each year is
BankAtlantic's annual bad debt deduction. If the percentage of BankAtlantic's
specified qualifying assets (generally, loans secured by residential real estate
or deposits, banker's acceptances, educational loans, cash, government
obligations and certain certificates of deposit) were to fall below 60% of its
total assets, BankAtlantic would not be eligible to claim further bad debt
reserve deductions, and would recapture into income all previously accumulated
bad debt reserves. At December 31, 1995, BankAtlantic's qualifying assets were
in excess of 60% of total assets.
The experience method allows a savings institution to deduct the greater of
an amount based upon a six-year moving average of loan losses or an amount
determined with respect to its bad debt reserve for the "base year". The "base
year" is, for these purposes, the last taxable year beginning before 1988. From
1990 through 1993, BankAtlantic has utilized the experience method. For the tax
year ended December 31, 1994,
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BankAtlantic used the percentage of taxable income method discussed below. For
1995, BankAtlantic anticipates using the experience method.
Under the percentage of taxable income method, the bad debt deduction
equals 8% of taxable income determined without regard to that deduction and with
certain adjustments. The percentage bad debt deduction thus computed is reduced
by the amount permitted as a deduction for the addition to the reserve for
losses on non-qualifying loans, which must be computed under the experience
method. The availability of the percentage of taxable income method permits
qualifying savings institutions to be taxed at a lower maximum effective federal
income tax rate than that applicable to corporations generally. The effective
maximum marginal federal income tax rate applicable to a qualifying savings
institution (exclusive of the alternative minimum tax), assuming the maximum
percentage bad debt deduction, is approximately 32.2%.
The percentage of taxable income method is available only to the extent
that amounts accumulated in reserves for losses on qualifying real property
loans do not exceed 6% of such loans at year-end. Use of this method is further
limited to the greater of (i) the amount which, when added to the amount
computed for the addition to the reserve for losses on non-qualifying loans,
equals the amount by which 12% of savings deposits or withdrawable accounts of
depositors at year-end exceeds the sum of surplus, undivided profits and
reserves at the beginning of the year or (ii) the amount determined under the
experience method. None of these limitations would have restricted the deduction
for the addition to the reserve for bad debts available to BankAtlantic for
1995.
BankAtlantic is permitted under the Internal Revenue Code to deduct an
annual addition to a reserve for bad debts in determining taxable income,
subject to certain limitations. To the extent that (i) a savings institution's
reserve for losses on qualifying real property loans exceeds the amount that
would have been allowed under the experience method and (ii) it makes
distributions to shareholders that are considered to result in withdrawals from
that excess bad debt reserve, then the amounts withdrawn will be included in its
taxable income. The amount considered to be withdrawn by a distribution will be
the amount of the distribution plus the amount necessary to pay the tax with
respect to the withdrawal. Dividends paid out of the savings institution's
current or accumulated earnings and profits, as calculated for Federal income
tax purposes, will not be considered to result in withdrawals from its bad debt
reserves. Accordingly, purchases of its outstanding stock by BankAtlantic could
result in an increase in BankAtlantic's taxable income in the period such stock
is repurchased. The increase in taxable income would be the lesser of the amount
repurchased divided by the reciprocal of the income tax rate or at December 31,
1995, maximum of $10.3 million. If BankAtlantic does not qualify as a qualified
savings association, as discussed above, the entire tax bad debt reserve would
be recaptured resulting in a $15.4 million increase in taxable income at
December 31, 1995.
Deferred tax liabilities are not recognized on the base year tax bad debt
reserve unless it becomes apparent that the reserve will be reduced and result
in taxable income in the foreseeable future. At December 31, 1995 and 1994
BankAtlantic's base year tax bad debt reserve was $8.3 million for each of such
dates, for which no deferred income taxes have been provided. If BankAtlantic no
longer meets any of the tests for a qualified savings association or repurchases
stock as discussed above, the base year bad debt reserve would be recaptured
resulting in an increase of $3.2 million in the provision for income taxes.
Florida Franchise Tax -- The State of Florida imposes a corporate franchise
tax on banks and savings and loan institutions, including bank holding
companies, at the rate of 5.5% on taxable income as determined for Florida
franchise tax purposes, in lieu of the Florida corporate income tax. Taxable
income for this purpose is based on federal taxable income in excess of $5,000
as adjusted by certain items. A credit is available against up to 65% of the
franchise tax otherwise due for certain intangible taxes imposed by the State of
Florida. The corporate franchise tax, exclusive of this credit availability, is
substantially equivalent to the Florida corporate income tax.
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MANAGEMENT
The table below sets forth the names and ages of the directors and
executive officers of the Company as well as the positions and offices held by
such persons. A summary of the background and experience of each of these
individuals is set forth after the table. The Company's Board of Directors
consists of eight directors divided into three classes, two composed of three
directors each and one composed of two directors. The Company's Board of
Directors consists of the same persons who serve on BankAtlantic's Board of
Directors. The directors are elected by the shareholders of the Company for
staggered three-year terms and hold office until their successors are elected
and qualified. One class of directors is elected each year.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------- --- -------------------------------------------------
<S> <C> <C>
Alan B. Levan............................ 51 Chairman of the Board and Chief Executive Officer
John E. Abdo............................. 52 Vice Chairman of the Board
Frank V. Grieco.......................... 52 Director; Senior Executive Vice President
John P. O'Neill.......................... 46 Director; President
Jasper R. Eanes.......................... 51 Executive Vice President; Chief Financial Officer
Steven M. Coldren........................ 48 Director
Bruno L. DiGiulian....................... 62 Director
Charlie C. Winningham, II................ 63 Director
Mary E. Ginestra......................... 71 Director
</TABLE>
BIOGRAPHICAL INFORMATION
ALAN B. LEVAN has been the Company's Chairman of the Board and Chief
Executive Officer since its inception. He has been a director of BankAtlantic
since 1984 and was elected Chairman of the Board and Chief Executive Officer of
BankAtlantic in April 1987. Mr. Levan also served as Chairman of the Board and
Chief Executive Officer of BFC Financial Corporation or its predecessor since
1972. Mr. Levan's term as a director of the Company expires in 1999.
JOHN E. ABDO has been the Company's Vice Chairman of the Board since its
inception. He has been a director of BankAtlantic since 1984 and was President
of BankAtlantic Development Corporation, a wholly-owned subsidiary of
BankAtlantic since 1985. He was elected Vice Chairman of the Board in 1987. Mr.
Abdo has been principally employed as President and Chief Executive Officer of
Wellington Construction & Realty, Inc., a real estate development, construction
and brokerage firm, for more than five years. Mr. Abdo is also a director and
Vice Chairman of the Board of BFC Financial Corporation, a director of Benihana
National Corporation and a director and Chairman of the Board of Coconut Code,
Inc. Mr. Abdo's term as a director expires in 1997.
FRANK V. GRIECO has been a director of the Company since its inception and
Senior Executive Vice President since July 1994. Mr. Grieco was an Executive
Vice President of the Company at its inception. He has been a director of
BankAtlantic since 1991 and was elected as an officer of BankAtlantic in 1991.
From 1987 to 1991 he was the sole proprietor of a financial consulting firm in
Miami. From 1979 to 1987, Mr. Grieco was Executive Vice President, Chief
Financial Officer and a director of BFC Financial Corporation. Mr. Grieco's term
as a director expires in 1997.
JOHN P. O'NEILL has been a director of the Company and its President since
its inception. He has been a director of BankAtlantic since 1991, having joined
BankAtlantic in March 1986 as Vice President and Manager of Branch Sales and
Administration. Mr. O'Neill became Senior Vice President, Community Banking in
December 1986, Executive Vice President, Community Banking in June 1988 and
President in July 1991. Mr. O'Neill's term as a director expires in 1999.
JASPER R. EANES has been the Company's Chief Financial Officer since its
inception and Executive Vice President since July 1994. He initially joined
BankAtlantic in January 1989 as Senior Vice President, Director of Internal
Auditing and became Executive Vice President, Chief Financial Officer in August
1989.
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STEVEN M. COLDREN has been a director of the Company since its inception
and a director of BankAtlantic since 1986. Mr. Coldren is also the President and
Chairman of the Board of Business Information Systems, Inc., a distributor of
dictation, word processing and computer equipment, for more than five years and
Chairman of the Board of Digital Information Systems Corp., a distributor of
hospital computer systems. Mr. Coldren's term as a director expires in 1998.
BRUNO L. DIGIULIAN has been a director of the Company since its inception
and a director of BankAtlantic since 1985. Mr. DiGiulian is of counsel, Ruden
McClosky Smith Schuster & Russell, P.A., a law firm, since January 1994. Prior
to that time, Mr. DiGiulian had been the President of DiGiulian & Di Chiara,
P.A., or Bruno L. DiGiulian & Associates, P.A., both law firms, for more than
five years. Mr. DiGiulian's term as a director expires in 1997.
CHARLIE C. WINNINGHAM, II has been a director of the Company since its
inception and a director of BankAtlantic since 1976. Mr. Winningham has been
principally employed as President of C.C. Winningham Corporation, a land
surveying firm, for more than five years. Mr. Winningham's term as a director
expires in 1998.
MARY E. GINESTRA has been a director of the Company since its inception and
a director of BankAtlantic since 1980. Mrs. Ginestra has been principally
engaged in private investments for more than five years. Ms. Ginestra's term as
a director expires in 1998.
DESCRIPTION OF THE DEBENTURES
The Debentures are a series of debt securities issued under an Indenture,
dated as of , 1996 (the "Indenture"), between the Company and First
Trust National Association, as trustee (the "Trustee"). The Debentures are not
savings accounts or deposits and are not insured by the FDIC or any other
governmental agency. The terms and provisions of the Debentures include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (the "Trust Indenture Act") as in effect on the date
of the Indenture. The Debentures are subject to all such terms, and holders of
the Debentures are referred to the Indenture and the Trust Indenture Act for a
statement thereof. The following summary of certain provisions of the Indenture
does not purport to be complete and is qualified in its entirety by reference to
the Indenture, including the definitions therein of certain terms used below. A
copy of the Indenture is filed as an exhibit to the Registration Statement, of
which this Prospectus is a part. For purposes of this section, the term
"Company" means only BankAtlantic Bancorp, Inc. and not its subsidiaries.
GENERAL
The Debentures will be general unsecured obligations of the Company limited
to $50 million in aggregate principal amount, assuming no exercise of the
Underwriters' over-allotment option. The Debentures will not be secured by the
assets of the Company or otherwise and will not have the benefit of a sinking
fund for the retirement of principal. The Debentures will rank on par with all
subordinated indebtedness of the Company, including the Company's currently
outstanding $21 million principal amount of 9% Debentures, and will be
subordinated in right of payment to all Senior Indebtedness (as defined below)
of the Company, which may include obligations of the Company to BankAtlantic.
The Company, or any subsidiary of the Company including BankAtlantic, may incur
additional indebtedness constituting Senior Indebtedness or indebtedness (as
defined below) that ranks on par with the Debentures. The Indenture does not
limit the total indebtedness that either the Company or any of its subsidiaries
may incur. The Debentures will be subordinate to all indebtedness of the Company
that does not state that it is subordinate to or on par with the Debentures. The
right of the Company to participate in any distribution of assets of any
subsidiary, upon its liquidation or reorganization or otherwise (and thus the
ability of Holders of the Debentures to benefit indirectly from such
distribution) is subject to the prior claims of creditors of that subsidiary.
The Debentures will mature on , 2006, unless redeemed earlier
at the option of the Company. See "-- Redemption or Repurchase of Debentures."
The Debentures will bear interest at the rate per annum shown on the cover page
of this Prospectus from the date of delivery or from the most recent
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Interest Payment Date to which interest has been paid or provided for, payable
semi-annually on and of each year, commencing
, 1996, to the person in whose name the Debenture (or any predecessor
Debenture) is registered at the close of business on the preceding
or , as the case may be. Interest on the Debentures will be computed
on the basis of a 360-day year or twelve 30-day months. The Trustee will serve
as Debenture Registrar and Paying Agent for the Debentures. Principal and
interest shall be payable by check mailed by the Trustee to the person entitled
to payment on the interest payment date.
The Debentures will be denominated in U.S. dollars and payments of
principal of and interest and premium, if any, on the Debentures will be in U.S.
dollars. The Debentures will be issued only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof. The
Debentures may be presented for registration of transfer or exchange and shall
be duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by the holder thereof or his
attorney duly authorized in writing. The registered holder of a Debenture will
be treated as its owner for all purposes. Money for the payment of principal or
interest or premium, if any, upon redemption remaining unclaimed for two years
will be paid back to the Company at its request.
The Company's primary source of funds for the payment of principal and
interest on the Debentures is dividends from BankAtlantic. From time to time
while the Debentures are outstanding BankAtlantic may be subject to regulatory
or contractual constraints that restrict its ability to pay dividends to the
Company. See "Investment Considerations -- Sources of Payments to Holders of
Debentures; Ability to Pay Dividends; Possible Issuance of Additional
Securities" and "Regulation and Supervision -- Savings Institution
Regulations -- Restrictions on Dividends and Other Capital Distributions."
REDEMPTION OR REPURCHASE OF DEBENTURES
The Debentures are redeemable at the option of the Company, in whole or in
part, at any time after , 1999, and in certain circumstances sooner,
on not less than 30 days notice, but not more than 60 days prior to the
redemption date at the following redemption prices (expressed as percentages of
principal amount), plus accrued interest to the redemption date, if redeemed
during the twelve month period beginning 1 of the years indicated
below:
<TABLE>
<S> <C>
1999.............................................................. 104%
2000.............................................................. 103
2001.............................................................. 102
2002.............................................................. 101
2003 and thereafter............................................... 100
</TABLE>
The Debentures may be redeemed at the option of the Company, in whole or in
part, prior to , 1999 if the closing sale price of the Class A
Common Stock equals or exceeds 140% of the then effective conversion price for
at least 30 consecutive trading days ending within five business days of the
date of the related notice of redemption. Redemption prior to , 1999
will be made at a redemption price of 100% of principal amount. The Company may
at any time repurchase the Debentures at any price in the open market or
otherwise. Debentures so purchased by the Company may be held or resold or, at
the discretion of the Company, may be surrendered to the Trustee for
cancellation.
CONVERTIBILITY
The holder of any Debenture will have the right, at its option, to convert
the principal amount thereof (or any portion thereof in whole multiples of
$1,000) into shares of the Company's Class A Common Stock at a conversion price
of $ per share (subject to adjustment as described below) at any time
prior to maturity, unless previously redeemed, or in case a Debenture has been
called for redemption, then with respect to such called Debenture, until and
including the close of business on the third business day preceding the
redemption date. Upon conversion, no payment of accrued interest (except as
provided below) will be made, but if any holder surrenders a Debenture for
conversion between the record date for the payment of an installment of interest
and the next Interest Payment Date, such holder will forfeit his right to such
interest
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payment and therefore such Debenture, when surrendered for conversion, must be
accompanied by payment of an amount equal to the interest thereon which the
holder on such record date is entitled to receive on the next interest payment
date. No fractional shares will be issued upon conversion, but in lieu thereof,
an appropriate amount based upon market prices will be paid in cash by the
Company. The Company will take all reasonable steps necessary to comply with
federal and state securities laws in connection with the issuance of shares of
Class A Common Stock upon conversion of the Debentures so that upon conversion
such shares will not bear any legend restricting transfer.
ANTI-DILUTION PROVISIONS
The conversion price of the Debentures is subject to adjustment upon the
occurrence of certain events, including (i) the payment of a dividend in shares
of Class A Common Stock to holders of Class A Common Stock or a dividend to
holders of Class A Common Stock payable in shares of the Company's capital stock
other than Class A Common Stock; (ii) the subdivision, combination or
reclassification of outstanding shares of Class A Common Stock and Class B
Common Stock; (iii) the distribution to all holders of Class A Common Stock of
evidences of indebtedness or assets (excluding cash dividends or cash
distributions payable out of retained earnings or stock dividends) or
subscription rights or warrants (other than those referred to above); or (iv)
the issuance of rights or warrants entitling anyone to subscribe for or purchase
shares of Class A Common Stock or securities or instruments convertible into
shares of Class A Common Stock in each case at less than current market price
(as defined in the Indenture) for such Class A Common Stock. The Company will
not be required to make any adjustments in the conversion price of less than one
percent of the conversion price, but the same will be carried forward and taken
into account in the computation of any subsequent adjustment.
In case of any reclassification or change of outstanding Class A Common
Stock (with certain exceptions) or in case of any consolidation or merger of the
Company with or into another person (with certain exceptions) or in case of any
transfer or conveyance of the property of the Company substantially as an
entirety, then the surviving entity will be required to execute and deliver a
supplemental indenture providing that the Holder of each Debenture then
outstanding would have the right thereafter to convert such Debenture into the
kind and amount of securities or property receivable upon the reclassification,
change, consolidation, merger, transfer or conveyance by a holder of the number
of shares of Class A Common Stock into which such Debenture could have been
converted immediately prior thereto.
SUBORDINATION
The principal and premium, if any, and interest on the Debentures will be
subordinated and junior in right of payment to the prior payment in full of all
Senior Indebtedness of the Company. As of March 31, 1996 the Company had no
Senior Indebtedness outstanding. The Debentures will rank on a par with all
subordinated indebtedness of the Company, including the Company's currently
outstanding $21 million principal amount of 9% Debentures. The Indenture does
not limit the amount of Senior Indebtedness or other indebtedness, secured or
unsecured, that the Company or any of its subsidiaries may incur. If payments on
any Senior Indebtedness have been accelerated, the Company shall be prohibited
from making any payment of principal, premium, if any, or interest on the
Debentures until payments of the Senior Indebtedness are made or provided for.
Upon any distribution of assets of the Company in connection with any
dissolution, winding up, liquidation or reorganization of the Company, payment
of principal, premium, if any, or interest on the Debentures will be
subordinated, to the extent and in the manner set forth in the Indenture, to the
prior payment in full of Senior Indebtedness. By reason of such subordination,
in the event of a distribution of assets in any such proceeding, certain general
creditors of the Company may recover more, ratably, than holders of the
Debentures.
CERTAIN DEFINITIONS
As used herein and in the Indenture, the following terms shall have the
meanings set forth below.
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"Capitalized Lease Obligation" means any lease obligations of a Person
incurred with respect to any property (whether real, personal or mixed) acquired
or leased by such Person and used in its business that is required to be
recorded as a capitalized lease in accordance with generally accepted accounting
principles.
"Holder" means a Person in whose name an outstanding Debenture is
registered.
"Indebtedness" means (a) all Obligations of the Company for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of the
Company or only to a portion thereof), (b) all indebtedness of the Company which
is evidenced by a note, debenture, bond or other similar instrument, including
Capitalized Lease Obligations, (c) all indebtedness of the Company representing
the unpaid balance of the purchase price of any goods or other property or
balance owed for any services rendered, (d) all indebtedness of the Company,
including Capitalized Lease Obligations, incurred, assumed or given in an
acquisition (whether by way of purchase, merger or otherwise) of any business,
real property or other assets, (e) any indebtedness of others described in the
preceding clauses (a), (b), (c) and (d) that the Company has guaranteed or for
which it is otherwise liable and (f) any amendment, renewal, extension,
deferral, modification, restructuring or refunding of any such indebtedness,
obligation or guarantee.
"Interest Payment Date" means the Stated Maturity of an installment of
Interest on the Debenture.
"Obligations" means, with respect to any indebtedness, any principal,
premium, interest, penalties, fees and other liabilities payable from time to
time and obligations performable under the documentation governing such
Indebtedness.
"Senior Indebtedness" means any and all Indebtedness of the Company, except
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall be subordinate or shall rank pari passu in right of payment
to the Debentures.
"Stated Maturity" when used with respect to any Debenture means the date
specified in such Debenture as the fixed date on which the principal of and the
premium, if any, and interest on such Debenture is due and payable.
"U.S. Government Obligations" means direct obligations of the United States
of America for the payment of which the full faith and credit of the United
States of America is pledged.
The Indenture contains certain customary covenants found in Indentures
under the Trust Indenture Act, including covenants with respect to the payment
of principal and interest, maintenance of an office or agency for administering
the Debentures, holding of funds for payments on the Debentures in trust,
payment by the Company of taxes and other claims, maintenance by the Company of
its properties and its corporate existence and delivery of annual certifications
to the Trustee.
RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS
The Indenture provides that the Company cannot declare or pay dividends on,
or purchase, redeem or acquire for value its capital stock, return any capital
to holders of capital stock as such, or make any distribution of assets to
holders of capital stock as such, unless, from and after the date of any such
dividend declaration (a "Declaration Date") or the date of any such purchase,
redemption, payment or distribution specified above (a "Redemption Date"), the
Company retains cash, cash equivalents (as determined in accordance with
generally accepted accounting principles) or marketable securities (with a
market value as measured on the applicable Declaration Date or Redemption Date)
in an amount sufficient to cover the two consecutive semi-annual interest
payments that will be due and payable on the Debentures following such
Declaration Date or Redemption Date, as the case may be. The Indenture further
provides that the amount of any interest payment made by the Company with
respect to the Debentures after any applicable Declaration Date or Redemption
Date shall be deducted from the aggregate amount of cash or cash equivalents
which the Company shall be required to retain pursuant to the foregoing
provision.
The Indenture does not prohibit or restrict the Company from selling
additional shares of capital stock or other debt securities nor from pledging
BankAtlantic's capital stock. Further, BankAtlantic is not restricted
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from issuing any shares of capital stock of BankAtlantic or debt securities of
BankAtlantic. However, the Company will not permit BankAtlantic to issue to BFC
or Mr. Alan B. Levan, any of BankAtlantic's capital stock or debt securities or
pledge any of the capital stock of BankAtlantic now or hereafter owned by the
Company in favor of BFC or Mr. Levan.
DEFAULTS AND REMEDIES
An "Event of Default," as defined in the Indenture, includes (i) the
failure by the Company to pay principal of or premium, if any, on the Debentures
at maturity or upon redemption (whether or not such payment is prohibited by the
subordination provisions), (ii) the failure by the Company to pay interest on
any of the Debentures on any Interest Payment Date and such failure continues
for a period of 30 days (whether or not such payment is prohibited by the
subordination provisions), (iii) the failure by the Company to comply with any
of its other agreements or covenants in, or provisions of, the Indenture and
such default continues for the period and after the notice specified below and
(iv) certain events of bankruptcy, insolvency or reorganization of the Company.
A Default under clause (iii) above is not an Event of Default until the
Trustee notifies the Company in writing, or the Holders of at least 25% in
principal amount of the Debentures then outstanding notify the Company and the
Trustee in writing, of the Default, and the Company does not cure the Default
within 60 days after receipt of the notice. The notice must specify the Default,
demand that it be remedied and state that the notice is a "Notice of Default".
Such notice shall be given by the Trustee if so requested in writing by the
Holders of at least 25% in principal amount of the Debentures then outstanding.
Any notice required to be delivered by the Trustee to the Company shall be given
promptly after the Trustee becomes aware of such Default or is requested by such
Holders to deliver such notice.
The Indenture provides that the Trustee will, within 90 days after the
occurrence of any Default known to it, mail to the Holders notice of such
Default, provided that, except in the case of Default in the payment of
principal of or interest on any of the Debentures, the Trustee shall be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of the Holders.
The Indenture only permits acceleration of payment of principal of the
Debentures upon an Event of Default resulting from the failure of the Company to
pay principal or interest on the Debentures or upon certain events of
bankruptcy, insolvency or reorganization. If an Event of Default resulting from
the failure of the Company to pay principal or interest on the Debentures or
upon certain events of bankruptcy, insolvency or reorganization shall have
occurred and be continuing, the Trustee or the Holders of not less than 30% in
aggregate principal amount of the Debentures then outstanding, by notice in
writing to the Company (and to the Trustee if given by the Holders), may declare
to be immediately due and payable all unpaid principal of all the Debentures. An
acceleration and its consequences may be rescinded and past defaults waived by
Holders of a majority in principal amount of the Debentures then outstanding
upon conditions provided in the Indenture. No Holder may pursue any remedy under
the Indenture unless such Holder has previously given to the Company and the
Trustee written notice of a continuing Event of Default and unless the Holders
of at least 30% in principal amount of the Debentures then outstanding have
requested the Trustee in writing to pursue the remedy and offered the Trustee
indemnity satisfactory to the Trustee against loss, liability and expense to be
thereby incurred and the Trustee has failed so to act within 60 days after
receipt of the same.
The Indenture requires the Company to file periodic reports with the
Trustee as to the absence of defaults.
SATISFACTION, DISCHARGE AND DEFEASANCE
The Indenture provides that the Company will at its option either (a) be
deemed to have paid and discharged the entire indebtedness represented by and
its obligations under the Debentures (except for the obligation to pay the
principal of, premium, if any, and interest on, the Debentures and certain
obligations to register the transfer or exchange of the Debentures, to replace
temporary or mutilated, destroyed, lost or stolen Debentures, to maintain an
office or agency in respect to the Debentures and to hold moneys for payment in
trust) ("legal defeasance") or (b) cease to be under any obligation to comply
with certain terms, provisions or
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conditions of the Indenture (those terms, provisions or conditions described in
the Indenture under "Consolidation, Merger or Sale") or the terms, provisions or
conditions of the Debentures ("covenant defeasance") in either case, on the 91st
day after (i) the Company has paid or caused to be paid all other sums payable
with respect to the outstanding Debentures and the Company has delivered to the
Trustee a certificate from an authorized officer and an opinion of legal
counsel, each stating that all conditions precedent relating to the satisfaction
and discharge of the entire indebtedness on all of the outstanding Debentures
have been complied with; (ii) the Company has deposited or caused to be
deposited irrevocably with the Trustee as a trust fund specifically pledged as
security for the benefit of the holders of the Debentures, (x) dollars in an
amount or (y) U.S. Government Obligations (which through the payment of interest
and principal in respect thereof in accordance with their terms will provide,
not later than the due date of any payment of principal, premium, if any, and
interest on the outstanding Debentures) in an amount or (z) a combination of (x)
and (y), sufficient to pay and discharge each installment of principal of and
interest or premium, if any, on the outstanding Debentures on the dates such
installments of interest or principal or premium, if any, are due; and (iii) no
Event of Default has occurred and is continuing on the date of such deposit.
Among the conditions of the Company's exercising any such option, the Company is
required to deliver to the Trustee an opinion of independent counsel of
recognized standing to the effect that the deposit and related defeasance would
not cause the Holders of the Debentures to recognize income, gain or loss for
United States Federal income tax purposes and that the Holders will be subject
to United States Federal income tax in the same amounts, in the same manner and
at the same times as would have been the case if such deposit and related
defeasance had not occurred.
CONSOLIDATION, MERGER OR SALE OF ASSETS
The Indenture provides that the Company will not merge or consolidate with
or sell all or substantially all of its assets to, any entity unless it is the
surviving or successor entity in such transaction and, immediately thereafter,
is not in default under the Indenture or, if it is not the surviving or
successor entity, the successor entity expressly assumes the Company's
obligations under the Indenture and, immediately after such transaction, the
successor entity is not in default under the Indenture. Any successor entity
shall assume by supplemental indenture all of the obligations of the Company
under the Debentures and the Indenture and the entity formed by such
consolidation or into which the Company is merged shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture, and thereafter the predecessor entity shall be relieved of all
obligations and covenants under the Indenture and the Debentures issued
thereunder and may thereafter be liquidated and dissolved.
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Trustee may, without the
consent of any holders of Debentures, enter into supplemental indentures for
purposes, among other things, of: (a) evidencing the succession of another
entity to the Company and the assumption by any such successor of the covenants
of the Company; (b) making any change that does not adversely affect the rights
of any Holders; or (c) curing any ambiguity, defect or inconsistency; provided,
however, that such action shall not adversely affect the interest of the Holders
in any material respect.
Most of the terms of the Indenture and the Debentures may be modified with
the consent of the Holders of not less than two-thirds of the principal amount
of Debentures then outstanding. However, each Holder must agree to: (i) an
extension of maturity, (ii) a reduction in principal amount or the rate of
interest on the Debentures, (iii) an increase in the conversion price of the
Debentures, (iv) a reduction in the premium, if any, payable upon redemption or
(v) a reduction in the aforesaid percentages required for modification.
The Company may omit in any particular instance to comply with any covenant
or condition as set forth in the Indenture if before the time for such
compliance two-thirds of the Holders of the principal amount of Debentures then
outstanding shall either waive such compliance in such instance or generally
waive compliance with such covenant or condition, but no such waiver may extend
to or affect such covenant or condition except to the extent so expressly
waived, and until such waiver has become effective, the obligation of the
Company and the duties of the Trustee in respect of any such covenant will
remain in full force and
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effect. No supplemental indenture will affect the seniority rights of the
holders of Senior Indebtedness without the consent of the such holders.
REGARDING THE TRUSTEE
The Company and its subsidiaries may maintain deposit accounts and conduct
other banking transactions with the Trustee in the ordinary course of their
businesses.
DESCRIPTION OF CAPITAL STOCK
The following summary description of the Company's capital stock does not
purport to be complete and is subject to the more detailed provisions of the
Company's Articles of Incorporation and Bylaws and is qualified in its entirety
by reference thereto.
The authorized capital stock of the Company consists of 30,000,000 shares
of Class A Common Stock, par value $.01 per share, 15,000,000 shares of Class B
Common Stock, par value $.01 per share, and 10,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"). As of May 29, 1996, the
Company had 1,311,803 shares of Class A Common Stock and 10,625,266 shares of
Class B Common Stock issued and outstanding and no shares of Preferred Stock
were outstanding.
The Class A Common Stock and the Class B Common Stock have substantially
identical terms except that (i) the Class B Common Stock is entitled to one vote
per share while the Class A Common Stock has no voting rights other than those
which may be required by Florida law in certain limited circumstances and (ii)
the 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.
VOTING
The holders of Class B Common Stock currently possess exclusive voting
rights in the Company. Shares of Preferred Stock issued in the future may be
granted voting rights at the discretion of the Board of Directors. On matters
submitted to the shareholders of the Company, the holders of the Class B Common
Stock will be entitled to one vote for each share held, while holders of Class A
Common Stock will not be entitled to vote except as may be required by Florida
law. Under the Florida Business Corporation Act (the "FBCA"), holders of Class A
Common Stock would currently be entitled to vote as a separate voting group on
certain amendments to the Company's Articles of Incorporation including, without
limitation, amendments which (i) increase or decrease the authorized number of
shares of Class A Common Stock, (ii) change the designation, rights, preferences
or limitations of the Class A Common Stock, (iii) create a new class of shares,
or increase the rights, preferences or number of authorized shares, which would
have rights or preferences with respect to distributions or dissolution that are
prior, superior or substantially equal to the Class A Common Stock, or (iv)
effect an exchange or reclassification of shares of another class of stock into
shares of Class A Common Stock or of Class A Common Stock into shares of another
class. In addition, under the FBCA holders of Class A Common Stock would
currently be entitled to vote as a separate voting group on any plan of merger
or plan of share exchange which contains a provision which, if included in a
proposed amendment to the Articles of Incorporation, would require their vote as
a separate voting group. No shares have cumulative voting rights.
DIVIDENDS
Holders of shares of Class A Common Stock and Class B Common Stock are
entitled to receive such dividends as may be declared by the Board of Directors
out of funds legally available therefor. The holders of Class A Common Stock
will be entitled to receive cash dividends in an amount equal to at least 110%
of any cash dividends declared and paid on the Class B Common Stock. With
respect to dividends other than cash (including stock splits and stock
dividends), the distribution per share with respect to Class A Common Stock will
be identical to the distribution per share with respect to Class B Common Stock,
except that a stock dividend or other distribution to holders of Class A Common
Stock may be declared and issued in Class A
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Common Stock while a stock dividend or other distribution to holders of Class B
Common Stock may be declared and issued in either Class A Common or Class B
Common Stock (at the discretion of the Board) provided that the number of any
shares so issued is, on a per share basis, the same. The ability of the Company
to pay cash dividends is subject to the ability of BankAtlantic to pay dividends
or make other distributions to the Company, which in turn is subject to
limitations which are imposed by law and regulation. See "Regulation and
Supervision -- Savings Institution Regulations -- Results of Failure to Meet
Capital Requirements," "-- Supervision Agreement," "-- Holding Company
Regulations" and "-- Restrictions on Dividends and Other Capital Distributions."
LIQUIDATION RIGHTS
In the event of any liquidation or dissolution of the Company, all assets
of the Company legally available for distribution after payment or provision for
payment of: (i) all debts and liabilities of the Company; (ii) any accrued
dividend claims; (iii) liquidation preferences of any Preferred Stock which may
be outstanding; and (iv) any interests in the Company's liquidation account,
will be distributed ratably, in cash or in kind, among the holders of Class A
Common Stock and Class B Common Stock.
Transfer Agent and Registrar -- Chemical Mellon Shareholder Services,
Ridgefield Park, New Jersey.
Other Characteristics -- Neither the Class A Common Stock nor the Class B
Common Stock is entitled to any preemptive right to subscribe for or receive any
shares of any class of stock of the Company (or any securities convertible into
shares of stock of the Company) issued in the future.
PREFERRED STOCK
In supplementary sections to its Articles of Incorporation, the Company may
provide for one or more classes of Preferred Stock, which must be separately
identified. The shares of any such class may be divided into and issued in
series, with each series separately designated so as to distinguish the shares
thereof from the shares of all other series and classes. The terms of each
series shall be set forth in a supplementary section to the Company's Articles
of Incorporation and may provide for, among other things, board representation,
voting rights and dividend and liquidation preferences. All shares of the same
class must be identical except as to certain relative rights and preferences
specified in the Company's Articles of Incorporation, as to which there may be
variations between different series.
98
<PAGE> 101
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriters named below, through their Representative, Ryan,
Beck & Co., Inc., have severally agreed to purchase from the Company the
principal amount of Debentures set forth opposite their respective names below.
The Underwriters are committed to purchase and pay for all Debentures if any
Debentures are purchased.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF DEBENTURES
--------------------------------------------------------------------- ----------------
<S> <C>
Ryan, Beck & Co., Inc................................................ $
----------------
TOTAL...................................................... $ 50,000,000
=============
</TABLE>
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Debentures to the public at the public offering
price set forth on the cover page of this Prospectus, and to certain dealers at
such price less a concession not in excess of % of the principal amount of
the Debentures. The Underwriters may allow and such dealers may re-allow a
concession not in excess of % of the principal amount of the Debentures to
certain other dealers. After the initial public offering, the public offering
price and such concessions may be changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to $7,500,000 principal
amount of additional Debentures at the public offering price set forth on the
cover page hereof less underwriting discounts. The Underwriters may exercise
such option to purchase additional Debentures solely for the purpose of covering
over-allotments, if any, incurred in the sale of the Debentures.
The Company has agreed to indemnify the Underwriters against and contribute
toward certain liabilities, including liabilities under the Securities Act. The
Company has agreed to reimburse the Representative for certain expenses and
legal fees related to the sale of the Debentures.
The Debentures are a new series of securities with no established trading
market. The Company has filed an application for the approval of the Debentures
for quotation on the Nasdaq SmallCap Market under the proposed trading symbol
"BANCG", subject to official notice of issuance.
LEGAL MATTERS
The validity of the Debentures offered hereby will be passed upon for the
Company by Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., Suite
2200, 150 West Flagler Street, Miami, Florida 33130, counsel to the Company.
Certain matters have been passed upon for the Underwriters by Malizia, Spidi,
Sloane & Fisch, P.C., One Franklin Square, 1301 K Street, N.W., Suite 700 East,
Washington, D.C., counsel to the Underwriters.
99
<PAGE> 102
EXPERTS
The consolidated financial statements of BankAtlantic Bancorp, Inc.
(formerly the consolidated financial statements of BankAtlantic, A Federal
Savings Bank prior to reorganization) as of December 31, 1995 and 1994, and for
each of the years in the three-year period ended December 31, 1995, and the
consolidated financial statements of Bank of North America Bancorp, Inc. as of
December 31, 1995 and 1994, and for each of the years in the three-year period
ended December 31, 1995, have been included herein and in the Registration
Statement in reliance upon reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing. The report of KPMG Peat
Marwick LLP covering the 1995 consolidated financial statements of Bank of North
America Bancorp, Inc. refers to a change in the method of accounting for certain
investments in debt and equity securities in 1993 to adopt the provisions of the
Financial Accounting Standards Board's SFAS No. 115 "Accounting for Certain
Investments in Debt and Equity Securities."
100
<PAGE> 103
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
Independent Auditors' Report........................................................ F-2
Consolidated Statements of Financial Condition as of March 31, 1996 (Unaudited) and
December 31, 1995 and 1994....................................................... F-3
Consolidated Statements of Operations for the Three Months Ended March 31, 1996 and
1995 (Unaudited) and for each of the years in the three year period ended
December 31, 1995................................................................ F-4
Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31,
1996 (Unaudited) and for each of the years in the three year period ended
December 31, 1995................................................................ F-5
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996 and
1995 (Unaudited) and for each of the years in the three year period ended
December 31, 1995................................................................ F-6
Notes to Consolidated Financial Statements.......................................... F-9
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BANK OF NORTH AMERICA BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition as of March 31, 1996 (Unaudited)..... F-55
Consolidated Statements of Operations for the Three Months Ended March 31, 1996 and
1995 (Unaudited)................................................................. F-56
Consolidated Statements of Stockholder's Equity for the Three Months Ended March 31,
1996 (Unaudited)................................................................. F-57
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996 and
1995 (Unaudited)................................................................. F-58
Notes to Unaudited Consolidated Financial Statements................................ F-59
Independent Auditors' Report........................................................ F-60
Consolidated Statements of Financial Condition as of December 31, 1995 and 1994..... F-61
Consolidated Statements of Operations for each of the years in the three year period
ended December 31, 1995.......................................................... F-62
Consolidated Statements of Stockholder's Equity for each of the years in the three
year period ended December 31, 1995.............................................. F-63
Consolidated Statements of Cash Flows for each of the years in the three year period
ended December 31, 1995.......................................................... F-64
Notes to Consolidated Financial Statements.......................................... F-65
</TABLE>
F-1
<PAGE> 104
INDEPENDENT AUDITORS' REPORT
The Board of Directors
BankAtlantic Bancorp, Inc.:
We have audited the accompanying consolidated statements of financial
condition of BankAtlantic Bancorp, Inc. ("the Company") and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
three year period ended December 31, 1995. These consolidated financial
statements (formerly the consolidated financial statements of BankAtlantic, A
Federal Savings Bank, prior to reorganization) are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BankAtlantic
Bancorp, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Fort Lauderdale, Florida
January 26, 1996
F-2
<PAGE> 105
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------------
1996 1995 1994
----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
Cash and due from depository institutions...................... $ 61,133 $ 69,867 $ 55,980
Investment securities, net -- held to maturity (approximate
market value: $40,537, $49,856 and $197,670)................. 40,537 49,856 202,676
Trading account securities, at market value.................... 0 0 9,100
Loans receivable, net.......................................... 863,348 828,630 546,396
Mortgage-backed securities -- held to maturity (approximate
market value: $550,134)...................................... 0 0 573,913
Debt securities available for sale, at market value............ 559,775 691,803 53,969
Accrued interest receivable.................................... 13,950 14,553 14,938
Real estate owned, net......................................... 6,737 6,279 7,238
Office properties and equipment, net........................... 42,602 40,954 38,132
Federal Home Loan Bank stock, at cost which approximates market
value........................................................ 8,840 10,089 8,840
Mortgage servicing rights...................................... 24,450 20,738 20,584
Deferred tax asset, net........................................ 1,828 0 1,568
Cost over fair value of net assets acquired.................... 10,517 10,823 0
Other assets................................................... 9,108 7,097 6,319
---------- ---------- ----------
Total assets.......................................... $1,642,825 $1,750,689 $1,539,653
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits..................................................... $1,323,229 $1,300,377 $1,085,782
Advances from FHLB........................................... 63,485 201,785 162,050
Federal funds purchased...................................... 0 1,200 0
Securities sold under agreements to repurchase............... 43,881 66,237 149,829
Subordinated debentures and note payable..................... 21,000 21,001 0
Drafts payable............................................... 546 796 685
Deferred tax liabilities, net................................ 0 744 0
Advances by borrowers for taxes and insurance................ 28,918 15,684 15,407
Other liabilities............................................ 24,947 22,304 20,380
---------- ---------- ----------
Total liabilities..................................... 1,506,006 1,630,128 1,434,133
---------- ---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares
authorized:
1,000,000 shares designated non-cumulative preferred stock,
$25.00 per share preference value, issued and outstanding
at December 31, 1994; 12.25% Series A, 188,600; 10.00%
Series B, 17,120; 8.00% Series C, 129,610 and none for 1995
and 1996................................................... 0 0 3
Additional paid-in capital -- preferred stock................ 0 0 7,027
Class A Common Stock, $0.01 par value, authorized 30,000,000
shares; issued and outstanding; 1,150,000, zero and zero
shares..................................................... 11 0 0
Class B Common Stock; $0.01 par value, authorized 15,000,000
shares; issued and outstanding; 10,592,999, 10,592,999 and
10,157,593 shares.......................................... 106 106 65
Additional paid-in capital................................... 64,685 48,905 47,027
Retained earnings............................................ 70,003 65,817 51,205
---------- ---------- ----------
Total stockholders' equity before net unrealized appreciation
on debt securities available for sale -- net of deferred
income taxes................................................. 134,805 114,828 105,327
Net unrealized appreciation on debt securities available for
sale -- net of deferred income taxes......................... 2,014 5,733 193
---------- ---------- ----------
Total stockholders' equity............................ 136,819 120,561 105,520
---------- ---------- ----------
Total liabilities and stockholders' equity............ $1,642,825 $1,750,689 $1,539,653
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 106
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
----------------- -------------------------------
1996 1995 1995 1994 1993
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INTEREST INCOME:
Interest and fees on loans........................... $20,333 $15,743 $72,841 $49,426 $47,335
Interest on banker's acceptances..................... 0 0 0 406 314
Interest on mortgage-backed securities held to
maturity........................................... 0 10,067 37,855 30,550 24,891
Interest on debt securities available for sale....... 10,500 1,400 7,207 5,542 9,412
Interest and dividends on investment securities...... 1,259 3,242 12,174 12,625 11,964
Other................................................ 0 0 0 0 587
------- ------- ------- ------- -------
Total interest income......................... 32,092 30,452 130,077 98,549 94,503
------- ------- ------- ------- -------
INTEREST EXPENSE:
Interest on deposits................................. 12,379 10,333 46,646 31,646 31,798
Interest on advances from FHLB....................... 2,027 1,606 7,449 4,976 2,359
Interest on securities sold under agreements to
repurchase......................................... 718 3,714 10,815 4,809 1,082
Interest on subordinated debentures, note payable and
capital notes...................................... 496 2 776 0 748
------- ------- ------- ------- -------
Total interest expense........................ 15,620 15,655 65,686 41,431 35,987
------- ------- ------- ------- -------
Net interest income.................................. 16,472 14,797 64,391 57,118 58,516
Provision for loan losses............................ 940 176 4,182 2,299 3,450
------- ------- ------- ------- -------
Net interest income after provision for loan
losses............................................. 15,532 14,621 60,209 54,819 55,066
------- ------- ------- ------- -------
NON-INTEREST INCOME:
Loan servicing and other loan fees................... 838 975 3,524 3,365 2,229
Gains on sales of loans originated for resale........ 164 65 395 773 1,246
Unrealized and realized gains (losses) on trading
account securities................................. 0 310 589 (558) 0
Gains on sales of mortgage servicing rights.......... 0 0 2,744 484 0
Gains on sales of debt securities available for
sale............................................... 2,292 0 0 0
Other................................................ 3,540 2,631 12,136 9,699 8,163
------- ------- ------- ------- -------
Total non-interest income..................... 6,834 3,981 19,388 13,763 11,638
------- ------- ------- ------- -------
NON-INTEREST EXPENSE:
Employee compensation and benefits................... 7,368 6,544 25,403 22,382 19,617
Occupancy and equipment.............................. 2,785 2,594 10,831 8,061 8,417
Federal insurance premium............................ 591 687 2,750 2,673 2,750
Advertising and promotion............................ 507 612 2,144 1,495 960
Foreclosed asset activity, net....................... (162) (1,163) (3,178) (2,290) 1,243
Amortization of cost over fair value of net assets
acquired........................................... 306 204 1,122 0 0
Other................................................ 3,120 2,397 12,088 9,764 10,546
------- ------- ------- ------- -------
Total non-interest expense.................... 14,515 11,875 51,160 42,085 43,533
------- ------- ------- ------- -------
Income before income taxes........................... 7,851 6,727 28,437 26,497 23,171
Provision for income taxes........................... 3,141 2,346 10,018 9,662 7,093
------- ------- ------- ------- -------
Net income........................................... 4,710 4,381 18,419 16,835 16,078
------- ------- ------- ------- -------
Dividends on non-cumulative preferred stock paid by
BFC escrow......................................... 0 0 0 0 147
Dividends on non-cumulative preferred stock.......... 0 220 677 880 733
Amount classified as dividends on non-cumulative
preferred stock redemption......................... 0 0 1,353(A) 0 0
------- ------- ------- ------- -------
Total dividends on non-cumulative preferred
stock....................................... 0 220 2,030 880 880
------- ------- ------- ------- -------
Net income available for common shares................. $ 4,710 $ 4,161 $16,389 $15,955 $15,198
======== ======== ======== ======== ========
Income per common and common equivalent share.......... $ 0.42 $ 0.39 $ 1.51(A) $ 1.52 $ 1.61
======== ======== ======== ======== ========
Income per common equivalent share assuming full
dilution............................................. $ 0.42 $ 0.39 $ 1.50(A) $ 1.52 $ 1.60
======== ======== ======== ======== ========
</TABLE>
- ---------------
(A) The excess of the redemption price above the recorded amount of preferred
stock is considered a preferred stock dividend. The impact of the October
1995 preferred stock redemption for the year ended December 31, 1995 was a
reduction of $0.13 and $0.12 for primary and fully diluted earnings per
share, respectively.
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 107
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED) AND
EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NET
UNREALIZED
ADDITIONAL APPRECIATION
PAID-IN ON DEBT
CAPITAL ADDITIONAL SECURITIES
PREFERRED PREFERRED COMMON PAID-IN RETAINED AVAILABLE
STOCK STOCK STOCK CAPITAL EARNINGS FOR SALE TOTAL
--------- ---------- ------- ---------- -------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992........ $ 3 $ 7,033 $ 41 $ 29,394 $29,694 $ 0 $ 66,165
Net income........................ 0 0 0 0 16,078 0 16,078
Dividends on preferred stock...... 0 0 0 0 (880 ) 0 (880)
Dividends on common stock......... 0 0 0 0 (738 ) 0 (738)
15% common stock dividend......... 0 0 6 7,323 (7,329 ) 0 0
Common stock issued to BFC upon
conversion of warrants.......... 0 0 11 1,960 0 0 1,971
Proceeds from issuance of common
stock, net...................... 0 0 7 8,049 0 0 8,056
-------- --------- ------ --------- ------- --------- --------
BALANCE, DECEMBER 31, 1993........ 3 7,033 65 46,726 36,825 0 90,652
Net income........................ 0 0 0 0 16,835 0 16,835
Dividends on preferred stock...... 0 0 0 0 (880 ) 0 (880)
Dividends on common stock......... 0 0 0 0 (1,575 ) 0 (1,575)
Exercise of 1984 Common Stock
Options......................... 0 0 0 301 0 0 301
Net unrealized appreciation on
debt securities available for
sale -- net of deferred income
taxes........................... 0 0 0 0 0 193 193
Preferred stock redemption........ 0 (6) 0 0 0 0 (6)
-------- --------- ------ --------- ------- --------- --------
BALANCE, DECEMBER 31, 1994........ 3 7,027 65 47,027 51,205 193 105,520
Net income........................ 0 0 0 0 18,419 0 18,419
5 for 4 stock split June 1995..... 0 0 16 0 (16 ) 0 0
5 for 4 stock split January
1996............................ 0 0 21 0 (21 ) 0 0
Dividends on preferred stock...... 0 0 0 0 (677 ) 0 (677)
Redemption of preferred stock..... (3) (7,027) 0 0 (1,353 ) 0 (8,383)
Dividends on common stock......... 0 0 0 0 (1,740 ) 0 (1,740)
Exercise of 1984 Common Stock
Options......................... 0 0 2 879 0 0 881
Exercise of stock warrants........ 0 0 2 999 0 0 1,001
Net change in unrealized
appreciation on debt securities
available for sale -- net of
deferred income
taxes........................... 0 0 0 0 0 5,540 5,540
-------- --------- ------ --------- ------- --------- --------
BALANCE, DECEMBER 31, 1995........ 0 0 106 48,905 65,817 5,733 120,561
Net income........................ 0 0 0 0 4,710 0 4,710
Proceeds from issuance of Class A
Common Stock, net............... 0 0 11 15,780 0 0 15,791
Dividends on common stock......... 0 0 0 0 (524 ) 0 (524)
Net change in unrealized
appreciation on debt securities
available for sale -- net of
deferred income
taxes........................... 0 0 0 0 0 (3,719) (3,719)
-------- -------- ------ -------- ------- -------- --------
BALANCE, MARCH 31, 1996........... $ 0 $ 0 $ 117 $ 64,685 $70,003 $ 2,014 $136,819
======== ======== ====== ======== ======= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 108
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE YEARS
ENDED MARCH 31, ENDED DECEMBER 31,
---------------------- -----------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income.................................. $ 4,710 $ 4,381 $ 18,419 $ 16,835 $ 16,078
ADJUSTMENT TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Provision for loan losses................... 940 176 4,182 2,299 3,450
Provision for (reversal of) losses on real
estate owned.............................. 0 (1,000) (1,187) 140 2,675
FHLB stock dividends........................ 0 0 0 (110) (364)
Depreciation................................ 858 786 3,203 2,731 3,408
Amortization of mortgage servicing rights... 1,500 1,015 4,362 4,960 4,452
Increase (decrease) in deferred income
taxes..................................... (297) 175 1,551 (1,266) (2,803)
Net amortization (accretion) of
securities................................ 5 (275) 780 1,068 9
Gains on sales of real estate owned......... (149) (136) (2,032) (2,105) (1,211)
Gains on sales of debt securities available
for sale.................................. (2,292) 0 0 0 0
Net amortization of deferred loan
origination
fees...................................... (285) (223) (1,095) (1,078) (794)
Proceeds from loans originated for resale... 15,345 4,636 34,548 38,941 46,229
Fundings of loans originated for resale..... (12,449) (6,530) (41,326) (39,259) (43,094)
Gains on sales of loans originated for
resale.................................... (164) (65) (395) (773) (1,246)
Losses (gains) on sales of office properties
and equipment............................. 71 0 (18) (272) 73
Purchase of trading account securities,
net....................................... 0 0 0 (9,658) 0
Proceeds from sales of trading account
securities................................ 0 0 9,524 0 0
Unrealized and realized (gains) losses on
trading account securities................ 0 (310) (589) 558 0
Gains on sales of mortgage servicing
rights.................................... 0 0 (2,744) (484) 0
Income (loss) from joint venture
operations................................ 0 0 (6) 30 25
Decrease (increase) in accrued interest
receivable................................ 603 (73) 1,593 2,636 4,614
Amortization of dealer reserve.............. 593 591 2,071 453 3,464
Amortization of cost over fair value of net
assets acquired........................... 306 204 1,122 0 0
Net accretion of other purchase accounting
adjustments............................... (68) (89) (612) 0 0
Amortization of subordinated debentures and
note payable deferred costs............... 26 0 98 0 0
Decrease (increase) in other assets......... (2,344) 1,404 3,522 2,505 3,057
(Decrease) increase in drafts payable....... (250) (14) 111 112 (673)
Increase (decrease) in other liabilities.... 2,585 1,783 540 (6,179) 7,206
Write down of office properties and
equipment................................. 0 0 120 0 222
Provision for (recovery from) tax
certificate
losses.................................... 125 (92) (145) 115 1,660
--------- --------- --------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES... $ 9,369 $ 6,344 $ 35,597 $ 12,199 $ 46,437
--------- --------- --------- --------- ---------
</TABLE>
(Continued)
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 109
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE YEARS
ENDED MARCH 31, ENDED DECEMBER 31,
--------------------- ---------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INVESTING ACTIVITIES:
Purchase of investment securities................ $ (220) $ (11,811) $ (70,872) $(240,726) $(121,538)
Proceeds from redemption and maturity of
investment securities.......................... 9,414 31,017 140,837 135,978 142,559
Principal collected on debt securities available
for sale....................................... 52,942 3,333 11,989 29,312 55,161
Proceeds from sales of debt securities available
for sale....................................... 75,394 0 852 0 0
Loans purchased.................................. (2,237) 0 (9,930) (3,989) (5,142)
Principal reduction on loans..................... 132,570 87,207 444,867 270,986 289,037
Loan fundings for portfolio...................... (169,172) (121,192) (597,274) (328,849) (220,130)
Banker's acceptances purchased................... 0 0 0 0 (109,931)
Proceeds from maturity of banker's acceptances... 0 0 0 109,931 0
Mortgage-backed securities purchased............. 0 (75,262) (75,262) (268,776) (206,854)
Proceeds from sales of real estate owned......... 548 2,533 5,373 5,660 6,278
Principal collected on mortgage-backed
securities..................................... 0 21,137 110,084 136,863 112,855
Additions to dealer reserve...................... (356) (562) (3,684) 0 0
Additions to office properties and equipment..... (2,577) (515) (5,535) (3,861) (2,525)
Proceeds from sales of office equipment.......... 0 0 18 643 46
Proceeds received from joint ventures............ 0 1,239 1,239 0 0
FHLB stock purchased............................. 0 0 (1,249) 0 0
Proceeds from sale of FHLB stock................. 1,249 0 0 0
Proceeds from sales of mortgage servicing
rights......................................... 0 0 8,340 2,920 0
Mortgage servicing rights purchased.............. (5,212) (1,166) (10,112) (8,147) (17,003)
Purchase of MegaBank, net of cash acquired....... 0 (14,733) (14,914) 0 0
--------- --------- --------- --------- ---------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES..................................... $ 92,343 $ (78,775) $ (65,233) $(162,055) $ (77,187)
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits.............. $ 12,345 $ 8 $ 51,093 $ (20,814) $ (59,370)
Interest credited to deposits.................... 10,507 9,023 43,447 30,236 27,615
Proceeds from FHLB advances...................... 186,970 115,000 641,785 516,400 95,000
Repayments of FHLB advances...................... (325,270) (162,050) (602,050) (482,650) (32,800)
Net increase (decrease) in federal funds
purchased...................................... (1,200) 0 1,200 0 0
Proceeds from note payable....................... 0 4,000 4,000 0 0
Repayment of note payable........................ (1) 0 (3,999) 0 0
Net increase (decrease) in securities sold under
agreements to repurchase....................... (22,356) 89,583 (104,207) 128,694 (397)
Redemption of subordinated debentures............ 0 0 0 0 (7,927)
Proceeds from the issuance of subordinated
debentures..................................... 0 0 21,000 0 0
Preferred stock redemption....................... 0 0 (8,383) (6) 0
Issuance of common stock and warrants, net....... 15,791 0 1,709 266 8,056
Receipts of advances by borrowers for taxes and
insurance...................................... 13,234 13,291 59,599 45,507 43,782
Payment for advances by borrowers for taxes and
insurance...................................... 0 0 (59,322) (46,091) (36,984)
Preferred stock dividends paid................... 0 (220) (677) (880) (733)
Common stock dividends paid...................... (466) (398) (1,672) (1,177) (349)
--------- --------- --------- --------- ---------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES..................................... $(110,446) $ 68,237 $ 43,523 $ 169,485 $ 35,893
--------- --------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents.................................... (8,734) (4,194) 13,887 19,629 5,143
Cash and cash equivalents at the beginning of
period......................................... 69,867 55,980 55,980 36,351 31,208
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD....... $ 61,133 $ 51,786 $ 69,867 $ 55,980 $ 36,351
========= ========= ========= ========= =========
</TABLE>
(Continued)
See Notes to Consolidated Financial Statements.
F-7
<PAGE> 110
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE YEARS
ENDED MARCH 31, ENDED DECEMBER 31,
---------------------- -----------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTARY DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Interest paid............................... $ 15,176 $ 14,907 $ 65,708 $ 40,334 $ 36,536
Income taxes paid........................... 0 1,100 9,320 10,435 11,198
Income taxes refunded....................... 0 0 88 0 1,629
Loans transferred to real estate owned...... 856 539 1,029 1,282 2,396
Loans charged-off........................... 1,854 981 5,433 5,968 5,459
Real estate owned charged-off............... 0 0 213 40 775
Tax certificates charge-offs (recoveries),
net....................................... (142) (16) 1,192 100 248
Book value of debt securities transferred to
available for sale........................ 0 0 638,818 0 0
Increase in equity for the tax effect
related to the exercise of employee stock
options................................... 0 0 173 35 0
Subordinated debentures due to BFC utilized
to exercise related warrants to purchase
stock of BankAtlantic..................... 0 0 0 0 1,971
Common stock issued to BFC upon exercise of
warrants.................................. 0 0 0 0 (1,971)
Issuance of subordinated debentures to BFC
for payment of preferred stock
dividends................................. 0 0 0 0 147
Preferred stock dividends paid by BFC
escrow.................................... 0 0 0 0 (147)
Common stock cash dividends declared and not
paid...................................... 524 398 467 398 389
Change in net unrealized appreciation on
debt securities available for sale........ (6,055) 1,473 9,019 314 0
Change in deferred taxes on net unrealized
appreciation on debt securities available
for sale.................................. (2,336) 568 3,479 121 0
Change in stockholders' equity from net
unrealized appreciation on debt securities
available for sale, less related deferred
income taxes.............................. (3,719) 905 5,540 193 0
</TABLE>
See Notes to Consolidated Financial Statements.
F-8
<PAGE> 111
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation. On July 13, 1994, BankAtlantic,
A Federal Savings Bank ("BankAtlantic") consummated its reorganization (the
"Reorganization") into a holding company structure and BankAtlantic Bancorp.,
Inc. (the "Company") acquired all the capital stock of BankAtlantic thereby
becoming a unitary savings bank holding company. The Reorganization resulted in
the shareholders of BankAtlantic becoming shareholders of the Company on the
same proportionate basis as their ownership in BankAtlantic and BankAtlantic
becoming a wholly-owned subsidiary of the Company. This Reorganization has been
accounted for in a manner similar to a pooling of interests, and has been given
retroactive effect in the accompanying consolidated financial statements. At the
time of, and as a result of the Reorganization, BFC Financial Corporation
("BFC") owned approximately 48.17% of the common stock of the Company. The
accounts of BFC are not included in the consolidated financial statements of the
Company. The Company's primary asset is the capital stock of BankAtlantic and
its principal activities relate to the operations of BankAtlantic and
BankAtlantic's subsidiaries. These subsidiaries are primarily utilized to
dispose of real estate acquired through foreclosure. All significant
intercompany balances and transactions have been eliminated in consolidation. At
March 31, 1996 and December 31, 1995, BFC's ownership in the Company's total
outstanding (A and B) common stock was 41% and 46%, respectively. At March 31,
1996 and December 31, 1995, BFC owned 46% of Class B Common Stock. (See also
"Common Stock" and Note 10).
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the statements of financial condition and
operations for the periods presented. Actual results could differ significantly
from those estimates. Material estimates that are particularly susceptible to
significant change in the next year relate to the determination of the allowance
for loan losses and the valuation of real estate acquired in connection with
foreclosure or in satisfaction of loans. In connection with the determination of
the allowances for loan losses and real estate owned, management obtains
independent appraisals for significant properties when it is deemed prudent.
All information related to March 31, 1996 and the three months ended March
31, 1996 and 1995, is unaudited.
Certain amounts for prior periods have been reclassified to conform with
statement presentations for 1996.
Cash Equivalents. Cash and due from depository institutions include demand
deposits at other financial institutions and federal funds sold. Generally,
federal funds are generally sold for one-day periods.
Investments and Mortgage-Backed Securities. In May, 1993, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities ("FAS 115"). FAS 115 was implemented, prospectively, by BankAtlantic
on January 1, 1994. Under FAS 115, investments in debt securities which
BankAtlantic has a positive intent and ability to hold to maturity are
classified as securities held to maturity and are carried at cost, adjusted for
discounts and premiums which are accreted or amortized to estimated maturity
under the interest method. In accordance with FAS 115, a security cannot be
classified as held to maturity if it might be sold in response to changes in
market interest rates, related changes in the security's prepayment risk,
liquidity needs, changes in the availability of and the yield on alternative
investments, and changes in funding sources and terms. Prior to the adoption of
FAS 115, securities that were held for sale were stated at the lower of
amortized cost or market. Upon adoption of FAS 115, all securities that were
previously classified as held for sale were designated as "available for sale".
F-9
<PAGE> 112
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Debt and equity securities and options related thereto, purchased or sold
for the purpose of a short-term profit are classified as "trading account
securities" and are recorded at fair value. Unrealized gains and losses in
trading account securities are reflected in operations.
Debt and equity securities not classified as held to maturity or trading
account securities are classified as "available for sale". Debt and equity
securities available for sale are carried at fair value, with the related
unrealized appreciation or depreciation, net of deferred income taxes, reported
as a separate component of stockholders' equity.
At December 31, 1994, the effect of implementing FAS 115 was to increase
the amount stated for debt securities available for sale by $314,000, record
related deferred income taxes of $121,000, and reflect the net of these amounts,
$193,000, as a separate component of stockholders' equity.
On November 15, 1995, the FASB issued Special Report No. 155-B, A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities (the "Special Report"). Pursuant to the Special Report,
BankAtlantic was permitted to conduct a one-time reassessment of the
classifications of all securities held at that time. Any reclassifications from
the held-to-maturity category made in conjunction with that reassessment would
not call into question an enterprise's intent to hold other debt securities to
maturity in the future. BankAtlantic undertook such a reassessment and,
effective December 15, 1995, all mortgage-backed and investment securities,
excluding tax certificates then classified as held-to-maturity were reclassified
as available for sale. On the effective date of the reclassification, the
securities transferred had a carrying value of $638.8 million and an estimated
fair value of $644.1 million, resulting in a net increase to stockholder's
equity for the net unrealized appreciation of $3.3 million, after deducting
applicable income taxes of $2.0 million.
Tax Certificates. Tax certificates are carried at cost. All tax
certificates are classified as held to maturity because management has the
positive intent and ability to hold such certificates to maturity. Tax
certificates and resulting deeds are classified as non-accrual when a tax
certificate is 48 months delinquent and a deed has aged 48 months from
BankAtlantic's acquisition date. At that time interest ceases to be accrued.
Prior to 1994, the practice was to establish an allowance for any interest
accrued after a specified term after acquisition of the certificate. The new
methodology charges off certificates at the same point in time, but discontinues
the practice of accruing interest and establishing an allowance for amounts
accrued after the specified term.
Allowance for tax certificate losses represents the amount which management
believes is sufficient to provide for future losses. In establishing its
allowance for tax certificates, management considers past loss experience,
present indicators, such as the length of time the certificate has been
outstanding, economic conditions and collateral values.
Construction and Development Lending. BankAtlantic's construction and
development lending generally requires an equity investment in the form of
contributed assets or direct cash investment from the borrower. Other than
advances to joint ventures, BankAtlantic has no loans which provide for a
participation in profits at March 31, 1996 and December 31, 1995, 1994 and 1993.
Accordingly, construction and development lending arrangements have been
classified and accounted for as loans.
Non-Accrual Loans, Impaired Loans and Real Estate Owned. Interest income
on loans, including the recognition of discounts and loan fees, is accrued based
on the outstanding principal amount of loans using the interest method. A loan
is generally placed on nonaccrual status, at the earlier of, management becoming
aware that the borrower has entered bankruptcy proceedings and the loan is
delinquent, or when the loan is past due 90 days as to either principal or
interest. When a loan is placed on nonaccrual status, interest accrued but not
received is reversed against interest income. A nonaccrual loan may be restored
to accrual status when delinquent loan payments are collected and the loan is
expected to perform according to its contractual terms. Management considers a
loan to be impaired when, based upon current information and events, it believes
it is probable that BankAtlantic will be unable to collect all amounts due
according to the contractual terms of the
F-10
<PAGE> 113
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
loan agreement. BankAtlantic continues to accrue interest on restructured loans
and other impaired loans since full payment of principal and interest is
expected and such loans are performing and therefore do not meet the above
criteria for nonaccrual status.
BankAtlantic adopted prospectively Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan," as
amended by Statement of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan -- Income Recognition and Disclosures" ("FAS
114"), effective January 1, 1995. There was no impact to the consolidated
statement of financial condition or the consolidated statement of operations
upon implementation. FAS 114 does not apply to large groups of smaller balance
homogeneous loans that are collectively evaluated for impairment. Loans
collectively reviewed by BankAtlantic for impairment include residential and
consumer loans and performing commercial real estate and business loans under
$500,000, excluding loans which are individually reviewed based on specific
criteria, such as delinquency and condition of collateral property.
BankAtlantic's impaired loans within the scope of FAS 114 include nonaccrual
commercial loans, restructured loans, and performing commercial loans less than
90 days delinquent, where management does not expect the loans to be repaid in
accordance with their contractual terms but which are expected to be collected
in full. Generally, BankAtlantic recognizes interest income on impaired loans on
a cash basis.
Allowance for Loan Losses. BankAtlantic, beginning on January 1, 1995,
bases the measurement of loan impairment on the fair value of the loan's
collateral in accordance with FAS 114. Non-collateral dependent loan impairment
is based on the present value of the estimated future cash flows. Impairment
losses are included in the allowance for loan losses through a charge to the
provision for loan losses. Adjustments to impairment losses resulting from
changes in the fair value of an impaired loan's collateral or projected cash
flows are included in the provision for loan losses. Upon disposition of an
impaired loan, any related valuation allowance is relieved from the allowance
for loan losses.
The allowance for loan losses is maintained by additions charged to
operations as a provision for loan losses and by loan recoveries, with
charge-offs reducing the allowance. BankAtlantic's process for evaluating the
adequacy of the allowance for loan losses has three basic elements: first, the
identification of impaired loans; second, the establishment of appropriate loan
loss allowances once individual specific impaired loans are identified; and
third, a methodology for estimating loan losses based on the inherent risk in
the remainder of the loan portfolio.
The identification of impaired loans is achieved mainly through individual
review of all commercial real estate and business loans over $500,000. Loss
allowances are established for specifically identified impaired loans based on
the fair value of the underlying collateral, and for non collateral dependent
loans, the present value of the estimated future cash flows.
The methodology for estimating losses inherent for non impaired loans also
includes estimates based upon consideration of actual loss experience for loans
during the past several years by loan type, condition of collateral and
projected economic conditions and other trends. Based upon this process,
consideration of the current economic environment and other factors, management
determines what it considers to be an appropriate allowance for loan losses.
Although BankAtlantic believes it has a sound basis for this estimation, actual
charge-offs incurred in the future are highly dependent upon future events,
including the economics of the areas in which BankAtlantic lends. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review BankAtlantic's allowance for loan losses. Such agencies may
require BankAtlantic to recognize additions to the allowance based on their
judgments about information available to them at the time of their examination.
Real Estate Owned ("REO"). Is recorded at the lower of the loan balance,
plus acquisition costs, or fair value, less estimated disposition costs.
Expenditures for capital improvements made thereafter are generally capitalized.
Real estate acquired in settlement of loans is anticipated to be sold and
valuation allowance
F-11
<PAGE> 114
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adjustments are made to reflect any subsequent changes in fair values from the
initially recorded amount. Costs of holding REO are charged to operations as
incurred. Provisions and reversals in the REO valuation allowance are reflected
in operations.
Profit or loss on real estate sold is recognized in accordance with
Statement of Financial Accounting Standard No. 66, Accounting for Sales of Real
Estate. Any estimated loss is recognized in the period in which it becomes
apparent.
Office Properties and Equipment. Land is carried at cost. Office
properties and equipment are carried at cost less accumulated depreciation.
Depreciation is computed on the straight-line method over the estimated useful
lives of the assets which generally range up to 50 years for buildings and 10
years for equipment. The cost of leasehold improvements is being amortized using
the straight-line method over the terms of the related leases.
Expenditures for new properties and equipment and major renewals and
betterments are capitalized. Expenditures for maintenance and repairs are
charged to expense as incurred and gains or losses on disposal of assets are
reflected in current operations.
In 1995, the FASB issued Statement of Financial Accounting Standard SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." ("FAS 121"). FAS 121 requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In performing the
review for recoverability, the entity should estimate the future cash flows
expected to result from the use of the asset and its eventual disposition. If
the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, an impairment loss is
recognized. Measurement of an impairment loss for long-lived assets and
identifiable intangibles that an entity expects to hold and use should be based
on the fair value of the asset. FAS 121 is effective for financial statements
for fiscal years beginning after December 15, 1995. BankAtlantic adopted FAS 121
effective January 1, 1996. Adoption of FAS 121 did not have any effect on
Consolidated Statement of Financial Position or Consolidated Statement of
Operations.
Loans Originated for Resale. Residential first mortgage loans originated
for resale are reported at the lower of cost or estimated fair value on an
aggregate basis. Loan origination fees and related direct loan origination costs
for these loans are deferred until the related loan is sold. Generally these
loans are committed for sale prior to origination; however, beginning in 1993, a
portion of these loans were not committed for sale, and were or will be held for
no longer than 12 months.
Loan Origination and Commitment Fees, Premiums and Discounts on Loans and
Mortgage Banking Activities. Origination and commitment fees collected are
deferred net of direct costs and are being amortized to interest income over the
loan life using the level yield method. Amortization of deferred fees is
discontinued when the related loan is placed on non-accrual status. Commitment
fees related to expired commitments are recognized as income when the commitment
expires.
Unearned discounts on installment, second mortgage and home improvement
loans are amortized to income using the level yield method over the terms of the
related loans. Unearned discounts on purchased loans are amortized to income
using the effective interest method over the estimated life of the loans.
Loan Servicing Fees. BankAtlantic services mortgage loans for investors.
These mortgage loans serviced are not included in the accompanying consolidated
statements of financial condition. Loan servicing fees are based on a stipulated
percentage of the outstanding loan principal balances being serviced and are
recognized as income when related loan payments from mortgagors are collected.
Loan servicing costs are charged to expense as incurred. Amounts paid for
purchased mortgage servicing rights are amortized to expense using the level
yield method over the estimated life of the loan, and continually adjusted for
prepayments. Management
F-12
<PAGE> 115
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
evaluates the carrying value of purchased mortgage servicing rights by
estimating the future net servicing income of the portfolio on a discounted,
disaggregated basis, based on estimates of the remaining loan lives. Prior to
January 1, 1996, mortgage servicing rights related to loans originated by
BankAtlantic, were not capitalized.
In May 1995 the FASB issued Statement of Financial Accounting Standard No.
122 ("FAS 122") which eliminated the accounting distinction between rights to
service mortgage loans for others that are acquired through loan origination
activities and those acquired through purchase transactions. FAS 122 requires an
entity to recognize as separate assets rights to service mortgage loans for
others, however those servicing rights are acquired. FAS 122 requires the
periodic evaluation of capitalized mortgage servicing rights for impairment
based on fair value. On January 1, 1996, this statement was implemented
prospectively. The initial valuation of MSR's are on an individual loan basis.
Both purchased and originated MSR's are amortized to expense using the level
yield method over the estimated life of the loan and continually adjusted for
prepayments. For the purpose of evaluating and measuring impairment of MSR's,
the Company stratifies those rights based on the predominant risk
characteristics of the underlying loans. Those characteristics include loan
type, note rate and term. Upon implementation of FAS 122, no additional
valuation allowance was required. Adjustments to the valuation allowance are
reflected in operations.
Dealer Reserves, Net. The dealer reserve receivable represents the portion
of interest rates passed through to dealers on indirect consumer loans.
BankAtlantic had funded 0-100% of the total dealer reserve at the inception of
the loan and currently funds 100% of the dealer reserves. Dealer reserves are
amortized over the contractual life of the related loans, adjusted for actual
prepayments, using the interest method and classified as an adjustment to
interest income except for the Subject Portfolio discussed further in Note 15
herein. Dealer reserves are stated net of accumulated amortization, allowances,
valuation adjustments, and any unfunded amounts due to the dealer.
Cost over fair value of net assets acquired and other intangible
assets. Cost over fair value of net assets acquired is being amortized on a
straight-line basis over its estimated useful life of 10 years. A non-
competition agreement was being amortized on a straight-line basis over its
useful life which was revised from six years to approximately three years. Cost
over fair value of net assets acquired and other intangible assets is evaluated
by management for impairment on an on-going basis based on the facts and
circumstances related to the net assets acquired.
Income Taxes. BankAtlantic and its subsidiaries have previously filed
consolidated federal and state income tax returns. Beginning with the tax year
ended December 31, 1994, the Company and its subsidiaries, including
BankAtlantic and its subsidiaries, will file consolidated federal and state
income tax returns.
The Company utilizes the asset and liability method to account for income
taxes. Under the asset and liability method , deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates on deferred tax assets
and liabilities is recognized in the period that includes the statutory
enactment date.
Common Stock. On February 13, 1996, the stockholders of the Company
approved at a special meeting, an amendment to the Company's Articles of
Incorporation (the "Amendment") authorizing 30,000,000 shares of a new class of
non-voting common stock designated Class A Common Stock, and redesignating the
Company's existing common stock, par value $0.01 per share, as Class B Common
Stock. The Class A Common Stock has no voting rights except as may be required
by Florida law. The two classes of stock generally have the same economic
rights, except Class A Common Stock is entitled to receive cash dividends equal
to at least 110% of any cash dividends declared and paid on Class B Common
Stock.
F-13
<PAGE> 116
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Preferred Stock. All three series of non-cumulative preferred stock had a
preference value of $25.00 per share and the shares issued were redeemable by
BankAtlantic at $25.00 per share. On July 13, 1994, pursuant to the
Reorganization, 260 shares of BankAtlantic's Series C preferred stock held by
dissenting shareholders were canceled in connection with the holders' exercise
of statutory appraisal rights. In October 1995, all preferred stock was
redeemed. For purposes of calculating income per common share, the excess of the
redemption price above the recorded amount is considered a preferred stock
dividend.
Income Per Common Share. In calculating income per common and common
equivalent share ("primary income per share") preferred stock dividends are
deducted from net income and the resulting amount is divided by the weighted
average number of common and common equivalents shares outstanding, when
dilutive. Common stock equivalents consist of common stock warrants and options.
In May 1993, a 15% stock dividend was declared and in June 1995 and January
1996, the Board of Directors declared five for four stock splits effected in the
form of 25% stock dividends issued in July 1995 and February 1996, respectively.
Where appropriate, amounts throughout this report have been adjusted to reflect
the stock dividend and stock splits.
Income per common and common equivalent share assuming full dilution
("fully diluted income per share") is calculated as above and, if dilutive,
after adjustment for interest charges as a result of the hypothetical conversion
of the BFC subordinated debentures, through their actual conversion date of June
30, 1993. Fully diluted income per share also utilizes the period end market
price of common stock if such price is greater than the average market price
utilized in computing primary income per share.
Common stock equivalents are not reflected in income per share until the
market price of the common stock obtainable has been in excess of the exercise
price for substantially all of three consecutive months, ending with the last
month of the period.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE YEARS ENDED
ENDED MARCH 31, DECEMBER 31,
----------------------- -----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Weighted average number of common and
common equivalent shares
outstanding......................... 11,292,320 10,571,570 10,830,603 10,490,033 9,460,004
========= ========= ========= ========= ========
Weighted average number of common and
common equivalent shares outstanding
assuming full dilution.............. 11,327,570 10,571,570 10,934,120 10,520,489 9,518,438
========= ========= ========= ========= ========
</TABLE>
On October 23, 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123"). This Statement applies to all
transactions in which an entity acquires goods or services by issuing equity
instruments or by incurring liabilities where the payment amounts are based on
the entity's common stock price. The Statement covers transactions with
employees and non-employees and is applicable to both public and non-public
entities. Entities are allowed (1) to continue to use the Accounting Principles
Board Opinion No. 25 method ("APB 25"), or (2) to adopt the FAS 123 fair value
based method. Once the method is adopted, an entity cannot change and the method
selected applies to all of an entity's compensation plans and transactions. For
entities not adopting the FAS 123 fair value based method, FAS 123 requires pro
forma net income and earnings per share information as if the fair value based
method has been adopted. For
F-14
<PAGE> 117
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
entities not adopting the fair value based method, the disclosure requirements
of FAS 123, including the pro forma information, are effective for financial
statements for fiscal years beginning after December 15, 1995 (calendar year
1996). The pro forma disclosures are to include all awards granted in fiscal
years that begin after December 15, 1994 (calendar year 1995). However, the
disclosures, including the pro forma net income and earnings per share
disclosure, for the first fiscal year beginning after December 15, 1994
(calendar year 1995) will not be included in that year's financial statements
but will be included in the following year's (calendar year 1996) financial
statements if the first fiscal year is presented for comparative purposes.
Management intends to continue to use APB 25 and disclose the pro forma net
income and earnings per share information in the December 31, 1996 and
subsequent financial statements.
2. DEBT SECURITIES AVAILABLE-FOR-SALE AND HELD-TO-MATURITY
Effective December 15, 1995, all mortgage-backed and investment securities,
excluding tax certificates then classified as held-to-maturity were reclassified
as available for sale. On the effective date of the reclassification, the
securities transferred had a carrying value of $638.8 million and an estimated
fair value of $644.1 million resulting in a net increase to stockholders' equity
for the net unrealized appreciation of $3.3 million after deducting applicable
income taxes of $1.2 million.
The following is a summary of debt securities available-for-sale and
held-to-maturity (in thousands):
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
-----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST APPRECIATION DEPRECIATION FAIR VALUE
--------- ------------ ------------- ----------
<S> <C> <C> <C> <C>
MARCH 31, 1996
MORTGAGE-BACKED SECURITIES(1):
FNMA mortgage backed securities........ $ 115,074 $ 921 $ 145 $ 115,850
FHLMC mortgage backed securities....... 348,508 3,216 1,540 350,184
FNMA real estate mortgage investment
conduits............................ 9,044 550 24 9,570
FHLMC real estate mortgage investment
conduits............................ 2,093 131 0 2,224
--------- -------- ------- ---------
Total mortgage-backed
securities................... 474,719 4,818 1,709 477,828
--------- -------- ------- ---------
INVESTMENT SECURITIES:
FHLB Bonds............................. 16,150 235 213 16,172
FHLMC Bond............................. 1,812 128 0 1,940
FNMA Bond.............................. 2,756 71 0 2,827
Asset-backed securities................ 57,220 143 211 57,152
Corporate bonds........................ 3,430 1 6 3,425
--------- -------- -------- ---------
Other................................. 410 21 0 431
--------- -------- -------- ---------
Total investment securities....... 81,778 599 430 81,947
--------- -------- ------- ---------
Total.......................... $ 556,497 $ 5,417 $ 2,139 $ 559,775
======== ======= ======= =========
DECEMBER 31, 1995
MORTGAGE-BACKED SECURITIES(2):
FNMA mortgage backed securities........ $ 120,584 $ 1,959 $ 123 122,420
FHLMC mortgage backed securities....... 455,962 7,118 874 462,206
FNMA real estate mortgage investment
conduits............................ 9,643 521 30 10,134
FHLMC real estate mortgage investment
conduits............................ 2,767 224 0 2,991
--------- -------- ------- ---------
Total mortgage-backed
securities................... 588,956 9,822 1,027 597,751
--------- -------- ------- ---------
</TABLE>
F-15
<PAGE> 118
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
-----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST APPRECIATION DEPRECIATION FAIR VALUE
--------- ------------ ------------- ----------
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES:
FHLB Bonds............................. 16,114 316 87 16,343
FHLMC Bond............................. 1,803 171 0 1,974
FNMA Bond.............................. 2,790 94 0 2,884
Asset-backed securities................ 68,907 224 192 68,939
Corporate bonds........................ 3,457 0 9 3,448
Other.................................. 442 22 0 464
--------- -------- ------- ---------
Total investment securities....... 93,513 827 288 94,052
--------- -------- ------- ---------
Total.......................... $ 682,469 $ 10,649 $ 1,315 $ 691,803
========= ======== ======= =========
DECEMBER 31, 1994
MORTGAGE BACKED SECURITIES:
FNMA mortgage-backed securities........ $ 16,624 $ 339 $ 140 $ 16,823
FHLMC mortgage-backed securities....... 37,031 148 33 37,146
--------- -------- ------- ---------
Total.......................... $ 53,655 $ 487 $ 173 $ 53,969
========= ======== ======= =========
</TABLE>
- ---------------
(1) Pledged as collateral are $4.0 million, $5.9 million, $81.9 million, $82.1
million and $19.6 million for commercial letters of credit, treasury tax
and loan, FHLB advances, repurchase agreements, and public funds,
respectively.
(2) Pledged as collateral are $8.4 million, $9.9 million, $105.6 million, $71.6
million and $11.6 million for commercial letters of credit, treasury tax
and loan, FHLB advances, repurchase agreements, and public funds,
respectively.
Included in the March 31, 1996 and December 31, 1995 table are
approximately $16.2 million and $17.0 million, respectively, of government
agency bonds and real estate mortgage conduits which were acquired during the
MegaBank acquisition, and are adjustable rate securities tied to various short
term and long term indices.
The maturities of mortgage-backed and investment securities available for
sale were (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1996
--------------------- ---------------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Due within one year........................... $ 29,511 $ 29,701 $ 12,095 $ 12,136
Due after one year, but within five years..... 407,610 406,597 452,171 453,784
Due after five years, but within ten years.... 12,466 13,037 35,565 37,214
Due after ten years........................... 106,910 110,440 182,638 188,669
--------- --------- --------- ---------
Total............................... $ 556,497 $ 559,775 $ 682,469 $ 691,803
======== ======== ======== ========
</TABLE>
F-16
<PAGE> 119
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
HELD TO MATURITY
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST APPRECIATION DEPRECIATION VALUE
--------- ------------ ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
MARCH 31, 1996
Tax certificates -- net of allowance of
$1,915(1).............................. $ 40,537 $ 0 $ 0 $ 40,537
======== === ======= ========
DECEMBER 31, 1995
Tax certificates -- net of allowance of
$1,648(1).............................. $ 49,856 $ 0 $ 0 $ 49,856
======== === ======= ========
DECEMBER 31, 1994
INVESTMENT SECURITIES:
Tax certificates -- net of allowance of
$2,985(1)........................... $ 61,132 $ 0 $ 0 $ 61,132
Asset-backed securities................ 127,981 0 3,722 124,259
Corporate bonds........................ 3,563 0 165 3,398
Federal agency obligations 10,000 0 1,119 8,881
-------- --- ------- --------
Total investment securities.... $202,676 $ 0 $ 5,006 $197,670
-------- --- ------- --------
MORTGAGE-BACKED SECURITIES:
FNMA................................... 121,906 0 6,506 115,400
FNMA real estate mortgage investment
conduits............................ 8,923 0 291 8,632
FHLMC.................................. 443,084 22 17,004 426,102
-------- --- ------- --------
Total mortgage-backed
securities................... 573,913 22 23,801 550,134
-------- --- ------- --------
Total.......................... $776,589 $ 22 $ 28,807 $747,804
======== === ======= ========
</TABLE>
- ---------------
(1) Tax certificates have no readily traded market and management considers
estimated fair value equivalent to book value.
The principal balance, unamortized premiums, unearned discount and
amortized cost of mortgage-backed securities held to maturity consisted of (in
thousands):
<TABLE>
<CAPTION>
HELD TO MATURITY
-------------------------------------------------
PRINCIPAL UNAMORTIZED UNAMORTIZED AMORTIZED
BALANCE PREMIUMS DISCOUNT COST
--------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
MORTGAGE-BACKED SECURITIES:
FNMA..................................... $ 120,973 $ 1,021 $ 88 $ 121,906
FNMA real estate mortgage investment
conduits.............................. 8,797 126 0 8,923
FHLMC.................................... 442,067 2,840 1,823 443,084
--------- ------- ------- ---------
Total mortgage-backed
securities..................... $ 571,837 $ 3,987 $ 1,911 573,913
========= ======= ======= =========
</TABLE>
F-17
<PAGE> 120
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The maturities of tax certificates held to maturity were (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
-------------------- --------------------
BOOK ESTIMATED BOOK ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Due in one year or less......................... $30,920 $ 30,920 $38,158 $ 38,158
Due after one year through five years........... 9,617 9,617 11,698 11,698
Due after five years through ten years.......... 0 0 0 0
------- -------- ------- --------
Total................................. $40,537 $ 40,537 $49,856 $ 49,856
======= ======== ======= ========
</TABLE>
In Florida, tax certificates represent a priority lien against real
property for which assessed real estate taxes are delinquent. BankAtlantic's
experience with this type of investment has been favorable as rates earned are
generally higher than many alternative investments and substantial repayment
occurs over a two year period. The primary risks BankAtlantic has experienced
with tax certificates have related to the risk that additional funds may be
required to purchase other certificates related to the property, the risk that
the liened property may be unusable and the risk that potential environmental
concerns may make taking title to the property untenable. See Note 5 for
activity in the allowance for tax certificate losses.
During the three months ended March 31, 1996, $73.1 million of
mortgage-backed securities were sold, resulting in a $2.3 million gain. During
the year ended December 31, 1995, $253,000 of Federal Reserve stock and $599,000
of GNMA mortgage-backed securities were sold resulting in an adjustment to cost
over fair value of net assets acquired of $26,000, as these securities were
acquired in the MegaBank acquisition. During the years ended December 31, 1994
and 1993, there were no sales of debt securities.
BankAtlantic's mortgage-backed securities held to maturity portfolio at
December 31, 1994 consisted of FNMA seven year balloon securities that mature in
1999-2000, FNMA adjustable rate securities that mature in 2023-2024, FNMA real
estate mortgage investment conduits that mature in 1997, FHLMC five and seven
year mortgage-backed securities that mature in 1996-2000 and FHLMC adjustable
rate mortgage-backed securities that mature in 2022-2024. Included in
mortgage-backed securities at December 31, 1994 was $139.5 million and $1.7
million of FHLMC and FNMA adjustable rate mortgage-backed securities. There were
no mortgage-backed securities held to maturity at December 31, 1995, and March
31, 1996.
An objective of BankAtlantic has been to improve its cumulative rate
sensitivity gap. In furtherance of this objective, BankAtlantic purchased, from
1990 through March 31, 1996 approximately $775.0 million of intermediate term
and adjustable rate mortgage-backed securities. Purchases of this type of
security are directed at reducing the intermediate term interest rate
sensitivity, reinvesting funds from principal repayments, reducing market
volatility compared to the longer term fixed rate mortgage-backed securities and
also providing future opportunities to improve liquidity.
During the third quarter of 1993, BankAtlantic established an investment
policy to increase fee income by selling uncovered European put options on
five-year treasury notes with notional principal not to exceed $10.0 million.
During the three months ended March 31, 1994, BankAtlantic sold two $5.0 million
U.S. Treasury European put options with expiration dates of April 27, 1994 and
May 31, 1994, respectively. BankAtlantic acquired the two five-year treasury
notes on the respective option expiration dates for $9.7 million and recorded
the notes in the trading category. At December 31, 1994, the mark-to-market
allowance for these treasury notes was $558,000. On May 11, 1995, in order to
lock-in the market values on the above treasury notes, BankAtlantic purchased
two 90 day U.S. Treasury European put options with the proceeds from the sale of
two 90 day U.S. Treasury European call options. The put options and call options
had $5.0 million notional principal each and expired on August 7, 1995. The
unrealized gain/loss is included in the consolidated statement of operations
under net "trading account securities" and amounted to an unrealized loss of
$558,000 for the year ended December 31, 1994, with the 1994 option proceeds
reducing the call on the treasury notes. A net realized gain of $589,000 was
recognized inclusive of the 1995 options for the
F-18
<PAGE> 121
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
year ended December 31, 1995 on the sale of the trading account securities upon
exercise of the call option. An unrealized gain on trading account securities of
$310,000 was recognized as of March 31, 1995.
During the three months ended March 31, 1996 and the years ended December
31, 1995 and 1994, BankAtlantic invested in repurchase agreements. The ending
balances at March 31, 1996, December 31, 1995 and 1994 were zero, the maximum
amount of repurchase agreements outstanding at any month end and the average
amount invested for the periods were zero, $20.0 million and $771,000 and $1.5
million, $29.0 million and $13.1 million, respectively. The underlying
securities were in the possession of BankAtlantic. During the three months ended
March 31, 1996 and the year ended December 31, 1995 BankAtlantic sold federal
funds. The outstanding balances at March 31, 1996 and December 31, 1995, maximum
amount of federal funds sold outstanding at any month end and the average amount
invested for the period were zero, $5.9 million and $4.1 million and zero, $11.0
million and $2.6 million, respectively.
3. LOANS RECEIVABLE -- NET
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------
1996 1995 1994
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Real estate loans:
Residential.................................................. $ 179,022 $157,361 $102,677
Residential held for sale (market value of $14,503, $17,254
and $6,889)............................................... 14,458 17,122 6,843
Construction and development................................. 133,762 122,371 45,725
FHA and VA insured........................................... 4,924 5,183 6,395
Commercial................................................... 375,782 350,256 303,877
Other loans:
Second mortgages -- direct................................... 65,463 63,052 40,564
Second mortgages -- indirect................................. 23,648 25,621 34,585
Commercial business.......................................... 63,622 64,194 24,566
Deposit overdrafts........................................... 856 832 503
Consumer loans -- other direct............................... 33,068 36,670 15,883
Consumer loans -- other indirect............................. 89,908 96,042 32,373
--------- -------- --------
Total gross loans.................................... 984,513 938,704 613,991
--------- -------- --------
Deduct:
Undisbursed portion of loans in process...................... 101,384 89,896 49,981
Other........................................................ 0 0 63
Unearned discounts on commercial real estate loans........... 772 793 874
Unearned discounts on consumer loans......................... 309 385 427
Allowance for loan losses.................................... 18,700 19,000 16,250
--------- -------- --------
Loan receivable -- net............................... $ 863,348 $828,630 $546,396
======== ======== ========
</TABLE>
No loans were securitized during the three months ended March 31, 1996 and
the years ended December 31, 1995 and 1994. BankAtlantic is subject to economic
conditions which could adversely affect both the performance of the borrower or
the collateral securing the loan. At March 31, 1996, 89% of total aggregate
outstanding loans were to borrowers in Florida, 4% of total loans were to
borrowers in the Northeastern United States and 7% were to borrowers located
elsewhere. At December 31, 1995, 90% of total aggregate outstanding loans were
to borrowers in Florida, 4% of total loans were to borrowers in the Northeastern
United States and 6% were to borrowers located elsewhere. Additionally, deferred
loan fees netted against loan balances were $2.0 million, $1.8 million and $1.4
million at March 31, 1996 and December 31, 1995 and 1994, respectively.
Commitments to sell residential mortgage loans were $5.7 million,
F-19
<PAGE> 122
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$5.7 million and $3.7 million at March 31, 1996 and December 31, 1995 and 1994,
respectively. Variable rate commitments to sell residential mortgage loans were
$137,000, $122,000 and $1.9 million, whereas, fixed rate commitments to sell
residential mortgage loans were $5.6 million, $5.6 million and $1.8 million at
March 31, 1996 and December 31, 1995 and 1994, respectively. Such residential
mortgage loan sales related to loans originated for sale.
Activity in the allowance for loan losses was (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
-------------------- --------------------------------
1996 1995 1995 1994(1) 1993(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period.... $ 19,000 $ 16,250 $ 16,250 $ 17,000 $ 16,500
Charge-offs:
Commercial business loans..... (3) 0 (382) (1,647) (835)
Commercial real estate
loans...................... (238) (222) (222) (220) 0
Consumer loans................ (1,610) (684) (4,566) (3,829) (4,322)
Residential real estate
loans...................... (3) (75) (263) (272) (302)
-------- -------- -------- -------- --------
(1,854) (981) (5,433) (5,968) (5,459)
-------- -------- -------- -------- --------
Recoveries:
Commercial business loans..... 174 491 738 565 262
Commercial real estate
loans...................... 38 0 102 18 6
Consumer loans................ 402 322 1,219 2,336 2,231
Residential real estate
loans...................... 0 0 0 0 10
-------- -------- -------- -------- --------
614 813 2,059 2,919 2,509
-------- -------- -------- -------- --------
Net charge-offs................. (1,240) (168) (3,374) (3,049) (2,950)
Additions charged to
operations.................... 940 176 4,182 2,299 3,450
Allowance for loan losses
acquired...................... 0 1,942 1,942 0 0
-------- -------- -------- -------- --------
Balance, end of period.......... $ 18,700 $ 18,200 $ 19,000 $ 16,250 $ 17,000
-------- -------- -------- -------- --------
Average outstanding loans during
the period.................... $860,179 $658,881 $750,058 $520,913 $522,938
======== ======== ======== ======== ========
Average outstanding banker's
acceptances during the
period........................ $ 0 $ 0 $ 0 $ 12,366 $ 9,379
======== ======== ======== ======== ========
Ratio of net charge-offs to
average outstanding
loans(2)...................... 0.58% 0.10% 0.45% 0.59% 0.56%
======== ======== ======== ======== ========
Ratio of net charge-offs to
average outstanding loans
including banker's
acceptances(2)................ 0.58% 0.10% 0.45% 0.57% 0.55%
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Included in installment loan recoveries for the years ended December 31,
1994 and 1993 is approximately $1.2 million and $1.0 million, respectively,
received from BankAtlantic's fidelity bond carrier (see Note 15). The ratio
of net charge-offs to average outstanding loans, excluding this recovery,
would have been 0.81%, and 0.74% for the years ended December 31, 1994 and
1993, respectively.
(2) Annualized where appropriate.
At March 31, 1996 and December 31, 1995, 1994 and 1993, BankAtlantic
serviced loans for the benefit of others amounting to approximately $2.3
billion, $1.8 billion, $1.9 billion and $1.9 billion, respectively. On February
1, 1996, BankAtlantic began sub-servicing $540 million of residential loans of
an unrelated financial institution which is included in the total loans serviced
for the benefit of others at March 31, 1996. Fees are
F-20
<PAGE> 123
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
based on the number of loans serviced and are recognized when the services are
performed. At March 31, 1996 and December 31, 1995 and 1994, other liabilities
includes approximately $7.2 million, $7.9 million and $6.0 million,
respectively, of loan payments due to others. Activity in mortgage servicing
rights was:
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS FOR THE YEARS ENDED
ENDED MARCH 31, DECEMBER 31,
----------------- ---------------------------
1996 1995 1995 1994 1993
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, beginning of period........... $20,738 $20,584 $20,584 $19,833 $ 7,282
Servicing rights acquired.............. 5,212 1,166 10,112 8,147 17,003
Servicing rights sold.................. 0 0 (5,596) (2,436) 0
Amortization of servicing rights....... (1,500) (1,015) (4,362) (4,960) (4,452)
------- ------- ------- ------- -------
Balance, end of period................. $24,450 $20,735 $20,738 $20,584 $19,833
======= ======= ======= ======= =======
</TABLE>
Aggregate loans to and repayments of loans by directors, executive
officers, principal stockholders and other related interests for the years ended
December 31, 1995, 1994 and 1993, were (in thousands):
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT BALANCE AT
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 ADDITIONS DELETIONS 1994 ADDITIONS DELETIONS 1995
- ------------ --------- --------- ------------ --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
$1,185 505 698 $992 15 70 $937
========== ======= ======= ========== ======= ======= ==========
<CAPTION>
BALANCE AT BALANCE AT
DECEMBER 31, MARCH 31,
1995 ADDITIONS DELETIONS 1996
- ------------ --------- --------- ----------
<S> <C> <C> <C>
$937 14 163 $788
============ ========= ========= ==========
</TABLE>
4. ACCRUED INTEREST RECEIVABLE
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------
1996 1995 1994
--------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Loans receivable.............................................. $ 6,199 $ 5,970 $ 4,125
Investment securities held to maturity........................ 3,265 3,407 6,355
Mortgage-backed securities held to maturity................... 0 0 3,808
Debt securities available for sale............................ 4,486 5,176 650
--------- ------- -------
$13,950 $14,553 $14,938
======= ======= =======
</TABLE>
5. NON-PERFORMING ASSETS AND RESTRUCTURED LOANS
Risk elements consist of non-accrual loans, non-accrual tax certificates,
restructured loans, past-due loans, REO, repossessed assets, and other loans
which management has doubts about the borrower's ability to comply with the
contractual repayment terms. Non-accrual loans are loans on which interest
recognition has been suspended because of doubts as to the borrower's ability to
repay principal or interest. Non-accrual tax certificates are tax deeds or
securities in which interest recognition has been suspended due to the aging of
the certificate or deed. Restructured loans are where the terms have been
altered to provide a reduction or deferral of interest or principal because of a
deterioration in the borrower's financial position. BankAtlantic did not have
any commitments outstanding to lend additional funds on restructured loans at
March 31, 1996 and December 31, 1995 and 1994. BankAtlantic has no commitments
to lend additional funds to borrowers whose loans are classified as
restructured.
F-21
<PAGE> 124
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Risk elements were (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------------
1996 1995 1994 1993
--------- ------- ------- -------
<S> <C> <C> <C> <C>
Non-accrual -- tax certificates(1)............... $ 1,709 $ 2,044 $ 3,578 $ 0
Non-accrual -- loans............................. 8,973 11,174 11,313 7,246
Loans contractually past due 90 days or
more(2)........................................ 1,295 1,536 736 2,580
Real estate owned, net of allowance.............. 6,737 6,279 7,238 9,651
Other repossessed assets......................... 528 461 350 512
--------- ------- ------- -------
Total non-performing................... 19,242 21,494 23,215 19,989
Restructured..................................... 3,456 2,533 1,648 2,647
--------- ------- ------- -------
Total risk elements.................... $22,698 $24,027 $24,863 $22,636
======= ======= ======= =======
Allowance for tax certificate losses............. $ 1,915 $ 1,648 $ 2,985 $ 2,970
======= ======= ======= =======
Allowance for loan losses........................ $18,700 $19,000 $16,250 $17,000
======= ======= ======= =======
</TABLE>
- ---------------
(1) Classification results from a change in methodology for classifying tax
certificates and calculating related allowances from the methodology used
in 1993.
(2) The majority of these loans have matured and the borrower continues to make
the payments under the matured loan agreement. BankAtlantic is in the
process of renewing or extending these matured loans.
The above schedule reflects, at March 31, 1996 all loans where known
information about the possible credit problems of the borrower caused management
to have serious doubts as to the ability of the borrower to comply with present
loan repayment terms which may result in disclosure of such loans in the future.
Interest income which would have been recorded under the original terms of
non-accrual and restructured loans and the interest income actually recognized
are summarized below (in thousands):
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
ENDED MARCH FOR THE YEARS
31, ENDED DECEMBER 31,
-------------- ------------------------
1996 1995 1995 1994 1993
----- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Interest income which would have been
recorded..................................... $ 321 $318 $1,393 $1,170 $1,068
Interest income recognized..................... (94) (37) (519) (443) (486)
----- ---- ------ ------ ------
Interest income foregone....................... $ 227 $281 $ 874 $ 727 $ 582
===== ==== ====== ====== ======
</TABLE>
The components of "Foreclosed asset activity, net" were (in thousands):
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS FOR THE YEARS
ENDED MARCH 31, ENDED DECEMBER 31,
--------------- ---------------------------
1996 1995 1995 1994 1993
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Real estate acquired in settlement of
loans:
Operating expenses (income), net......... $ (13) $ (27) $ 41 $ (325) $ (221)
Provision for (reversals of) losses on
REO................................... 0 (1,000) (1,187) 140 2,675
Net gains on sales....................... (149) (136) (2,032) (2,105) (1,211)
----- ------- ------- ------- -------
Total (income) expenses.......... $(162) $(1,163) $(3,178) $(2,290) $ 1,243
===== ======= ======= ======= =======
</TABLE>
F-22
<PAGE> 125
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Activity in the allowance for real estate owned consisted of (in
thousands):
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS FOR THE YEARS
ENDED MARCH 31, ENDED DECEMBER 31,
---------------- -------------------------
1996 1995 1995 1994 1993
------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period................ $2,800 $ 4,200 $ 4,200 $4,100 $2,200
Charge-offs:
Commercial loans.......................... 0 0 (213) 0 (706)
Residential loans......................... 0 0 0 (40) (69)
------ ------- ------- ------ ------
0 0 (213) (40) (775)
Provision for (reversals of) losses on
REO.................................... 0 (1,000) (1,187) 140 2,675
------ ------- ------- ------ ------
Balance, end of period............ $2,800 $ 3,200 $ 2,800 $4,200 $4,100
====== ======= ======= ====== ======
</TABLE>
Activity in the allowance for tax certificate losses was: (in thousands)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS FOR THE YEARS
ENDED MARCH 31, ENDED DECEMBER 31,
---------------- -------------------------
1996 1995 1995 1994 1993
------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period................ $1,648 $ 2,985 $ 2,985 $2,970 $1,558
Charge-offs................................. (43) (108) (1,854) (1,892) (810)
Recoveries.................................. 185 124 662 1,792 562
------ ------- ------- ------ ------
Net (charge-offs) recoveries................ 142 16 (1,192) (100) (248)
Additions (reversals) charged to
operations................................ 125 (92) (145) 115 1,660
------ ------- ------- ------ ------
Balance, end of period............ $1,915 $ 2,909 $ 1,648 $2,985 $2,970
====== ======= ======= ====== ======
</TABLE>
The following summarizes impaired loans at:
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
----------------------- -----------------------
RECORDED SPECIFIC RECORDED SPECIFIC
INVESTMENT ALLOWANCES INVESTMENT ALLOWANCES
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
IMPAIRED LOANS:
Nonaccrual loans:
With specific allowances.................... $ 1,052 $350 $ 1,962 $ 800
Without specific allowances................. 8,271 0 10,012 0
-------- ---- -------- ------
9,323 350 11,974 800
-------- ---- -------- ------
Restructured loans:
Without specific allowances................. 3,456 0 2,533 0
-------- ---- -------- ------
Other impaired loans:(1)
Other impaired commercial loans with
specific allowances...................... 1,183 577 1,340 577
Other impaired commercial loans without
specific allowances...................... 1,295 0 1,536 0
-------- ---- -------- ------
Total............................... $ 15,257 $927 $ 17,383 $1,377
======== ==== ======== ======
</TABLE>
- ---------------
(1) These loans are not included in risk elements, since subsequent to the date
of impairment these loans have performed based on their contractual terms.
F-23
<PAGE> 126
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The average net recorded investment in impaired loans for the three months
ended March 31, 1996 and the year ended December 31, 1995 was $16.3 million and
$16.9 million. Interest income of $151,000, $130,000 and $788,000 for the three
months ended March 31, 1996 and 1995 and the year ended December 31, 1995 was
recognized on impaired loans during the period of impairment.
Recorded investment of impaired loans reflects direct deferrals of $420,000
and $480,000 at March 31, 1996 and December 31, 1995.
Loans on nonaccrual status at March 31, 1996 and December 31, 1995 had
interest due but not recognized of approximately $227,000 and $874,000,
respectively. There was no net interest forgone related to restructured loans
during the three months ended March 31, 1996 and 1995 and the year ended
December 31, 1995. Interest income of $95,000, $37,000 and $243,000 was
recognized on restructured loans during the three months ended March 31, 1996
and 1995 and the year ended December 31, 1995.
6. OFFICE PROPERTIES AND EQUIPMENT
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995 1994
--------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Land.............................................................. $ 9,068 $ 8,721 $ 8,036
Building and improvements......................................... 37,220 35,620 32,946
Furniture and equipment........................................... 18,539 20,743 17,956
Properties under operating lease and property held for lease...... 5,983 5,906 5,288
--------- ------- -------
Total................................................... 70,810 70,990 64,226
Less accumulated depreciation..................................... 28,208 30,036 26,094
--------- ------- -------
Office properties and equipment -- net............................ $42,602 $40,954 $38,132
======= ======= =======
</TABLE>
Properties with a net book value of $4.0 million, $4.0 million and $3.5
million at March 31, 1996, December 31, 1995 and 1994, respectively was leased
to unrelated third parties. The following is a schedule of minimum future rental
income on the non-cancellable operating leases at (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNTS
---------------------------------------------------------------------------- -------
<S> <C>
1996........................................................................ $ 342
1997........................................................................ 342
1998........................................................................ 342
1999........................................................................ 342
2000........................................................................ 342
Thereafter.................................................................. 1,710
-------
Total............................................................. $3,420
======
</TABLE>
Net rental income for the three months ended March 31, 1996 and 1995 and
the years ended December 31, 1995, 1994 and 1993 was $363,000 and $86,000 and
$343,000, $248,000 and $205,000, respectively. Not included in the above table
but included in net rental income during the three months ended March 31, 1996
was $260,000 of additional lease income from a rent settlement relating to a
leased property in Broward county.
F-24
<PAGE> 127
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. DEPOSITS
The weighted average nominal interest rate payable on deposit accounts at
March 31, 1996 and December 31, 1995 and 1994 was 3.72%, 3.85% and 3.45%,
respectively. The stated rates and balances at which BankAtlantic paid interest
on deposits were:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
MARCH 31,
1996 1995 1994
-------------------- -------------------- --------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest free checking.............. $ 107,860 8.15 % $ 98,964 7.61 % $ 69,658 6.42 %
Insured money fund savings
3.19% at March 31, 1996
3.22% at December 31, 1995
3.71% at December 31, 1994........ 248,243 18.76 249,273 19.17 267,770 24.66
NOW accounts
1.42% at March 31, 1996
1.66% at December 31, 1995
1.57% at December 31, 1994........ 172,138 13.01 171,726 13.21 151,890 13.99
Savings accounts
1.61% at March 31, 1996
1.71% at December 31, 1995
1.87% at December 31, 1994........ 104,302 7.88 103,759 7.98 113,578 10.46
---------- ------- ---------- ------- ---------- -------
Total non-certificate accounts...... 632,543 47.80 623,722 47.97 602,896 55.53
---------- ------- ---------- ------- ---------- -------
Certificate accounts:
0.00% to 3.00%.................... 55,987 4.23 56,667 4.36 54,738 5.04
3.01% to 4.00%.................... 21,734 1.64 25,602 1.97 82,934 7.64
4.01% to 5.00%.................... 175,157 13.24 135,107 10.39 182,518 16.81
5.01% to 6.00%.................... 333,113 25.17 303,497 23.34 123,016 11.33
6.01% to 7.00%.................... 90,032 6.80 137,917 10.61 27,857 2.57
7.01% and greater................. 13,981 1.07 17,543 1.34 11,674 1.07
---------- ------- ---------- ------- ---------- -------
Total certificate accounts.......... 690,004 52.15 676,333 52.01 482,737 44.46
---------- ------- ---------- ------- ---------- -------
Total deposit accounts.............. 1,322,547 99.95 1,300,055 99.98 1,085,633 99.99
---------- ------- ---------- ------- ---------- -------
Interest earned not credited to
deposit account................... 682 0.05 322 0.02 149 0.01
---------- ------- ---------- ------- ---------- -------
Total...................... $1,323,229 100.00 % $1,300,377 100.00 % $1,085,782 100.00 %
========== ======= ========== ======= ========== =======
</TABLE>
Interest expense by deposit category was (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS FOR THE YEARS
ENDED MARCH 31, ENDED DECEMBER 31,
------------------ ---------------------------
1996 1995 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Money fund savings and NOW accounts..... $ 2,569 $ 3,185 $11,591 $10,751 $11,413
Savings accounts........................ 436 540 1,987 2,116 2,363
Certificate accounts -- below
$100,000.............................. 7,286 5,824 27,059 16,480 16,247
Certificate accounts, $100,000 and
above................................. 2,125 844 6,269 2,471 1,941
Less early withdrawal penalty........... (37) (60) (260) (172) (166)
------- ------- ------- ------- -------
Total......................... $12,379 $10,333 $46,646 $31,646 $31,798
======= ======= ======= ======= =======
</TABLE>
Included in other non-interest income is approximately $1.9 million and
$1.6 million and $7.0 million, $5.4 million and $4.8 million of checking account
fees for the three months ended March 31, 1996 and 1995 and the years ended
December 31, 1995, 1994 and 1993, respectively.
F-25
<PAGE> 128
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At March 31, 1996 and December 31, 1995, the amounts of scheduled
maturities of certificate accounts were (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
------------------------------------------------------------
1997 1998 1999 2000 2001 THEREAFTER
-------- ------- ------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
0.00% to 3.00%.................. $ 36,549 $10,140 $ 3,421 $ 2,887 $2,151 $ 839
3.01% to 4.00%.................. 21,366 37 70 261 0 0
4.01% to 5.00%.................. 152,301 17,426 4,994 158 130 148
5.01% to 6.00%.................. 291,156 24,157 12,556 2,123 2,861 260
6.01% to 7.00%.................. 66,791 15,792 1,601 3,587 2,086 175
7.01% and greater............... 7,756 1,160 307 3,489 1,269 0
-------- ------- ------- ------- ------ ------
Total................. $575,919 $68,712 $22,949 $12,505 $8,497 $1,422
======== ======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-------------------------------------------------------------
1996 1997 1998 1999 2000 THEREAFTER
-------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
0.00% to 3.00%................. $ 35,806 $11,687 $ 3,428 $ 2,056 $ 3,130 $ 560
3.01% to 4.00%................. 25,036 124 0 442 0 0
4.01% to 5.00%................. 120,490 9,869 3,979 643 64 62
5.01% to 6.00%................. 260,785 23,762 12,661 4,085 1,916 288
6.01% to 7.00%................. 109,194 20,738 1,667 3,119 3,026 173
7.01% and greater.............. 8,369 3,863 520 775 3,991 25
-------- ------- ------- ------- ------- ------
Total................ $559,680 $70,043 $22,255 $11,120 $12,127 $1,108
======== ======= ======= ======= ======= ======
</TABLE>
Time deposits of $100,000 and over had the following maturities at (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
<S> <C> <C>
Less than 3 months............................................. $ 11,673 $ 14,593
3 to 6 months.................................................. 27,544 25,111
6 to 12 months................................................. 49,353 49,167
More than 12 months............................................ 71,378 59,621
--------- --------
Total................................................ $ 159,948 $148,492
======== ========
</TABLE>
Beginning in 1990, the Office of the Comptroller for the State of Florida
("Comptroller") commenced a review of BankAtlantic's procedures for the
assessment of fees on dormant accounts. The Comptroller subsequently indicated
that BankAtlantic was not in compliance with applicable Florida law as
interpreted by the Comptroller. The difference in interpretation concerned
approximately $500,000. BankAtlantic amended its procedures to satisfy the
Comptroller's interpretation. While pending resolution, dormant account
assessments, approximately $10,000 per month, were eliminated for the period
1992 through March 1994, and an allowance was established for the amount in
question. During March 1994, modified procedures were instituted which
management believes comply with the applicable Florida laws and during April
1994, BankAtlantic began currently recognizing dormant account fee income. On
June 30, 1994 all issues were resolved with the Comptroller and in connection
therewith, BankAtlantic remitted $250,000 to the Comptroller and recognized
$332,000 of previously deferred dormant account fee income.
F-26
<PAGE> 129
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. ADVANCES FROM FEDERAL HOME LOAN BANK AND FEDERAL FUNDS PURCHASED
Advances from Federal Home Loan Bank ("FHLB") incur interest and were
repayable as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
REPAYABLE DURING YEAR ENDING DECEMBER MARCH 31, --------------------
31, INTEREST RATE 1996 1995 1994
-------------------------------------- -------------- --------- -------- --------
<S> <C> <C> <C> <C>
1995.................................. 4.92% to 7.80% $ 0 $ 0 $162,050
1996.................................. 5.32% to 5.94% 63,485 201,785 0
--------- -------- --------
Total....................... $63,485 $201,785 $162,050
======= ======== ========
</TABLE>
Short term FHLB advances at March 31, 1996, December 31, 1995 and 1994,
amounted to $23.5 million, $106.8 million and $55.0 million, respectively. At
March 31, 1996, December 31, 1995 and 1994, BankAtlantic pledged specific
mortgage-backed securities as collateral in the amount of $81.9 million, $105.6
million, and $62.4 million for short-term borrowings, respectively, for FHLB
advances. In June 1994, the FHLB accepted BankAtlantic's request to establish a
blanket floating lien for additional advance borrowings. Under a blanket
floating lien, BankAtlantic is exempt from having to assign specific collateral
to the FHLB. In addition, FHLB stock is pledged as collateral for outstanding
FHLB advances. In August 1994, a $300 million Credit Availability was
established with the FHLB with a maximum term of ten years.
During the fourth quarter of 1994, BankAtlantic established three $5.0
million unsecured lines of credit with three federally insured banking
institutions for the purchase of Federal Funds. At March 31, 1996 and December
31, 1995, the outstanding balance of these lines of credit was $0 and $1.2
million, respectively. The average balance outstanding and maximum outstanding
balance at any month end during 1995, and the three months of 1996 of the three
Federal Funds purchased lines of credit was $1.0 million and $4.5 million and
$1.5 million and $0, respectively.
9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The following table provides information on the agreements to repurchase
(dollars in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE YEARS ENDED
ENDED MARCH 31, DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Maximum borrowing at any month-
end within the period.......... $101,883 $328,666 $328,666 $182,736 $69,295
Average borrowing during the
period......................... 63,952 240,092 186,592 105,462 33,962
Average interest cost during the
period......................... 4.39% 6.26% 5.80% 4.56% 3.19%
Average interest cost at end of
the period..................... 4.07 5.91 4.59 5.94 3.30
======== ======== ======== ======== =======
</TABLE>
Average borrowing was computed based on average daily balances during the
period. Average interest rates during the period were computed by dividing
interest expense for the period by the average borrowing during the period.
Securities sold under agreements to repurchase are summarized below (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------
1996 1995 1994
--------- ------- --------
<S> <C> <C> <C>
Agreements to repurchase the same security............... $ 0 $23,860 $131,825
Customer repurchase agreements........................... 43,881 42,377 18,004
--------- ------- --------
Total.......................................... $43,881 $66,237 $149,829
======= ======= ========
</TABLE>
F-27
<PAGE> 130
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Customer repurchase agreements at March 31, 1996, December 31, 1995 and
1994 included a $7.4 million, $7.5 million and $12.5 million customer repurchase
agreement, respectively, related to a BFC escrow account. Total interest expense
related to this reverse repurchase agreement, which was initiated on March 2,
1994, was approximately $74,000 and $121,000, $374,000 and $284,000 during three
months ended March 31, 1996 and 1995 and the years ended December 31, 1995 and
1994, respectively.
The following table lists the amortized cost and estimated fair value of
securities sold under repurchase agreements, and the repurchase liability
associated with such transactions (dollars in thousands):
<TABLE>
<CAPTION>
WEIGHTED
ESTIMATED AVERAGE
AMORTIZED FAIR REPURCHASE INTEREST
COST VALUE BALANCE RATE(2)
--------- --------- ----------- --------
<S> <C> <C> <C> <C>
MARCH 31, 1996(1)
FNMA......................................... $ 4,252 $ 4,228 $ 3,523 4.07%
FHLMC........................................ 77,868 78,685 40,358 4.07
--------- --------- ---------- ------
Total.............................. $ 82,120 $ 82,913 $ 43,881 4.07%
======== ======== ========= ======
DECEMBER 31, 1995(1)
FNMA......................................... $ 8,780 $ 8,750 $ 7,981 3.91%
FHLMC........................................ 62,773 63,341 58,256 4.69
--------- --------- --------- ------
Total.............................. $ 71,553 $ 72,091 $ 66,237 4.59%
======== ======== ========= ======
DECEMBER 31, 1994
FNMA......................................... $ 21,059 $ 20,305 $ 14,752 5.45%
FHLMC........................................ 159,862 153,389 135,077 6.00
--------- --------- --------- ------
Total.............................. $ 180,921 $ 173,694 $ 149,829 5.94%
======== ======== ========= ======
</TABLE>
- ---------------
(1) At March 31, 1996 and December 31, 1995 these securities were classified as
available for sale and recorded at market value in the consolidated
statements of financial condition.
(2) At end of period.
All repurchase agreements at March 31, 1996, December 31, 1995 and 1994,
matured and were repaid in April 1996, and January 1996 and 1995, respectively.
These securities were held by unrelated broker dealers.
10. CAPITAL NOTES, SUBORDINATED DEBENTURES, NOTE PAYABLE, PREFERRED STOCK,
COMMON STOCK WARRANTS, COMMON STOCK OPTIONS AND COMMON STOCK
In order to increase its regulatory capital, BankAtlantic issued $25.0
million of its 1986 Capital Notes between January and August 1986. In March
1991, $10.2 million of 1986 Capital Notes were exchanged for noncumulative
preferred stock, cash payments and cash bonuses. All three series of
non-cumulative preferred stock had a preference value of $25.00 per share and
were redeemable at $25.00 per share. During July 1994, 260 shares of Series C
preferred stock were canceled in connection with the exercise of dissenters'
rights by certain BankAtlantic preferred shareholders in connection with the
Reorganization. In July 1993, BankAtlantic received approval from the Office of
Thrift Supervision ("OTS") to redeem all remaining Capital Notes and
subordinated debentures. BankAtlantic redeemed the remaining $6.8 million of
1986 Capital Notes and $1 million of 14% subordinated debentures on August 31,
1993 at par. Funds for the redemption were provided from loan repayments.
As a condition of the exchange of 1986 Capital Notes for preferred stock,
BFC placed cash in an escrow account equal to dividends payable on the preferred
stock for the first two years. The amount placed in escrow was approximately
$1.7 million. This escrow account was utilized by BankAtlantic to pay the
preferred
F-28
<PAGE> 131
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shareholder dividends during the first two years after issuance. Upon
establishing the escrow account, BankAtlantic entered into an agreement with BFC
that BFC be issued 13% subordinated debentures in the amount of the escrow
utilized, as well as non-detachable warrants to acquire additional shares of
BankAtlantic common stock on the basis of $1.12 per share purchase price to the
extent of subordinated debentures issued and any interest accrued and not
currently paid thereon. The related warrants were to expire at maturity of the
related subordinated debentures on March 7, 1998. The exercise price of the
warrants subject to the agreement was established at the greater of 120% of the
average market price of BankAtlantic stock during the 30 days prior to the
funding of the escrow or $1.11 per common share. At March 7, 1991, 120% of the
average market price of BankAtlantic common stock was $1.12, resulting in the
exercise price of the warrants being set at $1.12 per common share. Effective
June 30, 1993, BFC exercised its warrants to acquire 1,759,886 shares of
BankAtlantic's common stock at an exercise price of $1.12 per share. The payment
of the $1,971,072 purchase price was made through the tender of subordinated
debentures held by BFC. During July 1993, accrued interest of $83,704 was paid
to BFC for interest accrued on the subordinated debentures from March 1, 1993 to
June 30, 1993. From March 1991 through February 1993, BFC provided funds for the
payment of dividends on BankAtlantic's preferred stock. BFC has no further
obligation to provide the funds for payment of any dividends by BankAtlantic or
the Company. In October 1995, all series of preferred stock were redeemed at
$25.00 per share. BFC owned the following shares of preferred stock which were
obtained through open market purchases. The shares were redeemed on October 7,
1995.
<TABLE>
<CAPTION>
AT DECEMBER 31,
1994
------------------
PREFERRED STOCK -- SERIES SHARES PERCENT
------------------------------------------------------------ ------ -------
<S> <C> <C>
A........................................................... 5,600 2.97%
B........................................................... 529 3.09%
C........................................................... 7,245 5.59%
</TABLE>
The Company intends to pay a regular cash quarterly common stock dividend.
The availability of funds for the payment of dividends is generally dependent
upon BankAtlantic's ability to pay dividends to the Company.
In June 1990, a third party acquired $1.0 million of BankAtlantic's
subordinated debentures at a rate of 14% per annum with a maturity of June 1997.
The subordinated debentures were issued with detachable warrants entitling the
holder to purchase 338,395 shares of BankAtlantic's common stock at an exercise
price of $2.96 per share at any time prior to maturity. On March 31, 1991,
BankAtlantic issued to certain of its existing shareholders, 7,623 shares of
common stock and $8,000 of 14% subordinated debentures, having a March 1998
maturity date, with related detachable warrants to purchase 7,188 shares of
common stock. The $1.0 million and $8,000 of subordinated debentures were
redeemed along with the Capital Notes on August 31, 1993. However, the warrants
relating to such debentures are detachable and remain outstanding until the
earlier of exercise or original maturity of the subordinated debentures. The
warrants outstanding at December 1994 relating to the redeemed debentures were
338,395 and 5,388 with exercise prices of $2.96 and $1.11, respectively. On May
12, 1995, 338,395 of these stock warrants were exercised for $2.96 per share.
The proceeds of $1.0 million were utilized to partially repay the note payable
discussed below. The warrants outstanding at March 31, 1996 and December 31,
1995 relating to the redeemed debentures are 4,490 with a $1.11 exercise price.
On March 30, 1995, the Company borrowed $4.0 million from an unrelated
financial institution and incurred financing costs of $69,000. The debt matured
on March 30, 1996, bore interest at prime plus 1% and was collateralized by 12%
non-cumulative preferred stock of BankAtlantic having a preference value of $4.0
million. The $4.0 million was utilized by the Company to purchase the
BankAtlantic preferred stock used as collateral. The note payable was reduced to
$1,000 in September 1995 and the note was converted to a
F-29
<PAGE> 132
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$3.0 million line of credit with the same maturity and interest rate as the
original agreement. At March 31, 1996 the note was paid in full.
On November 12, 1993, BankAtlantic closed a public offering of 2.81 million
common shares at a price of $8.64 per common share. Of the 2.81 million shares
sold, 625,000 shares were sold by BankAtlantic and 2.18 million shares were sold
by BFC. Net proceeds to BankAtlantic from the sale of the 625,000 shares were
approximately $4.6 million. In connection with the public offering, BankAtlantic
granted the underwriters a 30 day option to purchase up to 421,875 additional
shares of common stock to cover overallotments. On November 10, 1993, the
underwriters exercised this option to purchase the 421,875 shares, with a
closing date of November 18, 1993. The additional net proceeds to BankAtlantic
were approximately $3.4 million. Upon sale of the 3,234,375 shares, BFC's
ownership of BankAtlantic changed from 77.83% to 48.17%.
In a public offering dated September 22, 1995, the Company issued $21.0
million principal amount of 9% subordinated debentures due October 1, 2005 (the
"9% Debentures"). The underwriting discount and other expenses of $1.0 million
are included in other assets in the December 31, 1995 and March 31, 1996
statement of financial condition. The proceeds from the offering were utilized
as follows: $6.0 million was contributed to the capital of BankAtlantic; $2.9
million was utilized to repay a note payable; $8.4 million was used to redeem
all of the outstanding shares of the Company non-cumulative preferred stock,
and, in accordance with the requirements of the Indenture under which the 9%
Debentures were issued, $1.9 million was invested in marketable securities to
cover two semi-annual interest payments. The October 7, 1995 preferred stock
redemption resulted in a $1.4 million payment above the recorded amount of the
preferred stock. Such excess was treated as a preferred stock dividend and
impacted earnings per common and common equivalent share by $.13 and $.12 per
share, respectively for the year ended December 31, 1995.
On February 13, 1996, the stockholders of the Company approved at a special
meeting, an amendment to the Company's Articles of Incorporation (the
"Amendment") authorizing 30,000,000 shares of a new class of non-voting common
stock designated Class A Common Stock, and redesignating the Company's existing
Common Stock, par value $0.01 per share, as Class B Common Stock. The Class A
Common Stock has no voting rights except as may be required by Florida law. The
two classes of stock generally have the same economic rights, except Class A
Common Stock is entitled to cash dividends equal to at least 110% of any cash
dividends declared and paid on Class B Common Stock. In March 1996, the Company
issued 1.15 million shares of Class A Common Stock in an underwritten public
offering at $15.00 per share. Net proceeds to the Company after underwriting
costs and other expenses of $1.2 million and $247,000, respectively, were $15.8
million. In April 1996 the underwriter exercised an overallotment option to
purchase an additional 161,803 shares of Class A Common Stock resulting in net
proceeds to the Company of $2.3 million. In March 1996, the Company contributed
$14.0 million of the net proceeds to the capital of BankAtlantic where it was
used for general corporate purposes. The net proceeds retained by the Company
are being used for general corporate purposes. As of result of the above Class A
Common Stock issuance BFC ownership in the Company's total outstanding (A and B)
common stock was approximately 41% at March 31, 1996, comprised of no shares of
Class A Common Stock and 46% of the Company's outstanding Class B Common Stock.
On April 6, 1984, BankAtlantic's stockholders approved a Stock Option Plan
("1984 Plan") under which options to purchase up to 557,031 shares of common
stock may be granted. The plan provided for the grant of both incentive stock
options and non-qualifying options. The exercise price of an incentive stock
option was not to be less than the fair market value of the common stock on the
date of the grant. The exercise price of non-qualifying options was determined
by a committee of the Board of Directors. The "1984 Plan" has expired; however,
options granted under this plan are still outstanding.
On May 25, 1993, the Board of Directors authorized the issuance of 297,843
incentive stock options and 169,345 non-qualifying stock options under the 1984
plan. Of the incentive and non-qualifying stock options, 68,063 were issued at
110% of the fair market value at the date of grant. The remaining incentive and
non-
F-30
<PAGE> 133
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
qualifying stock options were issued at the fair market value at the date of
grant. Non-qualifying stock options for 35,938 shares were issued outside of the
Plan to non-employee directors. These options have similar terms and conditions
as non-qualifying options under the 1984 Plan.
On May 31, 1994, the stockholders of BankAtlantic approved the BankAtlantic
1994 Stock Option Plan ("1994 Plan"), authorizing the issuance of options to
acquire up to 937,500 shares of BankAtlantic's common stock. In accordance with
the Reorganization, all outstanding options under the 1984 Plan and 1994 Stock
Option Plan became the obligation of the Company as of July 13, 1994.
The following table sets forth all outstanding options, adjusted for the
June 1995 and January 1996 five for four common share stock splits effected in
the form of 25% stock dividends. All options related to BankAtlantic's current
Stock Option Plans are for the purchase of Class B Common Stock.
A summary of 1984 and 1994 Plan activity was:
<TABLE>
<CAPTION>
OUTSTANDING
OPTIONS PRICE PER SHARE
----------- -------------------
<S> <C> <C> <C> <C>
Outstanding December 31, 1992............................ 41,606 $5.57 to $7.44
Expired.................................................. (270) 7.23 to 7.23
Issued................................................... 467,188 7.34 to 8.08
----------- ----- -----
Outstanding December 31, 1993............................ 508,524 5.57 to 8.08
Exercised................................................ (33,874) 7.23 to 7.23
Expired.................................................. (21,328) 7.34 to 9.52
Issued................................................... 575,821 9.52 to 9.52
----------- ----- -----
Outstanding December 31, 1994............................ 1,029,143 5.57 to 9.52
Exercised................................................ (95,976) 7.23 to 7.44
Expired.................................................. (41,912) 7.35 to 9.76
Issued................................................... 363,403 9.76 to 9.76
----------- ----- -----
Outstanding December 31, 1995............................ 1,254,658 5.57 to 9.76
Exercised................................................ 0
Expired.................................................. (2,737) 9.52 to 9.52
Issued................................................... 0
----------- ----- -----
Outstanding March 31, 1996............................... 1,251,921 $5.57 to $9.76
========= ===== =====
Exercisable at March 31, 1996 and December 31, 1995...... 399,457 $5.57 to $9.52
========= ===== =====
</TABLE>
The stock options issued in May 1993 expire on May 25, 1998 and were fully
vested as of December 31, 1995. The remaining options outstanding relating to
the 1984 Plan may currently be exercised and will expire in August 1996. At May
31, 1993, all issuable options under the 1984 Plan were outstanding and no
further options will be granted under the Plan.
On June 1, 1994, 284,470 of incentive stock options and 291,351 of
non-qualifying options were granted pursuant to the 1994 Stock Option Plan to
officers and directors of BankAtlantic. All the incentive and non-qualifying
stock options were issued at fair market value at the date of grant ($9.52) and
expire ten years from date of grant. All employee stock options vest and are
exercisable five years from the date of grant and directors stock options vested
immediately. On April 4, 1995, 81,960 of incentive stock options and 281,443 of
non-qualifying stock options were granted pursuant to the 1994 Stock Option Plan
to executives and directors of the Company. All the incentive and non-qualifying
stock options were issued at fair market value at the grant date ($9.76), expire
ten years from date of grant, vest and are exercisable five years from grant
date. During the years ended December 31, 1995 and 1994, 24,986 and 26,323 of
non-qualifying and 70,990 and
F-31
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BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7,551 of incentive stock options issued under the 1984 Plan were exercised
resulting in increases of $881,000 and $301,000 in stockholders' equity,
respectively. The tax effect of the exercise of 1984 stock options for December
31, 1995 and 1994 was $173,000 and $35,000, respectively, and has been reflected
in additional paid in capital. During the years ended December 31, 1995 and
1994, 40,413 and 12,344 of options under the 1994 Plan and 1,499 and 8,984 of
options under the 1984 Plan expired. At December 31, 1995, 399,448 options from
the 1984 plan and zero from the 1994 plan were exercisable. At March 31, 1996
and December 31, 1995, 55,882 and 52,530 options were available for grant under
the 1994 Plan.
11. INCOME TAXES
For federal income tax purposes, BankAtlantic reports its income and
expenses on the accrual method of accounting. Savings institutions that meet
certain definitional tests and other conditions prescribed by the Internal
Revenue Code of 1986 (the "Code") relating primarily to the composition of their
assets and the nature of their business activities are, within certain
limitations, permitted to establish, and deduct additions to, reserves for bad
debts in amounts in excess of those which would otherwise be allowable on the
basis of actual loss experience. A qualifying savings institution may elect
annually, and is not bound by such election in any subsequent year, one of the
following two methods for computing additions to its bad debt reserves for
losses on "qualifying real property loans" (generally, loans secured by
interests in improved real property): (i) the experience method or (ii) the
percentage of taxable income method BankAtlantic has utilized both the
percentage of taxable income method and the experience method in computing the
tax-deductible addition to its bad debt reserves. Additions to the reserve for
losses on non-qualifying loans, however, must be computed under the experience
method and reduce the current year's addition to the reserve for losses on
qualifying real property loans, unless the qualifying addition also is
determined under the experience method. The sum of the addition to each reserve
for each year is BankAtlantic's annual bad debt deduction. If the percentage of
BankAtlantic's specified qualifying assets (generally, loans secured by
residential real estate or deposits, banker's acceptances, educational loans,
cash, government obligations and certain certificates of deposit) were to fall
below 60% of its total assets, BankAtlantic would not be eligible to claim
further bad debt reserve deductions, and would recapture into income all
previously accumulated bad debt reserves. As of December 31, 1995,
BankAtlantic's qualifying assets were in excess of 60% of total assets.
The experience method allows a savings institution to deduct the greater of
an amount based upon a six-year moving average of loan losses or an amount
determined with respect to its bad debt reserve for the "base year". The "base
year" is, for these purposes, the last taxable year beginning before 1988. From
1990 through 1993, BankAtlantic has utilized the experience method. For the tax
year ended December 31, 1994, BankAtlantic used the percentage of taxable income
method discussed below. For 1995, BankAtlantic anticipates using the experience
method.
Under the percentage of taxable income method, the bad debt deduction
equals 8% of taxable income determined without regard to that deduction and with
certain adjustments. The percentage bad debt deduction thus computed is reduced
by the amount permitted as a deduction for the addition to the reserve for
losses on non-qualifying loans, which must be computed under the experience
method. The availability of the percentage of taxable income method permits
qualifying savings institutions to be taxed at a lower maximum effective federal
income tax rate than that applicable to corporations generally. The effective
maximum marginal federal income tax rate applicable to a qualifying savings
institution (exclusive of the alternative minimum tax), assuming the maximum
percentage bad debt deduction, is approximately 32.2%.
The percentage of taxable income method is available only to the extent
that amounts accumulated in reserves for losses on qualifying real property
loans do not exceed 6% of such loans at year-end. Use of this method is further
limited to the greater of (i) the amount which, when added to the amount
computed for the addition to the reserve for losses on non-qualifying loans,
equals the amount by which 12% of savings deposits or withdrawable accounts of
depositors at year-end exceeds the sum of surplus, undivided profits and
reserves
F-32
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BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
at the beginning of the year or (ii) the amount determined under the experience
method. None of these limitations would have restricted the deduction for the
addition to the reserve for bad debts available to BankAtlantic for 1995 or
1994.
BankAtlantic is permitted under the Code to deduct an annual addition to a
reserve for bad debts in determining taxable income, subject to certain
limitations. To the extent that (i) a savings institution's reserve for losses
on qualifying real property loans exceeds the amount that would have been
allowed under the experience method and (ii) it makes distributions to
shareholders that are considered to result in withdrawals from that excess bad
debt reserve, then the amounts withdrawn will be included in its taxable income.
The amount considered to be withdrawn by a distribution will be the amount of
the distribution plus the amount necessary to pay the tax with respect to the
withdrawal. Dividends paid out of the savings institution's current or
accumulated earnings and profits, as calculated for federal income tax purposes,
will not be considered to result in withdrawals from its bad debt reserves.
Accordingly, purchases of its outstanding stock by BankAtlantic could result in
an increase in BankAtlantic's taxable income in the period such stock is
repurchased. The increase in taxable income would be the lesser of the amount
repurchased divided by the reciprocal of the income tax rate or at December 31,
1995 and 1994, a maximum of $10.3 million and $8.3 million, respectively. If
BankAtlantic were not to qualify as a qualified savings association, as
discussed above, the entire tax bad debt reserve would be recaptured resulting
in a $15.4 million increase in taxable income at December 31, 1995 however, for
financial accounting purposes, an income tax provision for $7.1 million of the
$15.4 million has already been provided through December 31, 1995.
Deferred tax liabilities are not recognized on the base year tax bad debt
reserve unless it becomes apparent that the reserve will be reduced and result
in taxable income in the foreseeable future. At December 31, 1995, 1994 and
1993, BankAtlantic's base year tax bad debt reserve was $8.3 million, for which
no deferred income taxes have been provided. If BankAtlantic does not meet any
of the tests for a qualified savings association or repurchases stock as
discussed above, the base year bad debt reserve would be recaptured resulting in
an increase of $3.2 million in the provision for income taxes.
The provision for income taxes consisted of (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Current:
Federal................................................. $ 7,257 $ 9,379 $ 9,695
State................................................... 1,210 1,549 1,633
------- ------- -------
8,467 10,928 11,328
------- ------- -------
Deferred:
Federal................................................. 1,191 (1,159) (2,445)
State................................................... 360 (107) (358)
------- ------- -------
1,551 (1,266) (2,803)
------- ------- -------
Settlement with IRS, net.................................. 0 0 (1,432)
------- ------- -------
Provision for income taxes.............................. $10,018 $ 9,662 $ 7,093
======= ======= =======
</TABLE>
The December 31, 1995 and 1994 amounts above do not include deferred taxes
of $3.6 million and $121,000, respectively, related to unrealized appreciation
on debt securities available for sale which is a separate component of
stockholders' equity.
F-33
<PAGE> 136
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
BankAtlantic's actual provision differs from the Federal expected income
tax provision as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1995 1994 1993
------- ------ -------
<S> <C> <C> <C>
Income tax provision at expected federal income tax
rate(1).................................................. $ 9,953 $9,274 $ 8,110
Increase (decrease) resulting from:
Adjustment to allowance for loan losses recognized for
financial statement purposes not currently
recognized for tax
purposes............................................ 0 0 613
Tax-exempt interest income............................ (104) (110) (119)
Provision for state taxes net of federal benefit...... 897 941 828
Other -- net.......................................... (79) 19 (4)
Change in the beginning of the period balance of the
valuation allowance for deferred tax assets
allocated to income tax expense (credit)............ (972) (492) (963)
Expenses related to holding company reorganization.... 0 30 0
Adjustment to deferred tax assets and liabilities for
enacted changes in the tax laws and rates........... 0 0 60
Settlement with IRS, net(2)........................... 0 0 (1,432)
Amortization of costs over fair value of net assets
acquired............................................ 393 0 0
Charitable deduction of appreciated property.......... (70) 0 0
------- ------ -------
Provision for income taxes.......................... $10,018 $9,662 $ 7,093
======= ====== =======
</TABLE>
- ---------------
(1) The expected federal income tax rate is 35% for the years ended December 31,
1995, 1994 and 1993.
(2) During the second quarter of 1993, BankAtlantic settled a claim with the
Internal Revenue Service ("IRS") relating to net operating loss carrybacks
and previous Federal income tax examinations through 1988, resulting in an
increase in other interest income of $587,000 and a reduction in the
provision for income taxes of $1.4 million.
F-34
<PAGE> 137
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and tax liabilities were:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
DEFERRED TAX ASSETS:
Allowance for loans, REO and tax certificate losses, for
financial statement purposes................................. $ 6,798 $5,713.. $ 5,686
Other allowances and expense accruals recorded for financial
statement purposes not currently recognized for tax
purposes..................................................... 3,330 4,244 4,770
Deferred compensation accrued for financial statement purpose
not currently recognized for tax purposes.................... 199 186 112
Unearned commitment fees........................................ 101 75 204
Amortization of purchased mortgage servicing rights for
financial reporting purposes in excess of amount amortized
for tax purposes............................................. 255 188 49
Purchase accounting adjustments for MegaBank acquisition........ 1,073 0 0
Other........................................................... 171 123 179
------- ------- -------
Total gross deferred tax assets................................. 11,927 10,529 11,000
Less valuation allowance........................................ 0 972 1,464
------- ------- -------
Total deferred tax assets....................................... 11,927 9,557 9,536
------- ------- -------
DEFERRED TAX LIABILITIES:
Tax bad debt reserve in excess of base year reserve............. 2,725 1,095 1,164
Office properties and equipment and real estate owned, due to
differences in depreciation.................................. 1,613 1,202 1,537
FHLB stock, due to differences in the recognition of stock
dividends.................................................... 1,646 1,689 1,647
Deferred loan income, due to differences in the recognition of
loan origination fees........................................ 1,479 1,461 1,507
Receivable from the fidelity bond carrier recorded for financial
statement purposes........................................... 0 0 865
Discount on mortgage-backed securities, due to the accretion of
discounts.................................................... 673 1,010 848
Capital leases for financial reporting purposes and operating
leases for tax purposes...................................... 21 309 686
Prepaid pension expenses........................................ 473 370 459
Deferred tax liability on unrealized appreciation on debt
securities available for sale................................ 3,600 121 0
Prepaid insurance, primarily FDIC assessments................... 355 679 49
Other........................................................... 86 53 351
------- ------- -------
Total gross deferred tax liabilities............................ 12,671 7,989 9,113
------- ------- -------
Net deferred tax asset (liability).............................. (744) 1,568 423
Less deferred income tax (assets) liabilities at beginning of
period....................................................... (1,568) (423) 2,380
Deferred tax asset, net related to the MegaBank acquisition..... (2,718) 0 0
Change in deferred tax liability on unrealized appreciation on
debt securities available for sale included as a separate
component of stockholders' equity............................ 3,479 121 0
------- ------- -------
Benefit (provision) for deferred income taxes..................... $(1,551) $ 1,266 $ 2,803
======= ======= =======
</TABLE>
F-35
<PAGE> 138
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The valuation allowance for deferred tax assets at January 1, 1993 was $2.4
million. The net decrease in the valuation allowance for the years ended
December 31, 1995, 1994 and 1993 was $972,000, $492,000 and $963,000,
respectively. The changes in the valuation allowance were due to management's
determination that, more likely than not, these portions of the valuation
allowance were not required. The valuation allowance at December 31, 1995 was
zero.
On August 12, 1993, President Clinton signed the Omnibus Budget
Reconciliation Act of 1993 (the "Omnibus Act"). The most significant change
resulting from the Omnibus Act, as it relates to BankAtlantic, was to increase
the highest corporate rate from 34% to 35% retroactively to January 1, 1993.
The net operating loss ("NOL") and investment tax credits ("ITC")
carryovers acquired in connection with the acquisition of MegaBank were $878,000
and $48,000, respectively, upon acquisition. Due to IRS limitations, only
$784,000 of the NOL and none of the ITC will be utilized in 1995. The remaining
NOL and ITC are anticipated to be fully utilized in 1996. The utilization of
MegaBank's NOL and ITC are limited by regulations. Such utilization was assumed
at the date of acquisition of Mega Bank and resulted in an adjustment of cost
over fair value of assets acquired and does not affect the provision for income
taxes. The NOL will expire in 2010 and the ITC will expire in 1998 and 1999.
12. PENSION PLAN
BankAtlantic sponsors a non-contributory defined benefit pension plan (the
"Plan") covering substantially all of its employees. The benefits are based on
years of service and the employee's average earnings received during the highest
five consecutive years out of the last ten years of employment. The funding
policy is to contribute an amount not less than the ERISA minimum funding
requirement nor more than the maximum tax-deductible amount under Internal
Revenue Service rules and regulations.
Plan assets consist of mutual funds, corporate equities and cash
equivalents at December 31, 1995 and 1994.
The following table sets forth the Plan's funded status and the prepaid
pension cost included in the Consolidated Statements of Financial Condition at:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation,
including vested benefits of $9,911 and $8,394............... $(10,533) $ (9,130)
-------- --------
Actuarial present value of projected benefit obligation for
service rendered to date..................................... (13,435) (11,678)
Plan assets at fair value as of the actuarial date............. 12,768 12,633
-------- --------
Plan assets in excess (below) projected benefit obligation..... (667) 955
Unrecognized net loss from past experience different from that
assumed and effects of changes in assumptions................ 3,638 2,166
Prior service (cost) benefit not yet recognized in net periodic
pension cost................................................. 69 (81)
Unrecognized net asset at October 1, 1987, being recognized
over 15 years................................................ (1,808) (2,076)
-------- --------
Prepaid pension cost........................................... $ 1,232 $ 964
======== ========
</TABLE>
F-36
<PAGE> 139
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net pension cost includes the following components:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost benefits earned during the period............ $ 785 $ 811 $ 594
Interest cost on projected benefit obligation............. 1,010 833 714
Estimated return on plan assets........................... (1,009) (1,044) (1,030)
Net amortization and deferral............................. 44 45 (205)
------- ------- -------
Net periodic pension expense.............................. $ 830 $ 645 $ 73
======= ======= =======
</TABLE>
The actuarial assumptions used in accounting for the Plan were:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate............................... 8.50% 8.50% 7.00%
Rate of increase in future compensation levels............... 6.50 6.50 4.00
Expected long-term rate of return............................ 9.00 9.00 9.00
==== ==== ====
</TABLE>
Actuarial assumptions for the years ended December 31, 1995, 1994 and 1993
are projected based upon participant data at October 1 of the same year.
Actuarial estimates and assumptions are based on various market factors and are
evaluated on an annual basis, and changes in such assumptions may impact future
pension costs. Management believes that the impact, if any, of the difference
between actuarial assumptions utilized on October 1 and those appropriate at
December 31 is immaterial. There have been no changes in the Plan during the
year ended December 31, 1995 and the three months ended March 31, 1996 that
would significantly effect the actuarial assumptions. During the three months
ended March 31, 1996 and during the years ended December 31, 1995 and 1994,
BankAtlantic funded $125,000, $1.1 million and $490,000, respectively to the
Plan. No contributions were made to the Plan during the year ended December 31,
1993.
BankAtlantic sponsors a defined contribution plan ("401k Plan") for all
employees who have completed six months of service. Employees can contribute up
to 14% of their salary, not to exceed $9,500 for 1996, and $9,240 for 1995 and
1994 and $8,994 for 1993. For employees that fall within the highly compensated
criteria, maximum contributions are currently 10% of salary. Effective October
1991, BankAtlantic's 401k Plan was amended to include only a discretionary match
as deemed appropriate by the Board of Directors. In November 1993, the Board of
Directors declared discretionary matches in the aggregate amount of
approximately $60,000 to be paid during March 1994 to participants of record as
of December 31, 1993. Included in employee compensation and benefits on the
consolidated statement of operations was $75,000, $98,000 and $72,000 of
expenses and employer contributions related to the 401k Plan for the years ended
December 31, 1995, 1994 and 1993, respectively. For the year ended December 31,
1995, the Board of Directors declared a discretionary match of 15% of the first
4% of an employee's contribution. An additional 10% of the first 4% of an
employee's contribution related to meeting specific profit goals. For the year
ended December 31, 1995 and 1994, participating employees were matched 15% and
25% of their first 4% of contributions totaling $75,000 and $117,000,
respectively.
F-37
<PAGE> 140
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. COMMITMENTS AND CONTINGENCIES
BankAtlantic is lessee under various operating leases for real estate and
equipment extending to the year 2072. The approximate minimum rental under such
leases, at December 31, 1995, for the periods shown was (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
--------------------------------------------------------------------------- -------
<S> <C>
1996....................................................................... $ 2,690
1997....................................................................... 2,149
1998....................................................................... 2,008
1999....................................................................... 1,390
2000....................................................................... 773
Thereafter................................................................. 3,588
-------
Total............................................................ $12,598
=======
</TABLE>
Rental expense for premises and equipment was $500,000 and $424,000 and
$3.4 million, $2.4 million and $2.3 million for the three months ended March 31,
1996 and 1995 and for the years ended December 31, 1995, 1994 and 1993,
respectively. Included in other liabilities at March 31, 1996, December 31, 1995
and 1994, is an allowance of $96,000, $110,000 and $219,000, respectively, for
future rental payments on closed branches. BankAtlantic purchased two branches
from unrelated financial institutions, opened three Florida west coast branches
and acquired five branches associated with the MegaBank acquisition during the
year ended December 31, 1995.
On August 18, 1994, BankAtlantic entered into an agreement with Wal-Mart
Stores to establish in-store full service branches at the Wal-Mart Stores
Supercenters. Four such branches on the west coast of Florida were opened during
1994 and 1995. Management has committed to seven additional in-store full
service branches, which are anticipated to open during the year ended December
31, 1996 and early 1997. The estimated annual lease payments are $174,400, other
annual expenses are $318,500, and estimated leasehold improvements and other
capitalizable costs associated with the seven branches to be opened during 1996
and 1997, will be approximately $1.4 million.
BankAtlantic signed an agreement dated April 29, 1994 with Wal-Mart Stores,
Inc., pursuant to which BankAtlantic placed ATMs in 151 Wal-Mart and Sam's Club
locations throughout Florida. These ATMs accept BankAtlantic ATM cards, as well
as bank cards, Visa, MasterCard and American Express cards that are compatible
with national and international Cirrus, Plus and Honor ATM systems.
On April 24, 1996, BankAtlantic signed a contract with M&I Data Services a
division of the Marshall & Ilsley Corporation, ("M&I") to provide data
processing services to BankAtlantic for seven years. The conversion to the M&I
service bureau is anticipated to be completed in the fourth quarter of 1996. The
purpose of the conversion is to increase capacity as well as improve customer
service and operational effectiveness. The estimated annual expenses for the
service bureau are approximately $2.4 million. The Company anticipates that it
will be investing $2.1 million in technology upgrades, primarily computer
equipment.
During the ordinary course of business, BankAtlantic and its subsidiaries
are involved as plaintiff or defendant in various lawsuits. Management, based on
discussions with legal counsel, is of the opinion that no significant loss will
result from these actions.
In the normal course of its business, BankAtlantic is a party to financial
instruments with off-balance-sheet risk, when it is deemed appropriate in order
to meet the financing needs of its customers. These financial instruments
include commitments to extend credit and standby and documentary letters of
credit. Those instruments involve, to varying degrees, elements of credit risk
in excess of the amount recognized in the
F-38
<PAGE> 141
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
statement of financial position. BankAtlantic's exposure to credit loss in the
event of nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit written is
represented by the contractual amount of those instruments. BankAtlantic uses
the same credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments.
Financial instruments with off-balance sheet risk were:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------
1996 1995 1994
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Commitments to extend credit, including the
undisbursed portion of loans in process............ $ 208,927 $201,717 $119,601
Standby and documentary letters of credit............ 3,672 5,671 4,397
Commitments to purchase mortgage-backed securities... 0 0 38,726
Commitment to purchase residential loans............. 28,737 0 0
</TABLE>
Commitments to extend credit are agreements to lend funds to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. BankAtlantic evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral required by
BankAtlantic in connection with an extension of credit is based on management's
credit evaluation of the counter-party. Collateral held varies but may include
first mortgages on commercial and residential real estate. As part of the
commitment for standby letters of credit, BankAtlantic is required to
collateralize 120% of the commitment balance with mortgage-backed securities. At
March 31, 1996 and December 31, 1995, $4.0 million and $8.4 million of
mortgage-backed securities were pledged against the commitment balance.
Standby letters of credit written are conditional commitments issued by or
for the benefit of BankAtlantic to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
BankAtlantic may hold certificates of deposit and residential and commercial
liens as collateral for such commitments which are collateralized similar to
other types of borrowings.
BankAtlantic is required to maintain average reserve balances with the
Federal Reserve Bank. Such reserves consisted of cash and amounts due from banks
of $23.7 million, $21.5 million and $17.5 million at March 31, 1996 and December
31, 1995 and 1994, respectively.
BankAtlantic is a member of the FHLB system. As a member, BankAtlantic is
required to purchase and hold stock in the FHLB of Atlanta, in amounts at least
equal to the greater of (i) 1% of its aggregate unpaid residential mortgage
loans, home purchase contracts and similar obligations at the beginning of each
year or (ii) 5% of its outstanding advances from the FHLB of Atlanta. As of
March 31, 1996 and December 31, 1995, BankAtlantic was in compliance with this
requirement with an investment of approximately $8.9 million and $10.0 million,
respectively, in stock of the FHLB of Atlanta.
14. REGULATORY MATTERS
Savings institutions are subject to the provisions of the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), which was signed into
law on December 19, 1991. Regulations implementing the prompt corrective action
provisions of FDICIA became effective on December 19, 1992. In addition to the
prompt corrective action requirements, FDICIA includes significant changes to
the legal and
F-39
<PAGE> 142
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
regulatory environment for insured depository institutions, including reductions
in insurance coverage for certain kinds of deposits, increased supervision by
the federal regulatory agencies, increased reporting requirements for insured
institutions, and new regulations concerning internal controls, accounting and
operations.
The FDICIA requires financial institutions to take certain actions relating
to their internal operations, including: providing annual reports on financial
condition and management to the appropriate Federal banking regulators, having
an annual independent audit of financial statements performed by an independent
public accountant, and establishing an independent audit committee comprised
solely of outside directors. The FDICIA also imposes certain operational and
managerial standards on financial institutions relating to internal controls,
loan documentation, credit underwriting, interest rate exposure, asset growth
and compensation, fees, and benefits.
The prompt corrective action regulations define specific capital categories
based on an institution's capital ratios. The capital categories, in declining
order, are "well capitalized," "adequately capitalized", "undercapitalized",
"significantly undercapitalized" and "critically undercapitalized." Institutions
categorized as "undercapitalized" or worse are subject to certain restrictions,
including requirements to file a capital plan with the OTS, prohibitions on the
payment of dividends and management fees, restrictions on executive
compensation, and increased supervisory monitoring, among other things. Other
restrictions may be imposed on the institution either by the OTS or by the FDIC,
including requirements to raise additional capital, sell assets, or sell the
entire institution. Once an institution becomes "critically undercapitalized" it
is generally placed in receivership or conservatorship within 90 days.
To be considered "well capitalized," 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%. An
institution is deemed to be "critically undercapitalized" if it has a tangible
equity ratio of 2% or less. Management believes that at March 31, 1996 and
December 31, 1995, BankAtlantic met the definition of "well capitalized".
In August 1993, the OTS adopted a final rule incorporating an interest-rate
risk component into the risk-based capital regulation. Under the rule, an
institution with a greater than "normal" level of interest-rate risk will be
subject to a deduction of its interest-rate risk component from total capital
for purposes of calculating the risk-based capital requirement. As a result,
such an institution will be required to maintain additional capital in order to
comply with the risk-based capital requirement. An institution with a greater
than normal interest-rate risk is defined as an institution that would suffer a
loss of net portfolio value exceeding 2.0% of the estimated market value of its
assets in the event of a 200 basis point increase or decrease (with certain
minor exceptions) in interest rates. The interest-rate risk component is
calculated, on a quarterly basis, as one-half of the difference between an
institution's measured interest-rate risk, and 2.0% multiplied by the market
value of its assets. The rule also authorizes the director of the OTS, or his
designee, to waive or defer an institution's interest-rate risk component on a
case-by-case basis. The OTS implemented the interest-rate risk capital deduction
on June 30, 1995. However, in a letter dated March 20, 1995, the OTS stated no
institution would be required to deduct capital for interest rate risk or to
report such a deduction until guidance is issued describing the appeals process
for the deduction. The December 31, 1995 deduction would have been based on the
lesser of the March 1995, June 1995 or September 1995 interest rate risk
components, likewise the March 31, 1996 deduction would have been based on the
lesser of the June 1995, September 1995 and December 1995 interest rate risk
components. At March 31, 1996 and December 31, 1995, based on the above, no
interest rate risk deduction to capital would have been required.
Additionally, the Office of the Comptroller of the Currency (the "OCC"),
which is the primary regulator for national banks has adopted a final rule
increasing the leverage ratio requirements for all but the most highly rated
national banks. Pursuant to Financial Institutions Reform, Recovery and
Enforcement Act ("FIRREA"), the OTS is required to issue capital standards for
savings institutions that are no less stringent
F-40
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BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
than those applicable to national banks. Accordingly, based on the OCC rule,
savings institutions would be required to maintain a leverage ratio (defined as
the ratio of core capital to adjusted total assets) of between 4% and 5%. If
this OCC rule was in effect for OTS regulated financial institutions at March
31, 1996 and December 31, 1995, BankAtlantic would be in full compliance with
the requirements.
Effective July 1, 1995, any unrealized appreciation or depreciation of debt
securities available for sale included in capital calculated under Generally
Accepted Accounting Principles ("GAAP") was excluded from regulatory capital.
The payment of dividends by BankAtlantic is limited by federal regulations.
Effective August 1, 1990, the OTS adopted a new regulation that limits all
capital distributions made by savings institutions, including cash dividends, by
permitting only certain 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 and is in need of more than normal supervision would be a "Tier 2
Institution". An institution that does not meet all of its minimum regulatory
capital requirements would be a "Tier 3 Institution". Upon prior notice to, and
non-objection by, the OTS a Tier 1 Institution may, after prior notice, but
without the approval of the OTS, make capital distributions (i) during the year
of 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
capital requirement) or (ii) 75% of its net income over the most recent
four-quarter period. 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 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. At March 31, 1996 and December 31, 1995 BankAtlantic's capital exceeded
its fully phased-in capital requirements by approximately $60.5 million and
$42.1 million.
The 9% Debentures provides that the Company cannot declare or pay dividends
on, or purchase, redeem or acquire for value its capital stock, return any
capital to holders of capital stock as such, or make any distributions of assets
to holders of capital stock as such, unless, from and after the date of any such
dividend declaration (a "Declaration Date") or the date of any such purchase,
redemption, payment or distribution (a "Redemption Date"), the Company retains
cash, cash equivalents (as determined in accordance with GAAP) or marketable
securities (with a market value as measured on the applicable Declaration Date
or Redemption Date) in an amount sufficient to cover the two consecutive
semi-annual interest payments that will be due and payable on the 9% Debentures
following such Declaration Date or Redemption Date, as the case may be. The
Indenture further provides that the amount of any interest payment made by the
Company with respect to the 9% Debentures after any applicable Declaration Date
or Redemption Date shall be deducted from the aggregate amount of cash or cash
equivalents which the Company shall be required to retain pursuant to the
foregoing provision. At March 31, 1996 and December 31, 1995 the Company
designated $1.9 million of Federal Agency investments to satisfy the above
provision.
The Company, by virtue of its ownership of all of the common stock of
BankAtlantic, is a unitary savings bank holding company subject to regulatory
oversight by the OTS. As such, the Company is required to register with and be
subject to OTS examination, supervision and certain reporting requirements.
Further, as a company having a class of publicly held equity securities, the
Company is subject to the reporting and the other requirements of the Exchange
Act. In addition, 41% of the Company's (A and B) common stock is
F-41
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BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
owned by BFC at March 31, 1996 (46% at December 31, 1995) and, as such, BFC is
subject to the same oversight by the OTS as discussed herein with respect to the
Company.
The Home Owner's Loan Act ("HOLA") prohibits a savings bank holding company
from directly or indirectly acquiring control, including through an acquisition
by merger, consolidation or purchase of assets, of any savings association (as
defined in Section 3 of the Federal Deposit Insurance Act) or any other savings
and loan or savings bank holding company, without prior OTS approval. In
considering whether to grant approval for any such transaction, the OTS will
take into consideration a number of factors, including the competitive effects
of the transaction, the financial and managerial resources and future prospects
of the holding company and its bank or thrift subsidiaries following the
transaction, and the compliance records of such subsidiaries with the Community
Reinvestment Act ("CRA"). Generally, a savings bank holding company may not
acquire more than 5% of the voting shares of any savings association unless by
merger, consolidation or purchase of assets, in each case subject to prior OTS
approval. A savings bank holding company may not acquire as a separate
subsidiary an insured institution which has its principal offices outside of the
state where the principal offices of its subsidiary institution is located,
except in the case of certain emergency acquisitions approved by the FDIC, or
when the laws of the state in which the insured institution to be acquired is
located specifically authorize such an acquisition. However, a savings bank
holding company may acquire up to 5% of the voting shares of any savings
association or savings bank holding company not a subsidiary thereof without
prior regulatory approval. Another provision of HOLA permits a savings bank
holding company to acquire up to 15% of the voting shares of certain
undercapitalized savings associations.
Federal law empowers the Director of the OTS to take substantive action
when it determines that there is reasonable cause to believe that the
continuation by a savings bank holding company of any particular activity
constitutes a serious risk to the financial safety, soundness, or stability of a
savings bank holding company's subsidiary savings institution. The Director of
the OTS has oversight authority for all holding company affiliates, not just the
insured institution. Specifically, the Director of the OTS may, as necessary,
(i) limit the payment of dividends by the savings institution; (ii) limit
transactions between the savings institution, the holding company and the
subsidiaries or affiliates of either; or (iii) limit any activities of the
savings institution that might create a serious risk that the liabilities of the
holding company and its affiliates may be imposed on the savings institution.
Any such limits would be issued in the form of a directive having the legal
effect of a cease and desist order.
The Company will remain a unitary savings bank holding company under
applicable law until it acquires as a separate subsidiary another savings
institution. A savings bank holding company whose sole subsidiary qualifies as a
qualified thrift lender ("QTL"), described below, generally has the broadest
authority to engage in various types of business activities with little to no
restrictions on its activities, except that historically savings bank holding
companies have not been permitted to acquire or be acquired by an entity engaged
in securities underwriting or market making. A holding company that acquires
another institution and maintains it as a separate subsidiary or whose sole
subsidiary fails to meet the QTL test will become subject to the activities
limitations applicable to multiple savings bank holding companies. In general, a
multiple savings bank holding company (or subsidiary thereof that is not an
insured institution) may not commence, or continue for more than a limited
period of time after becoming a multiple savings bank holding company (or a
subsidiary thereof), any business activity other than (i) furnishing or
performing management services for a subsidiary insured institution; (ii)
conducting an insurance agency or an escrow business; (iii) holding, managing or
liquidating assets owned by or acquired from a subsidiary insured institution;
(iv) holding or managing properties used or occupied by a subsidiary insured
institution; (v) acting as trustee under deeds of trust; (vi) those activities
previously directly authorized by the OTS by regulation as of March 5, 1987 to
be engaged in by multiple savings bank holding companies; or (vii) subject to
prior approval of the OTS, those activities authorized by the Federal Reserve
Board ("FRB") as permissible investments for bank holding companies. These
restrictions do not apply to a multiple savings bank holding company if (a) all,
or all but
F-42
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BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
one, of its insured institution subsidiaries were acquired in emergency thrift
acquisitions or assisted acquisitions and (b) all of its insured institution
subsidiaries are QTLs.
BankAtlantic is subject to restrictions in its dealings with the Company
and any other companies that are "affiliates" of the Company under HOLA, and
certain provisions of the Federal Reserve Act ("FRA") that are made applicable
to savings institutions by FIRREA and OTS regulations.
On August 8, 1995, the FDIC established a reduced deposit insurance
assessment rate schedule of 4 to 31 basis points ($.04 to $.31 for every $100 of
assessable deposits) for BIF members retroactive to May 1995. The FDIC further
reduced the premiums applicable to BIF deposits, effective January 1, 1996, to a
minimum flat fee of $2,000 to a maximum assessment of 27 basis points. Under the
new assessment rate schedule, approximately 92% of BIF members will pay only the
minimum fee while SAIF members retain the existing assessment rate schedule of
23 to 31 basis points. BankAtlantic pays deposit insurance premiums primarily to
the SAIF and secondarily, to the BIF in connection with the deposits it acquire
as a result of the acquisition of MegaBank. At March 31, 1996 and December 31,
1995, BankAtlantic had approximately $135 million of deposits subject to BIF
premiums and $1.2 billion subject to SAIF premiums.
The disparity in insurance premiums between those required for financial
institutions with all or primarily SAIF insured deposits and those with all or
primarily BIF deposits generally allows BIF members to attract and retain
deposits at a lower effective cost. The resulting competitive disadvantage could
also result in BankAtlantic having to raise its deposit rates to remain
competitive or lose deposits to BIF members who may decide to pay higher rates
of interest on deposits because of the lower deposit insurance premiums.
Although BankAtlantic has other sources of funds, such sources may be more
costly than the cost of deposits.
Several alternatives to mitigate the effect of the BIF/SAIF premium
disparity have recently been proposed by the U.S. Congress, federal regulators,
industry lobbyists and the Clinton Administration. One plan to recapitalize the
SAIF that has gained support of several sponsors would require all SAIF member
institutions, including BankAtlantic, to pay a one-time fee of approximately 85
basis points on the amount of deposits held by the member institution, at March
31, 1995. This fee would amount to approximately $6.1 million on an after tax
basis to BankAtlantic. In addition, BNA is also subject to the proposed one-time
fee since all of its deposits are SAIF-insured deposits; however, management
believes that the assessment would be reduced by 20% based on BNA's status as a
"de novo sasser bank" as defined by the proposed legislation. The fee associated
with BNA's SAIF-insured deposits would amount to approximately $1.8 million on
an after tax basis. The Company is unable to predict whether this proposal or
any similar proposal will be enacted or whether ongoing SAIF premiums will be
reduced to a level equal to that of BIF premiums. If this proposal is enacted
into law, the effect would be to immediately reduce the capital of the
SAIF-member institutions by the amount of the fee, and such amount would most
likely be an immediate charge to earnings.
15. SUBJECT PORTFOLIO
From 1987 through 1990, BankAtlantic purchased in excess of $50 million of
indirect home improvement loans from certain dealers, primarily in the
northeastern United States. BankAtlantic ceased purchasing loans from such
dealers in the latter part of 1990. These dealers are affiliated with each other
but are not affiliated with BankAtlantic. In connection with loans originated
through these dealers, BankAtlantic funded amounts to the dealers as a dealer
reserve. Such loans and related dealer reserves are hereafter referred to as the
"Subject Portfolio." The risk of amounts advanced to the dealers is primarily
associated with loan performance but secondarily is dependent on the financial
condition of the dealers. The dealers were to be responsible to BankAtlantic for
the amount of the reserve only if the loan giving rise to the reserve became
delinquent or was prepaid. One of the dealers filed for protection under the
bankruptcy laws of the United States, while the other dealers have not indicated
any financial ability to meet any obligation relating to the dealer reserve.
F-43
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BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In late 1990, questions arose relating to the practices and procedures used
in the origination and underwriting of the Subject Portfolio, which suggested
that the dealers, certain home improvement contractors and borrowers, together
with certain former employees of BankAtlantic, engaged in practices intended to
defraud BankAtlantic. Due to these questions and potential exposure,
BankAtlantic performed, and continues to perform, certain investigations,
notified appropriate regulatory and law enforcement agencies, and notified its
fidelity bond carrier (the "carrier"). After an initial review and discussions
with the carrier, BankAtlantic concluded that any losses sustained from the
Subject Portfolio would adequately be covered by its fidelity bond coverage and,
in fact, on August 13, 1991, the carrier advanced $1.5 million against
BankAtlantic's losses. This payment and other payments by the carrier were
subject to identification and confirmation of the losses which were
appropriately covered under the fidelity bond.
Subsequently, commencing in September, 1991, as a consequence of issues
raised by the carrier, BankAtlantic reviewed the Subject Portfolio without
regard to the availability of any fidelity bond coverage. As a result of the
review, the provision for loan losses for the year ended December 31, 1991 was
increased by approximately $5.7 million, approximately $5.5 million of loans
were charged off, and $2.7 million of dealer reserves were charged to current
operations. On December 20, 1991, the carrier denied coverage and BankAtlantic
thereafter filed an appropriate action against the carrier. On October 30, 1992,
BankAtlantic and the carrier entered into the Covenant. Pursuant to the
Covenant, BankAtlantic will continue to pursue its litigation against the
carrier, but has agreed to limit execution on any judgment obtained against the
carrier to $18 million. Further, BankAtlantic agreed to join certain third
parties as defendants in that action. The carrier paid BankAtlantic $6.1 million
during the fourth quarter of 1992, $3 million in November 1993, and an
additional $2.9 million in November 1994. Such amounts related to losses and
expenses previously charged to operations by BankAtlantic. Additional
reimbursements have been made on a quarterly reporting basis commencing with the
period ended December 31, 1992. Reimbursable amounts are as defined in the
Covenant. Based upon such definitions BankAtlantic recorded estimated charges to
operations in advance of when such charges became reimbursable. Amounts
reimbursed were reflected in the period for which the reimbursement is related.
Through December 31, 1995 and 1994, the carrier paid or committed to pay
approximately $18.0 million and $17.9 million, respectively. The financial
statement effect of the Covenant for the fourth quarter and year ended December
31, 1992 was to reduce expenses by $3.3 million, increase interest income by
$1.9 million and to record $7.3 million of loan loss recoveries. Included in
other assets at December 31, 1994 was $594,000 due from the carrier but no
amounts were due from the carrier at March 31, 1996 or December 31, 1995. In no
event will the carrier be obligated to pay BankAtlantic in the aggregate more
than $18 million, which amount has been fully paid. However, in the event of
recovery by BankAtlantic of damages from third party wrongdoers, BankAtlantic
will be entitled to retain such amounts until such amounts, plus any payments
received from the carrier, equal $22 million. Thereafter, the carrier will be
entitled to any such recoveries to the extent of its payments to BankAtlantic.
To the extent that BankAtlantic incurs losses in excess of $18 million plus
available recoveries from third parties, BankAtlantic will be required to absorb
any such losses. At March 31, 1996 and December 31, 1995, the remaining amount
of reimbursement available from the carrier was approximately zero, and such
amount was approximately $120,000 at December 31, 1994. BankAtlantic also agreed
to exercise reasonable collection activities with regard to the Subject
Portfolio and to provide the carrier with a credit for any recoveries with
respect to such loans against future losses that the carrier would otherwise be
obligated to reimburse. The carrier has no further obligations for
reimbursement. In August 1994, BankAtlantic filed an action against the dealers,
certain home improvement contractors, and various individuals seeking
compensatory and other damages. On February 17, 1995, the United States Attorney
for the Eastern District of New York and the Assistant Attorney General, Tax
Division, United States Department of Justice, announced that the President of
the dealers noted above had pleaded guilty to bank fraud, bribery and tax fraud
conspiracy charges. The guilty plea states that BankAtlantic was one of the
financial institutions which was defrauded by the dealers and various home
improvement contractors.
F-44
<PAGE> 147
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Three actions have been filed, two in New Jersey and one in New York,
relating to the Subject Portfolio. One of the New Jersey actions was brought on
behalf of the State of New Jersey and the others purport to be class actions on
behalf of named and unnamed plaintiffs that may have obtained loans from dealers
who subsequently sold the loans to financial institutions including
BankAtlantic. Each of the New Jersey actions seek civil remedies against certain
contractors and a named dealer and also seeks to cancel or modify certain
mortgage loans. Although BankAtlantic was not a named party in the State of New
Jersey action, it sought to protect its interest in certain loans and entered
into an Alternative Dispute Resolution Agreement (the "ADR") with the state of
New Jersey. The ADR established procedures for determining whether certain
consumers were entitled to relief under the terms of their loans. Pursuant to
the ADR, BankAtlantic offered relief to certain consumers in the form of reduced
future interest rates, or reductions or forgiveness of principal. As part of the
ADR, the State of New Jersey agreed not to seek rescission of any of the
mortgage loans held by BankAtlantic. The ADR was completed in 1995 and
BankAtlantic obtained a release from the State of New Jersey for any claims
relating to the mortgage loans. The second New Jersey action was commenced
immediately after completion of the ADR. The New York and New Jersey actions,
which were brought against over 25 parties, including BankAtlantic, purport to
be class actions on behalf of named and unnamed plaintiffs that may have
obtained loans from dealers who subsequently sold the loans to financial
institutions including BankAtlantic. Both the remaining New Jersey action and
the New York action seek, among other things, rescission of the loan agreements
and damages. In November 1995, the court in the second New Jersey action entered
an order dismissing the complaint against BankAtlantic; plaintiffs appealed this
ruling. In January 1996, the Appellate Court reversed the lower court's decision
and remanded the case back to trial court to determine whether the action may be
maintained as a class action. The reversal was without prejudice to
BankAtlantic's right to renew their summary judgment motion after the trial
court has made a determination as to plaintiff's ability to maintain this case
as a class action. In October 1995, the court in the New York action
preliminarily approved a settlement proposed by the parties pursuant to which
members of the class who timely file a proof of claim would be entitled to
relief in the form of reduced future interest rates and reductions of principal.
The settlement, as presently structured, will have no significant impact on
BankAtlantic's financial condition or results of operations.
The balance of the loans associated with the Subject Portfolio amounted to
approximately $13.0 million, $14.2 million and $18.7 million at March 31, 1996,
December 31, 1995 and 1994, respectively. The related dealer reserve had been
completely charged-off by December 31, 1993. Charge-offs relating to the Subject
Portfolio amounted to $278,000 and $340,000 for the three months ended March 31,
1996 and 1995, respectively, and $1.0 million, $1.2 million and $972,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. All 1994 and 1993
charge-offs were recovered from the carrier while no charged-off amounts were
recovered from the carrier in 1995 and 1996. At December 31, 1995, 10% of the
loans were secured by collateral in South Florida and 90% were secured by
collateral in the northeastern United States. Collateral for these loans is
generally a second mortgage on the borrower's property. However, it appears that
in most cases the property is encumbered with loans having high loan to value
ratios. Loans in the Subject Portfolio are charged-off if payments are more than
90 days delinquent. While management believes that established reserves will be
adequate to cover any additional losses that BankAtlantic may incur from the
Subject Portfolio or the above described litigation, there is no assurance that
this will be the case.
F-45
<PAGE> 148
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. PARENT COMPANY FINANCIAL INFORMATION
The Company was not in existence prior to July 13, 1994. Condensed
Statements of Financial Condition at March 31, 1996, December 31, 1995 and 1994
and Condensed Statements of Operations of the Company, for the three months
ended March 31, 1996 and the year ended December 31, 1995 and Condensed
Statement of Cash Flows for the three months ended March 31, 1996 and 1995 and
the year ended December 31, 1995 are shown below. The Condensed Statement of
Operations are not presented for the three months ended March 31, 1995 and the
year ended December 31, 1994 as such presentation would primarily be comprised
of Equity in net earnings for BankAtlantic of $4,382 and $16,835, respectively.
Net income for the respective periods were $4,381 and $16,835.
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH DECEMBER 31,
31, -------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash deposits and repurchase agreement at BankAtlantic......... $ 3,919 $ 2,079 $ 91
Federal agency securities available for sale................... 1,853 1,892 0
Investment in subsidiaries..................................... 150,549 136,816 105,429
Due from BankAtlantic.......................................... 1,634 639 398
Deferred offering costs on subordinated debentures............. 990 1,023 0
Deferred income tax receivable from BankAtlantic............... 613 448 0
-------- -------- --------
Total assets......................................... $159,558 $142,897 $105,918
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Subordinated debentures and note payable....................... $ 21,000 $ 21,001 $ 0
Other liabilities.............................................. 1,739 1,335 398
-------- -------- --------
Total liabilities.............................................. 22,739 22,336 398
-------- -------- --------
Stockholders' equity:
Preferred stock, $0.01 par value 10,000,000 shares
authorized: non-cumulative preferred stock 1,000,000
shares designated, $25.00 per share preference value,
issued and outstanding at December 31, 1994; 12.25% Series
A, 188,600; 10.00% Series B, 17,120; 8.00% Series C,
129,610 and none for 1995 and 1996........................ 0 0 3
Additional paid in capital -- preferred stock................ 0 0 7,027
Class A Common Stock, $0.01 par value, authorized 30,000,000
shares; issued and outstanding, 1,150,000, zero and zero
shares.................................................... 11 0 0
Class B Common Stock, $0.01 par value, authorized 15,000,000
shares; issued and outstanding, 10,592,999, 10,592,999 and
10,157,593 shares......................................... 106 106 65
Additional paid-in capital................................... 64,685 48,905 47,027
Retained earnings............................................ 70,003 65,817 51,205
-------- -------- --------
134,805 114,828 105,327
Net unrealized appreciation on debt securities available for
sale and owned by BankAtlantic -- net of deferred income
taxes........................................................ 2,014 5,733 193
-------- -------- --------
Total stockholders' equity..................................... 136,819 120,561 105,520
-------- -------- --------
Total liabilities and stockholders' equity........... $159,558 $142,897 $105,918
======== ======== ========
</TABLE>
F-46
<PAGE> 149
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
1996 1995
--------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Interest income on repurchase agreements and deposits at
BankAtlantic.................................................... $ 45 $ 51
Interest income on Federal agency securities...................... 25 29
------- ------------
Total interest income................................... 70 80
------- ------------
Interest expense on subordinated debentures and note payable...... (496) 776
------- ------------
Net interest (expense).......................................... (426) (696)
Other expenses.................................................... (1) (5)
------- ------------
Income before income tax benefit and earnings of subsidiaries..... (427) (701)
Income tax benefit.............................................. 165 274
------- ------------
Income (loss) before earnings of subsidiaries................... (262) (427)
Equity in undistributed net earnings of subsidiaries excluding
BankAtlantic.................................................... 0 1
Equity in net earnings of BankAtlantic............................ 4,972 18,845
------- ------------
Net income.............................................. $ 4,710 $ 18,419
============ ==========
</TABLE>
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, DECEMBER 31,
------------------ ------------
1996 1995 1995
-------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.................................................... $ 4,710 $ 4,381 $ 18,419
Adjustment to reconcile net income to net cash provided by
operating activities:
Equity in net earnings of BankAtlantic and other
subsidiaries............................................. (4,972) (4,382) (18,846)
Accretion on securities..................................... (25) 0 (29)
Amortization of note payable deferred costs................. 0 0 69
Amortization of subordinated debentures deferred costs...... 26 0 29
Deferred costs on subordinated debentures................... 0 0 (1,052)
Increase in dividends payable............................... 0 0 69
Increase in accrued interest payable........................ 470 2 522
Increase in other assets.................................... 0 0 0
Increase in other liabilities............................... (124) 15 347
Increase in receivable from BankAtlantic.................... (995) (34) (241)
Increase in deferred income tax receivable from
BankAtlantic............................................. (165) 0 (448)
-------- ------- ------------
Net cash used by operating activities....................... (1,075) (18) (1,161)
-------- ------- ------------
INVESTING ACTIVITIES:
Purchase of BankAtlantic preferred stock...................... 0 (4,000) (4,000)
Additional investment in BankAtlantic......................... (14,000) 0 (6,000)
Dividends from BankAtlantic preferred and common stock........ 1,520 618 3,034
Purchase of investment securities............................. (3,729) 0 (3,663)
Proceeds from maturity of investment securities............... 3,800 0 1,800
-------- ------- ------------
Net cash used by investing activities......................... (12,409) (3,382) (8,829)
-------- ------- ------------
</TABLE>
F-47
<PAGE> 150
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, DECEMBER 31,
------------------ ------------
1996 1995 1995
-------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Issuance of common stock upon exercise of options and
warrants, net............................................... $ 0 $ 0 $ 1,709
Common stock dividends paid................................... (466) (398) (1,672)
Preferred stock dividends paid................................ 0 (220) (677)
Proceeds from note payable.................................... 0 4,000 4,000
Repayment of note payable..................................... (1) 0 (3,999)
Issuance of common stock, net................................. 15,791 0 0
Proceeds from issuance of subordinated debentures............. 0 0 21,000
Preferred stock redemption.................................... 0 0 (8,383)
-------- ------- ------------
Net cash provided by financing activities..................... 15,324 3,382 11,978
-------- ------- ------------
Increase in cash and cash equivalents......................... 1,840 (18) 1,988
Cash and cash equivalents at beginning of period.............. 2,079 91 91
-------- ------- ------------
Cash and cash equivalents at end of period.................... $ 3,919 $ 73 $ 2,079
======== ======= ==========
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Interest paid................................................. $ 0 $ 0 $ 161
Common stock dividends declared in prior year and paid in
current year................................................ 524 398 467
Change in stockholders' equity from net unrealized
appreciation on debt securities available for sale by
BankAtlantic, less related deferred income taxes............ (3,719) 905 5,540
Increase in equity for the tax effect related to the
exercise of employee stock options....................... 0 0 173
</TABLE>
No statement of cash flows has been provided from January 1, 1994 through
December 31, 1994. The only activities related to the establishment of a $92,000
deposit at BankAtlantic resulting from the proceeds received from employees'
exercise of the Company stock options and the exercise of rights offering
warrants, payment of dividends to common and preferred shareholders and receipt
or accrual of dividends from BankAtlantic; including a dividend declared by
BankAtlantic of $398,000 in November 1994, payable to the Company in January
1995.
F-48
<PAGE> 151
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. SELECTED QUARTERLY RESULTS (UNAUDITED)
The following tables summarize the quarterly results of operations for the
years ended December 31, 1995 and 1994 (in thousands except per share data):
<TABLE>
<CAPTION>
1995
-----------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Interest income............ $ 30,452 $ 32,588 $ 33,683 $ 33,354 $ 130,077
Interest expense........... 15,655 16,743 16,704 16,584 65,686
---------- ---------- ---------- ---------- ----------
Net interest income........ 14,797 15,845 16,979 16,770 64,391
Provision for loan
losses................... 176 1,205 1,436 1,365 4,182
---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan
losses................... 14,621 14,640 15,543 15,405 60,209
---------- ---------- ---------- ---------- ----------
Income before income
taxes.................... 6,727 7,706 7,721 6,283 28,437
---------- ---------- ---------- ---------- ----------
Net income....... $ 4,381 $ 4,935 $ 5,038 $ 4,065 $ 18,419
========= ========= ========= ========= =========
Income per common and
common equivalent
share.................... $ 0.39 $ 0.45 $ 0.44 $ 0.24(A) $ 1.51(A)
========= ========= ========= ========= =========
Income per common and
common equivalent share
assuming full dilution... $ 0.39 $ 0.44 $ 0.42 $ 0.24(A) $ 1.50(A)
========= ========= ========= ========= =========
Weighted average number of
common and common
equivalent shares
outstanding.............. 10,571,570 10,609,338 11,023,635 11,111,668 10,830,603
========= ========= ========= ========= =========
Weighted average number of
common and common
equivalent shares
outstanding assuming full
dilution................. 10,571,570 10,713,504 11,110,486 11,111,668 10,934,120
========= ========= ========= ========= =========
</TABLE>
- ---------------
(A) During the fourth quarter of 1995, the Company redeemed $8.4 million of
preferred stock. The October 7, 1995 preferred stock redemption resulted in
a $1.4 million payment above the recorded amount of the preferred stock.
Such excess is treated as a preferred stock dividend which impacted
F-49
<PAGE> 152
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
earnings per share by $0.13 and $0.12 primary and fully diluted earnings per
share, respectively for the year 1995 and $0.12 for both primary and fully
diluted earnings per share for the fourth quarter of 1995.
<TABLE>
<CAPTION>
1994
--------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Interest income............... $ 22,816 $ 23,213 $ 26,117 $ 26,403 $ 98,549
Interest expense.............. 8,406 9,220 11,168 12,637 41,431
---------- ---------- ---------- ---------- ----------
Net interest income........... 14,410 13,993 14,949 13,766 57,118
Provision for loan losses..... 779 316 615 589 2,299
---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses... 13,631 13,677 14,334 13,177 54,819
---------- ---------- ---------- ---------- ----------
Income before income taxes.... 6,883 7,318 7,086 5,210 26,497
---------- ---------- ---------- ---------- ----------
Net income.................... $ 4,255 $ 4,516 $ 4,661 $ 3,403 $ 16,835
========= ========= ========= ========= =========
Income per common and common
equivalent share............ $ 0.38 $ 0.41 $ 0.42 $ 0.30 $ 1.52
========= ========= ========= ========= =========
Income per common and common
equivalent share assuming
full dilution............... $ 0.38 $ 0.41 $ 0.42 $ 0.30 $ 1.52
========= ========= ========= ========= =========
Weighted average number of
common and common equivalent
shares outstanding.......... 10,425,113 10,457,301 10,553,689 10,519,676 10,490,033
========= ========= ========= ========= =========
Weighted average number of
common and common equivalent
shares outstanding assuming
full dilution............... 10,425,113 10,504,693 10,607,188 10,539,364 10,520,489
========= ========= ========= ========= =========
</TABLE>
18. OTHER INFORMATION
As further discussed in Note 10, BFC increased its common stock ownership
in BankAtlantic to 77.83% at June 30, 1993 and subsequently, in November 1993,
sold 2.18 million shares of BankAtlantic common stock to decrease their
ownership percentage to 48.17% at December 31, 1993. Upon consummation of the
Reorganization on July 13, 1994, BFC owned 48.07% of the Company's common stock
and 5,600, 529 and 7,245 shares of the Company's Series A, B and C preferred
stock, respectively. Such ownership was obtained through open market purchases
and represented approximately 2.97%, 3.09% and 5.59% of the Company's Series A,
B and C preferred stock, respectively. Such preferred stock was redeemed on
October 7, 1995. The exercise of the stock warrants and various exercises of
employee stock options reduced BFC's ownership percentage to 46.03% at December
31, 1995. The issuance of Class A non-voting stock reduced BFC's ownership
percentage in the Company's common stock to 41%, although BFC still owns 46% of
the Company's Class B voting stock.
Alan B. Levan, serves as the Chairman and Chief Executive Officer of
BankAtlantic, the Company and BFC. John E. Abdo is the Vice Chairman of
BankAtlantic, the Company.
On April 9, 1996, BankAtlantic, entered into an agreement to acquire Bank
of North America Bancorp, Inc. ("BNAB") for approximately $54 million in cash.
The acquisition will be accounted for as a purchase for financial reporting
purposes. BNAB's primary asset is its wholly owned subsidiary, Bank of North
America ("BNA"), a Florida chartered commercial bank. BNA has 13 branches, with
11 located in Broward county,
F-50
<PAGE> 153
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
one in Dade county and one in Palm Beach county. Closing of the acquisition is
expected to occur in the fourth quarter of 1996, subject to certain conditions
including receipt of all required regulatory approvals.
19. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The information set forth below provides disclosure of the estimated fair
value of BankAtlantic's financial instruments presented in accordance with the
requirements of Statement. No. 107, "Disclosures about Fair Value of Financial
Instruments" ("FAS 107") issued by the FASB.
Management has made estimates of fair value discount rates that it believes
to be reasonable. However, because there is no market for many of these
financial instruments, 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.
Fair values are estimated for loan portfolios with similar financial
characteristics. Loans are segregated by category such as commercial, commercial
real estate, residential mortgage, second mortgages, and other installment. Each
loan category is further segmented into fixed and adjustable rate interest terms
and by performing and non-performing categories.
The fair value of performing loans, except residential mortgage and
adjustable rate loans, is calculated by discounting scheduled cash flows through
the estimated maturity using estimated market discount rates that reflect the
credit and interest rate risk inherent in the loan. The estimate of average
maturity is based on BankAtlantic's historical experience with prepayments for
each loan classification, modified, as required, by an estimate of the effect of
current economic and lending conditions. For performing residential mortgage
loans, fair value is estimated by discounting contractual cash flows adjusted
for national historical prepayment estimates using discount rates based on
secondary market sources adjusted to reflect differences in servicing and credit
costs.
For adjustable rate loans, the fair value is estimated at book value after
adjusting for credit risk inherent in the loan. BankAtlantic's interest rate
risk is considered insignificant since the majority of BankAtlantic's adjustable
rate loans are based on prime rates or one year Constant Maturity Treasuries
("CMT") rates and adjust monthly or generally not greater than one year.
Fair values of non-performing loans are based on the assumption that
non-performing loans are on a non-accrual status discounted at market rates
during a 24 month work-out period. Assumptions regarding credit risk are
judgmentally determined using available market information and specific borrower
information.
The book value of tax certificates approximates market value. Fair value of
mortgage-backed and investment securities is estimated based on bid prices
available from security dealers. Estimated cash flows of securities were based
on BankAtlantic's historical experience, modified by current economic
conditions.
Fair value of mortgage-backed securities is estimated based on bid prices
available from security dealers.
Under FAS 107, the fair value of deposits with no stated maturity, such as
non-interest bearing demand deposits, savings and NOW accounts, and money market
and checking accounts, is equal to the amount payable on demand at December 31,
1995 and 1994.
The fair value of certificates of deposit is based on the discounted value
of contractual cash flows. The discount rate is estimated using alternative
borrowing rates adjusted for maintenance and insurance costs.
The book value of securities sold under agreements to repurchase and note
payable approximates fair value.
F-51
<PAGE> 154
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The fair values of advances from FHLB, were based upon comparable terms to
maturity, interest rates and issuer credit standing.
The following table presents information for BankAtlantic's financial
instruments at March 31, 1996 and December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- ----------------------- -----------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Financial assets:
Cash and due from depository
institutions.................... $ 61,133 $ 61,113 $ 69,867 $ 69,867 $ 55,980 $ 55,980
Debt securities available for
sale............................ 559,775 559,775 691,803 691,803 53,969 53,969
Mortgage-backed securities held to
maturity........................ 0 0 0 0 573,913 550,134
Investment and trading account
securities...................... 40,537 40,537 49,856 49,856 211,776 206,770
Loans receivable.................. 863,348 865,362 828,630 839,763 54,396 542,441
Financial liabilities:
Deposits.......................... $1,323,229 $1,326,573 $1,300,377 $1,306,732 $1,085,782 $1,082,874
Securities sold under agreements
to repurchase................... 43,881 43,878 66,237 66,240 149,829 149,769
Advances from FHLB................ 63,485 63,472 201,785 201,795 162,050 161,924
Subordinated debentures and note
payable......................... 21,000 20,657 21,001 21,537 0 0
Federal funds purchased........... 0 0 1,200 1,200 0 0
</TABLE>
The contract amount and related fees of BankAtlantic's commitments to
extend credit, standby letters of credit, and financial guarantees approximates
fair value (see Note 15 for the contractual amounts of BankAtlantic's financial
instrument commitments).
20. ACQUISITION OF MEGABANK
On February 7, 1995, BankAtlantic completed an agreement and plan of merger
with MegaBank, a Miami-based commercial bank, providing for the acquisition of
MegaBank by BankAtlantic for $21 million in cash, of which $900,000 was paid to
the former Chief Executive Officer of MegaBank in connection with a
non-competition agreement. MegaBank had assets of approximately $152 million.
The MegaBank acquisition added 5 branches to BankAtlantic's branch network.
The MegaBank acquisition, accounted for by the purchase method of
accounting, was effective for financial statement purposes as of February 1,
1995. The results of operations include MegaBank since February 1, 1995. Funds
for this acquisition were obtained from traditional sources. Interest expense of
$34,000 was imputed on the purchase price for the period of February 1, 1995
(effective date) through February 17, 1995 (merger date). The net cash utilized
in the purchase is summarized on the following page. Pro forma results would not
have differed significantly from actual operations if the acquisition had
occurred on January 1, 1995.
F-52
<PAGE> 155
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of assets acquired and liabilities assumed in conjunction
with the purchase of all the capital stock of MegaBank was as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Cash................................................................... $ 6,512
Investments............................................................ 1,700
Deferred tax asset..................................................... 2,697
Loans receivable, net.................................................. 116,389
Debt securities available for sale..................................... 18,119
Cost over fair value of assets acquired................................ 12,072
Accrued interest receivable............................................ 1,208
Real estate owned...................................................... 348
Property and equipment................................................. 613
Non-competition agreement.............................................. 900
Dealer reserve......................................................... 2,168
Other assets........................................................... 969
--------
Fair value of assets acquired................................ 163,695
--------
Deposits............................................................... 120,165
Securities sold under agreements to repurchase......................... 20,615
Other liabilities...................................................... 1,954
--------
Fair value of liabilities assumed............................ 142,734
--------
Acquisition costs...................................................... 465
--------
Purchase of MegaBank................................................... $ 21,426
Cash acquired.......................................................... 6,512
--------
Purchase of MegaBank, net of cash acquired............................. $ 14,914
========
</TABLE>
The following table indicates the estimated net decrease in earnings
resulting from the net amortization/ accretion of the adjustments, including the
excess of costs over fair value of net assets acquired, resulting from the use
of the purchase method of accounting during each of the years 1996 through 2000.
The amounts (in thousands) assume no sales or dispositions of the related assets
or liabilities.
<TABLE>
<CAPTION>
NET DECREASE
OF NET
YEARS ENDING DECEMBER 31, EARNINGS
- ------------------------- ------------
<S> <C> <C>
1996.................................................................. $ (201)
1997.................................................................. (216)
1998.................................................................. (1,226)
1999.................................................................. (1,192)
2000.................................................................. (1,192)
Thereafter............................................................ (4,865)
</TABLE>
Adjustments to fair value are being amortized on a straight-line basis,
which approximates the level yield method, over the estimated average term of
three years for loans and investments, and one year for deposits. Cost over fair
value of net assets acquired does not qualify for amortization for tax purposes.
Costs over fair value of net assets acquired is being amortized on a
straight-line basis over its estimated useful life of 10 years. The cost over
fair value of net assets acquired as of March 31, 1996 and December 31, 1995 is
$10.5 million and $10.8 million, respectively. The $900,000 non-competition
agreement is considered an intangible asset for tax purposes and amortized
ratably over 15 years. At March 31, 1996 and December 31, 1995, the non-
competition agreement balance was $626,000 and $696,000, respectively. The
agreement is being amortized
F-53
<PAGE> 156
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on a straight-line basis for financial statement purposes over its useful life
which was revised from six years to approximately three years upon the
resignation of the former MegaBank CEO from BankAtlantic's senior management
group.
The following is proforma information for the year ended December 31, 1994
as if the 1995 MegaBank purchase was consummated on January 1, 1994 (in
thousands, except for per share data):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1994
----------------------
HISTORICAL PRO FORMA
---------- ---------
(UNAUDITED)
<S> <C> <C>
Interest income.................................................. $ 98,549 $ 110,900
Interest expense................................................. 41,431 46,096
Provision for loan losses........................................ 2,299 2,869
---------- ---------
Net interest income after provision for loan losses.............. 54,819 61,935
---------- ---------
Net Income....................................................... $ 16,835 $ 16,680
======= ========
Income per common and common equivalent share.................... $ 1.52 $ 1.50
======= ========
Income per common and common equivalent share assuming
full dilution.................................................. $ 1.52 $ 1.50
======= ========
</TABLE>
The pro forma has been adjusted for MegaBank to exclude transaction costs
of $635,000 from historical results. Such transaction costs consisted primarily
of contract and employee severance costs. These proforma results may not be
representative of the actual results that would have occurred or may occur in
the future if the transaction had been in effect on the date indicated.
F-54
<PAGE> 157
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
MARCH 31, 1996
<TABLE>
<S> <C>
ASSETS
Cash and due from banks........................................................ $ 16,981,510
Interest bearing deposits with banks........................................... 5,718,538
Federal funds sold and securities purchased under agreements to resell......... 5,814,000
Securities available for sale.................................................. 108,553,658
Federal Home Loan Bank of Atlanta stock........................................ 2,775,000
Loans held for sale (approximate market value: $2,234,480)..................... 2,223,854
Loans receivable, net.......................................................... 397,155,919
Accrued interest receivable.................................................... 4,372,344
Premises and equipment......................................................... 8,500,356
Cost of mortgage loan servicing rights acquired................................ 2,180,000
Other intangible assets........................................................ 179,001
Foreclosed real estate......................................................... 1,118,594
Deferred income taxes.......................................................... 2,187,349
Other assets................................................................... 1,895,833
------------
Total assets......................................................... $559,655,956
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Deposits:
Non-interest bearing......................................................... $ 61,205,485
Interest bearing............................................................. 438,413,806
------------
Total deposits....................................................... 499,619,291
Securities sold under agreements to repurchase............................... 988,595
Other borrowings............................................................. 20,000,000
Accrued interest payable..................................................... 597,373
Other liabilities............................................................ 1,089,172
------------
Total liabilities.................................................... 522,294,431
------------
Commitments and contingencies
Stockholder's equity:
Common stock, $1.00 par value. Authorized, 5,000,000 shares; issued and
outstanding 100,000 shares................................................ 100,000
Additional paid-in capital................................................... 30,000,000
Retained earnings............................................................ 8,855,404
Unrealized loss on securities available for sale, net........................ (1,593,879)
------------
Total stockholder's equity........................................... 37,361,525
------------
Total liabilities and stockholder's equity........................... $559,655,956
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-55
<PAGE> 158
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
(UNAUDITED)
<S> <C> <C>
Interest income and fees
Loans.............................................................. $ 8,383,828 $7,268,232
Short-term investments............................................. 386,835 188,965
Securities......................................................... 1,542,315 2,265,803
----------- ----------
Total interest income...................................... 10,312,978 9,723,000
----------- ----------
Interest expense
Transaction accounts............................................... 1,072,492 956,317
Time deposits...................................................... 4,223,783 3,611,750
Borrowings......................................................... 334,399 830,632
----------- ----------
Total interest expense..................................... 5,630,674 5,398,699
----------- ----------
Net interest income........................................ 4,682,304 4,324,301
Provision for loan losses............................................ 180,000 75,000
----------- ----------
Net interest income after provision for loan losses........ 4,502,304 4,249,301
----------- ----------
Non-interest income
Service charges on deposits........................................ 675,232 500,574
Mortgage servicing income, net..................................... 273,207 392,161
Gains on sales of loans, net....................................... 106,026 561,297
Other.............................................................. 126,257 101,865
----------- ----------
Total non-interest income.................................. 1,180,722 1,555,897
----------- ----------
Operating expenses
Compensation and benefits.......................................... 2,328,045 2,087,701
Occupancy and equipment............................................ 750,020 880,106
Data processing.................................................... 304,114 244,968
Regulatory insurance and assessments............................... 298,863 276,570
Office expenses.................................................... 262,057 245,054
Professional fees.................................................. 147,133 157,602
Marketing.......................................................... 106,836 142,332
Other intangible amortization...................................... 25,050 25,050
Other.............................................................. 580,017 447,882
----------- ----------
Total operating expenses................................... 4,802,135 4,507,265
----------- ----------
Income before income taxes........................................... 880,891 1,297,933
Income tax expense................................................... 325,930 426,126
----------- ----------
Net income........................................................... $ 554,961 $ 871,807
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-56
<PAGE> 159
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
UNREALIZED
LOSS ON
ADDITIONAL SECURITIES
COMMON PAID-IN RETAINED AVAILABLE
STOCK CAPITAL EARNINGS FOR SALE, NET TOTAL
-------- ----------- ---------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994....... $100,000 $30,000,000 $6,122,015 (1,507,071) $34,714,944
Change in unrealized loss on
securities available for sale,
net........................... -- -- -- 1,047,692 1,047,692
Net income for the year ended
December 31, 1995............. -- -- 2,178,428 -- 2,178,428
-------- ----------- ---------- ------------- -----------
Balance at December 31, 1995....... 100,000 30,000,000 8,300,443 (459,379) 37,941,064
Change in unrealized loss on
securities available for sale,
net........................... -- -- -- (1,134,500) (1,134,500)
Net income for the three months
ended March 31, 1996.......... -- -- 554,961 -- 554,961
-------- ----------- ---------- ------------- -----------
Balance at March 31, 1996.......... $100,000 $30,000,000 $8,855,404 $ (1,593,879) $37,361,525
======== ========== ========= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-57
<PAGE> 160
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income...................................................... $ 554,961 $ 871,807
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Amortization of mortgage loan servicing rights acquired...... 97,000 73,000
Other amortization and depreciation.......................... 634,090 336,403
Provision for loan losses.................................... 180,000 75,000
Proceeds from loan sales of loans held for sale.............. 6,314,321 27,355,418
Origination and purchase of loans held for sale.............. (6,018,825) (1,441,180)
Net realized gains on sales of loans......................... (106,026) (561,297)
Changes in other assets and other liabilities:
Accrued interest receivable, current income taxes and other
assets...................................................... 626,672 314,807
Accrued interest payable and other liabilities............... (467,916) 296,870
------------ ------------
Net cash provided by operating activities....................... 1,814,277 27,320,828
------------ ------------
Cash flow from investing activities:
Purchase of available for sale securities....................... (10,081,094) --
Proceeds from sales of available for sale securities............ -- 2,000,000
Proceeds from maturities of available for sale securities....... 440,163 300,408
Proceeds from maturities of held to maturity securities......... -- 238,471
Net decrease in Federal Home Loan Bank of Atlanta stock......... -- 450,000
Originations of loans........................................... (42,465,687) (39,325,218)
Purchase of loans............................................... -- (238,301)
Proceeds from maturities of loans............................... 21,718,237 19,439,996
Net purchases of premises and equipment......................... (561,891) (246,390)
Proceeds from sale of foreclosed properties..................... 115,097 632,040
------------ ------------
Net cash used by investing activities........................... (30,835,175) (16,748,994)
------------ ------------
Cash flows from financing activities:
Net increase in deposits........................................ 5,906,982 13,415,971
Net increase (decrease) in securities sold under agreements to
repurchase and short term other borrowings................... 10,168,122 (3,748,027)
Repayments of long term other borrowings........................ (10,000,000) (20,000,000)
------------ ------------
Net cash provided (used) by financing activities................ 6,075,104 (10,332,056)
------------ ------------
Net increase (decrease) in cash and cash equivalents............ (22,945,794) 239,778
Cash and cash equivalents at beginning of period.................. 51,459,842 20,706,491
------------ ------------
Cash and cash equivalents at end of period........................ $ 28,514,048 $ 20,946,269
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest..................................................... $ 5,695,504 $ 5,484,393
=========== ===========
Income taxes................................................. $ -- $ --
=========== ===========
Supplemental non-cash investing and financing information:
Transfers to foreclosed real estate............................. $ 421,324 $ 983,989
=========== ===========
Transfers to loans held for sale................................ $ 296,600 $ --
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-58
<PAGE> 161
BANK OF NORTH AMERICA BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
1. POTENTIAL SALE TO BANKATLANTIC, A FEDERAL SAVINGS BANK ("BANKATLANTIC").
On April 9, 1996 Bank Atlantic entered into an agreement to acquire Bank of
North America Bancorp, Inc. ("BNAB") for approximately $54 million in cash.
BankAtlantic is a wholly owned subsidiary of BankAtlantic Bancorp, Inc., a
unitary savings bank holding company. BNAB's primary asset is its wholly owned
subsidiary, Bank of North America ("BNA"), a Florida chartered commercial bank.
BNA has 13 branches, with 11 located in Broward County, and one each in Dade and
Palm Beach counties.
Closing of the acquisition is subject to certain conditions including
receipt of all required regulatory approvals and is expected to occur in the
fourth quarter of 1996.
2. BASIS OF FINANCIAL STATEMENT PRESENTATION.
The accompanying unaudited financial information does not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. However, the information furnished reflects all
adjustments which are, in the opinion of management, necessary for a fair
presentation of operating results for the interim periods. All such adjustments
were of a normal and recurring nature.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 121 ("FAS 121") which requires that long-lived
assets and certain identifiable intangibles to be held by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
FAS 121 is effective as of January 1, 1996, prospectively. BNAB believes
that the adoption of this pronouncements did not have a significant impact on
its results of operations or financial position.
3. MORTGAGE SERVICING RIGHTS.
In May 1995 the FASB issued Statement of Financial Accounting Standard No.
122 ("FAS 122") which eliminated the accounting distinction between rights to
service mortgage loans for others that are acquired through loan origination
activities and those acquired through purchase transactions. FAS 122 requires an
entity to recognize as separate assets rights to service mortgage loans for
others, however those servicing rights are acquired. FAS 122 requires the
periodic evaluation of capitalized mortgage servicing rights for impairment
based on fair value. On January 1, 1996, this statement was implemented
prospectively. The initial valuation of mortgage servicing rights ("MSR") are on
an individual loan basis. During the three months ended March 31, 1996, BNAB did
not capitalize any MSR's. Amortization of MSR's amounted to $97,000 and $73,000
for the three months ended March 31, 1996 and 1995, respectively. MSR's are
amortized to expense using the level yield over the estimated life of the loan
and continually adjusted for prepayments. The fair value of capitalized mortgage
servicing rights at March 31, 1996 was estimated at $6.6 million. For the
purpose of evaluating and measuring impairment of MSR's, BNAB stratifies those
rights based on the predominant risk characteristics of the underlying loans.
Upon implementation of FAS 122, no additional valuation allowance was required.
Adjustments to the valuation allowance will be reflected in operations.
4. SALE OF INVESTMENT SECURITIES.
During the month of April 1996, BNAB sold substantially all of its
investment securities, resulting in a realized loss of $1.8 million net of
applicable income taxes. Proceeds from the sale of approximately $103 million
were used as follows: (a) $22 million to increase cash and cash equivalents; (b)
$66 million to purchase U.S. Treasury securities with remaining maturities not
exceeding two years; (c) $15 million to fund loan originations and to repay
borrowings.
F-59
<PAGE> 162
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Bank of North America Bancorp, Inc.
and subsidiaries:
We have audited the accompanying consolidated statements of financial
condition of Bank of North America Bancorp, Inc. and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 1995, 1994
and 1993. These consolidated financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bank of
North America Bancorp, Inc. and subsidiaries as of December 31, 1995 and 1994,
and the results of their operations and their cash flows for the years ended
December 31, 1995, 1994 and 1993, in conformity with generally accepted
accounting principles.
As discussed in note 1(d), the Bank changed its method of accounting for
investments to adopt the provisions of the Financial Accounting Standards
Board's SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities, at December 31, 1993.
January 11, 1996
F-60
<PAGE> 163
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks........................................... $ 14,605,787 $ 11,859,729
Interest bearing deposits with banks.............................. 36,423,055 7,719,762
Federal funds sold and securities purchased under agreements to
resell.......................................................... 431,000 1,127,000
Securities available for sale..................................... 100,786,529 30,629,965
Securities held to maturity....................................... -- 116,593,447
Federal Home Loan Bank of Atlanta stock........................... 2,775,000 3,225,000
Loans held for sale (approximate market value: $2,732,000 and
$26,403,000).................................................... 2,709,924 26,274,544
Loans receivable, net............................................. 376,781,652 326,222,418
Accrued interest receivable....................................... 4,026,657 3,939,323
Premises and equipment............................................ 8,210,789 8,356,578
Cost of mortgage loan servicing rights acquired................... 2,277,000 2,619,566
Other intangible assets........................................... 204,051 304,251
Foreclosed real estate............................................ 1,025,805 1,345,366
Deferred income taxes............................................. 1,502,866 2,087,828
Other assets...................................................... 2,741,408 2,567,266
------------ ------------
Total assets............................................ $554,501,523 $544,872,043
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Deposits:
Non-interest bearing......................................... $ 53,749,576 $ 47,876,926
Interest bearing............................................. 439,962,733 390,808,368
------------ ------------
Total deposits.......................................... 493,712,309 438,685,294
Securities sold under agreements to repurchase.................. 820,473 5,372,769
Other borrowings................................................ 20,000,000 64,500,000
Accrued interest payable........................................ 662,203 744,901
Other liabilities............................................... 1,365,474 854,135
------------ ------------
Total liabilities....................................... 516,560,459 510,157,099
------------ ------------
Commitments and contingencies
Stockholder's equity:
Common stock, $1.00 par value. Authorized, 5,000,000 shares;
issued and outstanding 100,000 shares........................ 100,000 100,000
Additional paid-in capital...................................... 30,000,000 30,000,000
Retained earnings............................................... 8,300,443 6,122,015
Unrealized loss on securities available for sale, net........... (459,379) (1,507,071)
------------ ------------
Total stockholder's equity.............................. 37,941,064 34,714,944
------------ ------------
Total liabilities and stockholder's equity.............. $554,501,523 $544,872,043
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-61
<PAGE> 164
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Interest income and fees
Loans................................................. $30,491,963 $27,035,132 $28,533,636
Short-term investments................................ 1,546,380 514,066 986,796
Securities............................................ 8,514,080 8,093,732 3,188,138
----------- ----------- -----------
Total interest income......................... 40,552,423 35,642,930 32,708,570
----------- ----------- -----------
Interest expense
Transaction accounts.................................. 3,923,685 2,549,174 2,677,321
Time deposits......................................... 16,755,725 14,297,037 14,010,768
Borrowings............................................ 2,336,889 2,245,418 383,535
----------- ----------- -----------
Total interest expense........................ 23,016,299 19,091,629 17,071,624
----------- ----------- -----------
Net interest income........................... 17,536,124 16,551,301 15,636,946
Provision for loan losses............................... 1,150,000 1,105,000 2,050,000
----------- ----------- -----------
Net interest income after provision for loan
losses...................................... 16,386,124 15,446,301 13,586,946
----------- ----------- -----------
Non-interest income
Service charges on deposits........................... 2,234,489 1,409,455 1,074,566
Mortgage servicing income (expense), net.............. 1,368,939 813,682 (5,099,847)
Gains on sales of loans, net.......................... 957,077 142,036 629,360
Securities transactions, net.......................... 136,931 25,006 1,196,882
Other................................................. 506,320 385,191 499,219
----------- ----------- -----------
Total non-interest income (expense)........... 5,203,756 2,775,370 (1,699,820)
----------- ----------- -----------
Operating expenses
Compensation and benefits............................. 8,674,567 8,029,031 7,884,864
Occupancy and equipment............................... 3,274,140 3,042,683 2,799,367
Data processing....................................... 1,022,109 866,850 934,529
Regulatory insurance and assessments.................. 1,128,452 1,084,152 1,119,894
Office expenses....................................... 994,215 812,496 745,173
Professional fees..................................... 781,507 588,150 743,432
Marketing............................................. 524,813 471,515 312,131
Other intangible amortization......................... 100,200 100,200 580,200
Other................................................. 1,798,066 1,377,485 1,272,149
----------- ----------- -----------
Total operating expenses...................... 18,298,069 16,372,562 16,391,739
----------- ----------- -----------
Income (loss) before income taxes....................... 3,291,811 1,849,109 (4,504,613)
Income tax expense (credit)............................. 1,113,383 492,588 (1,697,012)
----------- ----------- -----------
Net income (loss)....................................... $ 2,178,428 $ 1,356,521 $(2,807,601)
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-62
<PAGE> 165
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
------------- ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................... $ 2,178,428 $ 1,356,521 $ (2,807,601)
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Amortization of mortgage loan servicing rights acquired....... 342,566 1,087,758 7,372,024
Other amortization and depreciation........................... 1,562,129 1,142,154 691,007
Provision for loan losses..................................... 1,150,000 1,105,000 2,050,000
Deferred tax benefit.......................................... (47,147) (68,172) (509,369)
Proceeds from loan sales of loans held for sale............... 46,422,568 7,497,081 17,566,914
Origination and purchase of loans held for sale............... (22,623,506) (12,230,459) (22,373,224)
Net realized gains on available for sale securities........... (136,931) (25,006) (1,196,882)
Net realized gains on sales of loans.......................... (957,077) (142,036) (629,360)
Changes in other assets and other liabilities:
Accrued interest receivable, current income taxes and other
assets...................................................... (261,476) 322,948 (682,535)
Accrued interest payable and other liabilities................ 428,641 67,798 (35,809)
------------ ----------- ------------
Net cash provided (used) by operating activities................ 28,058,195 113,587 (554,835)
------------ ----------- ------------
Cash flow from investing activities:
Purchase of available for sale securities....................... -- (12,192,547) (130,267,067)
Proceeds from sales of available for sale securities............ 36,744,498 6,684,402 95,745,533
Proceeds from maturities of available for sale securities....... 3,160,569 3,181,930 9,482,093
Purchases of held to maturity securities........................ -- (55,326,011) (50,350,418)
Proceeds from maturities of held to maturity securities......... 8,118,723 9,249,653 13,712,885
Net (increase) decrease in Federal Home Loan Bank of Atlanta
stock......................................................... 450,000 75,000 (179,200)
Originations of loans........................................... (124,309,814) (75,372,844) (49,830,223)
Purchase of loans............................................... (238,301) (2,071,600) (71,863,864)
Proceeds from maturities of loans............................... 71,944,569 73,910,084 91,674,222
Proceeds from sales of loans.................................... -- -- 28,034,679
Net purchases of premises and equipment......................... (870,854) (1,443,122) (2,197,221)
Proceeds from sale of foreclosed properties..................... 1,721,047 1,978,422 2,665,961
Purchases of mortgage loan servicing rights..................... -- -- (2,935,746)
------------ ----------- ------------
Net cash used by investing activities........................... (3,279,563) (51,326,633) (66,308,366)
------------ ----------- ------------
Cash flows from financing activities:
Net increase (decrease) in deposits............................. 55,027,015 17,662,165 (45,225,652)
Net increase (decrease) in securities sold under agreements to
repurchase and short term other borrowings.................... (19,052,296) 9,872,769 --
Proceeds from long term other borrowings........................ -- 30,000,000 30,000,000
Repayments of long term other borrowings........................ (30,000,000) -- --
------------ ----------- ------------
Net cash provided (used) by financing activities................ 5,974,719 57,534,934 (15,225,652)
------------ ----------- ------------
Net increase (decrease) in cash and cash equivalents............ 30,753,351 6,321,888 (82,088,853)
Cash and cash equivalents at beginning of year.................... 20,706,491 14,384,603 96,473,456
------------ ----------- ------------
Cash and cash equivalents at end of year.......................... $ 51,459,842 $ 20,706,491 $ 14,384,603
============ =========== ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest...................................................... $ 23,098,997 $ 18,713,682 $ 17,018,377
============ =========== ============
Income taxes.................................................. $ 1,144,000 $ 550,000 $ --
============ =========== ============
Supplemental non-cash investing and financing information:
Transfers to foreclosed real estate............................. $ 2,420,335 $ 3,100,660 $ 2,126,810
============ =========== ============
Transfers to loans held for sale................................ $ (246,635) $ 21,399,130 $ (10,407,627)
============ =========== ============
Transfers to securities available for sale...................... $ 108,248,811 $ -- $ 4,848,166
============ =========== ============
Reclassification of allowance for purchased loans to discount
and premium (See Note 1(e))................................... $ -- $ 2,400,000 $ --
============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-63
<PAGE> 166
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
ADDITIONAL SECURITIES
COMMON PAID-IN RETAINED AVAILABLE
STOCK CAPITAL EARNINGS FOR SALE, NET TOTAL
-------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992..... $100,000 $30,000,000 $ 7,573,095 -- $37,673,095
Unrealized gain on securities
available for sale, net..... -- -- -- 65,598 65,598
Net loss for the year ended
December 31, 1993........... -- -- (2,807,601) -- (2,807,601)
-------- ----------- ----------- -------------- -----------
Balance at December 31, 1993..... 100,000 30,000,000 4,765,494 65,598 34,931,092
Change in unrealized loss on
securities available for
sale, net................... -- -- -- (1,572,669) (1,572,669)
Net income for the year ended
December 31, 1994........... -- -- 1,356,521 -- 1,356,521
-------- ----------- ----------- -------------- -----------
Balance at December 31, 1994..... 100,000 30,000,000 6,122,015 (1,507,071) 34,714,944
Change in unrealized loss on
securities available for
sale, net................... -- -- -- 1,047,692 1,047,692
Net income for the year ended
December 31, 1995........... -- -- 2,178,428 -- 2,178,428
-------- ----------- ----------- -------------- -----------
Balance at December 31, 1995..... $100,000 $30,000,000 $ 8,300,443 $ (459,379) $37,941,064
======== ========== ========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-64
<PAGE> 167
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Bank of North
America Bancorp, Inc. ("Company"), its wholly owned subsidiary Bank of North
America ("the Bank"), and two non-bank subsidiaries. Bank of North America is a
state-chartered commercial bank with offices in Dade, Broward and Palm Beach
Counties, Florida. The two non-bank subsidiaries are inactive. All significant
intercompany transactions and balances have been eliminated in consolidation.
(b) Basis of Financial Statement Presentation
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles and with general practices within the
banking industry. In preparing the consolidated financial statements, management
is required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the consolidated statement of
financial condition and revenues and expenses for the year. Actual results could
differ significantly from those estimates. Material estimates that are
particularly susceptible to significant change in the next year relate to the
determination of the allowance for loan losses, the carrying value of foreclosed
real estate, and the carrying value of mortgage servicing rights.
(c) Cash and Cash Equivalents
Cash and cash equivalents include cash, due from banks, interest-bearing
balances with banks, federal funds sold and securities purchased under
agreements to resell. Cash and cash equivalents have maturities, at acquisition
date, of three months or less.
(d) Securities
The Bank adopted the provisions of Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity (SFAS
No. 115) at December 31, 1993. Upon adoption of SFAS No. 115, all securities
previously classified as held for sale were designated as available for sale.
The adoption of SFAS No. 115 resulted in an increase in the carrying value of
investment securities available for sale of $105,175 and a corresponding
increase in stockholder's equity of $65,598 and in deferred tax liability of
$39,577.
Under SFAS No. 115 the Bank classifies its debt and equity securities in
one of three categories: trading, available-for-sale, or held-to-maturity.
Trading securities are bought and held principally for the purpose of selling
them in the near term. Held-to-maturity securities are those securities in which
the Bank has the ability and intent to hold the security until maturity. All
other securities not included in trading or held-to-maturity are classified as
available-for-sale.
Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains and
losses on trading securities are included in earnings. Unrealized holding gains
and losses, net of the related tax effect, on available-for-sale securities are
excluded from earnings and are reported as a separate component of stockholder's
equity until realized. Realized gains and losses from the sale of available-
for-sale securities are determined on a specific identification basis.
A decline in the market value of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary results in a reduction
in carrying amount to fair value. The impairment is charged to earnings and a
new cost basis for the security is established. Premiums and discounts are
amortized
F-65
<PAGE> 168
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
or accreted over the life of the related security as an adjustment to yield
using the effective interest method. Dividend and interest income are recognized
when earned.
On November 15, 1995, the Financial Accounting Standards Board ("FASB")
issued Special Report No. 155-B, A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities (the "Special
Report"). Pursuant to the Special Report, the Bank was permitted to conduct a
one-time reassessment of the classifications of all securities held at that
time. Any reclassifications from the held-to-maturity category made in
conjunction with that reassessment would not call into question an enterprises'
intent to hold other debt securities to maturity in the future.
The Bank undertook such a reassessment and, effective November 30, 1995,
all securities then classified as held-to-maturity were reclassified as
available for sale. On the effective date of the reclassification, the
securities transferred had a carrying value of $108,249,000 and an estimated
fair value of $107,211,000, resulting in a net reduction to stockholder's equity
for the net unrealized loss of $647,000, after deducting applicable income taxes
of $391,000.
(e) Loan Purchases, Securitization and Sales
Loans are stated at the unpaid principal balance net of unearned income and
discounts and allowance for loan losses plus prepaid dealer reserves. Loan
packages of primarily one to four family residential loans have been acquired
through Federal Deposit Insurance Corporation ("FDIC") and Resolution Trust
Corporation ("RTC") loan offerings and in private transactions. The purchase
price of these loans is determined based upon factors such as credit quality,
the type of loan product being offered and inherent market conditions at the
time of purchase. Upon the purchase of these loan packages, an allocation of the
purchase price is made among the allowance for loan losses and purchased
discount or premium.
The amount allocated to the allowance for loan losses is based on an
evaluation of the estimated discounted credit losses to be incurred for the
loans purchased. When loans are sold, gains or losses resulting from such sales
are measured by using the cost basis allocated to such loans at the time of
purchase, adjusted for amortization of premiums and accretion of discounts.
Specific allowances for loan losses, which are identified as part of loans being
sold, are included as part of the cost basis of such loans at time of sale. This
cost allocation methodology is also utilized for purchased loans which are
securitized.
Effective December 31, 1994, a comprehensive evaluation was made of the
allowance for loan losses originally established during 1993, 1992 and 1991
related to purchased one to four family residential loans. As a result of this
evaluation, which included a review of historical losses on the purchased loans,
the original estimates were revised. The effect of this change in estimate was
to reduce the allowance for loan losses on purchased loans and to increase net
unearned purchased discounts and premiums by $2,400,000. Beginning in 1995, the
increased net unearned purchased discount was amortized as an adjustment to the
related loans' yield over the estimated remaining lives of those loans.
The Bank classifies loans which it intends to sell or securitize and sell
as loans held for sale. These loans are carried at the aggregate of lower of
cost or market. At December 31, 1995, loans held for sale consisted of
originated residential loans. At December 31, 1994 loans held for sale consisted
of purchased consumer loans with a carrying value of approximately $25.8
million, and originated residential loans.
(f) Allowance for Loan Losses
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic evaluation
of the adequacy of the allowance is based on the Bank's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay, the estimated value of any
underlying collateral, and current economic conditions. Management believes that
the allowance for loan losses is adequate; however, regulatory agencies, as an
F-66
<PAGE> 169
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
integral part of their examination process, periodically review the allowance
for losses on loans. Such agencies may require the recognition of additions or
reductions to the allowance based on their judgement of information available at
the time of their examination.
The Bank adopted the provisions of Statement of Financial Accounting
Standard No. 114, Accounting by Creditors for Impairment of a Loan, as amended
by SFAS No. 118, Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosure, ("SFAS No. 114") on January 1, 1995. The provisions
of SFAS No. 114 did not have a significant impact on financial condition or
results of operations upon adoption. Management, considering current information
and events regarding the borrowers ability to repay their obligations, considers
a loan to be impaired when it is probable that the Bank will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. When a loan is considered to be impaired, the amount of the
impairment is measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or at the fair value of
collateral, if the loan is collateral dependent. Impairment losses and changes
in estimates to the impairment losses are included in the allowance for loan
losses through a provision for loan losses. The Bank recognizes interest income
on impaired loans on a cash basis. Prior periods have not been restated.
(g) Loan Interest Income Recognition
Interest income on commercial and real estate mortgage loans is recognized
as earned based upon the principal amounts outstanding. Interest income on
installment loans is recognized using a method which approximates the interest
method. Loans are placed on non-accrual status when management believes that
interest on such loans may not be collected in the normal course of business or
when the loans become ninety days delinquent, whichever is earlier. Premiums and
discounts on purchased loans are amortized or accreted using the level yield
method.
(h) Loan Fees
Loan origination, prepaid dealer reserves, certain other fees and certain
direct loan origination costs are being deferred and the net amount is being
amortized as an adjustment to the related loan's yield, generally over the
contractual life of the related loans, or if the related loan is held for sale,
until the loan is sold. Fees received in connection with loan commitments are
deferred until the loan is advanced and are then recognized over the term of the
loan as an adjustment of the yield. Fees on commitments that expire unused are
recognized in other non-interest income at expiration.
(i) Mortgage Loan Servicing Rights
The Bank services mortgage loans for investors. These mortgage loans
serviced are not included in the accompanying consolidated statements of
financial condition. Loan servicing fees are based on a stipulated percentage of
the outstanding loan principal balances being serviced and are recognized as
income when related loan payments from mortgagors are collected. Loan servicing
costs are charged to expense using the level yield method over the estimated
life of the loan, and continually adjusted for prepayments. Management evaluates
the carrying value of purchased mortgage servicing rights by estimating the
future net servicing income of the portfolio on a discounted basis, based on
estimates of the remaining loan lives.
In May 1995 the FASB issued Statement of Financial Accounting Standards No.
122, Accounting for Mortgage Servicing Rights, ("SFAS No. 122") which would
eliminate the accounting distinction between rights to service mortgage loans
for others that are acquired through loan origination activities and those
acquired through purchase transactions. SFAS No. 122 requires an entity to
recognize rights to service mortgage loans for others or rights to service
mortgage loans originated as separate assets, however acquired, for transactions
in which the Bank has sold the loan and retained the servicing rights. This
statement is to be
F-67
<PAGE> 170
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
applied prospectively effective on January 1, 1996. Retroactive application is
prohibited. Upon adoption, SFAS No. 122 is not expected to have a material
effect on results of operations or financial condition.
(j) Premises and Equipment
Land is carried at cost. Bank premises, furniture and equipment, and
leasehold improvements are carried at cost, less accumulated depreciation and
amortization, computed principally by the straight-line method.
(k) Income Taxes
The operating results of the Company and its subsidiaries are included in
consolidated federal and state income tax returns. Each subsidiary pays its
allocation of income taxes to the Company, or receives payment from the Company
to the extent that tax benefits are realized based on amounts computed as if
each subsidiary was an individual company.
Effective January 1, 1993, Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes, ("SFAS No. 109") was adopted prospectively.
The adoption of SFAS No. 109 changes the method of accounting for income taxes
from the deferred method to an asset and liability approach. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Deferred tax assets are
required to be reduced by a valuation allowance to the extent that, based on the
weight of available evidence, it is more likely than not that the deferred tax
assets will not be realized.
The adoption of SFAS No. 109 on January 1, 1993 did not have a significant
impact on financial condition or results of operations.
(l) Other Intangible Assets
Excess cost over fair value of assets acquired of $82,283 and $123,983 at
December 31, 1995 and 1994, respectively, is amortized on a straight-line basis
over a seven year period . Remaining core deposit premium of $121,768 and
$180,268 at December 31, 1995 and 1994, respectively, is being amortized over
its estimated remaining economic life of approximately 2 years at December 31,
1995.
(m) Foreclosed Real Estate
Real estate properties acquired through, or in lieu of, foreclosure are
initially recorded at fair value at the date of foreclosure establishing a new
cost basis. After foreclosure, valuations are periodically performed by
management and the real estate is carried at the lower of (1) cost or (2) fair
value minus estimated costs to sell. Revenue and expenses from operations and
adjustments of the fair value are included in earnings. Foreclosed real estate
is not depreciated.
(n) Reclassifications
Certain amounts for prior years have been reclassified to conform with
financial statement presentations for 1995.
F-68
<PAGE> 171
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SECURITIES
Securities available for sale consist of the following:
<TABLE>
<CAPTION>
DEBT SECURITY MATURITIES
-------------------------------------------------------------- CARRYING
AFTER 1 YEAR AFTER 5 YEARS TOTAL GROSS UNREALIZED VALUE
AT DECEMBER THROUGH THROUGH AMORTIZED -------------------- (ESTIMATED
31, 1995 1 YEAR OR LESS 5 YEARS 10 YEARS AFTER 10 YEARS COST GAINS LOSSES FAIR VALUE)
- ------------ -------------- ------------ ------------- -------------- ------------ -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt
securities
U.S.
Treasury... $ 4,999,638 $ -- $ -- $ -- $ 4,999,638 $ -- $ (19,169) $ 4,980,469
U.S.
Government
agencies... -- 2,999,585 -- -- 2,999,585 27,134 -- 3,026,719
Municipal
bonds.... 414,810 1,677,890 3,602,944 -- 5,695,644 13,910 (30,919) 5,678,635
Corporate
bonds.... -- 17,792,560 3,508,520 -- 21,301,080 14,922 (97,505) 21,218,497
Mortgage-backed
securities... 9,503,118 25,727,096 27,127,861 4,169,046 66,527,121 92,536 (737,448) 65,882,209
------------ ----------- ----------- ---------- ------------ -------- --------- ------------
Total... $ 14,917,566 $48,197,131 $34,239,325 $4,169,046 $101,523,068 $148,502 $(885,041) $100,786,529
============ =========== =========== ========== ============ ========= ========= ============
</TABLE>
<TABLE>
<CAPTION>
DEBT SECURITY MATURITIES
-------------------------------------------------------- CARRYING
AT AFTER 1 YEAR AFTER 5 YEARS TOTAL GROSS UNREALIZED VALUE
DECEMBER THROUGH THROUGH EQUITY AMORTIZED ------------------- (ESTIMATED
31, 1994 1 YEAR OR LESS 5 YEARS 10 YEARS AFTER 10 YEARS SECURITIES COST GAINS LOSSES FAIR VALUE)
- -------- -------------- ------------ ------------- -------------- ---------- ------------ -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Debt
securities...
U.S.
Government
agencies... $2,000,000 $ -- $2,000,000 $ -- $ -- $ 4,000,000 $ -- $ (127,153) $ 3,872,847
Corporate
bonds... -- -- 2,191,460 -- -- 2,191,460 -- (223,332) 1,968,128
Mortgage-backed
securities... 1,158,302 11,049,631 3,744,088 2,307,433 -- 18,259,454 -- (1,206,713) 17,052,741
U.S.
Government
agency
equity
securities... -- -- -- -- 8,595,391 8,595,391 -- (859,142) 7,736,249
---------- ----------- ---------- ---------- ---------- ----------- -------- ----------- -----------
Total... $3,158,302 $11,049,631 $7,935,548 $2,307,433 $8,595,391 $33,046,305 $ -- $(2,416,340) $30,629,965
========== =========== ========== ========== ========== =========== ======== =========== ===========
</TABLE>
Securities held to maturity at December 31, 1994 are presented below. All
securities were classified as available for sale at December 31, 1995.
<TABLE>
<CAPTION>
DEBT SECURITY MATURITIES
---------------------------------------------------------
AT AFTER 1 YEAR AFTER 5 YEARS TOTAL GROSS UNREALIZED
DECEMBER THROUGH THROUGH CARRYING VALUE ---------------------- ESTIMATED
31, 1994 1 YEAR OR LESS 5 YEARS 10 YEARS AFTER 10 YEARS (AMORTIZED COST) GAINS LOSSES FAIR VALUE
- -------- -------------- ------------ ------------- -------------- ---------------- ------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S.Treasury... $7,001,796 $ 4,998,701 $ -- $ -- $ 12,000,497 $ -- $ (278,778) $ 11,721,719
U.S.
Government
agencies... -- 2,999,398 -- -- 2,999,398 -- (186,273) 2,813,125
Municipal
bonds... 259,966 1,737,758 2,904,160 1,145,628 6,047,512 -- (441,501) 5,606,011
Corporate
bonds... -- 9,721,550 9,635,815 -- 19,357,365 -- (2,018,003) 17,339,362
Mortgage-backed
securities... 1,041,743 20,152,544 25,642,776 29,351,612 76,188,675 -- (7,802,067) 68,386,608
---------- ----------- ----------- ----------- ------------ --------- ------------ ------------
Total... $8,303,505 $39,609,951 $38,182,751 $30,497,240 $116,593,447 $ -- $(10,726,622) $105,866,825
========== =========== =========== =========== ============ ========= ============ ============
</TABLE>
Expected maturities of mortgage-backed securities will differ from
contractual maturities since borrowers generally have the right to prepay
obligations without penalty. The maturity distribution of mortgage-backed
securities is based on their expected maturities based on information available
at December 31, 1995 and 1994.
Gross gains resulting from the disposition of securities available for sale
amounted to $211,036, $25,006, and $1,196,882 during 1995, 1994 and 1993,
respectively. Gross losses amounted to $74,105 during 1995. There were no losses
on securities available for sale during 1994 or 1993.
Investment securities with carrying values of $607,617 and $610,172 were
pledged as required by government regulation as of December 31, 1995 and 1994,
respectively. In addition, at December 31, 1995 and
F-69
<PAGE> 172
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1994, investment securities with carrying values of $830,021 and $30,977,697,
respectively, were pledged to secure securities sold under agreements to
repurchase and other short-term borrowings.
3. LOANS
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
Real estate -- residential................................ $229,005,786 238,150,292
Real estate -- commercial................................. 47,216,816 37,346,130
Commercial................................................ 30,174,139 16,177,208
Consumer.................................................. 74,859,096 42,400,631
Overdrafts................................................ 598,985 102,421
------------ ------------
Subtotal........................................ 381,854,822 334,176,682
Add: prepaid dealer reserve............................... 3,746,096 1,731,182
Less: net deferred loan fees.............................. (452,078) (484,788)
Less: net purchased discounts and premiums (See Note
1(e))................................................... (2,866,041) (3,354,662)
Less: allowance for loan losses........................... (5,501,147) (5,845,996)
------------ ------------
Loans, net...................................... $376,781,652 326,222,418
=========== ===========
</TABLE>
At December 31, 1995 and 1994, approximately $3,914,000 and $3,989,000,
respectively, of loans were on non-accrual status. Interest related to
non-accrual loans, determined in accordance with the original contractual terms
for the years ended December 31, 1995, 1994 and 1993, amounted to approximately
$307,000, $343,000 and $531,000, respectively . Interest collected on such loans
and included in the results of operations during 1995, 1994 and 1993 amounted to
approximately $211,000, $133,000 and $314,000, respectively.
The Bank adopted SFAS No. 114 effective January 1, 1995. All loans on
non-accrual status are considered to be impaired loans for purposes of SFAS No.
114. At December 31, 1995, the Bank's recorded investment in impaired loans was
approximately $3.9 million. Of the total impaired loans, approximately $2.0
million in principal balance had related specific allowance for loan losses of
approximately $753,000. Average impaired loans for 1995 were approximately $3.4
million.
4. ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses is presented below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year...................... $ 5,845,996 $ 8,434,497 $ 6,214,414
Provision for loan losses....................... 1,150,000 1,105,000 2,050,000
Allowance for loan losses for purchased loans... -- -- 1,252,335
Reclassification of allowance for purchased
loans to discount and premium (See Note
1(e))......................................... -- (2,400,000) --
Loan sales...................................... (476,000) -- (17,358)
Charge-offs..................................... (1,331,811) (1,498,237) (1,465,438)
Recoveries...................................... 312,962 204,736 400,544
----------- ----------- -----------
Balance, end of year.................. $ 5,501,147 $ 5,845,996 $ 8,434,497
========== ========== ==========
</TABLE>
F-70
<PAGE> 173
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
----------- -----------
<S> <C> <C>
Land, building and improvements............................. $ 6,603,827 $ 6,408,645
Leasehold improvements...................................... 1,010,319 1,021,195
Furniture, fixtures and equipment........................... 3,805,526 3,336,839
----------- -----------
Subtotal.................................................. 11,419,672 10,766,679
Accumulated depreciation and amortization................... 3,208,883 2,410,101
----------- -----------
Premises and equipment, net................................. $ 8,210,789 $ 8,356,578
========== ==========
</TABLE>
The Bank is obligated under operating leases for office premises and
equipment. At December 31, 1995, the total remaining minimum lease commitments
were as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C> <C>
1996....................................................... $1,406,000
1997....................................................... 622,000
1998....................................................... 292,000
1999....................................................... 209,000
----------
$2,529,000
=========
</TABLE>
Rent expense for the years ended December 31, 1995, 1994 and 1993 was
approximately $1,433,000, $1,422,000, and $1,287,000, respectively, and is
included in occupancy and equipment expense.
In connection with a lease for the Bank's corporate offices, a letter of
credit with a redemption value of $97,500 at December 31, 1995 was issued by the
Bank in favor of the owner of such premises.
The Bank is lessor under operating leases for office premises. The building
being leased had cost and carrying a value of approximately $5.5 million and
$5.2 million at December 31, 1995, respectively. Minimum future rentals on
leases as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C> <C>
1996........................................................ $235,000
1997........................................................ 130,000
1998........................................................ 76,000
1999........................................................ 54,000
--------
$495,000
========
</TABLE>
F-71
<PAGE> 174
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. DEPOSITS
Deposits are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
Non-interest bearing:
Customers............................................... $ 49,786,586 $ 46,764,273
Official checks......................................... 3,962,990 1,112,653
Savings................................................... 66,271,833 28,735,724
NOW....................................................... 41,836,493 32,369,618
Money market.............................................. 40,893,238 53,780,385
Certificates of deposit................................... 290,961,169 275,922,641
------------ ------------
Total deposits.................................. $493,712,309 $438,685,294
=========== ===========
</TABLE>
As of December 31, 1995 and 1994, the Bank held certificates of deposit of
$100,000 or more of approximately $48.5 million and $43.4 million, respectively.
The interest expense on certificates of deposit of $100,000 or more amounted to
approximately $2,654,000, $2,230,000 and $1,969,000, during the years ended
December 31, 1995, 1994 and 1993, respectively.
The following table sets forth the amount and maturities of certificates of
deposits as of December 31, 1995:
<TABLE>
<CAPTION>
AMOUNT
AMOUNT DUE DURING DUE AFTER
YEARS ENDING DECEMBER 31, DECEMBER
--------------------------------------- 31,
1996 1997 1998 1998 TOTAL
------------ ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
2.00% to 3.00.......... $ 285,848 $ -- $ -- $ -- $ 285,848
3.01% to 4.00.......... 7,801,947 869,932 292,158 -- 8,964,037
4.01% to 5.00.......... 35,352,395 1,538,263 859,708 652,254 38,402,620
5.01% to 6.00.......... 66,954,442 12,674,703 4,455,642 890,217 84,975,004
6.01% to 7.00.......... 57,102,695 48,000,993 403,398 9,334,155 114,841,241
7.01% to 8.00.......... 23,761,812 15,310,625 -- 4,419,982 43,492,419
------------ ----------- ---------- ----------- ------------
Total........ $191,259,139 $78,394,516 $6,010,906 $15,296,608 $290,961,169
=========== ========== ========= ========== ===========
</TABLE>
NOTE 7. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31........................... $ 820,473 $ 5,372,769 $ --
Average balance for the year..................... 2,109,748 3,409,404 --
Maximum amount outstanding at any month end
during the year................................ 2,588,114 15,007,773 --
Average interest rate:
During the year................................ 5.71% 4.35% --
At December 31................................. 5.17 5.70 --
</TABLE>
At December 31, 1995 and 1994, the Bank had sold mortgage-backed securities
and United States treasury securities under agreements to repurchase those same
securities, with maturities ranging from one to thirty days. The Bank sells
securities under agreements to repurchase to its customers and to major
securities dealers. Securities sold to customers are maintained under the Bank's
control. Securities sold to dealers are
F-72
<PAGE> 175
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
maintained in safekeeping by those dealers for the Bank's benefit. At December
31, 1994, securities sold under agreements to repurchase with the investment
firm of Goldman, Sachs & Co. were $4.0 million.
8. OTHER BORROWINGS
Other borrowings consist of Federal Home Loan Bank of Atlanta ("FHLB")
advances of a short-term nature and advances with original maturities in excess
of one year. Short-term FHLB advances are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance at December 31........................ $ -- $14,500,000 $10,000,000
Average balance for the year.................. 6,121,636 10,471,557 3,748,219
Maximum amount outstanding at any month end
during the year............................. 20,000,000 18,000,000 22,500,000
Average interest rate:
During the year............................. 6.30% 4.14% 3.21%
At December 31.............................. -- 6.42 3.50
</TABLE>
FHLB advances with original maturities in excess of one year are summarized
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
----------- -----------
<S> <C> <C>
Floating rate advance, based on 3-month LIBOR, due 1995..... $ -- $10,000,000
Floating rate advance, based on 3-month LIBOR, due 1996..... 10,000,000 10,000,000
3.78% advance, due 1995..................................... -- 10,000,000
3.97% advance, due 1995..................................... -- 10,000,000
7.51% advance, due 1996..................................... 5,000,000 5,000,000
7.73% advance, due 1997..................................... 5,000,000 5,000,000
----------- -----------
Total............................................. $20,000,000 $50,000,000
========== ==========
</TABLE>
The Bank has been advised by the FHLB that it has a total credit
availability of $100 million with maturities of up to 10 years. The FHLB credit
availability does not represent a firm commitment by the FHLB. Rather, it is the
FHLB's assessment of what the Bank could borrow given the Bank's current
financial condition. The credit availability is subject to change at any time
based upon the Bank's financial condition and that of the FHLB, as well as
changes in FHLB policies or Congressional mandates. At December 31, 1995, the
Bank's available credit from the FHLB was $80 million.
In connection with its borrowings from the FHLB, the Bank is required to
own FHLB stock with a par value equal to at least five percent of total advances
outstanding. At December 31, 1995, the Bank's investment in FHLB stock had a par
and carrying value of $2,775,000, and was automatically pledged against FHLB
advances. Advances from the FHLB are secured by eligible investment securities
or first mortgage loans. Generally, short-term FHLB advances are secured by
pledging and delivering specific investment security collateral under terms and
at rates comparable to those available in the repurchase agreement market. All
other FHLB advances are secured by a blanket floating lien on the Bank's
residential, one-to-four family first mortgage loans. For advances secured by
the blanket floating lien, the Bank is not required to specifically identify,
deliver, or otherwise segregate first mortgage loans pledged as collateral for
advances, but must maintain eligible first mortgage loan collateral equal to
approximately 133% of outstanding advances, or approximately $27 million at
December 31, 1995.
F-73
<PAGE> 176
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. INCOME TAXES
Income tax expense (credit) reflected in the consolidated statements of
operations for 1995, 1994 and 1993 is detailed below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
---------- --------- -----------
<S> <C> <C> <C>
Current tax expense (credit):
Federal................................................. $1,053,600 $ 560,760 ($1,187,643)
State................................................... 106,930 -- --
---------- --------- -----------
Total current................................... 1,160,530 560,760 (1,187,643)
---------- --------- -----------
Deferred tax expense (benefit):
Federal................................................. (103,991) (154,531) (274,861)
State................................................... 56,844 86,359 (234,508)
---------- --------- -----------
Total deferred.................................. (47,147) (68,172) (509,369)
---------- --------- -----------
Total income tax expense (credit)............... $1,113,383 $ 492,588 ($1,697,012)
========= ========= ==========
</TABLE>
The actual income tax rate differs from the "expected" income tax rate (the
U.S. Federal corporate tax rate of 34%) for 1995, 1994 and 1993 as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------
1995 1994 1993
---- ---- -----
<S> <C> <C> <C>
Tax at federal statutory rate......................................... 34.0% 34.0% (34.0)%
State income tax, net of federal benefit.............................. 3.3 1.7 (3.6)
Amortization of intangibles........................................... 0.7 1.3 2.3
Corporate dividend exclusion.......................................... (2.5) (6.9) (2.3)
Tax-exempt interest................................................... (2.1) (3.6) (0.3)
Other, net............................................................ 0.4 0.1 0.2
---- ---- -----
Total income tax expense (credit)................................... 33.8% 26.6% (37.7)%
==== ==== =====
</TABLE>
F-74
<PAGE> 177
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Approximate temporary differences between financial statement carrying
amounts and tax basis of assets and liabilities that give rise to significant
portions of the net deferred tax asset at December 31, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax assets:
Provision for loan losses................................... $1,427,558 $1,262,251
Unrealized loss on securities available for sale............ 277,160 909,269
Intangible asset amortization............................... 223,568 266,052
Depreciation................................................ 117,858 63,075
Loan fees................................................... 108,035 121,573
Delinquent interest reserve................................. 80,351 188,950
State tax net operating loss carry forward.................. -- 74,645
Other....................................................... 68,685 35,255
---------- ----------
Gross deferred tax assets..................................... 2,303,215 2,921,070
Valuation allowance...................................... -- --
---------- ----------
Net deferred tax assets.................................. 2,303,215 2,921,070
---------- ----------
Deferred tax liabilities:
Intangible asset amortization............................... 362,352 351,345
Purchased loans............................................. 291,683 363,002
Stock dividends............................................. 91,223 107,659
Other....................................................... 55,091 11,236
---------- ----------
Total deferred tax liabilities...................... 800,349 833,242
---------- ----------
Deferred tax assets, net............................ $1,502,866 $2,087,828
========= =========
</TABLE>
An analysis of the changes in the net deferred tax asset is presented
below:
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Balance, beginning of year.................................... $2,087,828 $1,070,810
Deferred tax benefit.......................................... 47,147 68,172
Change in unrealized loss on securities available for sale.... (632,109) 948,846
---------- ----------
Balance, end of year................................ $1,502,866 $2,087,828
========= =========
</TABLE>
10. CREDIT COMMITMENTS
The Bank has outstanding at any time a significant number of commitments to
extend credit. Commitments to extend credit are agreements to lend to a customer
as long as there is no violation of any condition established in the loan
commitment contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since some of the
commitments are expected to expire without being drawn upon, the total
commitment amount does not necessarily represent future cash requirements. Each
customer's credit worthiness is evaluated on an individual basis and the amount
of collateral required, if deemed necessary, is based on management's credit
evaluation. As of December 31, 1995 and 1994, there were approximately $39.6
million and $34.4 million, respectively of commitments to extend credit,
generally with terms of up to 90 days. Commitments at December 31, 1995 and 1994
include approximately $5.8 million and $12.4 million in fixed rate commitments,
respectively.
F-75
<PAGE> 178
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Loan commitments have off-balance-sheet credit risk because only
origination fees and accruals for probable losses are recognized in the
statement of financial position until the commitments are fulfilled. Credit risk
represents the accounting loss that would be recognized at the reporting date if
counterparties failed completely to perform as contracted. The credit risk
amounts are equal to the contractual amounts, assuming that the amounts are
fully advanced and that the collateral or other security is of no value.
The Bank's policy with regard to collateral-dependent loans is to require
customers to provide collateral prior to the disbursement of approved loans. For
consumer loans, the Bank usually retains a security interest in the property or
products financed, which provides repossession rights in the event of default by
the customer. For commercial loans and financial guarantees, collateral is
usually in the form of inventory or marketable securities (held in trust) or
real estate (notations on title).
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. At December 31, 1995
and 1994, there were approximately $2.2 million and $574,000, respectively, of
standby letters of credit outstanding with maturities of up to one year. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The Bank holds
certificates of deposit as collateral supporting those commitments for which
collateral is deemed necessary. The extent of collateral held for those
commitments at December 31, 1995 and 1994 varies from unsecured to 100 percent.
The Bank has not incurred any losses on its commitments in either 1995 or
1994.
11. CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk (whether on or off balance sheet) arising
from financial instruments exist in relation to certain groups of customers. A
group concentration arises when a number of customers have similar economic
characteristics that would cause their ability to meet contractual obligations
to be similarly affected by changes in economic or other conditions. The Bank
does not have a significant exposure to any individual customer. The major
concentrations of credit risk for the Bank arise by customer type in relation to
loans and credit commitments, as shown in the following table. A geographic
concentration arises because the Bank operates primarily in Florida, where a
majority of loan customers and related collateral are located.
<TABLE>
<CAPTION>
COMMERCIAL
RESIDENTIAL REAL
REAL ESTATE ESTATE COMMERCIAL CONSUMER TOTAL
----------- ---------- ---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CREDIT RISK:
December 31, 1995
Loans...................................... $ 245,646 $ 38,167 $ 30,174 $70,578 $384,565
Credit commitments......................... 20,327 1,870 19,612 17 41,826
--------- -------- -------- ------- --------
$ 265,973 $ 40,037 $ 49,786 $70,595 $426,391
========= ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
COMMERCIAL
RESIDENTIAL REAL
REAL ESTATE ESTATE COMMERCIAL CONSUMER TOTAL
----------- ---------- ---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CREDIT RISK:
December 31, 1994
Loans...................................... $ 244,966 $ 34,908 $ 16,177 $64,400 $360,451
Credit commitments......................... 18,849 8,412 7,577 105 34,943
--------- -------- -------- ------- --------
$ 263,815 $ 43,320 $ 23,754 $64,505 $395,394
========= ======== ======== ======= ========
</TABLE>
The credit risk amounts represent the maximum accounting loss that would be
recognized at the reporting date if customers failed completely to perform as
contracted and any collateral or security proved to
F-76
<PAGE> 179
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
be of no value. The Bank has experienced little difficulty in accessing
collateral when required. The amounts of credit risk shown, therefore, greatly
exceed expected losses, which are included in the allowance for loan losses.
12. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Bank has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying consolidated financial statements. In addition, the Bank is
involved in various claims and legal actions arising in the ordinary course of
business. The outcome of these claims and actions are not presently
determinable, however, in the opinion of the Bank's management, after consulting
with their legal counsel, the ultimate disposition of these matters will not
have a material adverse effect on the consolidated financial statements.
Because of the legal structure of its acquisitions, the Bank pays deposit
insurance premiums to the FDIC's Savings Association Insurance Fund ("SAIF").
The majority of commercial banks pay such premiums to the FDIC's Bank Insurance
Fund ("BIF"). The SAIF and the BIF previously assessed deposit insurance
premiums at the same rate. However, effective September 30, 1995, the FDIC
reduced the minimum assessment rate applicable to BIF deposits, but not SAIF
deposits, from 23 basis points of covered deposits to four basis points of
covered deposits and will further reduce the BIF rate to zero effective January
1, 1996. This disparity in assessment rates may place the Bank at a competitive
disadvantage to institutions whose deposits are exclusively or primarily
BIF-insured (such as most commercial banks). Congress has proposed legislation
intended to recapitalize the SAIF and substantially bridge the assessment rate
disparity. As currently drafted, the Bank believes that it would be subject to a
one-time assessment estimated to be 80 basis points of covered deposits as of
March 31, 1995 and would subsequently pay a substantially reduced assessment
rate. Further, the Bank believes that the assessment would be reduced by 20%
based on the Bank's status as a "de novo sasser bank", as defined by the
proposed legislation. Should this legislation be enacted in its current form,
the Bank believes that its one-time assessment would result in a pre-tax charge
of $2.8 million and would be payable within 60 days after enactment of the
legislation. There is no assurance, however, that the proposed legislation, or
any other related legislation, will be enacted. Further, the legislation could
be materially modified prior to enactment. Accordingly, no provision has been
made in these financial statements for the proposed one-time assessment.
13. EMPLOYEE BENEFIT PLAN
The Bank sponsors a defined contribution 401(k) retirement savings plan
("Plan"). The Plan provides for certain contributions made by employees to be
matched by the Bank. Substantially all full-time employees with one year of
service can participate in the Plan. During 1995, 1994 and 1993, Bank
contributions to the Plan and Plan administrative expenses paid by the Bank
amounted to approximately $122,000, $109,000, and $123,000 respectively.
14. RELATED PARTY TRANSACTIONS
The Bank is a party to a loan subservicing agreement with a mortgage
servicing company owned by the Company's stockholder ("Loan Servicer"). The
agreement is under market terms and conditions and covers subservicing of one to
four family residential loans which the Bank owns or for which the Bank has
purchased servicing rights. The agreement can be cancelled by either party after
ninety days written notification. During 1995, 1994 and 1993, the Bank paid
approximately $619,000, $741,000 and $907,000, respectively, in servicing fees
to the Loan Servicer. At December 31, 1995 and 1994, approximately $487.9
million and $526.3 million, respectively, in loans were being serviced pursuant
to the loan subservicing agreement.
F-77
<PAGE> 180
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Loan Servicer has advised the Bank that, in the first quarter of 1996,
the Loan Servicer will cease operations. Accordingly, the Bank has entered into
a new subservicing agreement with an unaffiliated mortgage servicer. Conversion
to the new subservicer is scheduled for January 31, 1996.
During 1993 and 1992, the Bank acquired mortgage servicing rights to
approximately $242.2 million and $569.8 million of loans, respectively. These
loans, with an unpaid principal balance of $312.0 million and $359.4 million at
December 31, 1995 and 1994, respectively, are part of the loans being serviced
by the Loan Servicer under the subservicing agreement.
In conjunction with servicing performed by the Loan Servicer for the Bank
and for its own account, escrow funds and other servicing-related non-interest
bearing deposits are maintained at the Bank. Such funds averaged $17.6 million,
$30.2 million and $50.0 million for 1995, 1994 and 1993, respectively. At
December 31, 1995 and 1994, such servicing deposits amounted to $4.8 million and
$13.0 million, respectively.
Through September 30, 1995, the Bank was a party to an interest rate
exchange agreement ("interest rate swap") with the Loan Servicer. The
differential between the rate paid or received was recognized as a yield
adjustment to the Bank's cost of funds. The interest rate swap rates were
generally negotiated every sixty days under normal market terms and conditions.
The nature of the swap was such that the Loan Servicer earns a rate equal to
that available on short-term certificates of deposit on the notional amount.
Accordingly, the interest rate swap agreement did not have the characteristics
of a traditional interest swap in hedging interest rate risk. The notional
amount of the swap was established periodically by reference to the balance of
certain discretionary funds maintained by the Loan Servicer on deposit at the
Bank in non-interest bearing accounts. During 1995, 1994 and 1993, the average
notional amounts outstanding under the interest rate swap were $6.2 million,
$12.1 million, and $20.3 million, respectively. The net interest cost associated
with the interest rate swap during 1995, 1994 and 1993 amounted to approximately
$327,000, $456,000, and $513,000, respectively. At December 31, 1994, the
outstanding notional amount of the interest swap was $4.9 million.
From time to time, the Bank has securitized groups of mortgage loans it has
purchased or originated under programs established by government agencies,
primarily the Federal National Mortgage Association ("FNMA") and the Federal
Home Loan Mortgage Corporation ("FHLMC"), or sells individual loans to those
agencies, while maintaining the right to service the loans. During 1994 and
1993, the Bank sold to the Loan Servicer rights to $3.0 million and $18.3
million of such loans and recognized gains of $28,000 and $172,000,
respectively. There were no such sales during 1995.
During 1995, 1994 and 1993, the Bank purchased single family first mortgage
loans from the Loan Servicer for a total purchase price of approximately
$582,000, $3.4 million and $4.8 million, respectively. The Loan Servicer makes
available to the Bank information on loan applications being processed. The Bank
reviews those loans and, based upon an independent underwriting review, selects
loans for acquisition. Loans are purchased at prices customarily available in
the first mortgage market.
During 1994, the Bank invested in residential first mortgage loans
originated by the Loan Servicer from the date such loans were originated until
their delivery to permanent, non-affiliated investors or to the Bank. Purchases
made by the Bank were made pursuant to an agreement that the Loan Servicer would
repurchase the loans at no gain or loss to the Bank. A total of $88.8 million in
loans were purchased by the Bank under this arrangement and subsequently sold to
the Loan Servicer. No such loans were held by the Bank at December 31, 1995, or
1994, as the Loan Servicer terminated its loan origination capability during
1994.
In conjunction with the above purchases of loans, the Bank provided
underwriting services to the Loan Servicer and charged the Loan Servicer
approximately $104,000 during 1994.
During 1995, 1994 and 1993, the Loan Servicer paid the Bank rent of
approximately $183,000, $195,000 and $78,000 for use of office space in a
building owned by the Bank under the terms of a lease expiring July 1,
F-78
<PAGE> 181
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1996. Because of the Loan Servicer's winding-down of operations, it is
anticipated that this lease agreement will not be renewed.
The Bank provides certain human resource services to the Loan Servicer
primarily with regard to payroll, health insurance processing, and policies and
procedures. During 1995, 1994, and 1993, the Bank charged the Loan Servicer
approximately $21,000, $38,000, and $43,000, respectively for those services.
In the ordinary course of business, the Bank enters into transactions with
Directors of the Bank, with the Company's stockholder and with firms with which
the Directors or stockholder are affiliated. During 1995, 1994 and 1993,
respectively, the Bank paid marketing, advertising, and public relations fees of
approximately $179,000, $181,000, and $138,000 to a company owned by one of the
Bank's Directors. Another of the Bank's Directors is an employee of a law firm
which performs routine legal services for the Bank . During 1995, 1994, and
1993, the Bank paid legal fees of approximately $24,000, $11,000 and $19,000,
respectively, to that law firm. In addition, the Bank rents office space to a
firm managed by one of the Bank's Directors under a three year lease agreement
expiring on June 30, 1997. Rental income earned by the Bank from that lease was
approximately $14,000 and $6,000 in 1995 and 1994, respectively. The aggregate
unpaid principal balance of loans outstanding to the Bank's Directors or their
business interests was approximately $414,000 and $396,000 at December 31, 1995
and 1994, respectively.
The Company's stockholder has an ownership interest in a building which
houses one of the Bank's offices. Rent expense on that office was approximately
$7,000 for each of the years, 1995, 1994, and 1993, respectively. The Bank has
loans outstanding to a firm in which the Company's stockholder has ownership
interests. The principal balance of those loans was approximately $36,000 and
$315,000 as of December 31, 1995 and 1994 respectively. The Company's
stockholder or firms controlled by the stockholder had approximately $4.4
million and $4.6 million, on deposit at the Bank on December 31, 1995 and 1994
respectively, excluding servicing deposits held by the Loan Servicer.
15. RESTRICTIONS ON RETAINED EARNINGS
The Bank is subject to certain restrictions on the amount of dividends that
it may declare without prior regulatory approval. At December 31, 1995,
approximately $727,000 of retained earnings were available for dividend
declaration without prior regulatory approval.
16. REGULATORY CAPITAL REQUIREMENTS
During January 1989, the Federal Reserve Board ("FRB") issued final
guidelines for a risk-based approach in determining the capital requirements of
banking organizations. The guidelines consist of Tier I and total capital, the
difference primarily being that the allowance for loan losses is included in
total capital subject to certain specific limitations. The new guidelines became
fully phased in at December 31, 1992, at which time the total capital ratio
requirement was 8.00%, of which Tier I capital must be at least 4.00%. At
December 31, 1995, the Company's unaudited Tier I and total capital ratios were
11.5% and 12.7%, respectively.
The FRB and the FDIC have adopted minimum Tier I leverage ratio standards.
Tier I capital for purposes of the leverage ratio requirement is the same as
year end 1992 Tier I capital for purposes of the risk-based approach. The
leverage ratio establishes a minimum of Tier I capital to total assets of 3% for
strong banking organizations, generally with a composite CAMEL rating of one,
and 100 to 200 basis points above this minimum level for other institutions. The
Company's unaudited leverage ratio was 6.9% at December 31, 1995.
The Company and the Bank believe that the aforementioned capital amounts
exceed the minimum of risk-based and leverage ratio capital required by the FRB
and the FDIC. There can be no assurance that
F-79
<PAGE> 182
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interpretation of applicable regulations would not result in different capital
requirements for the Company and the Bank.
FDICIA also requires the FDIC to place financial institutions into
risk-based categories for purposes of determining the amount of risk, if any, to
the deposit insurance funds. Institutions are assigned to one of three groups:
well capitalized, adequately capitalized, or undercapitalized, based on their
capital ratios and other available relevant information. As of December 31,
1995, the Bank was included in the well capitalized category pursuant to a
notification received from the FDIC, as its total capital ratio exceeded 10% and
its Tier I capital ratio exceeded 6%. The Bank is also considered by management
to be well capitalized pursuant to the prompt corrective action provisions of
FDICIA.
17. FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments, defines the fair value of a financial instrument
as the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
The following table presents the carrying amounts and fair values of the Bank's
financial instruments at December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------- ----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and due from banks and
interest-bearing deposits with banks.... $ 51,029 $ 51,029 $ 19,579 $ 19,579
Federal funds sold and securities
purchased under agreements to resell.... 431 431 1,127 1,127
Securities available for sale............. 100,787 100,787 30,630 30,630
Securities held to maturity............... -- -- 116,593 105,867
FHLB stock................................ 2,775 2,775 3,225 3,225
Loans held for sale....................... 2,710 2,732 26,275 26,403
Loans receivable, net..................... 376,782 383,515 326,222 318,560
FINANCIAL LIABILITIES:
Deposit liabilities....................... $(493,712) (495,749) (438,685) (437,851)
Securities sold under agreements to
repurchase.............................. (820) (820) (5,373) (5,373)
Other borrowings.......................... (20,000) (20,127) (64,500) (64,266)
OFF-BALANCE-SHEET ASSETS (LIABILITIES):
Commitments to extend credit.............. $ -- -- -- --
Standby letters of credit................. -- -- -- --
</TABLE>
The fair value estimates do not include the benefit that results from the
low-cost funding provided by the deposit liabilities compared to the cost of
borrowing funds in the market. If that value were considered at December 31,
1995 and 1994, excluding escrow deposits held at the Bank related to mortgage
loan servicing rights purchased independently and relating to owned residential
loans, the fair value of the Bank's net assets would increase by approximately
$17.4 million and $31.9 million, respectively.
The fair value estimates also do not include the value of mortgage loan
servicing rights owned by the Bank. The value of those rights is composed of (1)
the value of low cost deposits maintained at the Bank relating to servicing
escrow and investor custodial funds, and (2) expected net servicing revenue from
purchased mortgage servicing rights. At December 31, 1995 and 1994, the fair
value of servicing rights owned by the Bank was approximately $5.1 million and
$8.1 million and the carrying value was $2.3 million and $2.6 million,
respectively.
F-80
<PAGE> 183
BANK OF NORTH AMERICA BANCORP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ESTIMATION OF FAIR VALUES
The following notes summarize the major methods and assumptions used in
estimating the fair values of financial instruments.
Short-term financial instruments are valued at their carrying amounts
included in the consolidated statement of financial condition, which are
reasonable estimates of fair value due to the relative short period to maturity
of the instruments. This approach applies to cash and cash equivalents.
Loans held for sale are valued at quoted market prices or investor
commitments.
Loans are valued on the basis of estimated future receipts of principal and
interest, discounted at various rates. Loan prepayments are assumed to occur at
the same rate as in previous periods when interest rates were at levels similar
to current levels. Future cash flows for homogeneous categories of consumer
loans, such as motor vehicle loans, are estimated on a portfolio basis and
discounted at current rates offered for similar loan terms to new borrowers. The
fair value of nonaccrual loans is estimated based on the fair value of related
collateral for collateral-dependent loans or on a present value basis, using
higher discount rates appropriate to the higher risk involved.
Securities are valued at quoted market prices.
FHLB stock is valued at the redemption value.
Fair value of demand deposits and deposits with no defined maturity is
taken to be the amount payable on demand at the reporting date. The fair value
of fixed-maturity deposits is estimated using rates currently offered for
deposits of similar remaining maturities. The intangible value of long-term
relationships with depositors is not taken into account in estimating the fair
values shown in the previous table.
Rates currently available to the Bank for term borrowings with similar
terms and remaining maturities are used to estimate the fair value of existing
borrowings as the present value of expected cash flows.
Commitments to extend credit and standby letters of credit are valued on
the basis of fees currently charged for commitments for similar loan terms to
new borrowers with similar credit profiles.
F-81
<PAGE> 184
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 4
Investment Considerations............. 11
The Company........................... 17
BankAtlantic.......................... 17
Pending Acquisition of Bank of North
America............................. 18
Use of Proceeds....................... 20
Market for Common Stock and
Dividends........................... 20
Capitalization........................ 22
Selected Consolidated Financial
Data................................ 23
Pro Forma Combined Financial Data..... 28
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................. 32
Business.............................. 69
Regulation and Supervision............ 78
Federal and State Taxation............ 88
Management............................ 90
Description of the Debentures......... 91
Description of Capital Stock.......... 97
Underwriting.......................... 99
Legal Matters......................... 99
Experts............................... 100
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$50,000,000
(LOGO) BANKATLANTIC BANCORP(R)
% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2006
--------------------
PROSPECTUS
--------------------
RYAN, BECK & CO.
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 185
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following statement sets forth the estimated amount of expenses (other
than underwriting discounts and commissions) to be borne by the Registrant in
connection with the Offering:
<TABLE>
<S> <C>
SEC Registration Fee..................................................... $19,827.55
NASD Filing Fee.......................................................... 6,250.00
Nasdaq Small Cap Market Listing Fee...................................... 5,000.00
Legal Fees and Expenses..................................................
Trustee Fees and Expenses................................................
Accounting Fees and Expenses.............................................
Printing and Mailing Expenses............................................
Blue Sky Fees and Expenses...............................................
Miscellaneous Expenses...................................................
----------
TOTAL FEES AND EXPENSES........................................ $
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0850 of the Florida Business Corporation Act and the Articles
of Incorporation and Bylaws of the Registrant provide for indemnification of the
Registrant's directors and officers against claims, liabilities, amounts paid in
settlement and expenses in a variety of circumstances, which may include
liabilities under the Securities Act of 1933, as amended (the "Securities Act").
In addition, the Registrant carries insurance permitted by the laws of the State
of Florida on behalf of Directors, officers, employees or agents which may cover
liabilities under the Securities Act.
ITEM 16. EXHIBITS
The following exhibits either are filed herewith or incorporated by
reference to documents previously filed or will be filed by amendment, as
indicated below:
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- -----------------------------------------------------------------------------------
<C> <S> <C>
1 -- Form of Underwriting Agreement between the Registrant and Ryan, Beck & Co.
3.1 -- Amended and Restated Articles of Incorporation of the Registrant.
3.2 -- Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement on Form S-4, filed on May 5, 1994 (Registration
No. 33-77708)).
4.1 -- Form of Indenture, dated as of , 1996, with respect to the Registrant's
% Convertible Subordinated Debentures due 2006.
4.2 -- Specimen Convertible Subordinated Debenture (found at Section 2.3 of the Form of
Indenture filed as Exhibit 4.1).
5 -- Form of Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
regarding validity of the Debentures being offered.
10.1 -- Key Employees' Stock Option Plan (incorporated by reference to Exhibit 10.1 to the
Registrant's Registration Statement on Form S-4, filed on May 5, 1994 (File No.
33-77708)).
10.2 -- BankAtlantic 1994 Stock Option Plan (incorporated by reference to Exhibit 10.2 to
the Registrant's Registration Statement on Form S-4, filed on May 5, 1994 (File No.
33-77708)).
10.3 -- AFS Savings Plan and AFS Trust Agreement (incorporated by reference to Exhibit 10.3
to the Registrant's Registration Statement on Form S-4, filed on May 5, 1994 (File
No. 33-77708)).
10.4 -- Indenture, dated September 22, 1995, by and between the Registrant and American
Bank National Association, as Trustee (incorporated by reference to Exhibit 10.4 to
the Registrant's Registration Statement on Form S-2, filed on February 9, 1996
(File No. 333-1212)).
</TABLE>
II-1
<PAGE> 186
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- -----------------------------------------------------------------------------------
<C> <S> <C>
12 -- Statement regarding computation of earnings to fixed charges.
23.1 -- Consent of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
23.2 -- Consent of KPMG Peat Marwick LLP regarding the Registrant.
23.3 -- Consent of KPMG Peat Marwick LLP regarding Bank of North America Bancorp, Inc.
24 -- Power of Attorney (included with signature pages to this Registration Statement).
25 -- Form T-1: Statement of Eligibility of Trustee
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 187
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Lauderdale, State of Florida, on the 5th day of
June, 1996.
BANKATLANTIC BANCORP, INC.
By: /s/ ALAN B. LEVAN
------------------------------------
Alan B. Levan,
Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alan B. Levan, John P. O'Neill and Frank V.
Grieco and each of them acting alone, his true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each said attorneys-in-fact and agents or any
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------ ---------------------
<C> <S> <C>
/s/ ALAN B. LEVAN Chairman of the Board, June 5, 1996
- --------------------------------------------- Chief Executive
Alan B. Levan Officer
/s/ JASPER R. EANES Executive Vice June 5, 1996
- --------------------------------------------- President, Chief
Jasper R. Eanes Financial Officer
/s/ JOHN E. ABDO Vice-Chairman of the June 5, 1996
- --------------------------------------------- Board
John E. Abdo
/s/ JOHN P. O'NEILL President and Director June 5, 1996
- ---------------------------------------------
John P. O'Neill
/s/ FRANK V. GRIECO Senior Executive Vice June 5, 1996
- --------------------------------------------- President and Director
Frank V. Grieco
/s/ STEVEN M. COLDREN Director June 5, 1996
- ---------------------------------------------
Steven M. Coldren
/s/ MARY E. GINESTRA Director June 5, 1996
- ---------------------------------------------
Mary E. Ginestra
/s/ BRUNO DIGIULIAN Director June 5, 1996
- ---------------------------------------------
Bruno DiGiulian
/s/ CHARLIE C. WINNINGHAM, II Director June 5, 1996
- ---------------------------------------------
Charlie C. Winningham, II
</TABLE>
II-3
<PAGE> 188
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBITS NUMBERED PAGE
- ------ ----------------------------------------------------------------------- -------------
<C> <C> <S> <C>
1 -- Form of Underwriting Agreement between the Registrant and
Ryan, Beck & Co........................................................
3.1 -- Amended and Restated Articles of Incorporation of the Registrant.......
4.1 -- Form of Indenture, dated as of , 1996, with respect to the
Registrant's % Convertible Subordinated Debentures due 2006.......
5 -- Form of Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson,
P.A. regarding validity of the Debentures being offered................
12 -- Statement regarding computation of earnings to fixed charges...........
23.1 -- Consent of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A....
23.2 -- Consent of KPMG Peat Marwick LLP regarding the Registrant..............
23.3 -- Consent of KPMG Peat Marwick LLP regarding Bank of North America
Bancorp, Inc...........................................................
25 -- Form T-1: Statement of Eligibility of Trustee..........................
</TABLE>
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EXHIBIT 1
BANKATLANTIC BANCORP, INC.
(a Florida corporation)
$50,000,000
__% Convertible Subordinated Debentures due 2006
UNDERWRITING AGREEMENT
_____________ __, 1996
RYAN, BECK & CO., INC.
As Representative of the several Underwriters
80 Main Street
West Orange, New Jersey 07052
Dear Sirs:
BankAtlantic Bancorp, Inc., a Florida corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the underwriters listed in Schedule A hereto (the "Underwriters"), for whom
you are acting as representative (the "Representative"), $50,000,000.00
principal amount of the Company's __% Convertible Subordinated Debentures due
2006. The aforesaid debentures ("Initial Securities") and all or any part of
the debentures subject to the option described in Section 2 hereof ("Option
Securities") are collectively herein referred to as the "Securities." The
Initial Securities are to be sold to each Underwriter, acting severally and not
jointly, in such amounts as are set forth in Schedule A hereto opposite the
name of such Underwriter. The Company also grants to the Underwriters,
severally and not jointly, the option described in Section 2 to purchase all or
any part of $7,500,000 principal amount of Option Securities to cover
over-allotments. The Securities are to be issued pursuant to an indenture,
dated as of ______________ __, 1996 (the "Indenture"), between the Company, as
issuer, and American Bank National Association, as trustee (the "Trustee").
The Company has, outstanding, shares of class A common stock, $0.01 par value
per share ("Class A Common Stock") and shares of class B common stock, $0.01
par value per share ("Class B Common Stock"). The Securities are convertible
at any time prior to maturity, unless previously redeemed, into shares of Class
A Common Stock.
The initial public offering price for the Securities, the
purchase price to be paid by the Underwriters for the Securities, the
conversion price per $1,000 principal amount of the Securities
<PAGE> 2
into shares of Class A Common Stock, and the rate of interest to be paid on the
Securities shall be agreed upon by the Company and the Representative, acting
on behalf of the several Underwriters, and such agreement shall be set forth in
a separate written instrument substantially in the form of Exhibit A hereto
(the "Price Determination Agreement"). The Price Determination Agreement may
take the form of an exchange of any standard form of written telecommunication
between the Company and the Representative and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the
Securities will be governed by this Agreement, as supplemented by the Price
Determination Agreement. From and after the date of the execution and delivery
of the Price Determination Agreement, this Agreement shall be deemed to
incorporate, and all references herein to "this Agreement" shall be deemed to
include, the Price Determination Agreement.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3
(File No. 333-____) covering the registration of the Securities under the
Securities Act of 1933, as amended (the "1933 Act"), including the related
preliminary prospectus or prospectuses, and, if such registration statement has
not become effective, the Company will prepare and file, prior to the effective
date of such registration statement, an amendment to such registration
statement, including a final prospectus. Each prospectus used before the time
such registration statement becomes effective is herein called a "preliminary
prospectus". Such registration statement, including the exhibits thereto
(excluding any Form T-1) and the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it becomes
effective and including documents filed after such effective time under the
Securities Exchange Act of 1934, as amended (the "1934 Act") is herein called
the "Registration Statement", and the prospectus, including the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
1933 Act, included in the Registration Statement at the time it becomes
effective is herein called the "Prospectus" except that, if any revised
prospectus provided to the Underwriters by the Company for use in connection
with the offering of the Securities differs from the prospectus included in the
Registration Statement at the time it becomes effective (whether or not such
prospectus is required to be filed pursuant to Rule 424(b)), the term
"Prospectus" shall refer to such revised prospectus from and after the time it
is first furnished to the Underwriters for such use.
The Company understands that the Underwriters propose to make a
public offering of the Securities (the "Offering") as soon as the
Representative deems advisable after the Registration Statement becomes
effective. The Underwriters may assemble and manage a selling group of
broker-dealers that are members of the National Association of Securities
Dealers, Inc. ("NASD") to
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participate in the solicitation of purchase orders for the Securities under a
selected dealer agreement, the form of which is set forth as Exhibit B to this
Agreement.
Section 1. Representations and Warranties.
(a) The Company represents and warrants to and agrees with
each of the Underwriters that:
(i) The Company meets the requirements for use of Form S-3
under the 1933 Act and when the Registration Statement on such form
shall become effective and at all times subsequent thereto up to the
Closing Time referred to below and with respect to Option Securities,
up to the Date of Delivery referred to below, (A) the Registration
Statement and any amendments and supplements thereto will comply in
all material respects with the requirements of the 1933 Act and the
rules and regulations of the Commission under the 1933 Act (the "1933
Act Regulations"); (B) neither the Registration Statement nor any
amendment or supplement thereto will contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
and (C) neither the Prospectus nor any amendment or supplement thereto
will include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not
apply to statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by the
Underwriters expressly for use in the Registration Statement or the
Prospectus, or any information contained in any Form T-1 which is an
exhibit to the Registration Statement. The statements contained under
the caption "Underwriting" in the Prospectus constitute the only
information furnished to the Company in writing by the Underwriters
expressly for use in the Registration Statement or the Prospectus.
(ii) The documents incorporated by reference in the Prospectus
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time they
were filed with the Commission, complied in all material respects with
the requirements of the 1934 Act, and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations") and, when read
together and with the other information in the Prospectus, at the time
the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Time, will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein not misleading, in each case after excluding any statement
that does not constitute a
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<PAGE> 4
part of the Registration Statement or the Prospectus pursuant to Rule
412 of the 1933 Act Regulations.
(iii) KPMG Peat Marwick LLP, who are reporting upon the
audited financial statements included or incorporated by reference in
the Registration Statement, are independent public accountants as
required by the 1933 Act and the 1933 Act Regulations.
(iv) This Agreement has been duly authorized, executed and
delivered by the Company and, when duly executed by the
Representative, will constitute the valid and binding agreement of the
Company enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy,
insolvency, or reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general
equitable principles. The Indenture has been duly authorized by the
Company and, at the Closing Time, will have been duly executed and
delivered by the Company and will constitute a valid and binding
agreement of the Company enforceable against the Company in accordance
with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, or reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or general
equitable principles.
(v) The consolidated financial statements, audited and
unaudited (including the Notes thereto), included or incorporated by
reference in the Registration Statement present fairly the
consolidated financial position of the Company and its subsidiaries as
of the dates indicated and the consolidated results of operations and
cash flows of the Company and its subsidiaries for the periods
specified. Such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis throughout the periods involved, except as otherwise stated
therein. The financial statement schedules, if any, included in the
Registration Statement present fairly the information required to be
stated therein. The selected financial, pro forma and statistical data
included in the Prospectus are accurate in all material respects and
present fairly the information shown therein and have been compiled on
a basis consistent with that of the audited consolidated financial
statements included or incorporated by reference in the Registration
Statement.
(vi) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida
with corporate power and authority under such laws to own, lease and
operate its properties and conduct its business as described in the
Prospectus and to enter into and perform
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its obligations under this Agreement and the Indenture. The Company
is duly qualified to transact business as a foreign corporation and is
in good standing in each other jurisdiction in which it owns or leases
property of a nature, or transacts business of a type, that would make
such qualification necessary, except to the extent that the failure to
so qualify or be in good standing would not have a material adverse
effect on the condition, financial or otherwise, or earnings, business
affairs, assets or business prospects of the Company and its
subsidiaries, considered as one enterprise.
(vii) The Company is duly registered with the Office of Thrift
Supervision as a savings and loan holding company under the Home
Owners' Loan Act as amended; each subsidiary of the Company that
conducts business as a savings association is duly authorized to
conduct such business in each jurisdiction in which such business is
conducted; and the deposit accounts of BankAtlantic, A Federal Savings
Bank (the "Bank") are insured by either the Savings Association
Insurance Fund or Bank Insurance Fund of the Federal Deposit Insurance
Corporation ("FDIC"), up to the maximum allowable limits thereof. The
Company has all such power, authority, authorization, approvals and
orders as may be required to enter into this Agreement, to carry out
the provisions and conditions hereof and to issue and sell the
Securities.
(viii) The Bank is a federally chartered savings association
duly organized, validly existing and in good standing under the laws
of the United States with corporate power and authority under such
laws to own, lease and operate its properties and conduct its
business; the Bank is duly qualified to transact business as a foreign
corporation and is in good standing in each other jurisdiction in
which it owns or leases property of a nature, or transacts business of
a type, that would make such qualification necessary, except to the
extent that the failure to so qualify or be in good standing would not
have a material adverse effect on the Bank and its subsidiaries,
considered as one enterprise. All of the outstanding shares of
capital stock of each subsidiary of the Company have been duly
authorized and validly issued and are fully paid and non-assessable
and are owned by the Company directly or through one or more
subsidiaries, free and clear of any pledge, lien, security interest,
charge, claim, equity or encumbrance of any kind, except as disclosed
in Note 10 to the consolidated financial statements in the Prospectus.
(ix) Except for the Bank, the Company does not have any
"significant subsidiaries" as defined in Rule 1-02 of Regulation S-X
under the 1933 Act.
(x) The Company had at the date indicated a duly authorized
and outstanding capitalization as set forth in the
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<PAGE> 6
Prospectus under the caption "Capitalization"; the capital stock of
the Company and the Securities conform in all material respects to the
description thereof contained or incorporated by reference in the
Prospectus and such description conforms to the rights set forth in
the instruments defining the same. Subsequent to such date, the
Company has not issued, and other than under the Company's existing
option plans, savings plan pursuant to Section 401(k) of the Internal
Revenue Code ("401(k) savings plan"), savings plan or outstanding
warrants, is neither authorized nor obligated to issue, any other
shares of capital stock. Without limiting the generality of the
foregoing, since the date of the last financial statement of the
Company contained in the Prospectus, the Company has not granted any
options to purchase any shares of capital stock. Except for
[1,116,783] shares of Class B Common Stock and [800,000] share of
Class A Common Stock reserved for issuance pursuant to the Company's
option plans, 401(k) savings plan or outstanding warrants, there are
no options, warrants, calls, employee benefit or other plans,
preemptive rights or commitments of any character relating to the
authorized but unissued capital stock or any other equity security of
the Company or the Bank, except as disclosed in Note 10 to the
consolidated financial statements in the Prospectus.
(xi) The Securities have been duly and validly authorized and,
when authenticated in the manner provided for in the Indenture and
delivered against full payment of the purchase price therefore
specified in this Agreement, will be validly issued and will
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
effecting creditors' rights generally or by general equitable
principles, and will be in the form contemplated by, and entitled to
the benefits of, the Indenture; no holder thereof will be subject to
personal liability solely by reason of being such a holder; such
Securities are not subject to the preemptive rights of any stockholder
of the Company; and all corporate action required to be taken for the
authorization, issue and sale of the Securities has been validly
taken. Upon conversion of the Securities into shares of Class A
Common Stock in accordance with the terms of the Indenture, the
Company will cause such shares of Class A Common Stock on or before
their issuance to be validly issued, fully paid and non-assessable.
(xii) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid and non-assessable, and none of the outstanding shares of capital
stock was issued in violation of the preemptive rights of any
stockholder of the Company.
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<PAGE> 7
(xiii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, there has not been (A) any material adverse
change in the condition (financial or otherwise), earnings, business
affairs, assets or business prospects of the Company and its
subsidiaries, considered as one enterprise, whether or not arising in
the ordinary course of business, (B) any transaction entered into by
the Company or any subsidiary, other than in the ordinary course of
business, that is material to the Company and its subsidiaries,
considered as one enterprise, or (C) any dividend or distribution of
any kind declared, paid or made by the Company on its capital stock,
excluding the regular $0.044 per share quarterly dividend paid on
Class B Common Stock and the regular $0.0506 per share quarterly
dividend paid on the Class A Common Stock. Neither the Company nor
the Bank has any material liability of any nature, contingent or
otherwise, except as set forth in the Prospectus.
(xiv) Neither the Company nor the Bank is in violation of any
provision of its charter or by-laws or in default in the performance
or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note,
lease or other agreement or instrument to which it is a party or by
which it may be bound or to which any of its properties may be
subject, except for such defaults that would not have a material
adverse effect on the condition (financial or otherwise), earnings,
business affairs, assets or business prospects of the Company and its
subsidiaries, considered as one enterprise. The execution and
delivery of this Agreement and the Indenture by the Company, the
issuance and delivery of the Securities, the consummation by the
Company of the transactions contemplated in this Agreement and the
Indenture and the transactions contemplated in the Registration
Statement in connection with the issuance and delivery of the
Securities and compliance by the Company with the terms of this
Agreement and the Indenture have been duly authorized by all necessary
corporate action on the part of the Company and do not and will not
result in any violation of the charter or by-laws of the Company or
the Bank, and do not and will not conflict with, or result in a breach
of any of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any
subsidiary under (A) any indenture, mortgage, loan agreement, note,
lease or other agreement or instrument to which the Company or any
subsidiary is a party or by which it may be bound or to which any of
its properties may be subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a
material adverse effect on the condition (financial or otherwise)
earnings, business affairs, assets or business prospects of the
Company and its
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subsidiaries, considered as one enterprise) or (B) any existing
applicable law, rule, regulation, judgment, order or decree of any
government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any subsidiary or any
of its properties.
(xv) No authorization, approval, consent or license of any
government, governmental instrumentality or court, domestic or foreign
(other than under the 1933 Act, the 1934 Act, the Trust Indenture Act
of 1934, as amended ("TIA"), and the securities or blue sky laws of
the various states), is required for the valid authorization,
issuance, sale and delivery of the Securities.
(xvi) Except as disclosed in the Prospectus, there is no
action, suit or proceeding before or by any government, governmental
instrumentality or court, domestic or foreign, now pending or, to the
knowledge of the Company, threatened against the Company or the Bank
that is required to be disclosed in the Prospectus or that could
reasonably be expected to result in any material adverse change in the
condition (financial or otherwise), earnings, business affairs, assets
or business prospects of the Company and its subsidiaries, considered
as one enterprise, or that could reasonably be expected to materially
and adversely affect the properties or assets of the Company and its
subsidiaries, considered as one enterprise, or that could reasonably
be expected to materially and adversely affect the consummation of the
transactions contemplated in this Agreement and the Indenture; all
pending legal or governmental proceedings to which the Company or the
Bank is a party that are not described in the Prospectus, including
ordinary routine litigation incidental to its business, if decided in
a manner adverse to the Company, would not have a material adverse
effect on the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company and its subsidiaries,
considered as one enterprise.
(xvii) There are no contracts or documents of a character
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described and filed as required.
(xviii) The Company and the Bank each has good and marketable
title to all properties and assets described in the Prospectus as
owned by it, free and clear of all liens, charges, encumbrances or
restrictions, except such as (A) are described in the Prospectus or
(B) are neither material in amount nor materially significant in
relation to the business of the Company and its subsidiaries,
considered as one enterprise; all of the leases and subleases material
to the business of the Company and its subsidiaries, considered as
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one enterprise, and under which the Company or the Bank holds
properties described in the Prospectus, are in full force and effect,
and neither the Company nor the Bank has any notice of any material
claim that has been asserted by anyone adverse to the rights of the
Company or the Bank under any of the leases or subleases mentioned
above, or affecting or questioning the rights of such corporation to
the continued possession of the leased or subleased premises under any
such lease or sublease.
(xix) Each of the Company and the Bank owns, possesses or has
obtained all material governmental licenses, permits, certificates,
consents, orders, approvals and other authorizations necessary to own
or lease, as the case may be, and to operate its properties and to
carry on its business as presently conducted, and neither the Company
nor the Bank has received any notice of any restriction upon, or any
notice of proceedings relating to revocation or modification of, any
such licenses, permits, certificates, consents, orders, approvals or
authorizations.
(xx) Except as disclosed in the Prospectus, no labor problem
exists with the employees of the Company or with employees of the Bank
or to the best knowledge of the Company is imminent that could
materially adversely affect the Company and its subsidiaries,
considered as one enterprise, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or the Bank's principal suppliers, contractors or customers that could
reasonably be expected to materially adversely affect the condition
(financial or otherwise), earnings, business affairs or business
prospects of the Company and its subsidiaries, considered as one
enterprise.
(xxi) The Securities and the Indenture will conform in all
material respects to the respective statements relating thereto
contained in the Prospectus and will be in substantially the
respective forms filed or incorporated by reference, as the case may
be, as exhibits to the Registration Statement.
(xxii) There are no persons with registration or other similar
rights to have any securities of the Company registered pursuant to
the Registration Statement or otherwise registered by the Company
under the 1933 Act.
(xxiii) The Company and the Bank own or possess all patents,
patent rights, licenses, inventions, copyrights, know-how (including
trade secrets or other unpatented and/or unpatentable proprietary or
confidential information systems or procedures), trademarks,
servicemarks and tradenames (collectively, "patent and proprietary
rights") currently employed by them in connection with the business
now operated
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by them except where the failure to so own, possess or acquire such
patent and proprietary rights would not have a material adverse effect
on the condition, financial or otherwise, or the earnings, business
affairs, assets or business prospects of the Company and its
subsidiaries considered as one enterprise, and neither the Company nor
the Bank has received any notice nor is otherwise aware of any
infringement of or conflict with asserted rights of others with
respect to any patent or proprietary rights, and which infringement or
conflict (if the subject of any unfavorable decision, rule and
refinement, singly or in the aggregate) could reasonably be expected
to result in any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs, assets or business
prospects of the Company and its subsidiaries considered as one
enterprise.
(xxiv) The Company and each subsidiary of the Company have
filed all Federal, state and local income, franchise or other tax
returns required to be filed and have made timely payments of all
taxes due and payable in respect of such returns and no material
deficiency has been asserted with respect thereto by any taxing
authority.
(xxv) The Company has filed with NASD all documents and
notices required by NASD of companies that have issued securities that
are traded in the over-the-counter market and quotations for which are
reported by the Nasdaq National Market of the Nasdaq Stock Market,
Inc. ("Nasdaq Stock Market").
(xxvi) The stock purchase agreement dated April 19, 1996
between the Bank, M. Lee Pearce and Bank of North America Bancorp,
Inc. ("BNAB") (hereinafter, such stock purchase agreement is referred
to as the "Stock Purchase Agreement"), was duly and validly
authorized, executed and delivered by the Bank and constituted a valid
and binding obligation of the Bank enforceable in accordance with its
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or effecting creditors' rights generally or by general equitable
principles; the Bank had full corporate power and authority to enter
into the Stock Purchase Agreement; the acquisition of BNAB was
approved by the board of directors of the Bank and the obligations of
the Bank were performed and consummated in compliance with all
applicable laws and regulations (except where the failure to so comply
would not have a material adverse effect on the condition (financial
or otherwise) earnings, business affairs or business prospects of the
Company and the subsidiaries considered as one enterprise.
(b) Any certificate signed by any authorized officer of the Company
or the Bank and delivered to the Representative or to
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counsel for the Representative pursuant to this Agreement shall be deemed a
representation and warranty by the Company to each Underwriter as to the
matters covered thereby.
Section 2. Sale and Delivery to the Underwriters; Closing.
(a) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company that amount of Initial
Securities set forth in Schedule A of the $50,000,000 principal amount of the
Initial Securities at the purchase price and terms set forth in the Price
Determination Agreement.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
hereby grants an option to the Underwriters, severally and not jointly, to
purchase up to an additional $7,500,000 principal amount of the Securities with
the terms set forth in the Price Determination Agreement. The option hereby
granted will expire at 5:00 p.m. on the 30th day after the date the
Registration Statement is declared effective by the Commission (or at 5:00 p.m.
on the next business day if such 30th day is not a business day) and may be
exercised solely for the purpose of covering over-allotments which may be made
in connection with the offering and distribution of the Initial Securities upon
notice by you to the Company setting forth the number of Option Securities as
to which the several Underwriters are exercising the option and the time, date
and place of payment and delivery for the Option Securities. Such time and
date of delivery (the "Date of Delivery") shall be determined by the
Representative but shall not be later than five full business days after the
exercise of said option, nor in any event prior to Closing Time, as hereinafter
defined, nor earlier than the second business day after the date on which the
notice of the exercise of the option shall have been given. If the option is
exercised as to all or any portion of the Option Securities, the Option
Securities as to which the option is exercised shall be purchased by the
Underwriters, severally and not jointly, in their respective underwriting
obligation proportions set forth in Schedule A.
(b) If the Company has elected not to rely upon Rule 430A, the
initial public offering price for the Securities, the purchase price for the
Securities to be paid by the several Underwriters and the interest rate on and
redemption provisions of the Securities have been agreed upon and set forth
herein and an amendment to the Registration Statement containing such price
information will have been filed before the Registration Statement becomes
effective.
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(c) Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Malizia, Spidi, Sloane & Fisch, P.C., or at such other place as shall be agreed
upon by the Company and the Representative, at 9:30 a.m. on the third full
business day after the effective date of the Registration Statement, or at such
other time not more than seven full business days thereafter as you and the
Company shall determine (such date and time of payment and delivery being
herein called the "Closing Time"). In addition, in the event that any or all of
the Option Securities are purchased by the Underwriters, payment of the
purchase price for, and delivery of certificates for, such Option Securities
shall be made at the above-mentioned office of Malizia, Spidi, Sloane & Fisch,
P.C., or at such other place as shall be agreed upon by the Company and the
Representative, on the Date of Delivery as specified in the notice from the
Representative to the Company. Payment for the Initial Securities and the
Option Securities, if any, shall be made to the Company by funds available the
same day to the Company, against delivery to the Representative for the
respective accounts of the several Underwriters of certificates for the
Securities to be purchased by them.
(d) Certificates for the Securities to be purchased by the
Underwriters shall be in such denominations and registered in such names as the
Underwriters may request in writing at least two full business days before the
Closing Time or the Date of Delivery, as the case may be. The certificates for
the Initial Securities or the Option Securities to be purchased will be made
available in New York City for examination and packaging by the Underwriters
not later than 10:00 a.m. on the business day prior to the Closing Time or the
Date of Delivery, as the case may be.
(e) It is understood that each Underwriter has authorized you,
for its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Securities that it has agreed to purchase. You,
individually and not as Representative, may (but shall not be obligated to)
make payment of the purchase price for the Initial Securities or Option
Securities to be purchased by any Underwriter whose check or checks shall not
have been received by the Closing Time or the Date of Delivery, as the case may
be.
Section 3. Certain Covenants of the Company. The Company
covenants with the Underwriters as follows:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and will notify the Representative
immediately, and confirm the notice in writing, (i) when the Registration
Statement, or any post-effective amendment to the Registration Statement, shall
have become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from the
Commission
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(iii) of any request of the Commission to amend the Registration Statement or
amend or supplement the Prospectus or for additional information and (iv) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or of any order preventing or suspending the use
of any preliminary prospectus, or of the suspension of the qualification of the
Securities or capital stock, for offering or sale in any jurisdiction, or of
the institution or threatening of any proceedings for any of such purposes. The
Company will use every reasonable effort to prevent the issuance of any such
stop order or of any order preventing or suspending such use and, if any such
order is issued, to obtain the lifting thereof at the earliest possible moment.
(b) The Company will not at any time file or make any
amendment to the Registration Statement, or any amendment or supplement if the
Company has elected to rely upon Rule 430A, to the Prospectus (including
documents incorporated by reference into such prospectus or to the Prospectus)
of which the Representative shall not have previously been advised and have
previously been furnished a copy, or to which the Representative or counsel for
the Representative shall reasonably object.
(c) The Company has furnished or will furnish to you as many
signed and conformed copies of the Registration Statement as originally filed
and of each amendment thereto, whether filed before or after the Registration
Statement becomes effective, copies of all exhibits and documents filed
therewith (including documents incorporated by reference into the Prospectus
pursuant to Item 12 of Form S-3 under the 1933 Act) and signed copies of all
consents and certificates of experts as you may reasonably request and has
furnished or will furnish to you, for each other Underwriter, one conformed
copy of the Registration Statement as originally filed and of each amendment
thereto (including documents incorporated by reference into the Prospectus but
without exhibits).
(d) The Company will deliver to each Underwriter, without
charge, from time to time until the effective date of the Registration
Statement, as many copies of each preliminary prospectus as such Underwriter
may reasonably request, and the Company hereby consents to the use of such
copies for purposes permitted by the 1933 Act. The Company will deliver to each
Underwriter, without charge, as soon as the Registration Statement shall have
become effective (or, if the Company has elected to rely upon Rule 430A, as
soon as practicable after the Price Determination Agreement has been executed
and delivered) and thereafter from time to time as requested during the period
when the Prospectus is required to be delivered under the 1933 Act, such number
of copies of the Prospectus (as supplemented or amended) as such Underwriter
may reasonably request.
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<PAGE> 14
(e) The Company will comply to the best of its ability with
the 1933 Act and the 1933 Act Regulations, and the 1934 Act and the 1934 Act
Regulations, so as to permit the completion of the distribution of the
Securities as contemplated in this Agreement and in the Prospectus. If, at any
time when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities, any event shall occur or condition
exist as a result of which it is necessary, in the reasonable opinion of
counsel for the Representative or counsel for the Company, to amend the
Registration Statement or amend or supplement the Prospectus in order that the
Prospectus will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the reasonable
opinion of either such counsel, at any such time to amend the Registration
Statement or amend or supplement the Prospectus in order to comply with the
requirements of the 1933 Act or the 1933 Act Regulations, the Company will
promptly prepare and file with the Commission, subject to Section 3(b), such
amendment or supplement as may be necessary to correct such untrue statement or
omission or to make the Registration Statement or the Prospectus comply with
such requirements.
(f) The Company will use its best efforts, in cooperation with
the Underwriters, to qualify the Securities, for offering and sale under the
applicable securities laws of such states and other jurisdictions as the
Representative may designate and to maintain such qualifications in effect for
a period of not less than one year from the effective date of the Registration
Statement and to qualify the shares of Class A Common Stock issuable upon
conversion of the Securities for offering and sale upon conversion of the
Securities under the applicable securities laws of such states and other
jurisdictions as you may designate and to maintain such qualifications in
effect for such period as any Securities may be issued and outstanding and
shares of Class A Common Stock issuable upon conversion thereof; provided,
however, that the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. The Company will file such statements and reports
as may be required by the laws of each jurisdiction in which the Securities
have been qualified as above provided.
(g) The Company will make generally available (within the
meaning of Rule 158) to its security holders as soon as practicable, but not
later than 90 days after the close of the period covered thereby, an earnings
statement of the Company (in form complying with the provisions of Rule 158 of
the 1933 Act Regulations) covering a period of at least 12 months beginning
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<PAGE> 15
after the effective date of the Registration Statement but not later than the
first day of the Company's fiscal quarter next following such effective date.
(h) The Company and the Bank will use the net proceeds
received by them from the sale of the Securities in the manner specified in the
Prospectus under the caption "Use of Proceeds".
(i) The Company, during the period when the Prospectus is
required to be delivered under the 1933 Act, will file promptly all documents
required to be filed with the Commission pursuant to Section 13 or 14 of the
1934 Act subsequent to the time the Registration Statement becomes effective.
(j) For a period of five years after the Closing Time, the
Company will furnish to the Representative, copies of all annual reports,
quarterly reports and current reports filed with the Commission on Forms 10-K,
10-Q and 8-K, or such other similar forms as may be designated by the
Commission, and such other documents, reports, Proxy Statements, and
information as shall be furnished by the Company to its stockholders generally.
(k) The Company will file with the Nasdaq Stock Market all
documents and notices required by the Nasdaq Stock Market of companies that
have issued securities that are traded in the over-the-counter market and
quotations for which are reported by the Nasdaq Stock Market.
(l) The Company shall pay for the legal fees and related
filing fees to the counsel to the Representative to prepare one or more "blue
sky" surveys (each, a "Blue Sky Survey") for use in connection with the
offering of the Securities as contemplated by the Prospectus and a copy of such
Blue Sky Survey or surveys shall be delivered to each of the Company and the
Representative.
(m) If, at the time the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance upon
Rule 430A of the 1933 Act Regulations, then the Company will prepare, and file
or transmit for filing with the Commission in accordance with such Rule 430A
and Rule 424(b), copies of an amended Prospectus, or, if required by such Rule
430A, a post-effective amendment to the Registration Statement (including an
amended Prospectus), containing all information so omitted.
(n) The Company will, at its expense, subsequent to the
issuance of the Securities, prepare and distribute to each of the
Representative, counsel to the Representative and counsel to the Company, a
hard-bound copy of the documents used in connection with the issuance of the
Securities.
(o) Other than the Stock Purchase Agreement, the Company
and the Bank have no agreement or understanding with any entity
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<PAGE> 16
concerning the future acquisition by the Company or the Bank of a controlling
interest in any entity that is required by the 1933 Act or the 1933 Act
Regulations to be disclosed by the Company that is not disclosed in the
Prospectus; the Company and the Bank have no agreement or understanding with
any entity concerning the future acquisition of a controlling interest in the
Company or the Bank by any entity that is required by the 1933 Act or the 1933
Act Regulations to be disclosed by the Company that is not disclosed in the
Prospectus.
Section 4. Payment of Expenses. The Company will pay and bear
all costs and expenses incident to the performance of its obligations under
this Agreement, including (a) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits), as
originally filed and as amended, the preliminary prospectuses and the
Prospectus and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Underwriters, (b) the preparation, printing
and distribution of this Agreement, the Securities and the Blue Sky Survey, (c)
the issuance and delivery of the Securities to the Underwriters, including any
transfer taxes payable upon the sale of the Securities to the Underwriters, (d)
the fees and disbursements of the Company's counsel and accountants, (e) NASD
filing fees, (f) fees and disbursements of counsel to the Representative in
connection with the Blue Sky Survey, (g) the qualification of the Securities
under the applicable securities laws in accordance with Section 3(f) and any
filing fee for review of the offering with the NASD, (h) the legal fees and
expenses (other than those applicable to the Blue Sky Survey) of the
Representative's counsel (such counsel's fees shall not exceed $40,000) and
general out-of-pocket expenses of the Representative not to exceed $15,000, (i)
out-of-pocket expenses of any co-manager with the Representative (such expenses
of a co-manager will not exceed $10,000) and (j) all other costs incident to
the performance of the Company's obligations hereunder.
If (i) the Closing Time does not occur on or before December 31,
1996, (ii) the Company abandons or terminates the Offering, or (iii) this
Agreement is terminated by the Underwriters in accordance with the provisions
of Section 5 or 10(a), the Company shall reimburse the Underwriters for all
their reasonable out-of-pocket expenses, as set forth in this Section 4,
including the reasonable fees and disbursements of counsel for the
Representative, but excluding fees associated with the Blue Sky Survey, which
shall be paid directly to the Representative's counsel.
Section 5. Conditions of Underwriters' Obligations. The
obligations of the several Underwriters to purchase and pay for the Securities
that they have respectively agreed to purchase pursuant to this Agreement are
subject to the accuracy of the
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<PAGE> 17
representations and warranties of the Company contained herein or in
certificates of any officer of the Company or any subsidiary delivered pursuant
to the provisions hereof to the performance by the Company of its obligations
hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M. on the date of this Agreement or, with your consent, at a
later time and date not later, however, than 5:30 P.M. on the first business
day following the date hereof, or at such later time or on such later date as
you may agree to in writing; at the Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act and no proceedings for that purpose shall have been instituted or
shall be pending or, to the Underwriters' knowledge or the knowledge of the
Company shall be contemplated by the Commission, and any request on the part of
the Commission for additional information shall have been complied with to the
satisfaction of counsel for the Representative. If the Company has elected to
rely upon Rule 430A, a prospectus containing the Rule 430A Information shall
have been filed with the Commission in accordance with Rule 424(b) (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 43OA).
(b) At the Closing Time, you shall have received a signed
opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., special
securities counsel for the Company, dated as of the Closing Time, together with
signed or reproduced copies of such opinion for each of the other Underwriters
in form and substance reasonably satisfactory to your counsel, to the effect
that:
(i) The Company is a corporation organized, validly existing
and in good standing under the laws of the State of Florida with
corporate power and authority under such laws to own, lease and
operate its properties and conduct its business as described in the
Prospectus.
(ii) To such counsel's knowledge, the Company is qualified to
transact business as a foreign corporation and is in good standing in
each other jurisdiction in which it owns or leases property of a
nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, considered as one
enterprise.
(iii) The Bank is chartered under the laws of the United
States to transact the business of a federal savings bank and its
charter is in full force and effect with the Office of Thrift
Supervision, with corporate power and authority under
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<PAGE> 18
such laws to own, lease and operate its properties and conduct its
business.
(iv) The deposit accounts of the Bank are insured by either
the Savings Association Insurance Fund or the Bank Insurance Fund of
the FDIC up to the maximum amount allowable under applicable law.
(v) To such counsel's knowledge, the Bank is qualified to
transact business as a foreign corporation in each other jurisdiction
in which it owns or leases property of a nature, or transacts business
of a type, that would make such qualification necessary, except to the
extent that the failure to so qualify would not have a material
adverse effect on the Company and its subsidiaries, considered as one
enterprise.
(vi) The Company is registered as a savings & loan holding
company under the Home Owners' Loan Act, as amended.
(vii) All of the outstanding shares of capital stock of the
Company have been authorized and are fully paid and non-assessable;
none of the outstanding shares of capital stock of the Company and
none of the Securities was issued in violation of the preemptive
rights of any stockholder of the Company.
(viii) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus under the heading
"Capitalization".
(ix) All of the outstanding shares of capital stock of the
Bank have been authorized and validly issued and are fully paid and
non-assessable; all of such shares are owned by the Company, to such
counsel's knowledge, free and clear of any pledge, lien, security
interest, charge, claim, equity or encumbrance of any kind, except as
disclosed in Note 10 to the consolidated financial statements in the
Prospectus; none of such shares was issued in violation of the
preemptive rights of any stockholder of the Bank.
(x) The Securities have been duly authorized and validly
issued and, when authenticated in the manner provided for in the
Indenture, and when delivered against payment of the purchase price
therefore specified in this Agreement, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally, or
by general equitable principles, and will be in the form contemplated
by, and entitled to the benefits of, the
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<PAGE> 19
Indenture; and no holder thereof is or will be subject to personal
liability solely by reason of being such a holder; such Securities are
not subject to the preemptive rights of any stockholder of the
Company; all corporate action required to be taken for the
authorization, issue and sale of such Securities has been validly
taken.
(xi) The Securities and the Indenture conform in all material
respects as to legal matters to the description thereof contained in
the Prospectus and such descriptions conform in all material respects
to the rights set forth in the instruments defining the same.
(xii) The execution and delivery of this Agreement and the
Indenture and the consummation of the transactions contemplated
thereby and in the Prospectus have each been duly and validly
authorized by all necessary action on the part of the Company.
(xiii) The Indenture and this Agreement have each been duly
executed and delivered by the Company and each constitutes the valid
and binding agreement of the Company enforceable against the Company
in accordance with its terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally, or
by general equitable principles and except with respect to the
enforceability of the indemnification and contribution or governing
law provisions of this Agreement, as to which such counsel need not
express any opinion.
(xiv) No authorization, approval, consent or license of any
government, governmental instrumentality or court, (other than under
the 1933 Act, the 1933 Act Rules, and the securities or blue sky laws
of the various states and by-laws and rules of the NASD and the TIA),
is required in connection with the execution, delivery and performance
of this Agreement or the Indenture or the transactions contemplated
therein or in the Prospectus or for the valid authorization, issuance,
sale and delivery of the Securities.
(xv) To such counsel's knowledge, there are no pending or
threatened legal or governmental proceedings, required under the 1933
Act and the 1933 Act Regulations to be described in the Prospectus
that are not described as required, other than litigation incidental
to the business of the Company or the Bank which is, considered in the
aggregate, not material to the Company and its subsidiaries,
considered as one enterprise, and there are no material contracts or
documents of a character required to be described or referred to in
the Registration Statement or the Prospectus or to be filed as
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<PAGE> 20
exhibits to the Registration Statement that are not described,
referred to or filed as required.
(xvi) The descriptions in the Prospectus of the statutes,
regulations, legal or governmental proceedings, contracts and other
documents therein described conform in all material respects with such
statutes, regulations, legal or governmental proceedings, contracts
and other documents.
(xvii) The statements made in the Prospectus under "Regulation
and Supervision", "Description of The Debentures," "Description of
Capital Stock," and "Federal and State Taxation" to the extent that
they constitute matters of law or legal conclusions, have been
reviewed by such counsel and are correct in all material respects.
(xviii) The execution and delivery of this Agreement and the
Indenture, the issuance and delivery of the Securities, the
consummation by the Company of the transactions contemplated in this
Agreement and the Indenture and compliance by the Company with the
terms of this Agreement and the Indenture do not and will not result
in any violation of the charter or by-laws of the Company or the Bank,
and to such counsel's knowledge do not and will not conflict with, or
result in a breach of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or
the Bank under (A) any indenture, mortgage or loan agreement, or any
other agreement or instrument to which the Company or the Bank is a
party or by which it may be bound or to which any of its properties
may be subject (except for such conflicts, breaches or defaults or
liens, charges or encumbrances that would not have a material adverse
effect on the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company and its subsidiaries,
considered as one enterprise), (B) any existing applicable law, rule
or regulation, or (C) any judgment, order or decree of any government,
governmental instrumentality or court, having jurisdiction over the
Company or the Bank or any of its properties.
(xix) The Registration Statement is effective under the 1933
Act; any required filing of the Prospectus or any supplement thereto
pursuant to Rule 424(b) has been made in the manner and within the
time period required by Rule 424(b); to such counsel's knowledge, no
stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the 1933 Act.
(xx) The Registration Statement (including the Rule 430A
Information, if applicable) and the Prospectus, excluding the
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<PAGE> 21
documents incorporated by reference therein, and each amendment or
supplement thereto (except for the financial statements and other
financial or statistical data included therein or omitted therefrom,
as to which such counsel need express no opinion), as of their
respective effective or issue dates, comply or complied as to form in
all material respects to the applicable requirements of the 1933 Act
and the 1933 Act Regulations.
(xxi) The documents incorporated by reference in the
Prospectus (except for the financial statements and other financial or
statistical data included therein or omitted therefrom, as to which
such counsel need express no opinion, and except to the extent that
any statement therein is modified or superseded in the Prospectus), as
of the dates they were filed with the Commission, complied as to form
in all material respects to the applicable requirements of the 1934
Act and the 1934 Act Regulations.
(xxii) To such counsel's knowledge, (1) there are no persons
with registration or other similar rights to have any securities of
the Company registered pursuant to the Registration Statement or
otherwise registered by the Company under the 1933 Act, and (2) except
as described in the Prospectus, there are no options, warrants, calls,
convertible securities, employee benefit or other plans, pre-emptive
rights or commitments of any character relating to the authorized but
unissued capital stock of the Company or the Bank.
(xxiii) To the best of such counsel's knowledge, the Company
and the Bank each has all material licenses, permits and other
governmental authorizations currently required for the conduct of its
business as presently conducted.
(xxiv) The Stock Purchase Agreement was duly and validly
authorized, executed, and delivered by the Bank and constituted a
valid and binding obligation of the Bank in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or effecting creditors' rights generally or by general equitable
principles; the Bank had full corporate power and authority to enter
into the Stock Purchase Agreement.
Counsel will provide by separate letter a statement that such
counsel has participated in the preparation of the Registration Statement and
Prospectus and has reviewed the documents incorporated by reference in the
Prospectus and no facts have come to the attention of such counsel to lead it
to believe (A) that the Registration Statement (including the Rule 430A
Information, if applicable) or any amendment thereto (except for
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<PAGE> 22
the financial statements and other financial or statistical data included
therein or omitted therefrom, as to which such counsel need express no
opinion), at the time the Registration Statement or any such amendment became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (B) that the Prospectus or any amendment
or supplement thereto (except for the financial statements and other financial
or statistical data included therein or omitted therefrom, as to which such
counsel need express no opinion), at the time the Prospectus was issued, at the
time any such amended or supplemented prospectus was issued or at the Closing
Time, included or includes an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading or (C) that the documents incorporated by reference in the
Prospectus (except for the financial statements and other financial or
statistical data contained therein or omitted therefrom, as to which such
counsel need express no opinion, and except to the extent that any statement
therein is modified or superseded in the Prospectus), as of the dates they were
filed with the Commission, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
In giving such opinion, such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the federal law of the
United States, upon opinions of other counsel, who shall be counsel
satisfactory to counsel for the Representative, in which case the opinion shall
state that counsel believes that you and your counsel are entitled to so rely.
Such counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon certificates of
officers of the Company and the Bank and certificates of public officials.
(c) At the Closing Time, the Representative shall have
received the favorable opinion of Malizia, Spidi, Sloane & Fisch, P.C., counsel
for the Representative, dated as of the Closing Time, to the effect that the
opinion delivered pursuant to Section 5(b) hereof appears on its face to be
appropriately responsive to the requirements of this Agreement except,
specifying the same, to the extent waived by the Representative, and with
respect to the incorporation and legal existence of the Company, the
Securities, this Agreement, the Registration Statement, the Prospectus, the
documents incorporated by reference and such other related matters as the
Representative may require. In giving such opinion such counsel may rely, as to
all matters governed by the laws of jurisdictions other than the federal law of
the United States, upon the opinions of counsel satisfactory to Malizia, Spidi,
Sloane & Fisch, P.C. as to form and scope and upon which the Representative
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<PAGE> 23
may justifiably rely. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and the Bank and
certificates of public officials.
(d) At the Closing Time, (i) the Registration Statement and the
Prospectus, as they may then be amended or supplemented, shall contain all
statements that are required to be stated therein under the 1933 Act and the
1933 Act Regulations and in all material respects shall conform to the
requirements of the 1933 Act and the 1933 Act Regulations, the Company shall
have complied in all material respects with Rule 430A (if it shall have elected
to rely thereon) and neither the Registration Statement nor the Prospectus, as
they may then be amended or supplemented, shall contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, (ii) there shall
not have been, since the respective dates as of which information is given in
the Registration Statement, any material adverse change in the condition
(financial or otherwise), earnings, business affairs, assets or business
prospects of the Company and its subsidiaries, considered as one enterprise,
whether or not arising in the ordinary course of business, (iii) no action,
suit or proceeding at law or in equity shall be pending or, to the knowledge of
the Company, threatened against the Company or any subsidiary that would be
required to be set forth in the Prospectus other than as set forth therein and
no proceedings shall be pending or, to the knowledge of the Company, threatened
against the Company or any subsidiary before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable decision,
ruling or finding could reasonably be expected to materially adversely affect
the condition (financial or otherwise), earnings, business affairs, assets or
business prospects of the Company and its subsidiaries, considered as one
enterprise, other than as set forth in the Prospectus, (iv) the Company shall
have complied with all agreements and satisfied all conditions on its part to
be performed or satisfied at or prior to the Closing Time, (v) the other
representations and warranties of the Company set forth in Section l(a) shall
be accurate in all material respects as though expressly made at and as of the
Closing Time, and (vi) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that
purpose been initiated or to the best knowledge of the Company threatened by
the Commission. At the Closing Time, the Representative shall have received a
certificate of the Chairman or the President, and the Chief Financial Officer
or Controller, of the Company, dated as of the Closing Time, to such effect.
(e) At the time that this Agreement is executed by the
Company, you shall have received from KPMG Peat Marwick LLP a letter or
letters, dated such date, in form and substance satisfactory to you, confirming
that they are independent certified
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<PAGE> 24
public accountants with respect to the Company (and BNAB, as applicable) within
the meaning of the 1933 Act and the published 1933 Act Regulations, and stating
in effect that:
With respect to the Company:
(i) in their opinion, the consolidated financial statements as
of December 31, 1995 and 1994, and for each of the years in the three
year period ended December 31, 1995 and the related financial
statement schedules, if any, included or incorporated by reference in
the Registration Statement and the Prospectus and covered by their
opinions included therein comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the
published 1933 Act Regulations;
(ii) on the basis of procedures (but not an audit in
accordance with generally accepted auditing standards) specified by
the American Institute of Certified Public Accountants for a review of
interim financial information as described in SAS No. 71, Interim
Financial Information, including a reading of the unaudited interim
consolidated financial statements of the Company for the three-month
period ended March 31, 1996 and March 31, 1995 (or, if available, the
six month period ended June 30, 1996 and June 30, 1995), a reading of
the minutes of all meetings of the stockholders of the Company and the
Bank, of the Board of Directors of the Company and the Bank and of the
Audit and Executive Committees of the Board of Directors of the Bank
since April 1, 1996, inquiries of certain officials of the Company and
its subsidiaries responsible for financial and accounting matters, and
such other inquiries and procedures as may be specified in such
letter, nothing came to their attention that caused them to believe
that:
(A) at a specified date not more than three days
prior to the date of this Agreement, there was any increase in
notes or subordinated debentures payable, advances from the
Federal Home Loan Bank, real estate owned, or allowance for
loan losses of the Company and its consolidated subsidiaries
or any decrease in total assets, total deposits or
stockholders' equity of the Company and its consolidated
subsidiaries or any increase in the number of outstanding
shares of capital stock of the Company and its consolidated
subsidiaries, in each case as compared with amounts shown in
the financial statements at March 31, 1996 included in the
Registration Statement; or
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<PAGE> 25
(B) for the period from April 1, 1996 to a specified
date not more than three days prior to the date of this
Agreement, there was any decrease in consolidated net interest
income, non-interest income or net income or the
(split-adjusted) total or fully diluted per share amounts of
net income or any increase in the consolidated provision for
loan losses or non-interest expense, in each case as compared
with the comparable period in the preceding year; or
(C) the unaudited consolidated financial statements
included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements
of the Commission and pursuant to the 1934 Act and the
respective rules and regulations of the Commission thereunder
and the regulations of the Office of Thrift Supervision; or
(D) such unaudited consolidated financial statements
included in the Prospectus are not in conformity with
generally accepted accounting principles ("GAAP") applied on a
basis substantially consistent with that of the audited
consolidated financial statements included in the Prospectus.
(iii) in addition to the procedures referred to in clause (ii)
above, they have performed other specified procedures, not
constituting an audit, with respect to certain amounts, percentages,
numerical data and financial information appearing in the Registration
Statement (including the Summary Financial Information) (having
compared such items with, and have found such items to be in agreement
with, the financial statements of the Company or general accounting
records of the Company, as applicable, which are subject to the
Company's internal accounting controls or other data and schedules
prepared by the Company from such records).
(iv) on the basis of a review of schedules provided to them by
the Company, nothing came to their attention that caused them to
believe that the pro forma information, set forth in the Prospectus,
had not been correctly calculated on the basis described therein.
With respect to BNAB:
(i) in their opinion, the consolidated financial statements as
of December 31, 1995 and 1994, and for each of the years in the three
year period ended December 31, 1995 and the related financial
statement schedules, if any, included or incorporated by reference in
the Registration Statement and the Prospectus and covered by their
opinions included therein comply as to form in all material respects
with the applicable
25
<PAGE> 26
accounting requirements of the 1933 Act and the published 1933 Act
Regulations;
(ii) on the basis of procedures (but not an audit in
accordance with generally accepted auditing standards) specified by
the American Institute of Certified Public Accountants for a review of
interim financial information as described in SAS No. 71, Interim
Financial Information, including a reading of the unaudited interim
consolidated financial statements of BNAB for the three-month period
ended March 31, 1996 and March 31, 1995 (or, if available, the six
month period ended June 30, 1996 and June 30, 1995), a reading of the
minutes of all meetings of the stockholder of BNAB and its
subsidiaries, of the Board of Directors of BNAB and its subsidiaries
and of the Audit and Executive Committees of the Board of Directors of
such subsidiaries since April 1, 1996, inquiries of certain officials
of BNAB and its subsidiaries responsible for financial and accounting
matters, and such other inquiries and procedures as may be specified
in such letter, nothing came to their attention that caused them to
believe that:
(A) at a specified date not more than three days
prior to the date of this Agreement, there was any increase in
borrowings, foreclosed real estate, or allowance for loan
losses of BNAB and its consolidated subsidiaries or any
decrease in total assets, total deposits or stockholder's
equity of BNAB and its consolidated subsidiaries or any
increase in the number of outstanding shares of capital stock
of BNAB and its consolidated subsidiaries, in each case as
compared with amounts shown in the financial statements at
March 31, 1996 included in the Registration Statement; or
(B) for the period from April 1, 1996 to a specified
date not more than three days prior to the date of this
Agreement, there was any decrease in consolidated net interest
income, non-interest income or net income or the total or
fully diluted per share amounts of net income or any increase
in the consolidated provision for loan losses or operating
expenses, in each case as compared with the comparable period
in the preceding year; or
(C) the unaudited consolidated financial statements
included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements
of the Commission and pursuant to the 1934 Act and the
respective rules and regulations of the Commission thereunder
and the regulations of the Federal Deposit Insurance
Corporation; or
26
<PAGE> 27
(D) such unaudited consolidated financial statements
included in the Prospectus are not in conformity with GAAP
applied on a basis substantially consistent with that of the
audited consolidated financial statements included in the
Prospectus.
(iii) in addition to the procedures referred to in clause (ii)
above, they have performed other specified procedures, not
constituting an audit, with respect to certain amounts, percentages,
numerical data and financial information appearing in the Registration
Statement (including the Summary Financial Information) (having
compared such items with, and have found such items to be in agreement
with, the financial statements of BNAB or general accounting records
of BNAB, as applicable, which are subject to BNAB's internal
accounting controls or other data and schedules prepared by BNAB from
such records).
(iv) on the basis of a review of schedules provided to them by
BNAB, nothing came to their attention that caused them to believe that
the pro forma information, set forth in the Prospectus, had not been
correctly calculated on the basis described therein.
(f) At the Closing Time, the Representative shall have
received from KPMG Peat Marwick LLP letters, in form and substance satisfactory
to the Underwriters and dated as of the Closing Time, to the effect that they
reaffirm the statements made in the letter(s) furnished pursuant to Section
5(e), except that the inquiries specified in Section 5(e) shall be made based
upon the latest available unaudited interim consolidated financial statements
and the specified date referred to shall be a date not more than two days prior
to the Closing Time.
(g) At the Closing Time, counsel for the Representative shall
have been furnished with all such documents, certificates and opinions as they
may request for the purpose of enabling them to pass upon the issuance and sale
of the Securities as contemplated in this Agreement and the matters referred to
in Section 5(c) and in order to evidence the accuracy and completeness of any
of the representations, warranties or statements of the Company, the
performance of any of the covenants of the Company, or the fulfillment of any
of the conditions herein contained; all proceedings taken by the Company at or
prior to the Closing Time in connection with the authorization, issuance and
sale of the Securities as contemplated in this Agreement shall be satisfactory
in form and substance to the Representative and to counsel for the
Representative.
(h) Between the date of this Agreement and the Closing Time,
(i) no downgrading shall have occurred in the rating accorded any securities of
the Company or any deposit instruments of the
27
<PAGE> 28
Bank by any "nationally recognized statistical rating organization," as that
term is defined by the Commission for purposes of Rule 436(g) (2) under the
1933 Act and (ii) no such organization shall have given any notice of any
intended or potential downgrading or of any surveillance or review, with
possible negative implications, of its rating of any of the Company's
securities or any deposit instruments of the Bank.
(i) The Company shall have paid, or made arrangements satisfactory to
the Underwriters for the payment of, all such expenses as may be required by
Section 4 hereof.
(j) In the event the Underwriters exercise their option
provided in Section 2 hereof to purchase all or any portion of the Option
Securities, the obligations of the several Underwriters to purchase the Option
Securities that they shall have respectively agreed to purchase shall be
subject to the accuracy of the representations and warranties of the Company
contained herein and of the statements in any certificates furnished by the
Company hereunder as of such Date of Delivery (as if made on such date), to the
performance by the Company of its obligations hereunder and to the receipt by
you on the Date of Delivery of:
(1) A certificate, dated the Date of Delivery, of the
Chairman or the President and the Chief Financial Officer or
Controller of the Company confirming that the certificate delivered on
the Closing Time pursuant to Section 5(d) hereof remains true as of
the Date of Delivery;
(2) The favorable opinion of Stearns Weaver Miller
Weissler Alhadeff & Sitterson, P.A., counsel for the Company,
addressed to you and dated the Date of Delivery, in form satisfactory
to Malizia, Spidi, Sloane & Fisch, P.C., your counsel, relating to the
Option Securities and otherwise to the same effect as the opinion
required by Section 5(b) hereof;
(3) The favorable opinion of Malizia, Spidi, Sloane &
Fisch, P.C., dated the Date of Delivery, relating to the Option Shares
and otherwise to the same effect as the opinion required by Section
5(c) hereof; and
(4) Letters from KPMG Peat Marwick LLP addressed to
the Representative and dated the Date of Delivery, in form and
substance satisfactory to the Representative and substantially the
same in form and substance as the letters furnished to the
Representative pursuant to Section 5(e) hereof.
28
<PAGE> 29
(k) At the Closing Date, you shall have received an opinion
from counsel to the Trustee, dated the date of its delivery, addressed to you
and in form and substance satisfactory to Representative's counsel, to the
effect that:
(1) the Trustee is a national banking association or
state chartered bank or trust company and is validly existing in good
standing under the laws of the jurisdiction in which it is
incorporated;
(2) the Trustee has the power and authority to enter
into the Indenture and authenticate the Securities as Trustee under
the Indenture;
(3) the Indenture has been duly authorized, executed
and delivered by the Trustee, as Trustee under the Indenture, and the
Indenture is valid and binding on the Trustee in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors'
rights generally or by equitable principles relating to the
availability of remedies; and
(4) the Securities have been duly authenticated and
delivered by the Trustee, as Trustee, under the Indenture.
If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement to be fulfilled,
this Agreement may be terminated by the Representative on notice to the Company
at any time at or prior to the Closing Time, and such termination shall be
without liability of any party to any other Party, except as provided in
Section 4. Notwithstanding any such termination, the provisions of Sections 7,
8, 9 and 11 shall remain in effect.
Section 6. [INTENTIONALLY LEFT BLANK]
Section 7. Indemnification
(a) The Company agrees to indemnify and hold
harmless each Underwriter, officers, directors, employees, agents, and counsel
of each Underwriter, and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934
Act, against any loss, liability, claim, damage, and expense whatsoever (which
shall include, but not be limited to amounts incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or any
claim or investigation whatsoever and any and all amounts paid in settlement of
any claim or litigation), as and when incurred, arising out of, based upon, or
in connection with (i) any untrue statement or alleged untrue statement of a
material
29
<PAGE> 30
fact or any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
contained in (A) any Preliminary Prospectus, the Registration Statement, or the
Prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto or in any document incorporated by reference therein or
required to be delivered with any Preliminary Prospectus or the Prospectus or
(B) in any application or other document or communication (collectively called
an "application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify the Securities under the "blue sky" or securities laws
thereof or filed with the Commission or any securities exchange; unless such
statement or omission was made in reliance upon and in conformity with written
information concerning that Underwriter, the Underwriting Agreement or the
compensation of the Underwriters furnished to the Company by on behalf of the
Underwriters expressly for inclusion in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or in any application, as the case may be, or (ii) any breach of any
representation, warranty, covenant, or agreement of the Company contained in
the Underwriting Agreement. For purposes of this section, the term "expense"
shall include, but not be limited to, counsel fees and costs, court costs,
out-of-pocket costs and compensation for the time spent by any of the
Underwriters' directors, officers, employees and counsel according to his or
her normal hourly billing rates. The indemnification provisions shall also
extend to all affiliates of any of the Underwriters, their respective
directors, officers, employees, legal counsel, agents and controlling persons
within the meaning of the federal securities laws. The foregoing agreement to
indemnify shall be in addition to any liability the Company may otherwise have
to the Underwriters or the persons entitled to the benefit of these
indemnification provisions.
(b) Each Underwriter severally agrees to
indemnify and hold harmless the Company, its directors, officers who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934
Act, against any and all loss, liability, claim, damage and expense described
in the indemnity contained in subsection (a) above, as incurred, but only with
respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto) or any
Preliminary Prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information about that
Underwriter, the Underwriting Agreement, or the compensation of that
Underwriter, furnished to the Company by that Underwriter expressly for use in
the Registration Statement (or any amendment thereto) or such Preliminary
Prospectus or the Prospectus (or any amendment or supplement thereto).
30
<PAGE> 31
(c) An indemnified party shall give prompt notice
to the indemnifying party if any action, suit, proceeding or investigation is
commenced in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve the indemnifying party from
its obligations to indemnify hereunder. If it so elects within a reasonable
time after receipt of such notice, an indemnifying party may assume the defense
of such action, including the employment of counsel satisfactory to the
indemnified parties and payment of all expenses of the indemnified party in
connection with such action. Such indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the indemnifying party in connection with the defense of such action
or the indemnifying party shall not have promptly employed counsel satisfactory
to such indemnified party or parties or such indemnified party or parties shall
have reasonably concluded that there may be one or more legal defenses
available to it or them or to other indemnified parties which are different
from or additional to those available to one or more of the indemnifying
parties, in any of which events such fees and expenses shall be borne by the
indemnifying party and the indemnifying party shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties. The Company shall be liable for any settlement of any claim against
any Underwriter (or its directors, officers, employees, affiliates or
controlling persons), made with the Company's written consent, which consent
shall not be unreasonably withheld. The Company shall not, without the written
consent of any Underwriter, settle or compromise any claim against it based
upon circumstances giving rise to an indemnification claim against the Company
hereunder unless such settlement or compromise provides that such Underwriter
and the other indemnified parties shall be unconditionally and irrevocably
released from all liability in respect to such claim.
(d) In order to provide for just and equitable
contribution, if a claim for indemnification pursuant to these indemnification
provisions is made but it is found in a final judgment by a court that such
indemnification may not be enforced in such case, even though the express
provisions hereof provide for indemnification in such case, then the Company,
on the one hand, and the Underwriters, on the other hand, shall contribute to
the amount paid or payable by such indemnified persons as a result of such
loss, liability, claim, damage and expense in such proportion as is appropriate
to reflect the relative benefits received by the Company, on the one hand, and
the Underwriters, on the other hand, from the underwriting, and also the
relative fault of the Company, on the one hand, and the Underwriters, on the
other hand, in connection with the statements, acts or omissions which resulted
in such loss, liability claim, damage and expense, and any other relevant
equitable considerations shall also be considered. No
31
<PAGE> 32
person found liable for a fraudulent misrepresentation or omission shall be
entitled to contribution from any person who is not also found liable for such
fraudulent misrepresentation or omission. Notwithstanding the foregoing, an
Underwriter shall not be obligated to contribute any amount hereunder that
exceeds the amount of the underwriting discount retained by it applicable to
the Securities purchased by that Underwriter.
(e) The indemnify and contribution agreements
contained herein are in addition to any liability which the Company may
otherwise have to the Underwriters.
(f) Neither termination nor completion of the
engagement of the Underwriters nor any investigation made by or on behalf of
the Underwriters shall effect the indemnification obligations of the Company or
the Underwriters hereunder, which shall remain and continue to be operative and
in full force and effect.
Section 8. [INTENTIONALLY LEFT BLANK]
Section 9. Representations, Warranties and Agreements to
Survive Delivery. The representations, warranties, indemnities, agreements and
other statements of the Company or its officers set forth in or made pursuant
to this Agreement will remain operative and in full force and effect regardless
of any investigation made by or on behalf of the Company or any Underwriter or
any controlling person and will survive delivery of and payment for the
Securities.
Section 10. Termination of Agreement.
(a) You may terminate this Agreement, by notice to the
Company, at any time at or prior to the Closing Time (i) if there has been,
since the respective dates as of which information is given in the Registration
Statement, any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company and
its subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any outbreak or
escalation of existing hostilities or other national or international calamity
or crisis the effect of which on the financial markets of the United States is
such as to make it, in the Underwriters' reasonable judgment, impracticable to
market the Securities or enforce contracts for the sale of the Securities, or
(iii) if trading in any securities of the Company has been suspended by the
Commission or the National Association of Securities Dealers, Inc., or if
trading generally on the New York Stock Exchange or in the over-the-counter
market has been suspended, or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices for securities have been required, by such
exchange or by order of the Commission, the
32
<PAGE> 33
National Association of Securities Dealers, Inc. or any other governmental
authority with appropriate jurisdiction over such matters, or (iv) if a banking
moratorium has been declared by either federal, Florida authorities, or (v) if
there shall have been such material and substantial change in the market for
securities in general or in political, financial or economic conditions as in
your reasonable judgment makes it inadvisable to proceed with the Offering,
sale and delivery of the Securities on the terms contemplated by the
Prospectus, or (vi) if you reasonably determine (which determination shall be
in good faith) that there has not been satisfactory disclosure of all relevant
financial information relating to the Company in the Company's disclosure
documents and that the sale of the Securities is unreasonable given such
disclosures.
(b) If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party,
except to the extent provided in Section 4. Notwithstanding any such
termination, the provisions of Sections 7, [8] and 9 shall remain in effect.
Section 11. Default by One or More of the Underwriters. If
one or more of the Underwriters shall fail at the Closing Time to purchase the
Initial Securities that it or they are obligated to purchase pursuant to this
Agreement (the "Defaulted Securities"), you shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Securities in such amounts as may be agreed upon and upon
the terms set forth in this Agreement; if, however, you have not completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does
not exceed 10% of the total number of Initial Securities, the non-defaulting
Underwriters shall be obligated to purchase the full amount thereof in the
proportions that their respective Initial Securities underwriting obligation
proportions bear to the underwriting obligations of all non-defaulting
Underwriters; or
(b) if the number of Defaulted Securities exceeds
10% of the total number of Initial Securities, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default that does not result in a
termination of this Agreement, either you or the Company shall have the right
to postpone the Closing Time for a period not exceeding seven days in order to
effect any required changes in the
33
<PAGE> 34
Registration Statement or Prospectus or in any other documents or arrangements.
As used herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 11.
Section 12. Notices. All notices and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered, mailed or transmitted by any standard form of
telecommunication. Notices shall be addressed as follows:
If to the Underwriters:
c/o Ryan, Beck & Co., Inc.
80 Main Street
West Orange, New Jersey 07052
Attention: Bruce G. Miller, Senior Vice President
with a copy to:
John J. Spidi, Esq.
Malizia, Spidi, Sloane & Fisch, P.C.
One Franklin Square, Suite 700 East
1301 K Street, N.W.
Washington, D.C. 20005
If to the Company:
BankAtlantic Bancorp, Inc.
1750 East Sunrise Boulevard
Fort Lauderdale, Florida 33304
Attention: Alan B. Levan, Chief Executive Officer
with a copy to:
Alison W. Miller, Esq.
Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
150 West Flager Street, Suite 2200
Miami, Florida 33130
Section 13. Parties. This Agreement herein set forth is made solely
for the benefit of the several Underwriters, the Company and any of, to the
extent expressed, any person controlling the Company or the Underwriters, and
the directors of the Company, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns and subject to the provisions of Section 11, no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from the several Underwriters of the Securities. All of the obligations of the
Underwriters hereunder are several and not joint.
34
<PAGE> 35
Section 14. Arbitration. Any claims, controversies, demands,
disputes or differences between or among the parties hereto or any persons
bound hereby arising out of, or by virtue of, or in connection with, or
otherwise relating to this Agreement shall be submitted to and settled by
arbitration conducted in Miami, Florida before one or three arbitrators, each
of whom shall be knowledgeable in the field of securities law and investment
banking. Such arbitration shall otherwise be conducted in accordance with the
rules then obtaining of the American Arbitration Association. The parties
hereto agree to share equally the responsibility for all fees of the
arbitrators, abide by any decision rendered as final and binding, and waive the
right to appeal the decision or otherwise submit the dispute to a court of law
for a jury or non-jury trial. The parties hereto specifically agree that
neither party may appeal or subject to the award or decision of any such
arbitrator to appeal or review in any court of law or in equity or in any other
tribunal, arbitration system or otherwise. Judgment upon any award granted by
such arbitrator may be enforced in any court having jurisdiction thereof.
Section 15. Governing Law and Time. This Agreement shall be governed
by the laws of the State of New Jersey. Specified times of the day refer to
New York City time.
Section 16. Counterparts. This Agreement may be executed in
one or more counterparts, and when a counterpart has been executed by each
party, all such counterparts taken together shall constitute one and the same
agreement.
Section 17. Representation of Underwriters. You will act for
the several Underwriters in connection with this financing, and any action
under or in respect of this Agreement taken by you as Representative will be
binding upon all Underwriters.
________________________
35
<PAGE> 36
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us a counterpart hereof, whereupon
this instrument will become a binding agreement between the Company and the
several Underwriters in accordance with its terms.
Very truly yours,
BANKATLANTIC BANCORP, INC.
By:
----------------------------------
Name: Alan B. Levan
Title: Chief Executive Officer
Confirmed and accepted as of
the date first above written:
RYAN, BECK & CO., INC.
By:
-------------------------------
Name: Bruce G. Miller
Title: Senior Vice President
For itself and as Representative
of the other Underwriters
named in Schedule A
36
<PAGE> 37
SCHEDULE A
<TABLE>
<CAPTION>
Amount of Percentage of Initial
Initial Securities Securities
Underwriter to be Purchased to be Purchased
----------- --------------- ---------------
<S> <C> <C>
Ryan, Beck & Co, Inc. . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . $50,000,000.00 100%
============= ===
</TABLE>
37
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BANKATLANTIC BANCORP, INC.
Pursuant to Sections 607.1002, 607.1006 and 607.1007 of the
Florida Business Corporation Act, the undersigned, Chairman of the Board of
BANKATLANTIC BANCORP, INC., a Florida corporation (the "Corporation"), hereby
executes and submits for filing with the Department of State, State of Florida,
these Amended and Restated Articles of Incorporation, to read as follows:
ARTICLE I - NAME AND ADDRESS
The name of this Corporation is BankAtlantic Bancorp, Inc.
The address of the principal office and the mailing address of this Corporation
is 1750 East Sunrise Boulevard, Fort Lauderdale, Florida 33304.
ARTICLE II - PURPOSE
This Corporation is organized for the purpose of transacting
any and all lawful business.
ARTICLE III - CAPITAL STOCK
The aggregate number of shares of capital stock which this
Corporation shall have authority to issue is Fifty Five Million (55,000,000) of
which Ten Million (10,000,000) shall be preferred stock, par value $.01 per
share, and of which Forty Five Million (45,000,000) shall be common stock, par
value $.01 per share, consisting of Thirty Million (30,000,000) shares of a
class designated "Class A Common Stock" and Fifteen Million (15,000,000) shares
of a class designated "Class B Common Stock" (the Class A Common Stock and the
Class B Common Stock are sometimes hereinafter referred to collectively as the
"Common Stock"). The preferred stock may be divided into and issued in series
by the Board of Directors as set forth below. The Board of Directors shall fix
the consideration to be received for each share. Such consideration shall
consist of any tangible or intangible property or benefit to this Corporation,
including cash, promissory notes, services performed or securities of other
corporations or entities and shall
<PAGE> 2
have a value, in the judgment of the Board of Directors, equivalent to or
greater than the full par value of the shares. In the case of a stock
dividend, that part of the surplus of the Corporation which is transferred to
stated capital upon the issuance of shares as a share dividend shall be deemed
to be the consideration for their issuance.
A. Class A Common Stock and Class B Common
Stock. The Class A Common Stock and the Class B Common Stock shall be
identical in all respects and shall have equal rights and privileges except as
set forth in this Article III A. The relative rights, preferences, privileges
and restrictions of the Class A Common Stock and the Class B Common Stock are
as follows:
1. Voting. Except as provided in this
Article III (or in any supplementary sections thereto), the holders of the
Class B Common Stock shall exclusively possess all voting power. Each holder
of shares of Class B Common Stock shall be entitled to one vote per share.
Each holder of shares of Class A Common Stock shall not be entitled to vote.
There shall be no cumulation of votes for the election of directors.
2. Dividends. Whenever there
shall have been paid, or declared and set aside for payment, to the holders of
the outstanding shares of any class of stock having preference over the Common
Stock as to the payment of dividends, the full amount of dividends and of a
sinking fund, retirement fund, or other required payments, if any, to which
such holders are respectively entitled in preference to the Common Stock, then
dividends may be paid on the Common Stock and on any class or series of stock
entitled to participate therewith as to dividends when and as declared by the
Board of Directors out of any assets legally available for the payment of
dividends. Holders of Common Stock shall be entitled to such dividends as may
be declared by the Board of Directors, provided that (i) with respect to
dividends payable in cash, the distribution per share of Class A Common Stock
must be equal to at least 110% of the amount of the distribution per share of
Class B Common Stock and (ii) with respect to dividends or other distributions
payable other than in cash, including distributions pursuant to stock dividends
or stock splits or divisions, the distribution per share of Class A Common
Stock must be identical to the distribution per share of Class B Common Stock,
except that a dividend or other distribution to holders of Class A Common Stock
may be declared and issued in Class A Common Stock and a dividend or other
distribution of Class B Common Stock may be declared and issued in either Class
A Common Stock or Class B Common Stock provided that in each case the number of
shares so declared and issued on a per share basis to such holders is the same.
3. Rights upon Liquidation or
Dissolution. In the event of any liquidation, dissolution, or winding up of
the Corporation, the holders of Common Stock (and the holders of any class or
series of stock entitled to participate with such stock in
-2-
<PAGE> 3
the distribution of assets) shall be entitled to receive, in cash or in kind,
the assets of the Corporation available for distribution remaining after: (i)
payment or provision for payment of the Corporation's debts and liabilities;
(ii) distributions or provision for distributions in settlement of its
liquidation account; and (iii) distributions or provision for distributions to
holders of any class or series of stock having preference over the Common Stock
in the liquidation, dissolution, or winding up of the Corporation. Each share
of Class A Common Stock and Class B Common Stock shall be entitled to share
ratably, as a single class, in such remaining assets of the Corporation.
B. Preferred Stock. The preferred stock may be
divided into one or more series or classes, with each series separately
designated so as to distinguish the shares thereof from the shares of all other
series and classes. The Board of Directors is authorized to divide the
preferred stock into one or more series or classes, by adoption of
supplementary sections or amendments to the articles of incorporation, having
the relative rights, preferences and limitations as may from time to time be
determined by the Board of Directors. Without limiting the generality of the
foregoing, the Board of Directors is authorized to fix and determine:
1. The number of shares which shall
constitute the series and the designation of such shares;
2. The rate and the time at which
dividends on that series shall be paid, whether dividends shall be cumulative
and the participating or other special rights, if any, with respect to
dividends;
3. The voting powers, full or limited,
if any, of shares of such series;
4. Whether the shares of such series
shall be redeemable and, if so, the price(s) at which, and the terms and
conditions on which, such shares may be redeemed and the terms and amount of
any sinking fund or purchase fund, if any, for the purchase or redemption of
that series;
5. The amount(s) payable upon the
shares of such series in the event of voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation.
6. The terms upon which the holder of
any series may convert their shares into any class or classes;
7. The price or other consideration for
which the shares of such series shall be issued; and
8. Whether the shares of such series
which are redeemed or converted shall have the status of authorized but
unissued shares of serial preferred stock and whether such shares
-3-
<PAGE> 4
may be reissued as shares of the same or any other series of serial preferred
stock.
Each share of each series of serial preferred stock shall have
the same relative rights as and be identical in respects with all the other
shares of the same series.
ARTICLE IV - PREEMPTIVE RIGHTS
Shareholders shall not be entitled to preemptive rights with
respect to any shares of the Corporation which may be issued.
ARTICLE V - INITIAL REGISTERED OFFICE AND AGENT
The street address of the initial registered office of this
Corporation is 150 West Flagler Street, Miami, Florida 33130 and the name of
the initial registered agent of this Corporation is Alison W. Miller.
ARTICLE VI - BYLAWS
The power to alter, amend or repeal the Bylaws shall be vested
in each of the Board of Directors and the shareholders of this Corporation.
ARTICLE VII - INDEMNIFICATION
This Corporation shall indemnify any officer or director, or
any former officer or director of this Corporation, to the fullest extent
permitted by law. The foregoing right of indemnification shall not be
exclusive of any other rights to which any Director, officer, employee or agent
may be entitled as a matter of law or which he may be lawfully granted.
ARTICLE VIII - AMENDMENT
This Corporation reserves to its shareholders the right to
amend or repeal any provisions now or hereafter contained in these Articles of
Incorporation. Any rights which these Articles of Incorporation may confer
upon this Corporation may be modified or cancelled by a vote of the holders of
a majority of the Corporation's stock entitled to vote thereon to amend or
repeal said Articles of Incorporation.
The foregoing Amended and Restated Articles of Incorporation
were duly adopted and approved without shareholder
-4-
<PAGE> 5
action by the Board of Directors of the Corporation at a duly called meeting on
May 14, 1996. Pursuant to Section 607.1007 of the Florida Business Corporation
Act, shareholder action was not required with respect to the adoption of the
foregoing Amended and Restated Articles of Incorporation.
IN WITNESS WHEREOF, the undersigned Chairman of the Board of
the Corporation has executed these Amended and Restated Articles of
Incorporation in his capacity as such this 15th day of May, 1996.
BANKATLANTIC BANCORP, INC.
/s/ Alan B. Levan
--------------------------------------
Alan B. Levan, Chairman of the
Board
-5-
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BANKATLANTIC BANCORP, INC.
AND
FIRST TRUST NATIONAL ASSOCIATION,
Trustee
______________________________
INDENTURE
Dated as of ___________________, 1996
_____________________________
$57,500,000
___% Convertible Subordinated Debentures
Due 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
BankAtlantic Bancorp, Inc.
Reconciliation and tie between Trust Indenture Act of
1939 and Indenture, dated as of ______________, 1996
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C> <C>
Section 310(a)(1) ................................. 7.8
(a)(2) ................................. 7.8
(a)(3) ................................. N/A
(a)(4) ................................. N/A
(b) ................................. 7.8, 7.9
(c) ................................. N/A
Section 311(a) ................................. 7.12
(b) ................................. 7.12
(c) ................................. N/A
Section 312(a) ................................. 5.1, 5.2
(b) ................................. 5.2
(c) ................................. 5.2
Section 313(a) ................................. 5.3
(b)(1) ................................. N/A
(b)(2) ................................. N/A
(c) ................................. 5.3
(d) ................................. 5.3
Section 314(a) ................................. 5.4
(b) ................................. N/A
(c) ................................. 2.2
(d) ................................. N/A
(e) ................................. 1.3
(f) ................................. N/A
Section 315(a) ................................. 7.1(a)
(b) ................................. 7.2
(c) ................................. 7.1(b)
(d) ................................. 7.1(c)
(e) ................................. 6.14
Section 316(a)(1)(A) ................................. 6.12
(a)(1)(B) ................................. 6.13
(a)(2) ................................. N/A
(b) ................................. 6.8
Section 317(a)(1) ................................. 6.3
(a)(2) ................................. 6.4
(b) ................................. 4.3
Section 318(a) ................................. 1.7
</TABLE>
- --------------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
[UPDATE TABLE]
<TABLE>
<S> <C>
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.3. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 1.4. Action by Debentureholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 1.5. Notices, etc., to Trustee and Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 1.6. Notices to Debentureholders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 1.7. Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 1.8. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 1.9. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 1.10. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 1.11. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 1.12. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 1.13. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE II
Debenture Forms . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.1. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.2. Debentures in Global Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.3. Form of Debenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE III
The Debentures . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.1. General Title; General Limitations; Terms of Debenture . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.2. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.3. Execution, Authentication and Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.4. Temporary Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.5. Registration, Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Debentures . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.7. Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.8. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.9. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.10. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE IV
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.1. Payment of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.2. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.3. Money for Debenture Payments to be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.4. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.5. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.6. Statement as to Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.7. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.8. Restrictions on Dividends, Redemptions and Other Payments . . . . . . . . . . . . . . . . . . 35
SECTION 4.9. Restrictions on Certain Issuances or Pledges of the Capital Stock of BankAtlantic, A
Federal Savings Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE V
Debentureholders' Lists and Reports by the
Trustee and the Company . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.1. Company to Furnish Trustee Names and Addresses of Debentureholders . . . . . . . . . . . . . . 36
SECTION 5.2. Preservation of Information; Communications to Debentureholders . . . . . . . . . . . . . . . 36
SECTION 5.3. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.4. Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VI
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.2. Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.3. Suits for Enforcement by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.4. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.5. Trustee May Enforce Claims Without Possession of Debentures . . . . . . . . . . . . . . . . . 41
SECTION 6.6. Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.7. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.8. Unconditional Right of Debentureholders to Receive Principal and Interest . . . . . . . . . . 42
SECTION 6.9. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.10. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.11. Delay or Omission Not A Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.12. Control by Debentureholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.13. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.14. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.15. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VII
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.1. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.2. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.3. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.4. Not Responsible for Recitals or Issuance of Debentures . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.5. May Hold Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.6. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.7. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.8. Corporate Trustee Required; Eligibility; Disqualification . . . . . . . . . . . . . . . . . . 49
SECTION 7.9. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.10. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 7.11. Merger, Conversion, Consolidation or Succession to Business of Trustee . . . . . . . . . . . . 52
SECTION 7.12. Preferential Collection of Claims against Company . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII
Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 8.1. Supplemental Indentures Without Consent of Debentureholders . . . . . . . . . . . . . . . . . 52
SECTION 8.2. Supplemental Indentures With Consent of Debentureholders . . . . . . . . . . . . . . . . . . . 53
SECTION 8.3. Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 8.4. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.5. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.6. Reference in Debentures to Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.7. Subordination Unimpaired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE IX
Consolidation, Merger, Conveyance, Transfer OR LEASE . . . . . . . . . . . . . . . 55
SECTION 9.1. Company May Consolidate, etc., Only on Certain Terms . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.2. Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 9.3. Limitation on Lease of Properties as Entirety . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE X
Satisfaction, Discharge and Defeasance . . . . . . . . . . . . . . . . . . 56
SECTION 10.1. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.2. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 10.3. Satisfaction, Discharge and Defeasance of Debentures . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
ARTICLE XI
SUBORDINATION OF DEBENTURES . . . . . . . . . . . . . . . . . . . . . 60
SECTION 11.1. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 11.2. Distribution of Assets, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 11.3. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 11.4. Obligation of the Company Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 11.5. Payments on Debentures Permitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.6. Effectuation of Subordination by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.7. Knowledge of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.8. Trustee May Hold Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.9. Rights of Holders of Senior Indebtedness Not Impaired . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.10. Alteration of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.11. Article Applicable to Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.12. Trustee Not Fiduciary for Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . 65
ARTICLE XII
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 12.1. Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 12.2. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 12.3. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 12.4. Selection of Debentures to be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 12.5. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 12.6. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 12.7. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.8. Debentures Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.9. Repurchasing of Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE XIII
CONVERSION OF DEBENTURES . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 13.1. Conversion Privilege. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 13.2. Manner of Exercise of Conversion Privilege. . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 13.3. Cash Adjustment Upon Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 13.4. Conversion Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 13.5. Adjustment of Conversion Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 13.6. Effect of Reclassifications, Consolidations, Mergers or Sales on Conversion Privileges. . . . 74
SECTION 13.7. Taxes on Conversions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 13.8. Company to Reserve Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 13.9. Disclaimer by Trustee of Responsibility for Certain Matters. . . . . . . . . . . . . . . . . 75
SECTION 13.10. Company to Give Notice of Certain Events. . . . . . . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE XIV
IMMUNITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS . . . . . . . . . . . . . 76
SECTION 14.1. Exemption from Individual Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>
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<PAGE> 8
THIS INDENTURE, dated as of ____________, 1996, by
and between BankAtlantic Bancorp, Inc., a corporation duly organized and
existing under the laws of the State of Florida ("the Company"), and First
Trust National Association (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation, execution and delivery
of its debentures, to be known as __% Convertible Subordinated Debentures due
2006 (the "Debentures"), the amount and terms of which are as hereinafter
provided; and, to provide the terms and conditions upon which the Debentures
are to be authenticated, issued and delivered, the Company has duly authorized
the execution and delivery of this Indenture.
All acts and things necessary to make the Debentures, when executed by
the Company and authenticated and delivered by the Trustee as in this Indenture
provided, the valid, binding and legal obligations of the Company, and to
constitute these presents as a valid indenture and agreement according to its
terms, have been done and performed, and the execution of this Indenture and
the issue hereunder of the Debentures have in all respects been duly
authorized, and the Company, in the exercise of the legal right and power
vested in it, executes this Indenture and proposes to make, execute, and
deliver the Debentures.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
Each party agrees as follows for the benefit of the other party and
for the equal and proportionate benefit of the Debentureholders (as hereinafter
defined):
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Indenture and of any indenture supplemental
hereto, except as otherwise expressly provided or unless the context otherwise
requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as
the singular;
(2) the term "this Indenture" means this instrument as
originally executed or as it may from time to time be
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<PAGE> 9
supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof;
(3) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(4) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally
accepted accounting principles in effect on the date of execution of
this Indenture; and
(5) all references in this instrument to designated
"Articles", "Sections" and other subdivisions are to the designated
Articles, Sections and other subdivisions of this instrument as
originally executed; the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other subdivision;
Certain terms used principally in Article Seven are defined in that
Article.
"Act" when used with respect to any Debentureholder has the meaning
specified in Section 1.4.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authorized Newspaper" means a newspaper of general circulation in the
relevant area, printed in the English language and customarily published on
each Business Day, whether or not published on Saturdays, Sundays or holidays.
Whenever successive weekly publications in an Authorized Newspaper are required
hereunder they may be made (unless otherwise expressly provided herein) on the
same or different days of the week and in the same or different Authorized
Newspapers.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
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<PAGE> 10
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each day which is neither a Saturday, Sunday nor
other day on which banking institutions in the Place of Payment are authorized
by law or required by executive order to close.
"Capitalized Lease Obligation" means any lease obligation of a Person
incurred with respect to any property (whether real, personal or mixed)
acquired or leased by such Person and used in its business that is required to
be recorded as a capitalized lease in accordance with generally accepted
accounting principles.
"Capital Stock" means any and all shares, interests, participation
rights or other equivalents (however designated) of corporate stock.
"Class A Common Stock" means the class of stock which, at the date of
this Indenture, is designated as Class A Common Stock, par value $.01 per
share, of the Company and the class or classes of stock, if any, into which
such Class A Common Stock may thereafter be changed or reclassified.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties on such date.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request", "Company Order" and "Company Consent" mean,
respectively, a written request, order or consent signed in the name of the
Company by its Chairman of the Board of Directors, President or a Vice
President, and delivered to the Trustee.
"Conversion Price" means the price per share of Class A Common Stock
from time to time in effect at which Debentures may be converted into Class A
Common Stock pursuant to Article Thirteen hereof.
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<PAGE> 11
"Debentures" means the debentures authenticated and delivered under
this Indenture.
"Debentureholder" or "Holder" means a Person in whose name a Debenture
is registered in the Debenture Register.
"Debenture Register" and "Debenture Registrar" have the respective
meanings specified in Section 3.5.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means The Depositary Trust Company or any other clearing
agency registered under the Securities Exchange Act of 1934, as amended,
subsequently designated as Depositary by the Company.
"Event of Default" has the meaning specified in Section 6.1.
"Indebtedness" means (i) all Obligations of the Company for borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of the Company or only to a portion thereof), (ii) all indebtedness of the
Company which is evidenced by a note, debenture, bond or other similar
instrument, including Capitalized Lease Obligations, (iii) all indebtedness of
the Company representing the unpaid balance of the purchase price of any goods
or other property or balance owed for any services rendered, (iv) all
indebtedness of the Company, including Capitalized Lease Obligations incurred,
assumed or given in an acquisition (whether by way of purchase, merger or
otherwise) of any business, real property or other assets, (v) any indebtedness
of others described in the preceding clauses (i), (ii), (iii) and (iv) that the
Company has guaranteed or for which it is otherwise liable and (vi) any
amendment, renewal, extension, deferral, modification, restructuring or
refunding of any such indebtedness, obligation or guarantee.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Debentures.
"Maturity" when used with respect to any Debenture means the date on
which the principal of and interest on such Debenture becomes due and payable
as therein or herein provided, whether at the Stated Maturity or by declaration
of acceleration or otherwise.
"Obligations" means, with respect to any Indebtedness, any principal,
premium, interest, penalties, fees and other liabilities
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<PAGE> 12
payable from time to time and obligations performable under the documentation
governing such Indebtedness.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board of Directors, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Controller, an Assistant Controller, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may,
except as otherwise expressly provided in this Indenture, be counsel for the
Company.
"Outstanding" when used with respect to Debentures means, as of the
date of determination, all Debentures theretofore authenticated and delivered
under this Indenture, except:
(i) Debentures theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Debentures for whose payment money in the necessary
amount has been theretofore deposited with the Trustee or any Paying
Agent in trust for the Holders of such Debentures;
(iii) Debentures in exchange for or in lieu of which other
Debentures have been authenticated and delivered pursuant to this
Indenture; and
(iv) Debentures which have been surrendered for conversion
pursuant to Article Thirteen hereof;
provided, however, that in determining whether the Holders of the requisite
principal amount of Debentures Outstanding have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Debentures owned
by the Company or any other obligor upon the Debentures or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Debentures which the Trustee knows to be so owned shall
be so disregarded. Debentures so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction
of the Trustee the pledgee's right so to act with respect to such Debentures
and that the pledgee is not the Company or any other obligor upon the
Debentures or any Affiliate of the Company or such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Debentures on behalf of the
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<PAGE> 13
Company. The Company or any of its subsidiaries may act as Paying Agent.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Place of Payment" means a city or political subdivision thereof
designated as such by the Company in accordance with the terms of this
Indenture.
"Predecessor Debentures" of any particular Debenture means every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture; and, for the purposes of this
definition, any Debenture authenticated and delivered under Section 3.6 in lieu
of a mutilated, lost, destroyed or stolen Debenture shall be deemed to evidence
the same debt as the mutilated, lost, destroyed or stolen Debenture.
"Principal Corporate Trust Office" means the principal corporate trust
office of the Trustee at the location set forth in Section 1.5 or at such other
location as the Trustee may from time to time designate by written notice to
the Company.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the close of business on the 15th day of the calendar month
immediately preceding the calendar month in which such Interest Payment Date
occurs unless such 15th day is not a Business Day, in which event it shall be
the first Business Day immediately following such 15th day.
"Responsible Officer" when used with respect to the Trustee means the
chairman or the vice chairman of the board of directors, the chairman or vice
chairman of the executive committee of the board of directors, the president,
any vice-president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller and any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter
is referred because of his knowledge of and familiarity with the particular
subject.
"Responsible Officer of the Company" shall mean the Chairman or Vice
Chairman of the Board of Directors, the President, any Vice-President, the
Treasurer, the Controller or the Secretary of the Company.
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<PAGE> 14
"Senior Indebtedness" means any and all Indebtedness of the Company,
except the Company's currently outstanding 9% Subordinated Debentures due 2005
(which rank pari passu in right of payment to the Debentures) and except any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall be subordinate or shall rank pari passu in right of payment
to the Debentures.
"Special Payment Date" has the meaning specified in Section 3.7.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity" when used with respect to any Debenture means the
date specified in such Debenture as the fixed date on which the principal of
and the interest on such Debenture is due and payable.
"Subsidiary" means, with respect to the Company, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, officers or trustees
thereof is at the time owned in the aggregate, directly or indirectly, by the
Company and its Subsidiaries.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
(15 U.S.C. Section Section 77aaa-77bbbb), as in force at the date as of which
this instrument was executed, except as provided in Section 8.5.
"Vice President" when used with respect to the Company or the Trustee
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
"U.S. Government Obligations" means direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged.
SECTION 1.2. Compliance Certificates and Opinions.
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<PAGE> 15
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate
or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the
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<PAGE> 16
certificate or opinion or representations with respect to the matters upon
which such counsel's certificate or opinion is based are erroneous. Any such
certificate or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Company stating that the information with respect to
such factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that such certificate
or opinion or representations are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Action by Debentureholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Debentureholders may be embodied in and evidenced by (i) one or more
instruments of substantially similar tenor signed by such Debentureholders in
person or by agent or proxy duly appointed in writing. Except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Debentureholders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Sections 7.1 and 7.3) conclusive in favor of the Trustee and the Company, if
made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by an officer of a corporation or association
or a member of a partnership or an employee of a public or governmental agency
on behalf of such corporation, association, partnership or agency, or by an
agent or fiduciary, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which the Trustee deems sufficient.
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<PAGE> 17
(c) The ownership of Debentures shall be proved by the Debenture
Register or by a certificate of the Debenture Registrar thereof.
(d) At any time prior to the taking of any action by the Holders
of the percentage in aggregate principal amount of the Debentures specified in
this Indenture in connection with such action, any Holder which has consented
to such action may, by filing written notice with the Trustee at its Principal
Corporate Trust Office and upon proof of holding as provided in this Section
1.4, revoke such action so far as concerns such Debenture. Except as
aforesaid, any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Debenture shall be conclusive and
binding upon such Holder and upon all future Holders of such Debenture and of
every Debenture issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered
to be done by the Trustee or the Company in reliance thereon, whether or not
notation of such action is made upon such Debenture. Any action taken by the
Holders of the percentage in aggregate principal amount of the Debentures
specified in the Indenture in connection with such action shall be conclusive
and binding upon the Company, the Trustee and the Holders of all of the
Debentures.
(e) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other
action, but the Company shall have no obligation to do so. If such a record
date is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action may be given before or after such record date, but only
Holders of record at the close of business on such record date shall be deemed
to be the Holders for the purposes of determining whether Holders of the
requisite proportion of Outstanding Debentures have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other action, and for that purpose the Outstanding Debentures shall
be computed as of such record date; provided that no such authorization,
agreement or consent by the Holders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.
SECTION 1.5. Notices, etc., to Trustee and Company.
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<PAGE> 18
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Debentureholders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Debentureholder or by the Company
shall be sufficient for every purpose hereunder if and only if made,
given, furnished or filed in writing to or with the Corporate Trust
Department of the Trustee at the Principal Corporate Trust Office
which at the date of this Indenture is 180 East Fifth Street, St.
Paul, Minnesota 55101, or
(2) the Company by the Trustee or by any Debentureholder
shall be sufficient for every purpose hereunder if in writing and
mailed, first-class, postage prepaid, to the Company addressed to it
at 1750 East Sunrise Boulevard, Ft. Lauderdale, Florida 33304, to the
attention of the Corporate Secretary, or at any other address
furnished in writing to the Trustee by the Company.
SECTION 1.6. Notices to Debentureholders; Waiver.
Where this Indenture provides for notice to Debentureholders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first class, postage prepaid, to
each Debentureholder affected by such event, at his address as it appears on
the Debenture Register, not later than the latest date, and not earlier than
the earliest date, prescribed for the giving of such notice. In any case where
notice to Debentureholders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular
Debentureholder shall affect the sufficiency of such notice with respect to
other Debentureholders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be
equivalent of such notice. Waivers of notice by Debentureholders shall be
filed with the Trustee, but such filing shall not be a condition precedent to
the validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of or irregularities in regular
mail service, it shall be impractical to mail notice of any event to
Debentureholders when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.
In case, by reason of the suspension of publication of any Authorized
Newspaper, or by reason of any other cause, it shall be
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<PAGE> 19
impossible to make publication of any notice in an Authorized Newspaper or
Authorized Newspapers as required by this Indenture, then such method of
publication or notification as shall be made with the approval of the Trustee
shall constitute a sufficient publication of such notice.
SECTION 1.7. Conflict with Trust Indenture Act.
This Indenture is subject to the TIA and if any provision hereof
limits, qualifies or conflicts with another provision hereof which is required
to be included in this Indenture by any of the provisions of TIA, such required
provision shall control.
SECTION 1.8. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 1.10. Separability Clause.
In case any provision in this Indenture or in the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Debentures, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness and the Debentureholders, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.12. Legal Holidays.
In any case where the date of an Interest Payment Date or the Stated
Maturity of any Debenture shall not be a Business Day, then (notwithstanding
any other provision of the Debentures or this Indenture) payment of the
principal of, or interest on, any Debentures need not be made on such date, but
may be made on the next succeeding Business Day with the same force and effect
as if made on the nominal date of any such Interest Payment Date or Stated
Maturity.
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<PAGE> 20
SECTION 1.13. Governing Law.
This Indenture and the Debentures issued hereunder shall be
controlled, construed and enforced in accordance with the laws of the State of
Florida applicable to contracts made and to be performed entirely in that
State.
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<PAGE> 21
ARTICLE II
DEBENTURE FORMS
SECTION 2.1. Forms Generally.
The Debentures and the certificates of authentication thereon shall be
in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon, as may be
required to comply with the rules of any securities exchange, or as may,
consistent herewith, be determined by the officers executing such Debentures,
as evidenced by their execution of the Debentures. Any portion of the text of
any Debenture may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Debenture.
The definitive Debentures shall be printed, lithographed or engraved
on steel engaged borders or may be produced in any other manner, all as
determined by the officers executing such Debentures as evidenced by their
execution of such Debentures.
SECTION 2.2. Debentures in Global Form.
The Debentures may be issued in whole or in part in global form and
any such Debenture in global form may provide that it shall represent the
aggregate or specified amount of Outstanding Debentures from time to time
endorsed thereon and may also provide that the aggregate amount of Outstanding
Debentures represented thereby may from time to time be reduced to reflect
exchanges. Any endorsement of a Debenture in global form to reflect the
amount, or any increase or decrease in the amount or changes in the rights of
Holders of Outstanding Debentures represented thereby, shall be made in such
manner and by such Person or Persons as shall be specified therein. Any
instructions by the Company with respect to a Debenture in global form shall be
in writing but, to the extent not relevant, need not comply with Section 314(c)
of the Trust Indenture Act.
SECTION 2.3. Form of Debenture.
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<PAGE> 22
[FORM OF FACE OF DEBENTURE]
__% Convertible Subordinated Debentures
Due 2006
No. $__________
BANKATLANTIC BANCORP, INC.
promises to pay to
or registered assigns,
the principal sum of
Dollars on ____________, 2006.
Interest Payment Dates: __________ 1 and __________ 1
Record Dates: ____________ 15 and ____________ 15 (whether or not a
Business Day)
Dated: _____________, 1996
BANKATLANTIC BANCORP, INC.,
a Florida corporation
By:
------------------------
By:
------------------------
(SEAL)
This is one of the Debentures
referred to in the within-
mentioned Indenture:
First Trust National Association, as Trustee
By:
------------------------------
Authorized Signature
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<PAGE> 23
BANKATLANTIC BANCORP, INC.
__% Convertible Subordinated Debentures
Due 2006
1. Interest. Bankatlantic Bancorp, Inc., a corporation duly
organized and existing under the laws of the State of Florida (the "Company"),
promises to pay simple interest on the principal amount of this Debenture at
the rate per annum shown above from the date of issuance until maturity. The
Company will pay interest semi-annually on each __________ 1 and __________ 1
of each year, or if any such day is not a Business Day (as defined in the
Indenture), on the next succeeding Business Day (each an "Interest Payment
Date").
Interest on the Debentures will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided, that if there is no existing Default in the payment of
interest, and if this Debenture is authenticated between a record date referred
to on the face hereof and the next succeeding interest payment date, interest
shall accrue from such next succeeding interest payment date; provided further,
that the first interest payment date shall be _____________ 1, 1996. The
Company shall pay interest on overdue principal at the then applicable interest
rate on the Debentures; it shall pay interest on overdue installments of
interest (without regard to any applicable grace periods) at the same rate to
the extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment. The Company will pay interest on the
Debentures (except defaulted interest) to the Persons who are registered
Holders of Debentures at the close of business on the record date next
preceding the interest payment date, even if such Debentures are cancelled
after such record date and on or before such interest payment date. The Holder
must surrender this Debenture to a Paying Agent to collect principal payments.
The Company will pay principal and interest in money of the United States that
at the time of payment is legal tender for payment of public and private debts.
The Company, however, may pay principal and interest by check payable in such
money. It may mail an interest check to a Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without notice to any Debentureholder. The Company
may act in any such capacity.
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<PAGE> 24
4. Indenture. This Debenture is one of a duly authorized issue
of Debentures of the Company issued under and pursuant to an Indenture dated as
of _____________, 1996 and all indentures supplemental thereto (herein referred
to as the "Indenture") between the Company and the Trustee. The terms of the
Debentures include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Section
Section 77aaa-77bbbb) as in effect on the date the Indenture is qualified.
The Debentures are subject to all such terms, and Debentureholders are referred
to the Indenture and such Act for a statement of such terms. The Debentures
are limited to $57,500,000 in aggregate principal amount. Capitalized terms
used in this Debenture and not defined in this Debenture shall have the
meanings set forth in the Indenture.
5. Optional Redemption. The Company may redeem all or any of the
Debentures at any time or from time to time after ____________, 1999, and in
certain circumstances sooner, at the redemption prices (expressed in
percentages of principal amount) set forth below plus accrued interest, if any,
to the redemption date, if redeemed during the 12-month period beginning
__________, of the years indicated below.
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999 104%
2000 103
2001 102
2002 101
2003 and thereafter 100
</TABLE>
The Company may redeem all or any of the Debentures at any time or from time to
time before _____________, 1999 if the closing sale price of the Company's
Class A Common Stock on the Nasdaq National Market System or a national
securities exchange or automated quotation system (or if the Class A Common
Stock shall not then be traded on the Nasdaq National Market System or listed
on an exchange or included on a quotation system, as reported by the National
Quotation Bureau, Inc. or similar reporting service) equals or exceeds 140% of
the then effective conversion price for at least thirty (30) consecutive
trading days ending within five (5) business days of the date of the related
notice of redemption described herein. Redemptions made prior to
________________, 1999 shall be at a redemption price equal to 100% of
principal amount plus accrued interest, if any, to the redemption date.
If the redemption date is subsequent to a record date with respect to
any interest payment date, and on or prior to such interest payment date the
Holder of such Debenture transfers the Debenture, then such accrued interest,
if any, shall be paid to the
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<PAGE> 25
person who surrenders the Debenture for redemption (and not the Holder as of
the record date with respect to such interest payment date), and no other
interest shall be payable thereon.
6. Mandatory Redemption. The Company shall have no mandatory
redemption or sinking fund obligations with respect to the Debentures.
7. Notice of Redemption. Notice of redemption shall be mailed at
least thirty (30) days but not more than sixty (60) days before the redemption
date, to each Holder of Debentures to be redeemed at its registered address.
Debentures may be redeemed in part but only in whole multiples of $1,000,
unless all of the Debentures held by a Holder are to be redeemed. On and after
the redemption date, interest ceases to accrue on Debentures or portions of
them called for redemption.
8. Conversion of Debenture. Subject to the provisions of the
Indenture, the Holder of this Debenture is entitled, at his option, at any time
prior to maturity, to convert the principal amount of this Debenture (or any
portion hereof in whole multiples of $1,000) into shares of Class A Common
Stock of the Company, as said shares shall be constituted at the date of
conversion, at the conversion price of $______ principal amount of Debentures
for each share of such Class A Common Stock (except that, in case this
Debenture or any portion thereof shall be called for redemption, such
conversion right shall terminate with respect to this Debenture or portion
thereof, as the case may be, so called for redemption at the close of business
on the fifth (5th) business day next preceding the date fixed for redemption as
provided in the Indenture), or at the adjusted conversion price in effect at
the date of conversion determined as provided in the Indenture, upon surrender
of this Debenture to the Registrar accompanied by written notice of election to
convert, and (if new Debentures for the unconverted portion of any Debenture
shall be registered in a name other than that of the Holder) by instruments of
transfer, in form satisfactory to the Registrar, duly executed by the
registered Holder or by his duly authorized attorney. Such surrender shall, if
made during the period from the close of business on the record date preceding
an interest payment date to the opening of business on such interest payment
date also be accompanied by payment in funds acceptable to the Company of an
amount equal to the interest payable on such interest payment date on the
principal amount of this Debenture then being converted. Subject to the
foregoing, no adjustment is to be made on conversion for interest accrued
hereon or for dividends on Class A Common Stock issued on conversion. The
Company is not required to issue fractional shares upon any such conversion,
but shall make adjustment therefor in cash on the basis of the current market
value of such fractional interest as provided in the Indenture.
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<PAGE> 26
9. Denominations, Transfer, Exchange. The Debentures are in
registered form without coupons and only in denominations of $1,000 and
integral multiples thereof. As provided in the Indenture, and subject to
certain limitations therein set forth, Debentures may be surrendered for
exchange or transfer for a like aggregate principal amount of Debentures of the
same or different authorized denominations, as requested by the Holder
surrendering the same. The Registrar and the Trustee may require the Holder to
furnish appropriate endorsements and transfer documents and to pay a sum
sufficient to cover any tax or other governmental charges that may be imposed
in connection with the requested exchange or transfer. The Registrar need not
exchange or register the transfer of any Debentures or portion of a Debenture
selected for redemption. Also, it need not exchange or register the transfer
of any Debentures for a period of fifteen (15) days before a selection of
Debentures to be redeemed or during the period between a record date and the
next succeeding interest payment date.
10. Persons Deemed Owners. Prior to due presentment to the
Trustee for registration of the transfer of this Debenture, the Company, the
Trustee and their respective agents may deem and treat the person in whose name
this Debenture is registered as the absolute owner hereof, whether or not this
Debenture shall be overdue and notwithstanding any notation of ownership or
other writing hereon, for the purpose of receiving payment of or on account of
the principal hereof and interest hereon, and for all other purposes, and
neither the Company, the Trustee, nor their agents shall be affected by any
notice to the contrary. The registered Holder of a Debenture shall be treated
as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Debentures may be amended with the consent of the Holders of
at least 66 2/3% in principal amount of the then outstanding Debentures, and
any existing default (except a payment default) may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding
Debentures. Without the consent of any Debentureholder, the Indenture or the
Debentures may be amended to cure any ambiguity, defect or inconsistency, to
provide for assumption of Company obligations to Debentureholders, to provide
for uncertificated Debentures in addition to certificated Debentures, or to
make any change that does not adversely affect the rights of any
Debentureholder.
12. Defaults and Remedies. Events of Default include: default in
payment of interest on the Debentures for thirty (30) days; default in payment
of principal on the Debentures at maturity, upon acceleration, redemption or
otherwise; failure by the Company for the period specified in the Indenture
after notice to it to perform certain covenants and to comply with any of its
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<PAGE> 27
other agreements in the Indenture or the Debentures; certain final judgments
which remain undischarged; and certain events of bankruptcy or insolvency. If
an Event of Default occurs and is continuing, the Trustee or the Holders of at
least 30% in principal amount of the then outstanding Debentures may declare
all the Debentures to be due and payable immediately, except that in the case
of an Event of Default arising from certain events of bankruptcy or insolvency,
all outstanding Debentures become due and payable immediately without further
action or notice. Debentureholders may not enforce the Indenture or the
Debentures except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the
Debentures. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Debentures may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Debentureholders
notice of any continuing default (except a default in payment of principal or
interest) if it determines that withholding notice is in their interests. The
Company must furnish an annual compliance certificate to the Trustee.
13. Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity may make loans to, accept
deposits from, and perform services for the Company or its Affiliates, and may
otherwise deal with the Company or its Affiliates, as if it were not Trustee.
14. Subordination. The indebtedness evidenced by the Debentures
is, to the extent provided in the Indenture, subordinate and subject in right
of payment to the prior payment in full of all Senior Indebtedness (as defined
in the Indenture) of the Company whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed, and is not
secured by any collateral, including the assets of the Company or any of its
Affiliates or Subsidiaries. Each Holder, by acceptance hereof, agrees to and
shall be bound by all provisions of the Indenture. Further, each Holder
authorizes and directs the Trustee to take such action on its behalf as may be
necessary or appropriate to acknowledge or effectuate, as between such Holder
and the holders of Senior Indebtedness, the subordination of this Debenture as
provided in the Indenture, and appoints the trustee its attorney-in-fact for
any and all such purposes.
15. No Recourse Against Others. No recourse shall be had for the
payment of the principal of or the interest on this Debenture, or for any claim
based hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture against any stockholder, officer, director, or employee, as such,
past, present or future, of the Company, its Subsidiaries, or any predecessor
or successor corporations, or entities, whether by virtue of any constitution,
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statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of
the consideration for the issue hereof, expressly waived and released.
16. Authentication. This Debenture shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. Abbreviations. Customary abbreviations may be used in the
name of a Debentureholder or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
The Company will furnish to any Debentureholder upon written request
and without charge a copy of the Indenture. Request may be made to:
BankAtlantic Bancorp, Inc.
1750 East Sunrise Boulevard
Fort Lauderdale, FL 33304
Attention: Secretary
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<PAGE> 29
ASSIGNMENT FORM
To assign this Debenture, fill in the form below: (I) or (we) assign
and transfer this Debenture to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
---------------------------------------------------------
- ----------------------------------------------------------------------- agent to
transfer this Debenture on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:
-----------------------
Your Signature:
-------------------------------
(Sign exactly as your name appears on the face
of this Debenture)
Signature Guarantee:
------------------------------------------------------------
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<PAGE> 30
[FORM OF CONVERSION NOTICE]
BANKATLANTIC BANCORP, INC.
The undersigned owner of this Debenture hereby irrevocably exercises
the option to convert this Debenture, or the portion hereof (which is $1,000 or
a whole multiple thereof) below designated, into shares of Class A Common Stock
of BankAtlantic Bancorp, Inc. in accordance with the terms of the Indenture
referred to in this Debenture, and directs that the shares issuable and
deliverable upon the conversion, together with any check in payment for
fractional shares and any Debentures representing any unconverted principal
amount hereof, be issuable and delivered to the registered holder hereof unless
a different name has been indicated below. If shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. Any amount required to be paid by
the undersigned on account of interest accompanies this Debenture.
- ----------------------------- Date:
Signature ---------------------------------------
Fill in for registration of shares of Class A Common Stock and Debentures if to
be issued otherwise than to the registered holder.
- ----------------------------- ----------------------------------------------
Name Social Security or other
taxpayer identifying number
$
- ----------------------------- --------------------------------------------
Address Principal Amount to be Converted
(in a whole multiple of $1,000
if less than all)
Please print name and address including zip code:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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<PAGE> 31
ARTICLE III
THE DEBENTURES
SECTION 3.1. General Title; General Limitations; Terms of Debenture.
The Debentures shall be known and designated as the "__% Convertible
Subordinated Debentures due 2006 of the Company". Their Stated Maturity shall
be ___________ 1, 2006, and they shall bear simple interest at the rate of __%
per annum commencing upon the date of issuance until Maturity. Interest on
each Debenture shall be payable on the dates specified in the form of Debenture
set forth in Section 2.3. The aggregate principal amount of Debentures which
may be authenticated and delivered under this Indenture is limited to
$57,500,000, except for Debentures authenticated and delivered upon
registration for transfer of or in exchange for or in lieu of other Debentures,
as provided herein.
The Person in whose name any Debenture is registered on the Regular
Record Date with respect to an Interest Payment Date will be entitled to
receive the interest payable on such Interest Payment Date, notwithstanding the
cancellation of such Debenture upon any registration of transfer or exchange or
conversion thereof subsequent to such Regular Record Date and prior to such
Interest Payment Date.
The principal of and interest on the Debentures shall be payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for public and private debts. Unless other arrangements are
made with the Debentureholders of record, interest payments shall be made by
check mailed to the Persons entitled thereto at their addresses last appearing
on the Debenture Register. Holders of Debentures must surrender Debentures at
the office or agency of the Company in the Place of Payment to collect the
principal payment on the Debentures.
The Debentures shall be subordinated in right of payment to Senior
Indebtedness of the Company as provided in Article Eleven and shall be pari
passu in right of payment to the Company's 9% Subordinated Debentures due 2005.
SECTION 3.2. Denominations.
The Debentures shall be issuable only in fully registered form and
without coupons in denominations of $1,000 and any integral multiples thereof.
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<PAGE> 32
SECTION 3.3. Execution, Authentication and Delivery.
The Debentures shall be executed on behalf of the Company by its
Chairman of the Board of Directors, its President or one of its Vice Presidents
under its corporate seal, which may be in facsimile form and may be imprinted
or otherwise reproduced thereon and attested by its Secretary or its Assistant
Secretary. The signature of any of these officers on the Debentures may be
manual or facsimile.
Debentures bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Debentures or did not
hold such offices at the date of such Debentures.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Debentures executed by the Company to
the Trustee for authentication, together with a Company Order of the
authentication and delivery of such Debentures; and the Trustee shall
authenticate and deliver such Debentures as in this Indenture provided and not
otherwise. All Debentures shall be dated the date of their authentication.
Notwithstanding the foregoing, if the Debentures are to be issued in
whole or in part in global form, then the Company shall execute and the Trustee
shall, in accordance with this Section and the Company Order with respect to
such Debentures, authenticate and make available for delivery one or more
Debentures in global form that (i) shall represent and shall be denominated in
an amount equal to the aggregate principal amount of the Outstanding
Debentures, (ii) shall be registered in the name of the Depositary for such
Debentures or the nominee of such Depositary, (iii) shall be delivered by the
Trustee to such Depositary or pursuant to such Depositary's instruction and
(iv) shall bear a legend substantially to the following effect: "Unless and
until it is exchanged in whole or in part for Debentures in certificated form,
this Debenture may not be transferred except as a whole by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary or by the Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary" or to such
other effect as the Depositary and the Trustee may agree.
Each Depositary for a Book-Entry Debenture must, at the time of its
designation and at all times while it serves as Depositary, be a clearing
agency registered under the Securities Exchange Act of 1934 and any other
applicable statute or regulation. The Trustee shall have no responsibility to
determine if the Depositary
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<PAGE> 33
is so registered. Each Depositary shall enter into an agreement with the
Trustee governing its respective rights with regard to Book-Entry Debentures.
No Debenture shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose, unless there appears on such Debenture
a certificate of authentication substantially in the form provided for herein
executed by the Trustee; and such certificate upon any Debenture shall be
conclusive evidence, and the only evidence, that such Debenture has been duly
authenticated and delivered hereunder.
SECTION 3.4. Temporary Debentures.
Pending the preparation of definitive Debentures, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Debentures which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Debentures in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Debentures may determine, as evidenced by their
execution of such Debentures.
Except in the case of temporary Debentures in global form, which shall
be exchanged in accordance with the provisions hereof, if temporary Debentures
are issued, the Company will cause definitive Debentures to be prepared without
unreasonable delay. After the preparation of definitive Debentures, the
temporary Debentures shall be exchangeable for definitive Debentures upon
surrender of the temporary Debentures at the office or agency of the Company in
the Place of Payment, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Debentures, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Debentures of authorized denominations. Until
so exchanged, the temporary Debentures shall in all respects be entitled to the
same benefits under this Indenture as definitive Debentures.
SECTION 3.5. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Principal Corporate Trust
Office a register (herein referred to as the "Debenture Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Debentures and the registration of transfers of
Debentures. Any such register shall be in written form or in any other form
capable of being converted into written form within a reasonable time. The
Trustee is hereby appointed "Debenture Registrar" for the purpose
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<PAGE> 34
of registering Debentures and transfers of Debentures as herein provided.
Upon surrender of a Debenture for registration of transfer accompanied
by a written instrument of transfer in form satisfactory to the Company or the
Debenture Registrar at the office or agency of the Company in the Place of
Payment, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Debentures of any authorized denominations, of a like aggregate principal
amount.
At the option of the Holder, Debentures (except a Book-Entry Debenture
representing all or a portion of the Debentures) may be exchanged for other
Debentures of any authorized denominations, of a like aggregate principal
amount upon surrender of the Debentures to be exchanged at such office or
agency. Whenever any Debentures are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Debentures
which the Debentureholder making the exchange is entitled to receive.
All Debentures issued upon any registration of transfer or exchange of
Debentures shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Debentures
surrendered upon such registration of transfer or exchange.
Every Debenture presented or surrendered for registration of transfer
or exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the Holder thereof or his attorney duly authorized in writing in form
satisfactory to the Company or the Debenture Registrar.
The Company shall not be required (i) to issue, to register the
transfer of or to exchange Debentures during a period beginning at the opening
of business on a Business Day fifteen (15) days before the day of any selection
of Debentures for redemption under Section 12.4 hereof and ending at the close
of business on the day of selection or (ii) to register the transfer of or
exchange of any Debentures so selected for redemption in whole or in part,
except the unredeemed portion of any Debentures being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Debentures, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Debentures, other than
exchanges pursuant to Sections 3.4 or 8.6 not involving any transfer.
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<PAGE> 35
Notwithstanding any other provision of this Section, unless and until
it is exchanged in whole or in part for Debentures in certificated form, a
Book-Entry Debenture may not be transferred except as a whole by the Depositary
to a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by such Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or if at any time the Depositary
ceases to be a clearing agency registered under the Securities Exchange Act of
1934, as amended, the Company shall appoint such a successor Depositary. If a
successor Depositary is not appointed by the Company within ninety (90) days
after the Company receives such notice or becomes aware of such ineligibility,
the Company shall execute, and the Trustee, upon receipt of a Company Order for
the authentication and delivery of certificated Debentures, shall authenticate
and make available for delivery Debentures in certificated form in an aggregate
principal amount equal to the principal amount of the Book-Entry Debenture or
Debentures in exchange for such Book-Entry Debenture or Debentures.
The Company may at any time and in its sole discretion determine that
the Debentures issued in the form of one or more global Debentures shall no
longer be represented by such Book-Entry Debentures. In such event the Company
shall execute, and the Trustee, upon receipt of a Company Order for the
authentication and delivery of certificated Debentures, shall authenticate and
make available for delivery, Debentures in certificated form and in an
aggregate principal amount equal to the principal amount of the Debenture or
Debentures in global form in exchange for such Debenture or Debentures in
global form.
In any exchange provided for in any of the preceding two paragraphs,
the Company shall execute and the Trustee shall authenticate and make available
for delivery Debentures in certificated form in authorized denominations.
Upon the exchange of a Book-Entry Debenture for Debentures in
certificated form, such Book-Entry Debentures shall be cancelled by the
Trustee. Debentures issued in exchange for a Book-Entry Debenture pursuant to
this Section shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. The Trustee
shall make available for delivery such Debentures to the Persons in whose names
such Debentures are so registered.
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<PAGE> 36
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Debentures.
If (i) any mutilated Debenture is surrendered to the Trustee, or if
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Debenture, and (ii) there is delivered to the
Company and the Trustee such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of notice to the Company or
the Trustee that such Debenture has been acquired by a bona fide purchaser, the
Company shall execute and upon its request the Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Debenture, a new Debenture of like tenor and principal amount, bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Debenture has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Debenture, pay or authorize the payment of such
Debenture (without surrender thereof except in the case of a mutilated
Debenture) if the applicant for such payment shall furnish to the Company such
security or indemnity as it may require to save it harmless and, in the case of
destruction, loss or theft, evidence to the satisfaction of the Company of the
destruction, loss or theft of such Debenture and of the ownership thereof.
Upon the issuance of any new Debenture under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Debenture issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Debenture shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Debenture shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Debentures duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Debentures.
SECTION 3.7. Payment of Interest; Interest Rights Preserved.
Interest on any Debenture which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Debenture (or one or more
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<PAGE> 37
Predecessor Debentures) is registered at the close of business on the Regular
Record Date for such interest payment.
Any interest on any Debenture which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the registered
Holder on the relevant Regular Record Date by virtue of having been such
Holder; and such Defaulted Interest may be paid by the Company, at its election
in each case, as provided in Clause (1) or Clause (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Debentures (or
their respective Predecessor Debentures) are registered at the close
of business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Debenture and the date of the
proposed payment (the "Special Payment Date"), and at the same time
the Company shall deposit with the Trustee or the Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in
trust as provided in Section 4.3), an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest, or shall make arrangements satisfactory to the Trustee for
such deposit prior to the Special Payment Date, such money when
deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this Clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than fifteen (15) nor less
than ten (10) days prior to the Special Payment Date and not less than
ten (10) days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of
such Special Record Date and shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first class, postage prepaid, to each
Debentureholder at his address as it appears in the Debenture
Register, not less than ten (10) days prior to such Special Record
Date. The Trustee may, in its discretion, in the name and at the
expense of the Company, cause a similar notice to be published at
least once in an Authorized Newspaper in the Place of Payment, but
such publication shall not be a condition precedent to the
establishment of such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date
therefor having been given as aforesaid, such Defaulted Interest shall
be paid on the Special Payment Date to the Persons in whose names the
Debentures (or their respective Predecessor Debentures) are
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<PAGE> 38
registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Debentures may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this Clause, such manner of payment shall be
deemed practicable by the Trustee.
SECTION 3.8. Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name any Debenture is registered as the absolute
owner of such Debenture for the purpose of receiving payment of principal of,
and, subject to Section 3.7, and interest on, such Debenture and for all other
purposes whatsoever, whether or not such Debenture be overdue and
notwithstanding any notation of ownership or other writing thereon, and neither
the Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 3.9. Cancellation.
All Debentures surrendered for payment, registration of transfer or
exchange or conversion shall, if surrendered to any person other than the
Trustee, be delivered to the Trustee and, if not already cancelled, shall be
promptly cancelled by it. The Company may at any time deliver to the Trustee
for cancellation any Debentures previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Debentures so delivered shall be promptly cancelled by the Trustee. No
Debentures shall be authenticated in lieu of or in exchange for any Debentures
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Debentures held by the Trustee shall be destroyed
and the Trustee shall deliver a certificate of destruction to the Company.
SECTION 3.10. Computation of Interest.
Interest on the Debentures shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE IV
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COVENANTS
SECTION 4.1. Payment of Principal and Interest.
The Company will duly and punctually pay the principal of and interest
on the Debentures in accordance with the terms of the Debentures and this
Indenture.
SECTION 4.2. Maintenance of Office or Agency.
The Company will maintain an office or agency in the Place of Payment
where Debentures may be presented or surrendered for payment, where Debentures
may be surrendered for registration of transfer or for exchange or conversion
and where notices and demands to or upon the Company in respect of the
Debentures and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and of any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain such office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be
made or served at the Principal Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee its agent to receive all such
presentations, surrenders, notices and demands.
SECTION 4.3. Money for Debenture Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of or interest or premium, if any,
on any of the Debentures, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal or interest or
premium, if any, so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided, and will promptly notify the
Trustee of its action or failure to so act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of or interest on any of the
Debentures, deposit with a Paying Agent a sum sufficient to pay the principal
or interest or premium, if any, so becoming due, such sum to be held in trust
for the benefit of the Persons entitled to such sums, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
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(1) hold all sums held by it for the payment of principal
of or interest or premium, if any, on the Debentures in trust for the
benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company
(or any other obligor upon the Debentures) in the making of any
payment of principal or interest or premium, if any; and
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same terms as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest or
premium, if any, on any Debenture and remaining unclaimed for two (2) years
after such principal or interest or premium, if any, has become due and
payable, shall be paid to the Company upon Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such
Debenture shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in an Authorized Newspaper
in the Place of Payment, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than thirty (30) days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
The Trustee and the Paying Agent shall promptly pay to the
Company upon Company Request any excess money or securities held by them at any
time.
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SECTION 4.4. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, all material taxes, assessments and
governmental charges levied or imposed upon it or upon its income, profits or
property; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment or charge
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 4.5. Maintenance of Properties.
The Company will, in all material respects, cause all its properties
and the properties of its Subsidiaries used or useful in the conduct of the
business of the Company and its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company or a Subsidiary from
discontinuing the operation and maintenance of any of its properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business and is not disadvantageous in any material respect to the
Debentureholders.
SECTION 4.6. Statement as to Compliance.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company, a written statement signed by the Chairman
of the Board of Directors, the President or a Vice President and by the Chief
Financial Officer, the Treasurer, an Assistant Treasurer, the Controller or an
Assistant Controller of the Company, stating, as to each signatory thereof,
that:
(1) a review of the activities of the Company during such
year and of performance under this Indenture has been made under his
supervision, and
(2) to the best of his or her knowledge, based on such
review, the Company has performed and fulfilled all of its obligations
under this Indenture throughout such year, or, if an Event of Default
shall have occurred, specifying each such Event of Default known to
him and the nature and status thereof.
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The Company will, so long as any of the Debentures are Outstanding,
deliver to the Trustee, forthwith upon becoming aware of any Event of Default,
an Officer's Certificate specifying such Event of Default.
SECTION 4.7. Corporate Existence.
Subject to Article Nine, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory) and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any right or franchise of the Company or its Subsidiaries if the Board
of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company or its Subsidiaries and
that the loss thereof is not disadvantageous in any material respect to the
Debentureholders.
SECTION 4.8. Restrictions on Dividends, Redemptions and Other Payments.
The Company shall not declare or pay any dividends on, or purchase,
redeem or otherwise acquire for value, any of its Capital Stock now or
hereafter outstanding (other than redemption or repurchase of the Debentures in
accordance with the terms of this Indenture) or return any capital to holders
of its Capital Stock as such, or make any distribution of assets to holders of
its Capital Stock as such, unless, from and after the date of any such dividend
declaration (a "Declaration Date") or the date of any such purchase,
redemption, payment or distribution specified above (a "Redemption Date"), the
Company retains cash, cash equivalents (as determined in accordance with
generally accepted accounting principles) or marketable securities (with a
market value as measured on the applicable Declaration Date or Redemption Date)
in an amount not less than the aggregate amount of the two consecutive
semi-annual interest payments that will be due and payable on the Debentures
following such Declaration Date or Redemption Date, as the case may be;
provided, however, that the amount of each semi-annual interest payment made by
the Company with respect to the Debentures following such Declaration Date or
Redemption Date, as applicable, shall be deducted from the aggregate amount of
cash or cash equivalents which the Company shall be required to retain pursuant
to the foregoing provision.
SECTION 4.9. Restrictions on Certain Issuances or Pledges of the Capital Stock
of BankAtlantic, A Federal Savings Bank
The Company shall not permit BankAtlantic, A Federal Savings Bank
("BankAtlantic") to issue to BFC Financial Corporation, a
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Florida corporation ("BFC"), or Mr. Alan B. Levan, any Capital Stock or debt
securities of BankAtlantic or pledge any of the Capital Stock of BankAtlantic
now or hereafter owned by the Company in favor of BFC or Mr. Levan.
ARTICLE V
DEBENTUREHOLDERS' LISTS AND REPORTS BY THE
TRUSTEE AND THE COMPANY
SECTION 5.1. Company to Furnish Trustee Names and Addresses of
Debentureholders.
The Company will furnish or cause to be furnished to the Trustee (i)
not more than ten (10) days after each Regular Record Date, a list, in such
form as the Trustee may reasonably require, of the names and addresses of the
Holders of Debentures as of such Regular Record Date; provided, however, that
the Company shall not be required to furnish the Trustee the names and
addresses of the Holders of Debentures if the Trustee receives such names and
addresses of the Holders of Debentures in its capacity as Debenture Registrar.
SECTION 5.2. Preservation of Information; Communications to
Debentureholders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders of Debentures
contained in the most recent list furnished to the Trustee as provided in
Section 5.1 and the names and addresses of Holders of Debentures received by
the Trustee at any time that it is acting as Debenture Registrar (if so
acting). The Trustee may destroy any list furnished to it as provided in
Section 5.1 upon receipt of a new list so furnished.
(b) The Trustee shall comply with Section 312(b) of the TIA. The
Trustee, the Company, and any other Person shall have the protection of Section
312(c) of the TIA.
SECTION 5.3. Reports by Trustee.
(a) So long as the Debentures are Outstanding, within sixty (60)
days after May 15 of each year (the "Reporting Date"), the Trustee shall, if
required by Section 313(a) of the TIA, transmit by mail to the Company and all
Debentureholders, as their names and addresses appear in the Debenture
Register, a brief report dated as of such Reporting Date that complies with
Section 313(a) of the TIA.
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(b) A copy of each such report shall, at the time of such
transmission to the Company and the Debentureholders, be filed by the Trustee
with each securities exchange upon which the Debentures are listed, and also
with the Commission. The Company will notify the Trustee when the Debentures
are listed on any securities exchange.
SECTION 5.4. Reports by Company.
The Company will:
(1) file with the Trustee, within fifteen (15) days after
the Company is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from time to
time by rules and regulations prescribe) which the Company may be required to
file with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of said Sections, then it
will file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities exchange
as may be prescribed from time to time in such rules and regulations;
(2) file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with respect to
compliance by the Company with the conditions and covenants of this Indenture
as may be required from time to time by such rules and regulations;
(3) transmit by mail to all Debentureholders as their
names and addresses appear in the Debenture Register, such summaries of any
information, documents and reports required to be filed by the Company pursuant
to paragraphs (1) and (2) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission; and
(4) furnish to the Trustee, not less often than annually,
a brief certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants set forth in Article
Four of this Indenture. For purposes of this paragraph, such compliance shall
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be determined without regard to any period of grace or requirement of notice
provided under the Indenture.
ARTICLE VI
REMEDIES
SECTION 6.1. Events of Default.
"Event of Default", wherever used herein means any one of the
following events, continued for the period of time, if any, and after the
giving of the notice, if any, therein designated, (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of any interest upon any
Debenture when it becomes due and payable, and continuance of such
default for a period of thirty (30) days; or
(2) default in the payment of the principal of any
Debenture at its Maturity; or
(3) default in the performance, or breach, of any
material covenant or warranty of the Company in this Indenture (other
than a covenant or warranty a default in the performance or the breach
of which is elsewhere in this Section specifically dealt with), and
continuance of such default or breach for a period of sixty (60) days
after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the
Holders of at least twenty-five percent (25%) in aggregate principal
amount of the Debentures then Outstanding, a written notice specifying
such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or
(4) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of the Company under the Federal Bankruptcy Act or any other
applicable Federal or State law, or appointing a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, and the continuance of any
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such decree or order unstayed and in effect for a period of ninety
(90) consecutive days; or
(5) the institution by the Company of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under the Federal Bankruptcy Act or any other similar
applicable Federal or State law, or the consent by it to the filing of
any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or the making by
it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they
become due, or the taking of corporate action by the Company in
furtherance of any such action.
SECTION 6.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default described in paragraphs (1), (2), (4) or (5) of
Section 6.1 occurs and is continuing, then and in every such case the Trustee
or the Holders of not less than thirty percent (30%) in aggregate principal
amount of the Debentures then Outstanding may declare the principal of all the
Debentures to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by the Debentureholders), and upon any
such declaration, such principal shall become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Debentures then Outstanding, by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(1) the Company has paid or deposited with the Trustee a
sum sufficient to pay:
(a) all overdue interest on all Debentures;
(b) the principal of any Debentures which have
become due otherwise than by such declaration of acceleration
and interest thereon at the rate borne by the Debentures; and
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(c) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel;
and
(2) all Events of Default, other than the non-payment of
the principal of Debentures which have become due solely by such
acceleration, have been cured or waived as provided in Section 6.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 6.3. Suits for Enforcement by Trustee.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Debentureholders by such appropriate judicial proceedings, as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 6.4. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company, or any other obligor upon the
Debentures or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Debentures
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(1) to file and prove a claim for the whole amount of
principal and interest owing and unpaid in respect of the Debentures
and to file such other papers or documents as may be necessary or
advisable in order to have the claim of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the
Debentureholders allowed in such judicial proceeding, and
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(2) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each
Debentureholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Debentureholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Debentureholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Debentures or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Debentureholder in any such proceeding.
SECTION 6.5. Trustee May Enforce Claims Without Possession of Debentures.
All rights of action and claims under this Indenture or the Debentures
may be prosecuted and enforced by the Trustee without the possession of any of
the Debentures or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Debentures in respect of which such
judgment has been recovered.
SECTION 6.6. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and
in case of the distribution of such money on account of principal or interest,
upon presentation of the Debentures and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
First: To the Trustee for amounts due under Section 7.7;
Second: To the Debentureholders for amounts then due and unpaid upon
the Debentures for principal and interest, in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to
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the amounts due and payable on such Debentures for principal and interest,
respectively; and
Third: To the Company.
SECTION 6.7. Limitation on Suits.
No Holder of any Debenture shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(1) such Holder has previously given written notice to
the Trustee and the Company of a continuing Event of Default;
(2) the Holders of not less than 30% in aggregate
principal amount of the Outstanding Debentures shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for sixty (60) days after its receipt of
such notice, request and offer of indemnity has failed to institute
any such proceedings; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such sixty (60) day period by the
Holders of a majority in principal amount of the Outstanding
Debentures;
it being understood and intended that no one or more Holders of Debentures
shall have any right in any manner whatever by virtue of, or by availing of,
any provision of this Indenture to affect, disturb or prejudice the rights of
any other Holders or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the Holders
of Debentures.
SECTION 6.8. Unconditional Right of Debentureholders to Receive Principal
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Debenture shall have the right which is absolute and unconditional to
receive payment of the principal of and interest on such Debenture on the
Stated Maturity expressed in such
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Debenture, and to institute suit for the enforcement of any such payment, and
such right shall not be impaired without the consent of such Holder.
SECTION 6.9. Restoration of Rights and Remedies.
If the Trustee or any Debentureholder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Debentureholder, then and in every such case the
Company, the Trustee and the Debentureholders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Debentureholders shall continue as though no such proceeding
had been instituted.
SECTION 6.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures in the last
paragraph of Section 3.6, no right or remedy herein conferred upon or reserved
to the Trustee or to the Debentureholders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 6.11. Delay or Omission Not A Waiver.
No delay or omission of the Trustee or of any Holder of any Debenture
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Debentureholders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the
Debentureholders, as the case may be.
SECTION 6.12. Control by Debentureholders.
The Holders of a majority in principal amount of the Outstanding
Debentures shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that:
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(1) such direction shall not be in conflict with any rule
of law or with this Indenture, and
(2) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction.
SECTION 6.13. Waiver of Past Defaults.
The Holders of a majority in principal amount of the Outstanding
Debentures may, on behalf of the Holders of all the Debentures, waive any past
default hereunder and its consequences, except a default:
(1) in the payment of the principal of or interest on any
Debenture, or
(2) in respect of a covenant or provision hereof which
under Article Eight cannot be modified or amended without the consent
of the Holders of each Outstanding Debenture affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 6.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Debenture
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken
or omitted by it as Trustee, the filing by any party litigant in such suit of
an undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Debentureholder, or group of
Debentureholders, holding in the aggregate more than 10% in principal amount of
the Outstanding Debentures, or to any suit instituted by any Debentureholder
for the enforcement of the payment of the principal of, or interest on, any
Debenture on or after the Stated Maturity expressed in such Debenture.
SECTION 6.15. Waiver of Stay or Extension Laws.
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The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE VII
THE TRUSTEE
SECTION 7.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this Indenture
against the Trustee, and
(2) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements
of this Indenture.
(b) In case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, or its own wilful misconduct, except that:
(1) this Subsection shall not be construed to limit the
effect of Subsection (a) of this Section;
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(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it shall
be proved that the Trustee was negligent in ascertaining the pertinent
facts;
(3) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a majority in
principal amount of the Outstanding Debentures relating to the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture; and
(4) no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably
assured to it.
(d) Whether or not therein expressly so provided, every provision
of this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 7.2. Notice of Defaults.
Within ninety (90) days after the occurrence of any default hereunder,
the Trustee shall transmit by mail to all Debentureholders, as their names and
addresses appear in the Debenture Register, notice of such default hereunder
known to the Trustee, unless such default shall have been cured or waived;
provided, however, that, except in the case of any default of the character
specified in Section 6.1(1) or (2), the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors or Responsible Officers of the
Trustee in good faith determine that the withholding of such notice is in the
interests of the Debentureholders; and provided, further, that in the case of
any default of the character specified in Section 6.1(3), no such notice to
Debentureholders shall be given until at least sixty (60) days after the
occurrence thereof. For the purpose of this Section, "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default.
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SECTION 7.3. Certain Rights of Trustee.
Except as otherwise provided in Section 7.1:
(1) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(2) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company
Order and any resolution of the Board of Directors shall be
sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(4) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Debentureholders pursuant to this
Indenture, unless such Debentureholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in compliance with such
request or direction;
(6) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture or other paper or document
but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney;
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(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(8) except with respect to Section 4.1 herein, the
Trustee shall have no duty to inquire as to the performance of the
Company's covenants in Article Four hereof. In addition, the Trustee
shall not be deemed to have knowledge of any Event of Default except
(i) any Event of Default occurring pursuant to Sections 6.1(1) and
6.1(2) or (ii) any Event of Default of which the Trustee shall have
received written notification or obtained actual knowledge.
SECTION 7.4. Not Responsible for Recitals or Issuance of Debentures.
The recitals contained herein and in the Debentures, except the
certificates of authentication, shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Debentures. The Trustee shall not be accountable for the
use or application by the Company of Debentures or the proceeds thereof.
SECTION 7.5. May Hold Debentures.
The Trustee, any Paying Agent, Debenture Registrar or any other agent
of the Company, in its individual or any other capacity, may become the owner
or pledgee of Debentures and, subject to Sections 7.8 and 7.12, if operative,
may otherwise deal with the Company with the same rights it would have if it
were not Trustee, Paying Agent, Debenture Registrar or such other agent.
SECTION 7.6. Money Held in Trust.
Money held by the Trustee in trust hereunder shall be held in a
separate interest-bearing account and such funds shall at all times be
segregated from all other funds and assets owned or held by the Trustee. Any
interest on any money received by the Trustee hereunder shall be for the
benefit of the Company and shall be paid to the Company upon Company Request.
SECTION 7.7. Compensation and Reimbursement.
The Company agrees:
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(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
SECTION 7.8. Corporate Trustee Required; Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any State or Territory or of the District of Columbia or a
corporation or other person permitted to act as Trustee by the Commission,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $25,000,000, and subject to
supervision or examination by Federal or State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. Neither the Company nor any of its Affiliates shall
serve as Trustee hereunder. The Trustee shall be subject to the provisions of
Section 310(b) of the Trust Indenture Act. This Indenture shall always have a
Trustee who satisfies the requirements of Section 310(a)(1) of the Trust
Indenture Act.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
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SECTION 7.9. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of
a successor trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 7.10.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within thirty (30) days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders
of a majority in principal amount of the Outstanding Debentures, delivered to
the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions
of Section 310(b) of the Trust Indenture Act after written request
therefor by the Company or by any Debentureholder who has been a bona
fide Holder of a Debenture or Debentures for at least six (6) months;
or
(2) the Trustee shall cease to be eligible under Section
310(a) of the Trust Indenture Act and shall fail to resign after
written request therefor by the Company or by any such
Debentureholder; or
(3) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee and appoint a successor trustee, or (ii) subject to the provisions of
Section 6.14, any Debentureholder who has been a bona fide Holder of a
Debenture for at least six (6) months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee.
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(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee.
If, within one (1) year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding Debentures
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Debentureholders and accepted appointment in the manner hereinafter provided,
any Debentureholder who has been a bona fide Holder of a Debenture for at least
six (6) months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Debentures as their names and addresses appear in the Debenture
Register. Each notice shall indicate the name of the successor Trustee and the
address of its Principal Corporate Trust Office.
SECTION 7.10. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the registration or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on request of the Company or
the successor Trustee, such retiring Trustee shall, upon payment of its
charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee, and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder, subject nevertheless to its
lien, if any, provided for in Section 7.7. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all of such
rights, power and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
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SECTION 7.11. Merger, Conversion, Consolidation or Succession to Business of
Trustee.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Debentures shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Debentures so authenticated with the same
effect as if the successor Trustee had itself authenticated such Debentures.
SECTION 7.12. Preferential Collection of Claims against Company.
The Trustee shall comply with Section 311(a) of the Trust Indenture
Act, excluding any creditor relationship listed in Section 311(b) of the Trust
Indenture Act. A trustee who has resigned or been removed shall be subject to
Section 311(a) of the Trust Indenture Act to the extent indicated therein.
ARTICLE VIII
SUPPLEMENTAL INDENTURES
SECTION 8.1. Supplemental Indentures Without Consent of Debentureholders.
Without the consent of the Holders of any Debentures, the Company,
when authorized by a Board Resolution, and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to
the Company, and the assumption by any such successor of the covenants
of the Company herein and in the Debentures contained; or
(2) to add to the covenants of the Company, for the
benefit of the Holders of the Debentures, or to surrender any right or
power herein conferred upon the Company; or
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(3) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provisions of this Indenture, provided such action shall not
adversely affect the interests of the Holders of the Debentures; or
(4) to convey, transfer, assign, mortgage or pledge to or
with the Trustee any property or assets which the Company may desire
to convey, transfer, assign, mortgage or pledge; or
(5) to add to or change any of the provisions of this
Indenture to such extent as shall be necessary to permit or facilitate
the issuance of Debentures in bearer form, registrable or not
registrable as to principal, and with or without interest coupons.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer, assignment, mortgage or pledge of any property
thereunder, but the Trustee shall not be obligated to, but may in its
discretion, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section 8.1 may be executed by the Company and the Trustee without the consent
of the Holders of any of the Debentures at the time Outstanding,
notwithstanding any of the provisions of Section 8.2.
SECTION 8.2. Supplemental Indentures With Consent of Debentureholders.
With the consent of the Holders of not less than 66 2/3% in principal
amount of the Outstanding Debentures, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board Resolution,
and the Trustee may amend this Indenture or the Debentures and enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of the
Debentures under this Indenture; provided, however, that no such amendment or
supplemental indenture shall, without the consent of the Holders of each
Outstanding Debenture affected thereby:
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(1) change the Stated Maturity of the principal of, or
interest on, any Debenture, or reduce the principal amount thereof,
the rate of interest or premium, if any, thereon or change any Place
of Payment where, or the coin or currency in which, any Debentures or
the interest or premium, if any, thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof; or
(2) except as otherwise permitted or contemplated in
Article Thirteen hereof, increase the Conversion Price of any
Debenture; or
(3) make any change in Section 6.8; or
(4) reduce the percentage in principal amount of the
Outstanding Debentures, the consent of whose Holders is required for
any such supplemental indenture or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture; or
(5) modify any of the provisions of this Section or
Section 6.13, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Debenture affected
thereby.
It shall not be necessary for any Act of Debentureholders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 8.3. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 7.1) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
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SECTION 8.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and the respective
rights, limitations of rights, obligations, duties and immunities under this
Indenture of the Trustee, the Company and the Holders of Debentures shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and such supplemental indenture
shall form a part of this Indenture for any and all purposes; and every Holder
of Debentures theretofore or thereafter authenticated and delivered thereunder
shall be bound thereby.
SECTION 8.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the TIA as then in effect.
SECTION 8.6. Reference in Debentures to Supplemental Indentures.
Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Debentures so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture, may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Debentures.
SECTION 8.7. Subordination Unimpaired.
No supplemental indenture executed pursuant to this Article shall
affect the superior position of the holders of Senior Indebtedness with respect
to such Debentures.
ARTICLE IX
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 9.1. Company May Consolidate, etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other
corporation or convey or transfer its property and assets substantially as an
entirety to any Person, unless:
(1) the corporation formed by such consolidation or into
which the Company is merged or the Person which acquires by
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conveyance or transfer the properties and assets of the Company
substantially as an entirety shall be a corporation organized and
existing under the laws of the United States of America or any State
or the District of Columbia, and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, the due and punctual payment of
the principal of and interest on all the Debentures and the
performance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(2) immediately after giving effect to such transaction,
no Event of Default, and no event which, after notice or lapse of time
or both, would become an Event of Default, shall have happened and be
continuing; and
(3) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance or transfer and such supplemental
indenture comply with this Article and that all conditions precedent
herein provided for relating to such transaction have been complied
with.
SECTION 9.2. Successor Corporation Substituted.
Upon any consolidation or merger of the Company into another entity,
or any conveyance or transfer of the properties and assets of the Company
substantially as an entirety in accordance with Section 9.1, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such conveyance or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor corporation had been
named as the Company herein.
SECTION 9.3. Limitation on Lease of Properties as Entirety.
The Company shall not lease its properties and assets substantially as
an entirety to any Person.
ARTICLE X
SATISFACTION, DISCHARGE AND DEFEASANCE
SECTION 10.1. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange or conversion of
Debentures herein expressly provided for), and the
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Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when
(1) either:
(a) all Debentures theretofore authenticated and
delivered (other than (i) Debentures which have been destroyed, lost
or stolen and which have been replaced or paid as provided in Section
3.6 and (ii) Debentures for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as
provided in Section 4.3) have been delivered to the Trustee cancelled
or for cancellation at any time after the Distribution Date; or
(b) all such Debentures not theretofore delivered
to the Trustee cancelled or for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one (1) year,
and the Company, in the case of (i) or (ii) above, has deposited or
caused to be deposited with the Trustee, as trust funds in trust for
the purpose, an amount in money or noncallable U.S. Government
Obligations sufficient to pay and discharge the entire indebtedness on
such Debentures not theretofore delivered to the Trustee cancelled or
for cancellation, for principal and interest to the date of such
deposit (in the case of Debentures which have become due and payable)
or to the date of redemption or the Stated Maturity;
(2) the Company has paid or caused to be paid all other
sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
However, the obligations in Article Thirteen shall survive until the Debentures
are no longer outstanding. Thereafter, notwithstanding the satisfaction and
discharge of this Indenture, the obligations of the Company to the Trustee
under Section 7.7 shall survive.
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SECTION 10.2. Application of Trust Money.
All money deposited with the Trustee pursuant to Section 10.1 shall be
held in trust and applied by it, in accordance with the provisions of the
Debentures and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent), as the
Trustee may determine, to the Persons entitled thereto, of the principal and
interest for whose payment such money has been deposited with the Trustee.
Money held by the Trustee in trust hereunder shall be held in a separate
interest bearing account and such funds shall at all times be segregated from
all other funds and assets owned or held by the Trustee. Any interest on any
money received by the Trustee hereunder shall be for the benefit of the Company
and shall be paid to the Company on Company Request.
Any money deposited with the Trustee in trust for the payment of the
principal of and interest on any Debenture pursuant to Section 10.1 and
remaining unclaimed for two (2) years after such principal or interest has
become due and payable, shall be paid to the Company on Company Request; and
the Holder of such Debenture shall thereafter, as an unsecured general
creditor, look to the Company for payment thereof, and all liability of the
Trustee with respect to such trust money shall thereupon cease; provided,
however, that the Trustee, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in an Authorized
Newspaper in the Place of Payment, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than thirty (30)
days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
The Trustee shall promptly pay to the Company upon Company
Request any excess money or securities held by it at any time.
SECTION 10.3. Satisfaction, Discharge and Defeasance of Debentures.
(a) The Company will be deemed to have been Discharged
(as defined below) from its obligations with respect to the Debentures; or
(b) The Company will cease to be under any obligation to
comply with any term, provision or condition set forth in (i) Article Nine or
(ii) the terms, provisions or conditions of the Debentures (provided, however,
that the Company may not cease to comply with any obligations as to which it
may not be Discharged pursuant to the definition of "Discharged"), if, in the
case of (a) and (b), with respect to the Debentures on the 91st day after the
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applicable conditions set forth below in (x) and (y) have been satisfied:
(x)(1) the Company has paid or caused to be
paid all other sums payable with respect to the Outstanding Debentures
(in addition to any required under (y)); and
(2) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent herein provided for relating to
the satisfaction and discharge of the entire indebtedness on all
Outstanding Debentures have been complied with;
(y)(1) the Company shall have deposited or
caused to be deposited irrevocably with the Trustee as a trust fund
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of the Debentures (i) an amount in the coin or
currency of the United States of America as at the time of such
deposit is legal tender for the payment of public and private debts or
(ii) U.S. Government Obligations which through the payment of interest
and principal in respect thereof in accordance with their terms will
provide, not later than the due date of any payment of principal and
interest under the Debentures, money in an amount or (iii) a
combination of (i) and (ii) sufficient (in the opinion with respect to
(ii) and (iii) of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee) to pay and discharge each installment of principal of,
and interest on, the outstanding Debentures on the dates such
installments of interest or principal are due;
(2)(i) no Event of Default or event
(including such deposit) which with notice or lapse of time or both
would become an Event of Default shall have occurred and be continuing
on the date of such deposit, (ii) no Event of Default as defined in
clause (4) or (5) of Section 6.1, or event which with notice or lapse
of time or both would become an Event of Default under either such
clause, shall have occurred within 90 days after the date of such
deposit and (iii) such deposit and the related intended consequence
under (a) or (b) will not result in any default or event of default
under any material indenture, agreement or other instrument binding
upon the Company or any Subsidiary or any of their properties; and
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(3) the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that Holders of the
Debentures will not recognize income, gain or loss for Federal income
tax purposes as a result of the Company's exercise of its option under
this Section 10.3 and will be subject to Federal income tax in the
same amount, in the same manner and at the same times as would have
been the case if such option had not been exercised.
Any deposits with the Trustee referred to in clause (y)(1)
above will be made under the terms of an escrow trust agreement in form and
substance satisfactory to the Trustee.
"Discharged" means that the Company will be deemed to have
paid and discharged the entire indebtedness represented by, and obligations
under, the Debentures and to have satisfied all the obligations under this
Indenture relating to the Debentures (and the Trustee, at the expense of the
Company, will execute proper instruments acknowledging the same), except (A)
the rights of Holders thereof to receive, from the trust fund described in
clause (y)(1) above, payments of the principal of and the interest on the
Debentures when such payments are due, (B) the Company's obligations with
respect to the Debentures under Sections 3.5, 3.6., 10.2, 4.2, 4.3 (penultimate
paragraph only) and Article Thirteen and the Company's obligations to the
Trustee under Sections 7.7 and 7.9 and (C) the rights, powers, trusts, duties
and immunities of the Trustee hereunder, will survive such discharge. The
Company will reimburse the trust fund for any loss suffered by it as a result
of any tax, fee or other charge imposed on or assessed against deposited U.S.
Government Obligations or any principal, premium or interest paid on such U.S.
Government Obligations, and, subject to the provisions of Section 7.7, will
indemnify the Trustee against any claims made against the Trustee in connection
with any such loss.
ARTICLE XI
SUBORDINATION OF DEBENTURES
SECTION 11.1. Subordination.
The Company covenants and agrees, and each Holder of Debentures, by
his acceptance thereof, likewise covenants and agrees, that the indebtedness
represented by the Debentures and the payment of the principal of, interest and
premium, if any, on each and all of the Debentures is expressly subordinated,
to the extent and in the manner hereinafter set forth, in right of payment to
the prior payment in full of all Senior Indebtedness, and that the
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subordination is for the benefit of the holder of Senior Indebtedness.
SECTION 11.2. Distribution of Assets, etc.
No payment on account of principal of or interest on the Debentures
shall be made, and no Debentures shall be purchased or otherwise acquired, and
no funds shall be set aside for the purchase of any Debentures, either directly
or indirectly, by the Company, if a default in the payment of the principal of
or premium, if any, or interest on any Senior Indebtedness shall have occurred
and continued beyond any applicable period of grace so as to entitle the holder
of such Senior Indebtedness to accelerate its maturity, unless and until such
default shall have been cured or waived or shall have ceased to exist or moneys
for the payment thereof shall have been duly set aside.
In the event of any distribution of assets of the Company upon any
dissolution, winding up, total or partial liquidation, or reorganization of the
Company, whether in bankruptcy, insolvency or receivership proceedings, or upon
any assignment for the benefit of creditors or any other marshalling of the
assets and liabilities of the Company, or otherwise,
(1) all of the principal of and premium, if any, and
interest on all Senior Indebtedness shall first be paid in full or
moneys for the full payment thereof shall have been duly set aside
before any payment is made upon the principal of or interest on any
Debenture, and
(2) any payment or distribution of assets or securities
of the Company of any kind or character, whether in cash, property or
securities (other than securities of the Company as reorganized or
readjusted, or securities of the Company or of any other corporation
provided for by a plan of reorganization or readjustment, the payment
of which is subordinated to the payment of all principal of and
premium, if any, and interest on such Senior Indebtedness as may at
the time be outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment,
provided that the obligations represented by all notes or other
evidences of Senior Indebtedness are assumed by the new corporation,
if any, resulting from any such reorganization or readjustment and
provided further that the rights of the holders of Senior Indebtedness
are not, without the consent of such holders, altered by such
reorganization or readjustment), to which the Debentureholders would
be entitled except for the provisions of this Article, shall be paid
by the liquidating trustee or agent or other Person making such
payment or distribution, whether a trustee in bankruptcy, a receiver
or
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liquidating trustee or otherwise, to the holders of Senior
Indebtedness (pro rata to each such holder on the basis of the
respective amounts of Senior Indebtedness held by such holder) or
their representatives, to the extent necessary to pay the principal of
and premium, if any, and interest on all Senior Indebtedness in full,
after giving effect to any concurrent payment or distribution to the
holders of Senior Indebtedness, before any payment or distribution is
made to the Debentureholders or to the Trustee.
If the payment of principal of and any interest on the Debentures is
accelerated because of an Event of Default, no payment on account of principal
of or interest on the Debentures shall be made until all of the principal of
and premium, if any, and interest on all Senior Indebtedness has been paid in
full or due provision has been made for such payment.
In the event that, notwithstanding the foregoing, any payment or
distribution of any character or any security, whether in cash, securities or
other property (other than securities of the Company as reorganized or
readjusted, or securities of the Company or of any other corporation provided
for by a plan of reorganization or readjustment, the payment of which is
subordinated to the payment of all principal of and premium, if any, and
interest on such Senior Indebtedness as may at the time be outstanding and to
any securities issued in respect thereof under any such plan of reorganization
or readjustment provided that the obligations represented by all notes or other
evidences of Senior Indebtedness are assumed by the new corporation, if any,
resulting from any such reorganization or readjustment and provided further
that the rights of the holders of Senior Indebtedness are not, without the
consent of such holders, altered by such reorganization or readjustment), shall
be received by the Trustee or any Holder in contravention of any of the terms
hereof, such payment or distribution or security shall be received in trust for
the benefit of, and shall be paid over or delivered and transferred to, the
holders of the Senior Indebtedness at the time outstanding in accordance with
priorities then existing among such holders for application to the payment of
all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
such Senior Indebtedness in full. In the event of the failure of the Trustees
or any Holder to endorse or assign any such payment, distribution or security,
each holder of Senior Indebtedness is hereby irrevocably authorized to endorse
or assign the same.
SECTION 11.3. Subrogation.
Subject to the payment in full of all Senior Indebtedness, the
Debentureholders shall be subrogated (equally and ratably with the holders of
the Company's currently outstanding 9% Subordinated
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Debentures due 2005 and all other indebtedness of the Company which, by its
express terms, ranks on a parity with the Debentures and is entitled to like
rights of subrogation) to the rights of the holders of Senior Indebtedness to
receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Indebtedness until all amounts owing on the
Debentures shall be paid in full, and, as between the Company, its creditors
other than holders of Senior Indebtedness, and the Debentureholders, no such
payment or distribution made to the holders of Senior Indebtedness by virtue of
this Article which otherwise would have been made to the Debentureholders,
shall be deemed to be a payment by the Company on account of the Senior
Indebtedness, it being understood that the provisions of this Article are and
are intended solely for the purpose of defining the relative rights of the
Debentureholders, on the one hand, and the holders of the Senior Indebtedness,
on the other hand.
SECTION 11.4. Obligation of the Company Unconditional.
Nothing contained in this Article or elsewhere in this Indenture or in
the Debentures is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness, and the
Debentureholders, the obligation of the Company, which is absolute and
unconditional, to pay to the Debentureholders the principal of and interest on
the Debentures as and when the same shall become due and payable in accordance
with their terms, or affect the relative rights of the Debentureholders and
creditors of the Company other than the holders of Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or any Debentureholder
from exercising all remedies otherwise permitted by applicable law upon an
Event of Default under this Indenture, subject to the rights, if any, under
this Article of the holders of Senior Indebtedness in respect of cash, property
or securities of the Company received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee and the Debentureholders shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
any such dissolution, winding up, liquidation or reorganization proceeding
affecting the affairs of the Company is pending and the Trustee, subject to the
provisions of Section 7.1, and the Debentureholders shall be entitled to rely
upon a certificate of the liquidating trustee or agent or other person making
any payment or distribution to the Trustee or to the Debentureholders for the
purpose of ascertaining the persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon,
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the amount paid or distributed thereon, and all other facts pertinent thereto
or to this Article.
SECTION 11.5. Payments on Debentures Permitted.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Debentures shall affect the obligation of the Company to make, or
prevent the Company from making, payment of the principal of or interest on the
Debentures in accordance with the provisions hereof, except as otherwise
provided in this Article.
SECTION 11.6. Effectuation of Subordination by Trustee.
Each Holder of Debentures, by his acceptance thereof, authorizes and
directs the Trustee in his behalf to take such action at the request of the
Company as may be necessary or appropriate to effectuate the subordination
provided in this Article and appoints the Trustee his attorney-in-fact for any
and all such purposes.
SECTION 11.7. Knowledge of Trustee.
Notwithstanding the provisions of this Article or any other provisions
of this Indenture, but subject to the provisions of Section 7.1, the Trustee
shall not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment of moneys to or by the Trustee, or the
taking of any other action by the Trustee under this Article Eleven, unless and
until the Trustee shall have received written notice thereof, in the manner
required by Section 1.5, from the Company, any Debentureholder, any Paying
Agent, any Debenture Registrar, or the holder or representative of any class of
Senior Indebtedness.
SECTION 11.8. Trustee May Hold Senior Indebtedness.
The Trustee shall be entitled to all the rights set forth in this
Article with respect to any Senior Indebtedness at the time held by it, to the
same extent as any other holder of Senior Indebtedness, and nothing in Section
7.12 or elsewhere in this Indenture shall deprive the Trustee of any of its
rights as such holder.
SECTION 11.9. Rights of Holders of Senior Indebtedness Not Impaired.
No right of any present or future holder of any Senior Indebtedness to
enforce the subordination herein shall at any time or in any way be prejudiced
or impaired by any act or failure to act on the part of the Company or by any
non-compliance by the
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Company with the terms, provisions and covenants of this Indenture, regardless
of any knowledge thereof any such holders may have or be otherwise charged
with.
SECTION 11.10. Alteration of Senior Indebtedness.
The Holders of any Senior Indebtedness may extend, renew, modify or
amend the terms of such Senior Indebtedness or any security therefor and may
release, sell or exchange such security and otherwise deal freely with the
Company, all without notice to or consent of the Debentureholders and without
affecting the liabilities and obligations of the Company, the Trustee or the
Debentureholders under this Indenture or the Debentures.
SECTION 11.11. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee, provided,
however, that Sections 11.7, 11.8, and 11.10 shall not apply to the Company if
it acts as Paying Agent.
SECTION 11.12. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if
the Trustee shall in good faith mistakenly pay over or distribute to Holders of
Debentures or to the Company or to any other person cash, property or
securities to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article Eleven or otherwise.
ARTICLE XII
REDEMPTION
SECTION 12.1. Mandatory Redemption.
The Company shall have no mandatory redemption or sinking fund
obligations with respect to the Debentures.
SECTION 12.2. Optional Redemption.
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The Company may redeem all or any portion of the Debentures at any
time and from time to time after ____________, 1999, upon the terms and at the
redemption prices set forth in the form of Debenture included in Section 2.1
hereof; provided, however, that the Debentures may be redeemed prior to
___________, 1999 if the closing sale price of the Class A Common Stock on the
Nasdaq National Market System or a national securities exchange or automated
quotation system (or if the Class A Common Stock shall not then be traded on
the Nasdaq National Market System or listed on an exchange or quoted on a
quotation system, as reported by the National Quotation Bureau, Inc. or similar
reporting service) equals or exceeds 140% of the then effective Conversion
Price for at least thirty (30) consecutive trading days ending within five (5)
business days of the date of the related notice of redemption under Section
12.5. Any redemption made prior to ___________, 1999 shall be at a redemption
price equal to 100% of principal amount plus accrued interest, if any, to the
redemption date. Any redemption pursuant to this Section 12.2 shall be made
pursuant to the provisions of Section 12.3 through 12.8 hereof.
SECTION 12.3. Notices to Trustee.
If the Company elects to redeem Debentures pursuant to the optional
redemption provisions of Section 12.2 hereof, it shall furnish to the Trustee,
at least thirty (30) days but not more than sixty (60) days before a redemption
date, an Officers' Certificate setting forth the redemption date, the principal
amount of Debentures to be redeemed and the redemption price.
SECTION 12.4. Selection of Debentures to be Redeemed.
If less than all of the Debentures are to be redeemed, the Trustee
shall select the Debentures to be redeemed among the Holders of the Debentures
pro rata or in accordance with a method the Trustee considers fair and
appropriate (and in such manner as complies with applicable legal and stock
exchange requirements, if any). In the event of partial redemption by lot, the
particular Debentures to be redeemed shall be selected, unless otherwise
provided herein, not less than thirty (30) nor more than sixty (60) days prior
to the redemption date by the Trustee from the outstanding Debentures not
previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Debentures selected for redemption and, in the case of any Debenture selected
for partial redemption, the principal amount thereof to be redeemed.
Debentures and portions of them selected shall be in amounts of $1,000 or whole
multiples of $1,000; except that if all of the Debentures of a Holder are to be
redeemed, the entire outstanding amount of Debentures held by such Holder
shall be redeemed. Except as provided
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in the preceding sentence, provisions of this Indenture that apply to
Debentures called for redemption also apply to portions of Debentures called
for redemption.
SECTION 12.5. Notice of Redemption.
At least thirty (30) days but not more than sixty (60) days before a
redemption date, the Company shall mail a notice of redemption to each Holder
whose Debentures are to be redeemed.
The notice shall identify the Debentures to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) if any Debenture is being redeemed in part, the
portion of the principal amount of such Debenture to be redeemed and that,
after the redemption date, upon surrender of such Debenture, a new Debenture or
Debentures in principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Debentures called for redemption must be
surrendered to the Paying Agent to collect the redemption price; and
(6) that interest on Debentures called for redemption
ceases to accrue on and after the redemption date.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that
the Company shall deliver to the Trustee, at least thirty-five (35) days prior
to the redemption date, an Officers' Certificate requesting that the Trustee
give such notice and setting forth the information to be stated in such notice
as provided in the preceding paragraph.
SECTION 12.6. Effect of Notice of Redemption.
Once notice of redemption is mailed, Debentures called for redemption
and not converted into Class A Common Stock pursuant to Article Thirteen
hereof become due and payable on the redemption date at the redemption price.
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SECTION 12.7. Deposit of Redemption Price.
One Business Date prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Debentures to be redeemed on
that date. The Trustee or the Paying Agent shall return to the Company any
money not required for that purpose.
If the Company complies with the preceding paragraph, interest on the
Debentures to be redeemed will cease to accrue on the applicable redemption
date, whether or not such Debentures are presented for payment. If any
Debenture called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest will be paid on the unpaid principal, from the redemption
date until such principal is paid, and on any interest not paid on such unpaid
principal, in each case at the rate provided in the Debentures and in Section
4.1 hereof.
SECTION 12.8. Debentures Redeemed in Part.
Upon surrender of a Debenture that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder at the expense of
the Company a new Debenture equal in principal amount to the unredeemed portion
of the Debenture surrendered.
SECTION 12.9. Repurchasing of Debentures.
Nothing herein shall prohibit the Company from repurchasing from time
to time all or any portion of the Debentures in the open market or in privately
negotiated transactions.
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ARTICLE XIII
CONVERSION OF DEBENTURES
SECTION 13.1. Conversion Privilege.
Subject to and upon compliance with the provisions of this Article
Thirteen and the terms of the form of Debenture set forth in Section 2.3
hereof, at the option of the Holder, any Debenture or any portion of the
principal amount thereof which is $1,000 or a whole multiple thereof, may, at
any time on or before ____________, 2006 [Maturity Date], or in case such
Debenture or some portion thereof shall be called for redemption prior to such
date, then, with respect to such Debenture or portion thereof, until and
including, but not after, the close of business on the fifth (5th) business day
next preceding the date fixed for such redemption, be converted at the
principal amount thereof into Class A Common Stock at the Conversion Price in
effect at the date of conversion.
SECTION 13.2. Manner of Exercise of Conversion Privilege.
To exercise the conversion privilege, the Holder shall surrender such
Debenture to the Registrar, together with a duly executed conversion notice in
the form provided on the Debenture, and, if so required by the Registrar, the
Debenture shall also be accompanied by proper assignments thereof to the
Company or in blank for transfer and any requisite Federal and state transfer
tax stamps. Debentures surrendered for conversion during the period from the
close of business on the record date preceding an interest payment date to the
opening of business on such interest payment date shall also be accompanied by
payment in funds in cash or by certified bank cashier's check of an amount
equal to the interest payable on such interest payment date on the principal
amount of such Debenture then being converted. As promptly as practicable
after the surrender of Debenture for conversion, the Company shall issue and
shall deliver to the Registrar for delivery to such Holder, or his designee, a
certificate or certificates for the number of full shares of Class A Common
Stock issuable upon the conversion of such Debenture or portion thereof and a
check or cash in respect of any fraction of a share of Class A Common Stock
issuable upon such conversion, all as provided in this Section 13.2, together
with a Debenture or Debentures in principal amount equal to the unconverted and
unredeemed portion, if any, of the Debenture so converted. Conversion shall be
deemed to have been effected on the date on which notice (and payment, if
required) shall have been received at the Registrar's office and such Debenture
shall have been surrendered to the Registrar, and at that time the rights of
the holder as a Holder shall cease as to that portion of the Debenture
converted, and the person or persons in
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whose name or names any certificate or certificates for shares of Class A
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder or holders of record of the shares represented
thereby; provided, however, that in the event any such conversion occurs on any
date when the stock transfer books of the Company are closed, the person or
persons in whose name or names the certificates for shares of Class A Common
Stock are to be issued will be deemed the record holder or holders thereof for
all purposes on the next succeeding day on which such stock transfer books are
open, and the conversion shall be at the Conversion Price in effect on such
next succeeding day on which such transfer books are open. Subject to the
foregoing, no adjustment shall be made for interest accrued on any Debenture
that shall be converted or for dividends on any Class A Common Stock that shall
be issued upon the conversion of such Debenture.
SECTION 13.3. Cash Adjustment Upon Conversion.
The Company shall not be required to issue fractions of shares of
Class A Common Stock upon conversion of Debentures. If more than one Debenture
shall be surrendered for conversion at any time by the same holder, the number
of full shares of Class A Common Stock which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate principal amount of the
Debentures so surrendered. If any fractional interest in a share of Class A
Common Stock would be deliverable upon the conversion of any Debenture or
Debentures, the Company shall make an adjustment therefor in cash equal to the
current market value of such fractional interest computed to the nearest
thousandth of a share at the closing price on the Nasdaq National Market or, if
then traded on a national securities exchange, the closing price on such
exchange or the highest bid quotation on an automated quotation system on the
last business day prior to the date of conversion, or if the Common Stock shall
not then be listed on the Nasdaq National Market or on an exchange or included
on an automated quotation system, as reported by the National Quotation Bureau,
Inc. or similar reporting service.
SECTION 13.4. Conversion Price.
The Conversion Price shall be as specified in the form of Debenture
set forth in Section 2.3 hereof or, after adjustment as provided in this
Section 13, the Conversion Price as so adjusted.
SECTION 13.5. Adjustment of Conversion Price.
The Conversion Price shall be adjusted from time to time as follows:
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(a) In case the Company shall, at any time or from time
to time while any of the Debentures are outstanding, (i) issue any
shares of its capital stock as a dividend (or other distribution) on
its Class A Common Stock; (ii) subdivide its outstanding shares of
Class A Common Stock into a greater number of shares; (iii) combine
its outstanding shares of Class A Common Stock into a smaller number
of shares, or (iv) issue by reclassification of its Class A Common
Stock any shares of stock of the Company, the Conversion Price in
effect immediately prior thereto shall be adjusted so that any
Debentureholder who thereafter converts his Debenture shall be
entitled to receive the number of shares of capital stock of the
Company which he would have owned or have been entitled to receive
after the happening of any of the events described above, had such
Debenture been converted immediately prior to the happening of such
event. Any adjustment made pursuant to this subdivision (a) shall
become effective, in the case of a dividend, on the payment date
retroactively to immediately after the opening of business on the day
following the record date for the determination of shareholders
entitled to receive such dividend, subject to the provisions of
subdivision (f) of this Section 13.5, and shall become effective in
the case of a subdivision, combination or reclassification immediately
after the opening of business on the day following the day when such
subdivision, combination or reclassification, as the case may be,
becomes effective.
(b) In case the Company shall, at any time or from time
to time while any of the Debentures are outstanding, issue rights or
warrants entitling anyone to subscribe for or purchase shares of
Class A Common Stock at a price per share less than the current
market price per share of Class A Common Stock (as defined in
subdivision (d) below) at the Measurement Date (as defined below), the
Conversion Price in effect immediately prior to the issuance of such
rights or warrants shall be adjusted as follows: the number of
shares of Class A Common Stock into which $1,000 principal amount of
Debentures was theretofore convertible shall be multiplied by a
fraction, the numerator of which shall be the number of shares of
Class A Common Stock outstanding immediately prior to such issuance
plus the number of additional shares of Class A Common Stock offered
for subscription or purchase, and the denominator of which shall be
the number of shares of Class A Common Stock outstanding immediately
prior to such issuance plus the number of shares which the aggregate
offering price of the total number of shares so offered would
purchase at such current market price; and the Conversion Price shall
be adjusted by dividing $1,000 by the new number of shares into
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which $1,000 principal amount of Debentures shall be
convertible as aforesaid. The term "Measurement Date" shall mean,
with respect to determining current market price in connection with
the issuance of rights or warrants to purchase Class A Common Stock,
the earlier of (i) the date upon which the Company enters into a bona
fide and binding agreement for the issuance of such rights or
warrants and (ii) the issuance or grant thereof. Such adjustment
shall become effective on the date of such issuance, all as determined
by the independent certified public accountants then regularly
auditing the accounts of the Company, whose determination shall be
conclusive, subject to the provisions of subdivision (f) of this
Section 13.5.
(c) In case the Company shall, at any time or from time
to time while any of the Debentures are outstanding, distribute to all
holders of shares of Class A Common Stock evidences of its
indebtedness or securities or assets (excluding cash dividends or cash
distributions payable out of retained earnings, or distributions
payable in shares of Class A Common Stock) or rights to subscribe for
same (excluding those referred to in subdivision (b) above), the
Conversion Price in effect immediately prior to such distribution
shall be adjusted as follows: the number of shares of Class A Common
Stock into which $1,000 principal amount of Debentures was theretofore
convertible shall be multiplied by a fraction, the numerator of which
shall be the current market price per share of Class A Common Stock
(as defined in subdivision (d) below) on the record date for such
distribution, and the denominator of which shall be such current
market price per share of the Class A Common Stock, less the then fair
market value (as determined by the Board of Directors of the Company,
whose determination shall be conclusive) of the portion of the assets
or securities or evidences of indebtedness so distributed or of such
subscription rights applicable to one share of Class A Common Stock;
and the Conversion Price shall be adjusted by dividing $1,000 by the
new number of shares into which $1,000 principal amount of Debentures
shall be convertible as aforesaid. Such adjustment shall become
effective on the date of such distribution retroactively to
immediately after the opening of business on the day following the
record date for the determination of shareholders entitled to receive
such distribution, subject to the provisions of subdivision (f) of
this Section 13.5. For the purposes of this subdivision (c), retained
earnings shall be computed by adding thereto all charges against
retained earnings on account of dividends paid in shares of Class A
Common Stock in respect of which the Conversion Price has been
adjusted, all as determined by the independent certified public
accountants then regularly auditing the accounts of the Company, whose
determination shall be conclusive.
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(d) For the purpose of any computation under subdivision
(b) and (c) above, the current market price per share of Class A
Common Stock at any date shall be deemed to be the average of the
market values of the Class A Common Stock for the ten (10) consecutive
business days immediately preceding the day in question. The market
value of the Class A Common Stock for each day shall be determined as
provided in Section 13.3 hereof.
(e) Except as herein otherwise provided, no adjustment in
the Conversion Price shall be made by reason of the issuance in
exchange for cash, property or services, of shares of Class A Common
Stock, or any securities convertible into or exchangeable for shares
of Class A Common Stock, or carrying the right to purchase any of the
foregoing.
(f) If the Company shall take a record of the holders of
Class A Common Stock for the purpose of entitling them to receive any
dividend, for any subscription or purchase rights or any distribution
and shall, thereafter and before the distribution to stockholders of
any such dividend, subscription or purchase rights or distribution,
abandons its plan to pay or deliver such dividend, subscription or
purchase rights or distribution, then no adjustment of the Conversion
Price shall be required by reason of the taking of such record.
(g) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or decrease
of at least 1% in such price; provided, however, that any adjustments
which by reason of this subdivision (g) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 13.5 shall be made to
the nearest cent or to the nearest one-thousandth of a share, as the
case may be.
(h) Whenever the Conversion Price is adjusted as herein
provided, the Company shall (i) forthwith place on file at the
corporate trust office of the Trustee and the Registrar a statement
signed by the Chairman of the Board, the President, or an Executive
Vice President of the Company and by its Treasurer or an Assistant
Treasurer showing in detail the facts requiring such adjustment and
the Conversion Price after such adjustment and the statement of the
Company's independent certified public accounts confirming the
Conversion Price after such adjustment, and the Trustee and Registrar
shall exhibit the same from time to time to any Holder desiring to
inspect such certificate during normal business hours, and (ii) cause
a notice stating that such adjustment has been effective and the
adjusted Conversion Price to be mailed to
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the Holders of Debentures at their last addresses as they shall appear
on the books of the Registrar.
SECTION 13.6. Effect of Reclassifications, Consolidations, Mergers or Sales
on Conversion Privileges.
In case of any reclassification or change of outstanding shares of
Class A Common Stock issuable upon conversion of the Debentures (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in case of any
consolidation of the Company with one or more other corporations (other than a
consolidation in which the Company is the continuing corporation and which does
not result in any reclassification or change of outstanding shares of Class A
Common Stock issuable upon conversion of the Debentures), or in case of the
merger of the Company into another corporation, or in case of any sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety, the Company, or such successor or purchasing
corporation, as the case may be, shall execute with the Trustee a supplemental
indenture which shall conform to the TIA, providing that each Holder shall have
the right to convert their outstanding Debenture into the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Class A Common Stock into which such Debenture might
have been converted immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Such supplemental indenture shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article Thirteen and any
such adjustments which shall be approved by the Board of Directors and set
forth in such supplemental indenture shall be conclusive for all purposes of
this Section 13.6, and the Trustee shall not be under any responsibility to
determine the correctness of any provision contained in such supplemental
indenture relating to either the kind or amount of shares of stock or
securities or property receivable by Debentureholders upon the conversion of
their Debentures after any such reclassification, change, consolidation,
merger, sale or conveyance.
The above provisions of this Section 13.6 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, sales and
conveyances.
SECTION 13.7. Taxes on Conversions.
The issue of stock certificates on conversion of Debentures shall be
made without charge to the converting Debentureholder for any issue tax in
respect of the issue thereof. The Company shall
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<PAGE> 82
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Class A Common Stock
(or other security) in any name other than that of the Holder of any Debenture
converted, and the Company shall be not required to issue or deliver any such
stock certificate unless and until the person or persons requesting the issue
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
SECTION 13.8. Company to Reserve Stock.
The Company shall at all times reserve and keep available out of its
authorized but unissuable shares of Class A Common Stock, for the purpose of
effecting the conversion of the Debentures, such number of its duly authorized
shares of Class A Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding Debentures.
The Company covenants that it will in good faith and as expeditiously
as possible take all reasonable steps necessary to ensure that any shares of
Class A Common Stock reserved or to be reserved for the purpose of conversion
of Debentures hereunder may be issued upon conversion without a legend
restricting transfer.
The Company covenants that all shares of Class A Common Stock which
may be issuable upon conversion of Debentures shall upon issue be fully paid
and non-assessable and free from all taxes, liens and charges with respect to
the issue thereof.
SECTION 13.9. Disclaimer by Trustee of Responsibility for Certain Matters.
Neither the Trustee nor any conversion agent shall at any time be
under any duty or responsibility to any Holder to determine whether any facts
exist which may require any adjustment of the Conversion Price, or with respect
to the nature or extent of any such adjustment when made, or with respect to
the method employed, or provided to be employed, herein or in any supplemental
indenture in making such adjustment. Neither the Trustee nor any conversion
agent shall be accountable with respect to the validity or value (or the kind
or amount) of any shares of Class A Common Stock, or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Debenture; and neither the Trustee nor any conversion agent makes any
representation with respect thereto. Neither the Trustee nor any conversion
agent shall be responsible for any failure of the Company to make any cash
payment or to issue, register the transfer of or deliver any shares of Class A
Common Stock or stock certificates or other securities or property upon the
surrender of any Debenture for the
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<PAGE> 83
purpose of conversion or to comply with any of the covenants of the Company
contained in this Article Thirteen.
SECTION 13.10. Company to Give Notice of Certain Events.
In the event that the Company shall:
(1) pay any dividend or make any distribution to the
holders of Class A Common Stock otherwise than in cash out of its
retained earnings; or
(2) offer for subscription, pro rata, to the holders of
Class A Common Stock any additional shares of stock of any class or
any other right; or
(3) effect any reclassification or change of outstanding
shares of Class A Common Stock issuable upon the conversion of the
Debentures (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of a
subdivision or combination), or any consolidation of the Company with,
or merger of the Company into, another corporation (other than a
consolidation in which the Company is the continuing corporation and
which does not result in any reclassification or change of
outstanding shares of Class A Common Stock issuable upon conversion of
the Debentures), or any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an
entirety; then, and in any one or more of such events, the Company
will give a Responsible Officer of the Trustee and the Registrar
written notice thereof at least two (2) business days prior to (i) the
record date fixed with respect to any of the events specified in (1)
and (2) above, and (ii) the effective date of any of the events
specified in (3) above; and shall mail a copy of such notice to
Holders at their last addressees, as they appear upon the books of the
Registrar.
ARTICLE XIV
IMMUNITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
SECTION 14.1. Exemption from Individual Liability.
No Affiliate, officer, director, employee or stockholder, as such, of
the Company, or its Subsidiaries, shall have any liability for any obligations
of the Company under the Debenture or this Indenture or for any claim based on,
in respect of or by reason of such obligations or their creation. Each
Debentureholder by accepting a Debenture hereby expressly waives and releases
all such liability. The waiver and release are part of the consideration for
the issue of the Debentures.
-76-
<PAGE> 84
* * * * * * * * * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed and attested, all as of the day and year first above written.
Attest: BANKATLANTIC BANCORP, INC.
By: By:
------------------------------- ------------------------------
Jean Carvalho, Secretary Name: Alan B. Levan
Title: Chief Executive
Officer
[CORPORATE SEAL]
Attest: FIRST TRUST NATIONAL ASSOCIATION
By: By:
------------------------------- ------------------------------
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<PAGE> 1
EXHIBIT 5
____________, 1996
THE FOLLOWING OPINION IS INTENDED TO BE RENDERED UPON THE
TRANSACTIONS DESCRIBED HEREIN IN SUBSTANTIALLY THE FORM
PRESENTED, ASSUMING NO CHANGES IN THE FACTS OR THE LAW UPON
WHICH SUCH OPINION IS BASED, AND SUBJECT TO THE RECEIPT,
REVIEW AND APPROVAL OF FINAL DOCUMENTS.
Mr. Alan B. Levan
Chief Executive Officer
BankAtlantic Bancorp, Inc.
1750 East Sunrise Boulevard
Fort Lauderdale, Florida 33304
RE: BankAtlantic Bancorp, Inc.
$57,500,000 of Convertible Subordinated Debentures
Dear Mr. Levan:
As counsel to BankAtlantic Bancorp, Inc. (the "Corporation"), we have
examined the Amended and Restated Articles of Incorporation and Bylaws of the
Corporation as well as such other documents and proceedings as we have
considered necessary for the purposes of this opinion. We have also examined
and are familiar with the proceedings taken by the Corporation to authorize the
issuance and sale of up to $57,500,000 of convertible subordinated debentures
of the Corporation (the "Debentures"). In addition, we have examined a copy of
the Corporation's Registration Statement on Form S-3, File No. 333-_________,
and that certain Indenture (the "Indenture") between the Corporation and
American Bank National Association, as Trustee, filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, and the Trust
Indenture Act of 1939.
Based upon the foregoing, and having regard to legal considerations
which we deem relevant, we are of the opinion that following the issuance and
delivery of the Debentures by the Corporation in accordance with the terms of
the Indenture, the Debentures will be validly issued, fully paid and
non-assessable and will be binding obligations of the Corporation.
Very truly yours,
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
<PAGE> 1
RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS
ENDED MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
--------------- ----------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Earnings (loss) before income taxes and
extraordinary items . . . . . . . . . . . . . . . . $ 7,851 $ 6,727 $28,437 $26,497 $23,171 $24,493 $(14,064)
Fixed interest charges . . . . . . . . . . . . . . . 15,945 15,933 66,862 42,227 36,758 56,749 92,539
------- ------- ------- ------- ------- ------- --------
Earnings (loss):
Including fixed interest charges . . . . . . . . . . 23,796 22,660 95,299 68,724 59,929 81,242 78,475
Excluding interest expense on deposits . . . . . . . 11,417 12,327 48,653 37,078 28,131 33,831 (4,778)
Fixed interest charges excluding interest
expense on deposits . . . . . . . . . . . . . . . . 3,566 5,600 20,216 10,581 4,960 9,338 9,286
Ratios:
Earnings including fixed interest charges
to fixed interest charges . . . . . . . . . . . . 1.49 1.42 1.43 1.63 1.63 1.43 0.85
Earnings to fixed interest excluding
interest on deposits . . . . . . . . . . . . . . . 3.20 2.20 2.41 3.50 5.67 3.62 0.51
Dollar deficiency of earnings to fixed
interest charges . . . . . . . . . . . . . . . . . . $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 14,064
======= ======= ======= ======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
AS ADJUSTED
-----------
FOR THE THREE FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
(IN THOUSANDS)
Earnings (loss) before income taxes and
extraordinary items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,482 $27,603
Fixed interest charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,363 67,911
------- -------
Earnings (loss):
Including fixed interest charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,845 95,514
Excluding interest expense on deposits . . . . . . . . . . . . . . . . . . . . . . . . 11,835 49,702
Fixed interest charges excluding interest
expense on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,984 21,265
Ratios:
Earnings including fixed interest charges
to fixed interest charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.46 1.41
Earnings to fixed interest excluding
interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.97 2.34
Dollar deficiency of earnings to fixed
interest charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0
====== =======
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF COUNSEL
We hereby consent to the use of our opinion included herein and to all
references to this firm under the heading "Legal Matters" in the Prospectus
constituting a part of this Registration Statement of BankAtlantic Bancorp,
Inc. on Form S-3.
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
Miami, Florida
June 3, 1996
<PAGE> 1
EXHIBIT 23.2
ACCOUNTANTS' CONSENT
The Board of Directors
BankAtlantic Bancorp, Inc.:
We consent to the use of our reports included herein and to the
reference of our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Fort Lauderdale, Florida
May 31, 1996
<PAGE> 1
EXHIBIT 23.3
ACCOUNTANTS' CONSENT
The Board of Directors
Bank of North America Bancorp, Inc.
We consent to the use of our reports included herein and to the
reference of our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Fort Lauderdale, Florida
May 31, 1996
<PAGE> 1
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
FIRST TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
BANKATLANTIC BANCORP, INC.
(Exact name of Registrant as specified in its charter)
Florida 65-0507804
(State of Incorporation) (I.R.S. Employer
Identification No.)
1750 East Sunrise Boulevard
Fort Lauderdale FLorida 33304
(Address of Principal Executive Offices) (Zip Code)
% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2006
(Title of the Indenture Securities)
<PAGE> 2
GENERAL
1. General Information Furnish the following information as to the Trustee.
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this
statement of eligibility and qualification. Each of the exhibits listed
below is incorporated by reference from registration number 22-27000.
1. Copy of Articles of Association.
2. Copy of Certificate of Authority to Commence Business.
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).
4. Copy of existing By-Laws.
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
<PAGE> 3
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee
has no reason to doubt the accuracy of any such information, it cannot accept
any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, First Trust National Association, an Association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested,
all in the City of Saint Paul and State of Minnesota on the 3rd day of June,
1996.
FIRST TRUST NATIONAL ASSOCIATION
[SEAL]
/s/ Richard H. Prokosch
--------------------------------
Richard H. Prokosch
Trust Officer
/s/ Kathe Barrett
- ----------------------------
Kathe Barrett
Assistant Secretary
<PAGE> 4
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee
has no reason to doubt the accuracy of any such information, it cannot accept
any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, First Trust National Association, an Association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested,
all in the City of Saint Paul and State of Minnesota on the 3rd day of June,
1996.
FIRST TRUST NATIONAL ASSOCIATION
[SEAL]
/s/ Richard H. Prokosch
-----------------------------------
Richard H. Prokosch
Trust Officer
/s/ Kathe Barrett
- --------------------------
Kathe Barrett
Assistant Secretary
<PAGE> 5
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, FIRST TRUST NATIONAL ASSOCIATION hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: June 3, 1996
FIRST TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
--------------------------------
Richard H. Prokosch
Trust Officer
<PAGE> 6
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, FIRST TRUST NATIONAL ASSOCIATION hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: June 3, 1996
FIRST TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
----------------------------------
Richard H. Prokosch
Trust Officer
